10% of state’s budget to go towards power subsidies

The financial situation in Punjab for the upcoming fiscal reflects a significant dependence on subsidies, particularly in the power sector. Nearly 10% of the state’s total budget is allocated to providing free power to various consumer groups, a key financial challenge for the state government.

Out of the total outlay of ₹2,36,080 crore for the upcoming fiscal, a whopping ₹20,500 crore will go towards power subsidies in the form of free electricity to farmers and domestic users, and subsidies for industrialists. Though this figure is almost identical to the previous fiscal year, the government still faces outstanding payments to the power department.

The substantial allocation toward power subsidies limits the state’s ability to make significant capital investments. Nevertheless, the free power policy continues to be highly popular, benefiting over 80% of the state’s consumers, including farmers, industries and domestic households.

While presenting the budget, finance minister Harpal Singh Cheema also listed the achievements of Punjab State Power Corporation Limited (PSPCL), emphasising the improvements in its operational efficiency and service delivery. PSPCL now ranks 7th among state utilities, with a reduction in Aggregate Technical & Commercial (AT&C) losses and a 25 paise per unit reduction in the cost-supply and revenue gap, he said, adding that this reduction in costs has helped somewhat alleviate the financial burden on the state, with the power subsidy budget increasing by just ₹300 crore compared to the previous year.

A key feature of the government’s subsidy policy is the provision of free electricity to farmers for tubewell operations, which will cost nearly ₹10,000 crore — the highest subsidy allocation for any sector. The subsidy for industrial power stands at ₹2,893 crore, while the subsidy for domestic consumers is ₹7,614 crore for the upcoming fiscal year.

In addition, the finance minister announced the “Mukh Mantri Street Light Yojana,” which will see the installation of 2.5 lakh streetlights across Punjab. Instead of erecting costly poles, the streetlights will be installed outside people’s homes, drawing electricity from their domestic connections. The equivalent electricity consumption will be deducted from the residents’ bills. This initiative, which aims to improve safety while minimising costs, has been allocated ₹115 crore for the coming fiscal year.