Vishal Rana, Hamirpur

Himachal Pradesh is facing an unprecedented financial crisis that has resulted in a historic first—the delay in salary payments to government employees. This alarming situation underscores the deep financial distress the state is currently grappling with, largely attributed to the lack of adequate support from the central government and a failure to effectively harness its own resources.

Central Government’s Financial Apathy
At the heart of this crisis is the substantial reduction in financial aid from the BJP-led central government. The 15th Finance Commission’s allocation to Himachal Pradesh saw a sharp decrease to ₹37,199 crores, down from ₹40,624 crores allocated by the 14th Finance Commission. This reduction has severely crippled the state’s ability to manage its finances effectively.

Plummeting GST Compensation
Adding to the woes is the steep decline in GST compensation. While Himachal Pradesh received ₹10,249 crores in the fiscal year 2021-22, this figure is projected to plummet to just ₹3,257 crores by 2025-26. This sharp drop is expected to further strain the state’s already fragile revenue system.

Tightened Borrowing Limits
The state government has been heavily reliant on loans to cover revenue shortfalls, borrowing over ₹3,000 crores annually in the last two years. However, recent policy changes by the central government have tightened Himachal’s borrowing capacity, slashing it from ₹14,500 crores to ₹9,000 crores. This restriction has left the state with limited avenues to bridge its financial gaps.

Pension Scheme Controversy
The shift from the New Pension Scheme (NPS) back to the Old Pension Scheme (OPS) has also added to the financial strain. The central government has cut off the annual grant of ₹1,842 crores that Himachal used to receive under the NPS, further complicating the state’s fiscal situation.

Mounting Debt and Interest Burden
The state’s debt burden has spiraled out of control, with annual interest payments now ballooning to ₹12,000 crores. This overwhelming debt service cost is rapidly depleting the state’s resources, pushing it deeper into financial turmoil.

Fiscal Responsibility Challenges
The state is now required to deposit ₹1,780 crores annually under the NPS, an obligation that did not exist under the OPS. This additional financial responsibility has further strained the state’s fiscal management. Moreover, the central government’s refusal to reimburse 5% of Himachal’s borrowing capacity under the Fiscal Responsibility and Budget Management (FRBM) Act has further restricted the state’s ability to raise necessary funds.

Call for Self-Reliance
In light of these challenges, it has become imperative for Himachal Pradesh to rethink its economic strategy. The state must urgently explore ways to generate income from its own abundant natural and human resources, reducing its dependency on central grants.

As Himachal Pradesh navigates this economic crisis, the need for bold and decisive action has never been greater. The state’s financial future hinges on its ability to stabilize its economy, with or without central government support.