The Himachal Pradesh Cabinet, including Chief Parliamentary Secretaries (CPSs), recently decided to defer salaries for two months due to the state’s severe financial crunch. This move has spotlighted the state’s fiscal issues, sparking a political clash between the ruling Congress and the opposition BJP.

Chief Minister Sukhvinder Singh Sukhu attributes the financial crisis to the previous Jai Ram Thakur-led government and the central government’s policies. On the other hand, the BJP accuses the Congress-led state government of mismanaging finances, leading to the current crisis.

Understanding the Financial Crisis

Himachal Pradesh is grappling with a staggering debt of ₹86,589 crore. In the 2024-2025 Budget, the state plans to spend ₹52,965 crore (excluding debt repayment), with major allocations for salaries, pensions, and other costs totaling approximately ₹20,639 crore. This expenditure is expected to be covered by receipts (excluding borrowings) of ₹42,181 crore and net borrowings of ₹7,340 crore, marking a 4% increase from the previous fiscal year.

Over the past three financial years, the state has borrowed ₹21,366 crore, with ₹5,864 crore repaid. Additionally, ₹2,810 crore has been borrowed from the Department of Pension and Pensioners’ Welfare. While this borrowing is within legal limits, it reflects the state’s fragile financial situation. With a population of around 77.56 lakh, the per capita debt in Himachal Pradesh stands at ₹1.17 lakh, second only to Arunachal Pradesh.

Impact of the Old Pension Scheme and Welfare Schemes

Chief Minister Sukhu has highlighted that the reintroduction of the Old Pension Scheme (OPS) has reduced the state’s borrowing capacity by approximately ₹2,000 crore. The introduction of the Indira Gandhi Pyari Sukh Samman Nidhi Yojana (IGPSSNY), which provides ₹1,500 to eligible women over 18, has further strained the state’s finances.

Congress’ Accusations

The Congress government blames the previous BJP administration for compromising the state’s interests by allowing private companies to set up hydroelectric projects at the expense of local communities. Sukhu also criticizes the BJP for allegedly misusing the ₹10,000 crore Deficit Revenue Grant (DRG) received under the 15th Finance Commission. He claims that the DRG has been steadily declining, from ₹6,258 crore when he took office to a projected ₹3,257 crore in the next fiscal year.

The Congress further alleges that the central government has withheld ₹9,042 crore in Post-Disaster Needs Assessment (PDNA) funds due to political differences. Additionally, National Pension System funds amounting to ₹9,200 crore have yet to be received from the Pension Fund Regulatory and Development Authority (PFRDA).

Sukhu Government’s Response to the Crisis

In response to the crisis, the Sukhu government has deferred salaries and perks for ministers and CPSs. Under the “Vyavastha Parivartan” initiative, the government has also discontinued the power subsidy scheme that provided 125 units of free electricity to households, except for Below Poverty Line (BPL) families, saving an estimated ₹200 crore. The state has also started recovering water charges from commercial establishments, such as hotels and homestays.

Despite these measures, Chief Minister Sukhu downplays the severity of the crisis, calling it a “temporary hurdle.” He believes that his government’s reforms will make Himachal Pradesh self-sufficient within three years.

Opposition’s Criticism

The opposition BJP, led by Jai Ram Thakur, has criticized the Sukhu government for reneging on its promise of 300 units of free electricity and for increasing the financial burden by appointing non-elected individuals to Cabinet-level positions. Thakur also accuses the government of misusing pension funds and delaying salary and pension payments. He further warns that the deferred salary move may soon be extended to government employees as well.

As the political battle continues, the financial future of Himachal Pradesh remains uncertain.