Shimla: Himachal Pradesh currently finds itself at a critical juncture as the state grapples with mounting debt and financial constraints. With an inherited liability of Rs 86,589 crore, along with employee payment backlog of Rs 10,000 crore, the Sukhvinder Singh Sukhu-led government has embarked on a bold journey to stabilise the state’s finances.
The measures include streamlining expenditure, rationalising the workforce and mobilising resources. But can these efforts yield tangible results over the next three years?
Committee formed under Deputy Chief Minister
Deputy Chief Minister Mukesh Agnihotri, chairing the Resource Mobilisation Committee, painted a stark picture of Himachal’s finances. With per capita debt exceeding Rs 1.16 lakh, the state ranks second only to Arunachal Pradesh in debt burden.
The challenge has been compounded by a sharp decline in revenue deficit grants from the Central Government. These grants, which amounted to Rs 40,624 crore under the 14th Finance Commission, have fallen to Rs 37,199 crore in the 15th Finance Commission period. By 2025-26, this support is projected to plummet to a mere Rs 3,257 crore annually.
Furthermore, the state has seen a disproportionate increase in high-level administrative roles. Between 2006 and 2022, the number of gazetted officers surged by 62%, straining resources. Agriculture Minister Chander Kumar aptly described the state’s government structure as “an inverted pyramid”, urging rationalisation to prioritise field-level roles and on-ground implementation.
Reforms and resource mobilisation
Chief Minister Sukhu is steering the state with a clear vision: reduce dependency on borrowing and enhance Himachal’s self-reliance. Revenue-boosting measures include negotiating higher stakes in power projects operated by central public sector undertakings (CPSUs) and implementing liquor auction reforms, which have delivered a 40% increase in excise revenue.
“We have inherited a precarious financial condition, but this will not hinder development,” CM Sukhu has reiterated at public events. His administration is also championing green initiatives, aiming to transition the state into India’s first “Green Energy State”. By promoting electric vehicles, green hydrogen corridors and renewable energy, the government hopes to attract tourism investments and create an estimated 90,000 jobs across public and private sectors this year.
Borrowing ceiling reduced due to old pension scheme
Despite its ambitious plans, the government faces significant hurdles. The restoration of the old pension scheme for 1.36 lakh employees has reduced Himachal’s borrowing ceiling by Rs 1,779 crore.
Additionally, open market borrowing limits have been curtailed by Rs 5,500 crore compared to previous years. These constraints have left the state with limited fiscal flexibility, with borrowing capped at Rs 2,944 crore until 2025-26 under Union Government-imposed restrictions.
Moreover, the Chief Minister has criticised the fiscal mismanagement of the previous BJP regime, citing the discontinuation of GST compensation after June 2022 as a significant blow to the state’s budget. Despite these challenges, Sukhu remains committed to reshaping the fiscal framework and ensuring that resource mobilization offsets funding shortfalls.
