NEW DELHI: The state has accumulated a massive debt of nearly Rs 90,000 crore.
The state of Himachal Pradesh known for its beautiful landscape is going through a turbulent phase as it faces one of its biggest financial crises ever, with the state government delaying salaries of its employees and rethinking its plan to continue with its freebies.
The situation is reminiscent of the financial mess created because of misgovernance and the freebie culture that led to financial crises in Karnataka, Punjab and now in Himachal Pradesh.
The state’s poor fiscal condition has been caused by rising salary and pension costs, reduction in Central aid, insufficient revenue generation for the lack of industries, revival of the Old Pension Scheme (OPS), welfare and freebie policies such as delivering Rs 1,500 to women and providing free power. All this blended together contributed to the ongoing financial strain.
An economic analyst based in Himachal Pradesh told The Sunday Guardian that “A crisis was already brewing, which has now exploded. We are not an industrial state where we can create a huge amount of revenue from industries. We have one of the largest salaried classes here and a major chunk of our budget goes to these salaried classes and pensioners.”
He further said that the freebie and welfare policies that usually attract a lot of attention because of the political benefits these provide, have become a matter of concern in this Congress-ruled state because these are putting a lot of financial burden on the state’s exchequer.
At a time when the Himalayan state is showing the ill effects of such political populism and irrational welfare schemes, the Congress government in Shimla is trying to rationalise these subsidies and freebies to revive the state’s economy, only after the situation get worsened.
The financial mess in Himachal has landed the state in a massive debt of nearly Rs 90,000 crore.
Economists and analysts had been flagging the issue of fiscal deficit for a while now, and when Chief Minister Sukhvinder Singh Sukhu presented the budget in February 2024, analysts had noted that its fiscal ratios could be higher than estimated.
It was for the first time in the history of Himachal Pradesh that around 2 lakh employees and 1.5 lakh pensioners did not get salaries and pensions on September 1 because of the financial crisis.
When this crisis was deepening, the Chief Minister on September 5 declared that employees have received their salaries, along with some people who have received their pension on Thursday while other pensioners would do so on September 8.
This deferment of dues is being defended by the CM as a move that will help save at least Rs 3 crore every month and Rs 36 crore annually on interest payment.
Meanwhile, CM Sukhvinder Singh Sukhu is refusing to take responsibility for the financial mess that his state has landed in and is instead blaming the previous BJP dispensation for the ongoing crisis. He is claiming that the earlier BJP government’s populist decisions put a burden of thousands of crores on the state exchequer. He also accused the BJP of providing free water and electricity, which added an annual burden of Rs 1,080 crore on the state exchequer.
In response, BJP’s National Co-Treasurer and Rajya Sabha MP Dr Naresh Bansal told The Sunday Guardian, “This is a pathetic situation and not a good time to engage in blame game. Congress Party’s ‘Khata-Khat’ planning is showing its real face. They have been making poll promises during election season but now the whole country is seeing the financial crisis in Himachal. No one can blame the previous BJP government in Himachal.
During our time also, there was a lot of pressure about bringing back the Old Pension Scheme (OPS) but we did not bring it. The revival of OPS by Congress has a huge role in this crisis and experts have been criticising the move. BJP never makes fake poll promises just for the lust of power, whereas it’s the tendency of the Congress to engage in such acts and we are seeing the disastrous results”, he added.
Noted economist Aakash Jindal told The Sunday Guardian, “The current crisis in the Himalayan state is a structural issue. Our Chief Ministers, Finance Ministers have been focusing hugely on relief and welfare schemes and that is a good step for any democratic set up. But for that to happen, we need more money and more taxes so that the respective governments can deliver.”
“For that to happen, we need a holistic approach. For example, Manali in Himachal is a tourist hub but as per our analysis, there are 5-6 more such places which can be transformed like Manali and emerge as tourist hubs which can bring in lot of money for the government. Similarly, the whole of Himachal is not mountainous and in places that are close to Chandigarh, the government should set up industries because of the availability of huge tracts of land and the proximity to Chandigarh and Delhi highway. This can generate a lot of capital”, he added.
The Himalayan state witnessed a pendulum like situation in the 2022 Assembly elections after the loss of BJP and the Congress high command appointing Sukhvinder Singh Sukhu as the Chief Minister, which led to internal dissatisfaction amongst the supporters of Vikramaditya Singh, the son of the late Virbhadra Singh (who was the longest serving CM of HP).
Since then, Himachal has had a turbulent political run, which has now spilled over to the economic area as well.