One lakh crore on freebies: Punjab’s soaring subsidy bill raises fiscal concerns

Taken together, these subsidies alone push the government’s welfare bill beyond Rs 1 lakh crore during its present tenure.

The sharpest jump has come in the power subsidy bill after the AAP government extended 300 units of free electricity every month to domestic consumers from July 1, 2022. Before that, Punjab’s subsidy burden was largely confined to electricity for the agriculture sector and subsidised power for industry. The domestic free-power scheme substantially widened the beneficiary base.

The state paid Rs 20,200 crore each towards power subsidy in 2022-23, 2023-24 and 2024-25, followed by Rs 19,372 crore in 2025-26. For the current financial year 2026-27, the government has set aside Rs 15,550 crore. This means that in the first four financial years of its tenure, the AAP government has already paid Rs 79,972 crore towards power subsidy. With the current year’s allocation added, the cumulative expenditure reaches Rs 95,522 crore by the end of March 2027.

In contrast, the previous Congress government spent Rs 55,994 crore on power subsidy during its five-year tenure. The annual subsidy stood at Rs 10,255 crore in 2017-18, Rs 10,718.85 crore in 2018-19, Rs 11,904.78 crore in 2019-20, Rs 9,674.52 crore in 2020-21 and Rs 13,443.42 crore in 2021-22.

The increase during the Congress regime itself came in its final year after then Chief Minister Charanjit Singh Channi announced free power for domestic consumers with sanctioned load up to 7.5 kW, taking the subsidy bill from around Rs 9,700 crore to Rs 13,443 crore. The AAP government subsequently expanded the scheme to provide 300 units of free electricity to domestic consumers, resulting in the subsidy bill almost doubling over the next few years.

The government’s welfare expenditure has expanded further with newer schemes. Apart from free bus travel for women costing around Rs 650 crore every year, the government this year rolled out Meri Rasoi Yojana, under which nearly 40 lakh beneficiary families receive wheat along with essential kitchen items including dal, sugar, mustard oil, tea leaves, turmeric and salt. The scheme is expected to cost about Rs 1,850 crore annually. 

Noted Economist Kesar Singh Bhangoo said the subsidy burden is likely to rise further as more welfare schemes are rolled out.

“The government will end up spending around Rs 1.10 lakh crore on these subsidies alone. If they pay Rs 1,000 to Rs 1,500 every month to women under the new financial assistance scheme launched this month, it would translate into nearly Rs 12,000 crore every year. That will further add to the burden,” he said.

Bhangoo warned that the state’s rising debt leaves little fiscal room. “The debt is already increasing. By the end of this year, Punjab is expected to borrow nearly Rs 50,000 crore from the market. Then there are off-budget borrowings, which are not reflected in the Consolidated Fund. The Comptroller and Auditor General (CAG) has already raised objections and advised states against resorting to such borrowings,” he said.

Describing the trend as worrying, Bhangoo said, “Freebies were once considered an ailment of the southern states. Unfortunately, that culture has now reached Punjab.” The government, however, defended its welfare spending. Finance Minister Harpal Singh Cheema dismissed concerns over the rising subsidy bill. “When do states have shortage of funds for public welfare? It is the people’s money being given back to the people,” Cheema said.

Power subsidy Bill during AAP government (In crores)

2022-23—20200.00

2023-24—20200.00

2024-25—20200.00

2025—26— 19372.00 

2026-27—15550.00

During Congress government

2017–18—10255.00

2018-19—10718.85

2019-20—11904.78

2020-21—9674.52

2021-22—13443.42