Punjab spends 24% of revenue on subsidies; Andhra Pradesh, Gujarat, Rajasthan follow: Report

Punjab, Andhra Pradesh, Gujarat and Rajasthan spend the most on subsidies, the latest report on state finances by PRS Legislative Research has revealed.

Aam Aadmi Party-ruled Punjab spends nearly one-fourth (24%) of the revenue receipts on subsidies. Punjab is followed by Andhra Pradesh, which spends 15% of the revenue receipts on subsidies, while Gujarat and Rajasthan spend about 13%. According to the PRS Legislative report, State of State Finances 2024-25, the national average of 26 states was 6.75%, with 12 of them spending more than this on subsidies.

In Punjab, the AAP government's promise of 300 units of free power is the major component of the subsidies given. According to the report, this is a common thread in several states. "In certain states, a major share of subsidies is provided for supplying free or low-cost electricity. For instance, over 95% of the total subsidies in Punjab and Rajasthan were provided for the electricity sector," the report says.


Punjab has witnessed a surge in domestic power connections following the free electricity scheme. Punjab State Power Corporation Ltd had approved 550,000 new domestic electricity connections between 2020 and 2022 before the launch of the free power scheme, but the number rose to 627,000 between 2022 and 2024, marking an increase of nearly 80,000.

The report comes at a time when the BJP-led alliance has won decisively in Maharashtra, presumably on the back of the Ladki Bahin Yojana, a direct cash benefit scheme targeted at women. Maharashtra, according to the report, spends 11% of its revenue receipts on subsidies.

In 2022, the RBI had red-flagged increasing subsidies announced by several states. It had said that subsidies would put a strain on resources and leave less funds for capital expenditure.