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Explained: How the new AAP government plans to clear Punjab’s mounting debt

Funds crunched Punjab has a burgeoning debt that is set to cross Rs 3 lakh crore this fiscal. How has the debt mounted? What does the new AAP government plan to do about it?

Punjab Chief Minister Bhagwant Mann addresses a press conference. (PTI Photo/File)

Punjab Chief Minister Bhagwant Mann has decided to carry out an audit of Punjab’s total debt. In a tweet by Aam Aadmi Party (AAP) Punjab on Monday, Mann was quoted as saying that previous governments have left a debt of Rs 3 lakh crore. The Indian Express explains how the debt has mounted.

What is the issue?

Funds crunched Punjab has a burgeoning debt that is set to cross Rs 3 lakh crore this fiscal. The government spends huge amounts from the budget on debt servicing every year. Twenty per cent of annual budget is being spent on repaying the loans. For servicing the debt, the government has to borrow money every year. This puts a pressure on the already fund-crunched state.

The debt is estimated to cross the Rs 4 lakh crore mark in three years.

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How has the debt mounted?

In 2017, when Congress government took over the reins of the state, the SAD-BJP government had left a legacy of Rs 2.08 lakh crore of debt. In five years the state has added a debt of Rs 1 lakh crore. Last 20 years, including that of 10 years of the Akali regime and five years of Congress regime have seen the borrowing multiplying by 10 times. In 2002, when former Chief Minister Amarinder Singh’s government took over, the outstanding debt was Rs 36,854 crore. It went up by Rs 21,000 crore in five years in 2007 to Rs 51,155 crore. In 2017, it was Rs 2.08 lakh crore.

What is the debt about?

Records show that an amount of Rs 5,800 crore was given to the state between 1984 and 1994 for combating insurgency and militancy in the state. The SAD-BJP government in the state have blamed the Centre for the debt. They have been saying that it is a legacy of trouble-torn days of terrorism, when the Centre had sent security agencies to the state and charged the state for that. However, the Centre had waived the debt twice after the state had said militancy was a national problem.

How much waiver was given?


According to finance department records, the Centre has waived off Rs 5,029 crore till 2007, against a loan of Rs 5,800 crore. By then, the state had repaid an amount of Rs 771 crore towards the principal payment and an interest payment to the extent of Rs 1,923 crore. Later, the state government got a waiver on the principal during former PM IK Gujral’s regime. Gujral had reasoned that militancy was not a problem of Punjab alone but a national problem. The break-up of the amount waived was Rs 176 crore in 1995-96; Rs 123 crore in 1997-98; Rs 221 crore in 1998-99; Rs 241 crore in 1999-2000; and Rs 3,772 crore in 2006-07. An amount of Rs 496 crore of the principal was waived by the Centre as per the 10th Finance Commission recommendation. Thus, by 2007, the entire balance amount of Rs 5,029 crore had been waived off.

How will the audit help?

As most of the loan was waived, the Congress had alleged it to be an outcome of Akalis profligacy. The AAP is alleging that it was the legacy of profligacy of both the governments. The audit will explain the exact expenditure by the state for which the amount was borrowed.


How much does the govt pay towards debt servicing?

In 2019-20 fiscal, the state had paid Rs 17,567 crore towards debt servicing. In 2020-21, it was Rs 18,588 crore. By March 31 this year, in the 2021-22 fiscal, it was estimated that the government would pay Rs 20,315 for paying off loans.

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First published on: 21-04-2022 at 11:56:03 am
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