Shimla, Dec 22
The Himachal Pradesh government recently presented a report highlighting the state’s financial troubles, revealing a rising fiscal deficit and increasing expenditure commitments. It shows that the state is spending more money than it earns, which is causing serious financial stress.
A significant issue is the loss of ₹1,000 crore in expected revenue from the Himachal Pradesh Water Cess on Hydropower Generation Act, 2023, which was quashed by the state’s High Court. With the case still under judicial review, the state remains unable to recover this crucial revenue. Compounding the problem, the central government has reduced the revenue deficit grant for Himachal Pradesh by ₹1,800 crore for 2024-25, as per the 15th Finance Commission’s recommendations.
On the income side, the state’s revenue receipts are expected to slightly exceed budget estimates due to an increase in its share of central taxes and funding from externally aided projects.
However, the expenditure side paints a concerning picture. Revenue expenditure under state schemes is projected to rise by ₹1,285.50 crore, driven by higher spending on pensions, social security programs, subsidies, grants-in-aid, and court-mandated payments related to power projects. This increase is pushing the revenue deficit up by ₹1,493.25 crore beyond initial estimates.
The fiscal deficit, which represents the gap between the government’s total income and expenditure, is expected to rise by ₹2,308.11 crore, bringing it to 5.76% of the state’s Gross State Domestic Product (GSDP).
This marks a significant increase from the earlier projection. Additionally, the primary deficit, which excludes interest payments, is expected to grow from ₹4,528.53 crore to ₹6,836.64 crore.
Himachal Pradesh’s financial strain is further worsened by rising costs for centrally sponsored schemes like Pradhan Mantri Awas Yojana (PMAY), MNREGA, and AMRUT, which demand higher outlays. Balancing developmental expenditures with the need to reduce fiscal deficits remains a key challenge for the state.
To address these issues, the government has introduced measures to boost revenue, including revising its Excise Policy and increasing rates for water supply and other public services. It is also seeking additional resources from central funds and externally aided projects to ease the financial burden.
The state’s medium-term fiscal strategy includes enhancing state-owned tax and non-tax receipts, such as higher excise revenue and the newly imposed milk cess. At the same time, the government aims to manage unproductive expenses by optimizing liquor retail allocations and revising service charges for public transport. While these steps may help, the report underlines that Himachal Pradesh’s path to fiscal stability will require sustained efforts, prudent financial management, and careful planning.
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