Decode Politics: As Sukhu Cabinet defers salaries, why does Himachal have second highest per capita debt?

What are the possible reasons for the crisis and how has the Sukhu government handled it so far?

What is the current financial crisis?

Himachal Pradesh has an estimated debt of Rs 86,589 crore. In the 2024-2025 Budget, the state has set an expenditure target of Rs 52,965 crore, excluding debt repayment. This includes salaries, pensions and other costs, which amount to approximately Rs 20,639 crore, which is proposed to be met through receipts (excluding borrowings) of Rs 42, 181 crore and net borrowings of Rs 7,340 crore, marking an increase of 4% over the revised estimate of the 2023-2024 fiscal.

Sukhu, in a written reply to the Assembly, said the state has borrowed Rs 21, 366 crore over the last three financial years, of which Rs 5,864 was repaid, while another Rs 2,810 crore has been borrowed from the Department of Pension and Pensioners’ Welfare.

Experts say the state government is within its right to withdraw money from the Department of Pensions and Pensioners’ Welfare on loan but it would reflect the state’s poor financial condition.

With a population of around 77.56 lakh, the per capita debt in Himachal Pradesh stands at Rs 1.17 lakh per head, only second to Arunachal Pradesh.

Sukhu also claimed that the re-introduction of the Old Pension Scheme (OPS) has decreased the state’s borrowing capacity by around Rs 2,000 crore.

“Since the scheme was reintroduced, the Centre has capped the borrowing capacity of the state. Moreover, the introduction of the Indira Gandhi Pyari Sukh Samman Nidhi Yojana (IGPSSNY) – which promises Rs 1,500 to every eligible woman over the age of 18 – has increased the financial burden on the exchequer,” a government official said.

What does the Congress claim?

While blaming the previous BJP government, Sukhu has also accused it of compromising the state’s interest by allowing private players to set up hydro-electric projects by putting the local population at a disadvantage.

The CM also accused the BJP of misusing the Rs 10,000 crore Deficit Revenue Grant (DRG), which it got under the 15th Finance Commission, and claimed the DRG has been on a steady decline. While the amount has reduced to Rs 6,258 crore since Sukhu took office and is expected to further slide to Rs 3,257 crore in the next fiscal.

The Sukhu government also claims that the Centre has withheld Rs 9,042 crore Post-Disaster Needs Assessment (PDNA) funds due to political differences and said National Pension System funds, amounting to Rs 9,200 crore, have not yet been received from the Pension Fund Regulatory and Development Authority (PFRDA).

The CM, during his Independence Day address from Dehra, also slammed the Thakur government of burdening the state exchequer additionally by Rs 1,080 crore, providing free water and electricity.

What is the Sukhu government doing to tackle the crisis?

In addition to deferring their salaries and perks, the government under “Vyavastha Parivartan” has decided to discontinue its power subsidy scheme – 125 units of electricity for all households – except for Below Poverty Line (BPL) families, with an aim to save Rs 200 crore. Himachal has around 28 lakh power consumers, of which 14.07 lakh had been availing the schemes.

It has also begun recovering water charges from commercial establishments like hotels, private institutions and homestays in rural areas.

Sukhu also seemed to downplay the crisis terming it a “temporary hurdle”. “There have been temporary hurdles whenever economic reforms were initiated. Our government’s decisions will make Himachal Pradesh self-sufficient in the next three years,” the CM said.

What does the Opposition say?

The Opposition has accused Sukhu of coming to power on the basis of false promises.

“The Congress had promised 300 units of free electricity but now has taken away the subsidy on 125 units. Seven people, including four who are not even elected MLAs, have been given Cabinet ranks while six MLAs have been made CPSs, thus increasing the burden on the state exchequer. The government has no money to release pending DA and other allowances of government employees,” Leader of the Opposition (LoP) in the Assembly, Jai Ram Thakur said.

He also accused the Sukhu government of taking loans from the Pensioners’ Welfare Fund and delaying the release of salaries and pensions. Incidentally, the BJP was initially against the implementation of the OPS but changed its stance saying it is not against implementation but wants the scheme to be in the state’s interests.

Terming Sukhu’s move to defer salaries as an “eyewash”, Thakur said: “Wait for a month, he will ask government employees also to do the same.