Himachal Ministers Defer Salaries Amid Financial Crisis

Himachal Pradesh is in the grip of a severe financial crisis, prompting the state government to make tough decisions to manage its fiscal health. Chief Minister Sukhvinder Singh Sukhu announced on Thursday that all ministers, including himself, chief parliamentary secretaries (CPS), and Cabinet-rank members will not draw their salaries or allowances for the next two months. This measure is part of an effort to alleviate the state’s worsening economic situation.

The decision, made after a Cabinet discussion, is symbolic but reflects the government’s resolve to address the financial challenges. “Until we see significant improvement in the state’s financial health, we will not accept any salary, travel allowance, or daily allowance for two months,” said Sukhu. He also urged all MLAs to voluntarily contribute to the state’s financial recovery.

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Reasons Behind Himachal’s Financial Crisis

Himachal Pradesh’s poor fiscal health stems from several factors, including heavy borrowing, increasing salary and pension bills, reduced central aid, and insufficient revenue generation. The revival of the Old Pension Scheme (OPS), along with other promises like monthly payments of Rs 1,500 to women, and free power, have compounded the financial strain. The state is currently burdened with a debt of Rs 86,589 crore.

The government has implemented five key election promises, including providing Rs 1,500 per month to over 5 lakh women. This initiative alone is projected to cost Rs 800 crore annually. Additionally, the restoration of the OPS will benefit 1.36 lakh employees, adding another Rs 1,000 crore to the annual expenditure.

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Currently, the state government spends Rs 20,639 crore on salaries, with pay, pensions, and interest payments accounting for 46.3% of total spending for the fiscal year 2023-24. The number of pensioners in the state is expected to increase from 1,89,466 to 2,38,827 by 2030-31, raising the annual pension burden by nearly Rs 20,000 crore.

In March, the government decided to provide Rs 1,500 per month to women aged 18 to 60, costing Rs 800 crore per annum. Moreover, the e-taxi scheme under the Rajiv Gandhi Self-Employment Start-up Scheme has been launched with a budget of Rs 680 crore.

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To counter the financial crisis, the state has already implemented several austerity measures. Besides deferring ministers’ salaries, the power subsidy to taxpayers was withdrawn earlier in July, limiting subsidies only to people belonging to the BPL, IRDP, and weaker sections, which cost the state electricity board Rs 1,800 crore in 2023-24.

Revenue Deficit and Reduced Borrowing Limit

Chief Minister Sukhu highlighted in the Assembly that the state’s financial health is critically poor. The revenue deficit grant for the fiscal year 2023-24 has been cut by Rs 1,800 crore. Further reductions are expected, with the revenue deficit grant projected to decrease to Rs 3,257 crore in 2025-26, potentially causing an additional Rs 3,000 crore loss to the state exchequer.

The central government has also slashed the state’s borrowing limit by Rs 5,500 crore, reducing it from 5% of the GDP to 3.5%. As a result, Himachal Pradesh’s borrowing capacity has been reduced from Rs 14,500 crore to Rs 9,000 crore.

The state’s total debt stands at approximately Rs 86,589 crore, with expectations to reach Rs 1 lakh crore by the next fiscal year. Himachal has a per capita debt of Rs 1.17 lakh, making it the second-highest in India after Arunachal Pradesh.

Sukhu blamed the previous BJP government for the financial crisis, stating that it left a massive debt for his government to manage. However, he assured that steps are being taken to improve revenue collection, noting that his administration generated Rs 485 crore in excise revenue in just one year, compared to Rs 665 crore collected by the previous government in five years.

Opposition’s Response

The opposition BJP, led by former Chief Minister Jairam Thakur, criticized the Sukhu government’s handling of the crisis and staged a walkout from the Assembly. Thakur accused the government of merely deferring salaries and continuing to create unconstitutional positions, further burdening the state’s finances.

“We need to investigate this matter further,” Thakur stated, indicating a potential showdown with the ruling government over its financial policies.

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