Sidhu, a DGP-level officer, had actively led the STF over the past one year on the anti-drugs front.
Sidhu has been appointed as Special Principal Secretary to the Chief Minister, considered an inconsequential post.
The government appointed Mohammad Mustafa as the DGP of the STF for anti-drug abuse measures in place of Sidhu "on administrative grounds".
Mustafa would continue to hold the additional charge of DGP (Human Rights).
The Amarinder government had earlier ordered that Sidhu, as STF chief, would report directly to the Chief Minister. However, earlier this year, the wings of the STF chief were clipped and he was ordered to report to the Punjab Director General of Police (DGP) Suresh Arora.