Cash-strapped Punjab govt borrows again: Rs 700 crore more, and the debt meter keeps running
Punjab Government will raise Rs 700 crore by re-issuing 7.75% state bonds maturing in 2035. RBI auction on October 19. Know the key details
PTC Web Desk: Cash-strapped Punjab Government is borrowing again. On October 19, the state will raise another Rs 700 crore by re-issuing its 7.75% bonds maturing in 2035, the same ones it first sold on September 9. That is barely six weeks ago. When a state is back at the borrowing window this quickly, it’s fair to ask how healthy its finances really are.
About the auction
The RBI will carry out the action in Mumbai through its E-Kuber system. Big players can bid between 10.30 am and 11.30 am, while small investors get a shorter window, 10.30 to 11 am. Results come out the same day and the money has to be paid by October 21. Up to 10% of the issue is set aside for small investors with a cap of 1% per bid. Notably, this market is dominated by banks and big institutions and the “small investor” quota is mostly symbolic.
Also Read | Punjab MLA Manwinder Singh Giaspura declared tankhaiya by Sri Akal Takht Sahib over objectional remarks on Sri Darbar Sahib
Who really lends the money
These bonds count towards banks’ SLR requirement, meaning banks have to hold such securities anyway. So demand is partly built in. Banks aren’t necessarily buying because Punjab is a great credit; they’re buying because rules push them to. That makes borrowing easy, and easy borrowing is exactly what tempts governments to keep doing it.
7.75% per year
Punjab will pay 7.75% a year, in half-yearly instalments, for nine years and return the principal in September 2035. That is a long commitment. The Rs 700 crore sounds modest, but each re-issue adds to a pile of interest that future budgets must pay. Every rupee spent on interest is a rupee not spent on schools, hospitals or roads.
The notification says the money will fund capital expenditure on ongoing Plan Schemes and other development work. That’s the standard line and it’s the justification that makes borrowing look responsible: borrow to build assets, not to pay salaries. But the notification gives no project list, no figures, no timelines. The public is told the money is for “development” but not which projects, how much each gets or when they will be done, when the elections are nearing.
Without that, it is hard to check whether borrowed funds are building anything lasting or just plugging gaps in the regular budget.
THE NOTIFICATION COPY