Faced with mounting financial challenges, the Punjab government announced a hike in fuel prices and a partial withdrawal of the power subsidy scheme for domestic consumers, as part of a broader effort to address the state’s fiscal deficit. The decision was taken during a cabinet meeting chaired by Chief Minister Bhagwant Mann on Thursday.
Fuel Price Hike
As per the new measures, the value-added tax (VAT) on petrol and diesel has been increased by 61 paise and 92 paise per litre, respectively. This price hike comes as the state grapples with a deepening financial crisis. In addition, the Punjab government has decided to partially roll back the power subsidy introduced by the previous Congress-led government, affecting domestic consumers with a load of up to 7 KW.
Power Subsidy Rollback
The power subsidy scheme, which was introduced by former Chief Minister Charanjit Singh Channi in 2021, provided a discount of ₹3 per unit of electricity to households consuming up to 7 KW. However, this scheme has now been withdrawn, impacting many lower and middle-income households that relied on the subsidy to manage their monthly electricity bills.
Finance Minister Harpal Cheema explained that the rollback was necessary to streamline the state’s subsidy system. The Aam Aadmi Party (AAP) government will continue to provide 300 units of free electricity per month to domestic consumers, but the overlapping benefits of dual subsidies have been eliminated. “By abolishing the ₹3 per unit discount, the state will save ₹392 crore annually,” Cheema said.
Punjab’s Financial Struggles
Punjab’s financial difficulties have been worsening in recent years. Presenting the state’s annual budget in March, Cheema projected Punjab’s debt to reach ₹3.74 lakh crore by the end of the 2024-25 fiscal year, which amounts to more than 46% of the state’s gross domestic product (GDP) of over ₹8 lakh crore.
In July, the AAP government sought a bailout package from the 16th Finance Commission, with Mann requesting ₹1.32 lakh crore to support development initiatives. The government has faced criticism from opposition parties for emptying its coffers through populist measures and subsidies.
Recently, the government has also increased the collector rate for property registrations and hiked the motor vehicle tax on two-wheelers and four-wheelers in a bid to improve the state’s fiscal health.
Focus on Agriculture and Water Crisis
The cabinet meeting also discussed the draft agriculture policy, with a particular focus on Punjab’s depleting groundwater levels. Chief Minister Mann is scheduled to meet representatives from the Bharti Kisan Union (Ekta-Ugrahan) and the Punjab Khet Mazdoor Manch to address concerns surrounding water usage and sustainability in agriculture.
As Punjab navigates through this financial crunch, the government’s latest decisions are expected to ease some pressure on the state’s coffers, but they also pose challenges for residents, particularly those in lower income brackets, who will now have to adjust to higher fuel prices and the removal of electricity subsidies.
Sources By Agencies