Punjab is among the most indebted states in India measured against its own output. Its debt to gross state domestic product ratio has been among the highest in the country for years and the interest bill takes a large share of revenue before anything is spent.
The structural causes are consistent across governments: the power subsidy, salaries and pensions, subsidised or free provision of several services, and a revenue base that has not grown because manufacturing has not grown.
Punjab was the richest state in India by per capita income into the 1990s. It is now in the middle of the table and has been overtaken by states that were far behind it.
The reasons given are the militancy years, the absence of a port, the failure to diversify out of agriculture, the border, and the loss of central investment. All of them have some force and none of them is a complete explanation.
A state that fed India for fifty years and cannot pay its own bills is not a paradox that has been adequately explained by anybody.
Free power to agriculture is the largest single line in it. The state pays the distribution company for what the tubewells draw, the payment is generally late, and the arrears are themselves part of the debt. Every government has said the subsidy has to be targeted and no government has targeted it.
A large part of the borrowing does not appear as state debt at all. It sits with the power utility, the food procurement account and other undertakings that borrow against a state guarantee. The cash credit gap on the grain account ran for years before it was converted into a loan the state is now servicing out of its own revenue.
Every government since the 1990s has inherited the position and added to it. There is no politically available path to reducing the subsidy and no policy path to growing out of it quickly.