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Himachal Pradesh Chief Minister Sukhvinder Singh Sukhu (Photo: PTI)
Himachal Pradesh, known for its serene landscapes and the picturesque Himalayas, is grappling with a financial crisis. With mounting debt and a series of ambitious promises weighing on the state’s coffers, Chief Minister Sukhvinder Singh Sukhu’s government is taking steps to rein in state finances. After announcing that his government would forgo his and his Cabinet’s salaries for two months, Sukhu told multiple media outlets on September 1 that many of the subsidies would be reviewed.
“We are reviewing all subsidies introduced by the previous BJP government and have already begun reversing some after assessing their financial impact,” the chief minister was quoted as saying by The Economic Times.
With Himachal Pradesh’s debt now approaching Rs 90,000 crore, the Bharatiya Janata Party (BJP), as the main opposition, has accused the ruling Congress of financial mismanagement. The state’s debt had surged from Rs 47,906 crore in 2018 to Rs 76,651 crore in 2023, reported The Hindu.
Critical condition of Himachal’s coffers
Chief Minister Sukhu clarified in the Assembly that the state’s financial health is critical. The revenue deficit grant for FY24 has been reduced by Rs 1,800 crore.
The Centre has also reduced the state’s borrowing limit by Rs 5,500 crore. Previously, the state could borrow up to 5 per cent of its Gross Domestic Product (GDP), but this has been reduced to 3.5 per cent. While the state initially had the capacity to borrow Rs 14,500 crore, it is now limited to Rs 9,000 crore, according to a report by IndiaToday.
The state’s debt has accumulated to around Rs 86,589 crore and is expected to reach Rs 1 trillion by the next financial year. The per capita debt in Himachal stands at Rs 1.17 lakh per person, making it the highest in the country after Arunachal Pradesh.
Which ‘freebies’ are under the scanner?
Sukhu noted that the challenging financial conditions his administration inherited were well known and that they were taking structured steps to address the issues caused by the previous BJP government’s financial mismanagement and wasteful spending.
Himachal Pradesh has identified 14 subsidies benefiting hotels and large commercial establishments, which it plans to rationalise. “Just before the November 2022 Assembly elections, the BJP government made electricity free for everyone, including taxpayers across the state. Women were given free bus travel on 3,000 state roadways buses. We’ve now decided to remove the subsidised electricity for hotel owners and will provide a 50 per cent bus fare subsidy for women,” Sukhu told the national newspaper, adding that the BJP’s decision to make water supply free will also be reversed.
Why is Himachal Pradesh in a financial tangle?
The state’s poor fiscal condition is due to excessive borrowing, rising salary and pension costs, reduced central aid, and insufficient revenue generation.
Promises like reviving the Old Pension Scheme (OPS), paying Rs 1,500 to women, and providing free power have contributed to the financial strain, with the state now facing a debt of Rs 86,589 crore, IndiaToday said.
The state government has fulfilled five election promises, including the Rs 1,500 monthly allowance for five lakh women, which will cost around Rs 800 crore annually. Restoring the OPS will benefit 136,000 employees and cost the state Rs 1,000 crore per year.
The government spends Rs 20,639 crore on salaries, with pay, pension, and interest payments consuming 46.3 per cent of the total budget for FY24.
There are over 189,466 pensioners in the state, expected to rise to 238,827 by 2030-31, which will increase the annual pension burden by nearly Rs 20,000 crore.
In March, the state government decided to provide Rs 1,500 per month to women aged 18 to 60, costing Rs 800 crore per annum and benefiting over five lakh women.
Additionally, the e-taxi scheme has been launched under the first phase of the Rs 680 crore Rajiv Gandhi Self-Employment Start-up Scheme.
The next steps
Faced with an empty treasury, the state government has had to take drastic measures. Besides postponing ministers’ salaries for two months, the government had already ended the power subsidy for taxpayers earlier in July. Now, only people from below the poverty line (BPL), Integrated Rural Development Programme (IRDP), and weaker sections will receive this subsidy. The power subsidy cost the state electricity board Rs 1,800 crore in FY24.
First Published: Sep 02 2024 | 9:46 AM IST
