Himachal Govt raises Rs 350-cr loan amidst severe fiscal strain

The financially stressed Himachal Pradesh Government will raise a loan of Rs 350 crore to meet its immediate developmental and administrative needs. The Finance Department issued a notification confirming that the funds will be deposited in the state treasury on December 3. For the government, navigating the remaining two months of the financial year, November and December 2025, has become exceptionally challenging as it grapples with acute fiscal distress.

A significant relief for the state is the Centre’s indication that it is likely to permit additional borrowing for the first trimester of 2026 (January to March), in keeping with past practice. The government also expects the recommendations of the 16th Finance Commission to take effect from the next financial year, beginning April 1, 2026, which may offer some structural support to its finances.

The Union Government has already granted consent for floating the Rs 350-crore loan, as mandated under Article 293(3) of the Constitution. The borrowing is to be repaid over four years, with the maturity date set for December 3, 2029. Given that Himachal’s borrowing ceiling for the current financial year is almost fully exhausted, this loan functions as a medium-term measure for which Central approval has already been secured. Officials do not rule out the possibility of raising another short- or medium-term loan in December 2025 if cash flow pressures persist.

The state’s financial stress has been compounded by the massive expenditure on relief, rehabilitation and restoration after the extensive monsoon devastation. Key infrastructure — roads, bridges, water supply networks — suffered widespread damage, forcing the government to divert significant resources toward emergency repairs.

Himachal’s overall debt burden has now crossed Rs 1 lakh crore. With limited avenues for internal resource generation, the current year has proved especially difficult. The Revenue Deficit Grant has sharply declined to Rs 3,257 crore in 2025-26 from Rs 6,258 crore in 2024-25, intensifying fiscal pressure. The discontinuation of GST compensation in June 2022 has removed another critical revenue buffer, leaving the state dependent on borrowing and Central support to stay afloat.