Debt mountain grows: Himachal to raise Rs 1,500 crore loan for development

Shimla, Aug 23,

The Himachal Pradesh Government has announced the sale of state government securities worth Rs 1,500 crore through the Reserve Bank of India, adding to its rising debt burden that has already crossed Rs 1 lakh crore. To raise funds for the development programme of Himachal Pradesh, is the purpose of taking the loan, informed a notification.

According to notifications issued by the Finance Department on August 21, 2025, the state will float two separate loans — one comprising securities of 10-year tenure worth Rs 500 crore and another of 15-year tenure worth Rs 1,000 crore. Both will be auctioned by the Reserve Bank of India’s Mumbai office, through the electronic bidding platform E-Kuber.

The proceeds, as per the government’s statement, will be utilized for the development programme of Himachal Pradesh, with repayment dates fixed for August 28, 2035 (for the 10-year stock) and August 28, 2040 (for the 15-year stock). Interest will be paid twice a year, on February 28 and August 28.

The notifications clarify that the Central Government’s consent has been obtained for floating these loans, as required under Article 293(3) of the Constitution of India. The securities will also qualify as eligible investments for banks under Statutory Liquidity Ratio (SLR).

As per a report Himachal can raise only up to Rs 7,000 crore as loan in 2025-26. In the 2024–25 state budget, over 62% of government expenditure is committed to salaries, pensions and interest payments. This includes nearly Rs 24,000 crore on salaries, Rs 16,500 crore on pensions, and Rs 6,700 crore on interest payments, leaving little fiscal space for capital investment.

Himachal’s debt, which stood at around Rs 47,000 crore in 2017–18, has more than doubled in just seven years. Annual interest payments have also surged, crossing Rs 6,000 crore. Economists warn that continued reliance on borrowings to fund routine expenditure could push the hill state into a deeper debt trap.

The fresh Rs 1,500 crore loan may provide temporary relief, but with mounting obligations and limited revenue streams, the state’s fiscal path remains under sharp scrutiny