Punjab: Revenue receipts up 10%; deficit, subsidy key challenges

Punjab has registered a 10% year-on-year increase in its revenue receipts in the first five months of the financial year 2024-25, driven by improved property registration and excise duty collections and increased revenue from the state’s share of Union taxes.

Revenue receipts, which include tax revenue, non-tax revenue and grants-in-aid, stood at ₹34,983 crore for the April-August period, up from ₹31,840 crore garnered in the corresponding period of the previous year, according to the data on key fiscal indicators released recently. This collection amounts to 34% of the revenue receipt target of ₹1.03 lakh crore set in the 2024-25 budget estimates (BE). Tax revenue, which constitutes 80% of total revenue receipts, rose by nearly 13% during the five-month period of the current fiscal year, increasing to ₹29,337.68 crore from ₹26,063.28 crore last year.

Modest growth in GST revenue

While the Goods and Services Tax (GST), which contributes a third of the state’s tax revenue, has seen a modest growth of 5.26% so far, the state’s income from stamps and registration fees and excise duty has increased by 28% and 16%, respectively. During the April-August period, the state’s share of Union taxes also rose to ₹8,234.74 crore in FY23 from last year’s ₹6,911.43 crore, due to a robust growth in direct and indirect tax collections.

A taxation department official said that with the upcoming festival season and the hike effected by the government in taxes on petrol and diesel, tax collections, particularly GST and sales tax, are expected to pick up in the few months. Non-tax revenue also clocked a 15% growth year-on-year, rising to ₹2,206 crore from ₹1,917 crore. However, grants-in-aid and contribution from the Centre have dipped by 11%. The state received ₹3,439 crore in grants-in-aid and contribution between April and August this year, compared to ₹3,858.74 crore during the same period last year.

Committed liabilities exceed revenue receipts

Despite the growth, revenue receipts fell short of the state government’s revenue expenditure, leading to a high revenue deficit. Revenue deficit occurs when the government’s revenue expenditure exceeds its revenue receipts. It stood at ₹13,507 crore at the end of first five months, which is 58% of revenue deficit of ₹23,198 crore for the full year, as per the 2024-25 budget estimates.

Of the total revenue expenditure of ₹48,489 crore incurred by the state government during the April-August period, ₹38,294 crore, or 79%, went into meeting committed liabilities such as salaries/wages, interest payments, pensions and subsidies. During this period, the expenditure on subsidy soared to ₹10,110 crore, with the bulk of it going into the providing free or subsidised electricity to agricultural tubewells, domestic power users and industry. At this rate, the subsidy bill could exceed the ₹20,200 crore allocated for power subsidies in the budget 2024-25. The state government recently withdrew ₹3 per unit power subsidy for domestic consumers having 7 kW of load. “This decision will help save ₹2,200 crore each year,” a finance department official said.

₹15,903 cr borrowed till August

According to the fiscal indicators released by the audit and accounts department, the Punjab government borrowed ₹15,903.45 crore during the April-August period of the current fiscal, which is 52.20% of the full-year net borrowing target of ₹30,464.92 crore. Although the amount raised so far is slightly lower than ₹16,075.44 crore borrowed by the government during the same period in the financial year 2023-24, it had a higher net borrowing limit of ₹34,784 crore at that time. The state government has now written to the Centre requesting an additional borrowing limit of ₹10,000 crore for the current financial year.