Finance minister Harpal Singh Cheema presented the fifth and final budget of the Bhagwant Mann-led Aam Aadmi Party (AAP) government on Sunday. In his 51-page budget speech, Cheema, who is also the taxation and planning minister, reflected on the four-year journey focused on strengthening Punjab’s finances, expanding infrastructure, and rebuilding trust in governance. Here is the fine print of his latest budget for positives and negatives.
Revenue receipts
Revenue augmentation was touted by the present government as its strong suit, and the budget set bold revenue targets for the current fiscal. However, the state’s own tax revenues (SOTR) are estimated to remain short of target. Against 2025-26 budget estimate (BE) of ₹63,250 crore, the SOTR is expected to be ₹61,700 crore as per revised estimate (RE) — a deficit of around 2.5%. The lower collections are primarily due to shortfall in receipts from goods and services tax, VAT, and electricity duty.
The state’s own non-tax revenues (SONTR), on the other hand, are expected to be 60% more than the budget estimate.
Committed liabilities
A major worry for the state government is the rising burden on the state exchequer on account of salaries, interest payments, and pensions and retirement benefits. These committed liabilities are estimated to consume approximately 72% of its revenue receipts — in actual terms, ₹90,335 crore out of the estimated collections of ₹1,26,190 crore — in the 2026-27 financial year.
During the current fiscal, the outgo on interest payments and pensions is estimated to be 9% more than the budget estimates for the year. The expenditure on salaries and wages, estimated at ₹3,260 crore in FY 2026-27, is also rising each year.
Spike in tax share
Punjab will receive a higher share of the Union taxes and duties as recommended by the 16th Finance Commission. The state’s share in horizontal devolution of the divisible pool has been enhanced from 1.807% to 1.996%. In FY 2026-26, this means a gain of ₹5,293 crore over the previous year. “Our share of central taxes is estimated to rise to ₹30,464 crore in the coming fiscal, as against ₹25,171 crore in FY 2025–26,” Cheema said in his speech. Grant-in-aid from the Centre has been projected at ₹9,188 crore in FY 2026-27.
Capex up
After dismal performance for years, there is finally some good news on capital expenditure — investment on creation of assets that are long-term in nature. The government has given a boost to capex, with 2025-26 RE showing spending ₹10,434 crore against the BE of ₹10,302 crore. “We are spending more on development of schools, roads, hospitals and sports stadiums,” Cheema told reporters last week.
In FY 2026-27, the FM has projected capex of ₹18,381 crore. Punjab has been reporting the lowest capex among the major states in the country, with its spending falling below budget estimates.
Subsidy slashed
Another positive is a major cut in the state’s power subsidy bill, which has been reduced from ₹20,500 crore in 2025-26 BE to ₹15,550 crore in the coming fiscal year. “Through focused energy reforms, strengthened power management, and systemic efficiency measures, we will successfully curtail the subsidy burden by 25%,” the finance minister said, pegging the savings through efficiency gains at nearly ₹5,000 crore. According to official data, the power subsidy ballooned during the current decade, rising from ₹9,747 crore in FY 2020-21 to ₹20,500 crore as per 2025-26 BE. In 2023‑24, Punjab paid the highest per capita subsidy of ₹5,893 in the country.
