No end in sight for state’s financial woes
It’s been a tight ropewalk for the Himachal Government with there being no end to its financial woes. The year ahead is likely to be even tougher.
Not only has the second year of the Congress government headed by Chief Minister Sukhvinder Singh been politically very tumultuous due to a failed ‘Operation Lotus’ but financially also, it’s been a tough time.
The reducing Revenue Deficit Grant (RDG) has been a major cause for worry and the Rs 30,000 crore annual salary and pensionary bills of serving and retired employees have only compounded the situation.
With a fiscal liability of Rs 86,589 crore, Himachal is the fourth-highest debt-stressed state of the country and will require a sum of Rs 44,617 crore in the next five years to just pay the interest on the loans raised for development, salaries and other works.
The details of the fiscal liabilities presented before the 16th Finance Commission present a very grim picture of the state’s finances. The fiscal liabilities have mounted from Rs 54,299 crore in 2018-19 to Rs 86,589 crore in 2022-23.
The state’s fiscal liabilities are likely to reach Rs 1,07,230 crore in 2024-25 considering the limited revenue-generating areas that the state has.
Himachal made national headlines when salaries and pensions of employees were delayed even though the government claimed that it had been done only to save the extra interest which could be saved by staggering the payment of salaries.
The employees ratio in Himachal to its population is amongst the highest in the country with their number being 2.42 lakh.
The revenue deficit grant (RDG) that Himachal received for 2023-24 was Rs 8,058 crore, which during the current financial year has been reduced by Rs 1,800 crore to Rs 6,258 crore. In 2025-26, the RDG would be reduced by another Rs 3,000 crore to a mere Rs 3,257 crore, which would make it even tougher for Himachal to meet its needs.
With a tapering RDG and the GST compensation ending, the Himachal Government is desperately looking towards generating additional revenue from sectors like tourism, mining, power and auction of liquor vends. The bold step taken by Chief Minister Sukhvinder Singh Sukhu by withdrawing power and water subsidies from income tax payers could bring some relief. He also hopes to withdraw similar subsidies in transport and ration supply in public distribution system (PDS).
With little hope of help from the Centre despite repeated requests for a special financial package, the debt burden of the state has crossed Rs 85,000 crore. Notwithstanding the political slugfest between the ruling Congress and BJP, the situation remains grim. The loan raising limit of Rs 6,200 crore for the Himachal Government from April 1 to December 31, 2024 has already been exhausted. In fact, a Rs 500 crore advance loan has been raised to meet the salary and development needs for this month.
The wait to get Rs 9,200 crore Post Disaster Need Assessment (PDNA) from the Centre as relief for damages suffered during the massive devastation caused by the unprecedented rain in 2023 monsoon continues. Though the state has undertaken repairs and restoration from its own resources and money received from the Centre under various heads but even now, much of the damaged infrastructure like roads and bridges are yet to be restored permanently.
