However, the rollback in the power subsidy is a particularly thorny move for the AAP as its government had continued this grant of Rs 3 per unit up to a 7KW load introduced by the previous Congress regime, after it came to power in 2022. This was over and above the offer of 300 units of free power per month to all consumers, which was one of its poll promises.

The withdrawal of the subsidy, which is expected to affect at least 12 lakh consumers during the summer months and 1.5 lakh in the winter, will help the state exchequer save Rs 1,800 crore a year, as well as raise an additional Rs 300 crore in revenues on account of the various taxes levied on power supply to the tune of 20%, a government functionary said.

However, as some officials pointed out, it would have served the AAP government better to have withdrawn the power subsidy when it implemented 300 units of free power in July 2022, implementing the first of its poll promises. The subsidy was not needed after this, the officials said, adding that suggestions to this effect to the AAP government had gone unheard.

With the free-power promise being one of the cornerstones of the AAP government, including in Delhi, the issue is set to be played by the Opposition.

What will give them additional fuel is that after the hike in VAT, petrol and diesel in Punjab are now among the costliest in northern India. While petrol is now up 61 paise to Rs 97.44 per litre, diesel has been hiked by 92 paise to Rs 88.03 per litre.

However, the Bhagwant Singh Mann government was left with few choices given that the cash crunch has forced it to even delay the salaries of its employees this month; they were eventually paid on September 4 instead of on the 1st. “Now, when the freebies have bled the exchequer dry and the government is unable to pay the salaries of its employees, this step has been taken. Now, the government will face criticism,” an official said. “If more measures are not taken, the government will not be able to pay salaries next month also. We have been in overdraft,” the official added.

By the end of this fiscal year, the government’s outstanding debts are expected to rise to Rs 3.74 lakh crore.

Before it was partially withdrawn, the power subsidy alone was set to cost the state exchequer Rs 24,000 crore over the course of the 2024-25 financial year, owing in large part to the prolonged heatwaves this year. The state’s revenue deficit is also projected to hit Rs 24,000 crore in 2024-25. In 2023-24, Punjab’s debt-to-GDP ratio stood at 47.6%, as per the Reserve Bank of India.

Fulfilling its other poll promises, the AAP government also provides free transport for women in state-run buses, which costs the exchequer around Rs 650 crore every year. Earlier this year, a proposal had been made to end this scheme, which was shot down by CM Mann.

But then, after presenting this year’s Budget without any new tax proposals, the Mann government had imposed new taxes, including the recent “green tax” on older vehicles. Last month, the government hiked the motor vehicle tax by 0.5%-points to 1%.

Leader of the Opposition (LoP) and Congress MLA Partap Singh Bajwa has accused the AAP government of “burning holes in the pockets of the common people” on the pretext of raising revenues. “In one of its most shameless moves ever, the AAP government has increased the prices of retail fuel and also withdrawn the scheme of giving subsidised power… Enhancement in the price of the diesel will not only cost farmers dearly but also add to the inflation,” Bajwa said.

He pointed out that the government had earlier promised to raise revenues from other sources, including Rs 20,000 crore from mining and Rs 34,000 crore by ending corruption.

“The way the AAP government is handling the economy demonstrates that Punjab has been swiftly moving towards bankruptcy under the AAP regime,” Bajwa said.

He also accused the government of “squandering Rs 750 crore annually” on its “fake” publicity expenditure. “If it really cared so much about the deteriorated fiscal health of the state, it should refrain from spending so recklessly.”