Cash-strapped Punjab hikes fuel prices, withdraws power subsidy scheme partially

The Punjab cabinet on Thursday hiked the prices of petrol and diesel by 61 paise and 92 paise per litre, respectively, and withdrew the scheme of subsidised power to domestic consumers having up to 7KW load.

The decisions were taken at a meeting of the council of ministers, chaired by chief minister Bhagwant Mann, in Chandigarh as part of the government’s broader strategy to address the state’s financial constraints. The release of salaries and pensions of state government employees for August were delayed by four days.

Presenting the state’s annual budget in March this year, finance minister Harpal Cheema projected Punjab’s debt to touch ₹3.74 lakh crore by the end of the 2024-25 fiscal, amounting to more than 46% of the state’s total gross domestic product (GDP) of over ₹8 lakh crore.

Punjab’s financial crisis forced the state to seek a bailout package from the 16th Finance Commission in July with Mann asking for ₹1.32 lakh crore to boost development in the state. The AAP government is criticised for emptying its coffers by doling out freebies.

The government has now decided to hike the value-added tax (VAT) on petrol and diesel.

Besides the fuel price increase, the cabinet decided to revoke the power subsidy scheme that was introduced by the Charanjit Singh Channi-led Congress government in 2021.

The subsidy provided discounted electricity rates to households with a load of up to 7 KW. The cancellation of this scheme is expected to affect households in the lower and middle-income brackets who relied on the subsidy to manage their monthly expenses.

Channi had provided a discount of ₹3 per unit on electricity for up to 7 KW load. Since the Aam Aadmi Party-led Punjab government has rolled out 300 units free electricity per month to domestic consumers, the government has withdrawn the discount given earlier by the Channi government.

Announcing the decision, Cheema reiterated that the AAP government would continue giving 300 units of free power a month to domestic consumers. “But some consumers were getting dual subsidy. We have decided to abolish this. In doing so, the state will save ₹392 crore per year,” he said.

To improve the fiscal situation, the AAP government recently increased the collector rate for the registration of property and hiked the motor vehicle tax on two-wheelers and four-wheelers.

The council of ministers also discussed the draft agriculture policy, particularly in the light of the depleting groundwater level in the state. The chief minister will be meeting representatives of the Bharti Kisan Union (Ekta-Ugrahan) and the Punjab Khet Mazdoor Manch later in the afternoon.