Punjab govt tightens fiscal belt, tells depts to cut wasteful expenditure, maximise revenue

In a bid to rein in its growing revenue deficit, the Punjab government has directed all departments to work for “revenue maximisation” while simultaneously tightening their belts by cutting wasteful spending and obtaining prior approval for expenses on foreign travel and the purchase of new vehicles.

All administrative departments have been instructed to set monthly and quarterly revenue targets, covering both tax and non-tax revenues. These targets must be monitored at every level — division, district, and sub-division — and reviewed monthly by administrative secretaries. The finance department will assess the performance of each department on a quarterly basis at the highest level.

According to guidelines issued by the finance department on the management of state finances, any administrative department that fails to achieve its budgeted revenue targets for the 2025-26 financial year, without reasonable justification, may face an automatic reduction in its budgetary allocations for expenditure. The departments have also been warned of disciplinary action against erring officials if any revenue from tax, user charges, fees and cess is retained in the department’s accounts and not credited to the consolidated fund of the state.

These instructions for maximisation of revenue were sent to all administrative secretaries and heads of departments days after finance minister Harpal Singh Cheema presented a ₹2.36-lakh crore budget for the 2025-26 financial year. The state government has estimated a double-digit growth in its tax and non-tax revenues during the current fiscal after falling short of its revenue targets in 2024-25.

The state’s own tax revenue is projected to increase by about 10% to ₹63,250 crore as per 2025-56 budget estimate (BE) from 2024-25 revised estimate (RE) of ₹57,919 crore. Similarly, the NTR is estimated to growth by 13% to ₹12,210 crore 2025-26 BE from 2024-25 RE of ₹10,826 crore, according to the budget documents.

The tax maximisation efforts of the state government are already drawing flak from the opposition Congress, SAD and BJP which have accused the state government of directing 240 excise and taxation officers of the goods and services tax (GST) wing to conduct four raids each month, targeting penalties of ₹8 lakh per case.

In 2024-25, the state government overshot its revenue deficit budget estimate of ₹23,198 crore by ₹5,487 crore, or approximately 24%, ending the financial years with ₹28,685 crore as per revised estimates.

The finance department, while stressing the need to cut wasteful spending, has also directed the departments to plan their expenditure in such a manner that not more than 25% of the budgetary allocation is spent in each of the four quarters of the current financial year. However, expenditure on salaries, professional services, medical reimbursements and centrally sponsored schemes would be exempted from the quarterly restrictions. The administrative secretaries and head of departments have been asked to incur the expenditure within the budgetary allocations approved in the budget estimates for the current fiscal and submit detailed proposals with proper reasons for any exemption in exceptional circumstances.

The finance department’s prior approval is a must for any expenditure to be incurred foreign travel, hiring of professional services, purchase of staff cars and transport vehicles, and payment of penal interest. “Any expenditure in excess of the budgetary allocations provided in 2025-26 BE without the explicit prior approval shall not only entail strict disciplinary action against the officials who sanctioned such expenditure but also summary rejection of the proposal for revision of budget. All VAT and stamp duty refund matters will also require through vetting,” said a finance department official.