4th highest debt-stressed, Himachal Pradesh needs Rs 44,617 cr just to pay interest on loans

Pratibha Chauhan

Shimla, July 3

Himachal, having fiscal liabilities of Rs 86,589 crore, is the fourth highest debt-stressed state in the country and will require Rs 44,617 crore in the next five years just to pay interest on the loans raised for development, salary payment and other works.

The details of the fiscal liabilities presented before the 16th Finance Commission present a grim picture of the state’s finances. The fiscal liabilities have risen from Rs 54,299 crore in 2018-19 to Rs 86,589 crore in 2022-23 and are likely to go up to Rs 107,230 crore in 2024-25, considering the limited revenue generating resources of the state.

Himachal has pleaded its case with the 16th Finance Commission on the ground that due recognition should be accorded to states that have done well on various indicators of human development and a separate recommendation be made for the hill states to provide them relief from the debt stress. The Himachal Government has also sought the waiver of the outstanding interest on loans from the Central Government and their conversion into interest-free loans.

The huge salary burden and pension liabilities are the biggest burden on the state government, which is left with very little funds for development. “The high debt stress can nullify the achievements of the state unless the Finance Commission recognises it. The commission should factor in these liabilities and recommend to the Central Government to provide a significant debt relief for Himachal,” the government has urged the commission.

The major fiscal liabilities of Himachal include open market borrowings, loans from financial institutions, loans and advances from the Central Government, compensation and bonds raised under the UDAY scheme and those accrued from public account under the General Provident Fund, deposits and the reserve fund. Himachal, which has a limited revenue base, has sought a realistic assessment of its debt requirement so that its economic and social development is not affected.

Himachal’s fiscal liabilities to its Gross State Domestic Product (GSDP) have increased from 39 per cent during the award of the 14th Finance Commission primarily due to the taking over of the liabilities of the HP State Electricity Board under the UDAY scheme and the impact of the worldwide economic slowdown.

Even as the Congress and the BJP blame each other for the grave financial health of the state, the fact remains that without liberal Central funding the path ahead for the hill state appears very difficult.

Fiscal liabilities may rise to over Rs 1L cr in 2024-25

• The fiscal liabilities have risen from Rs 54,299 crore in 2018-19 to Rs 86,589 crore in 2022-23 and are likely to go up to Rs 107,230 crore in 2024-25, considering limited revenue resources
• The Himachal Government has urged the 16th Finance Commission for the waiver of outstanding interest on loans from the Centre and their conversion into interest-free loans
• The huge salary burden and pension liabilities are the biggest burden on the state government, which has left it with very little funds for development works