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Informist, Friday, Aug 30, 2024

 

NEW DELHI - Himachal Pradesh Chief Minister Sukhvinder Singh Sukhu said he and his Cabinet ministers, chief parliamentary secretaries and chairmen of state boards will forego their salaries, allowances and other benefits for the next two months in the wake of the grave financial crisis in the state.

 

Making a statement in the Vidhan Sabha on Thursday, Sukhu urged all the members of the state assembly to voluntarily take a similar decision. Efforts are being made to increase revenue and reduce unproductive expenditure though it will take some time for the results to become visible, he added.

 

Himachal Pradesh's poor fiscal health is attributed to heavy borrowings, rising salary and pension budgets, reduced central aid, and inadequate revenue generation. "Our government is facing many challenges due to financial mismanagement and wasteful expenditure spree practised by the previous government," Sukhu had said while presenting the Budget in February.

 

Speaking about the poor financial condition of the state, Sukhu said the revenue deficit grant for the year 2023-24 was 80.58 bln rupees and for the current financial year, it has been cut by 18 bln rupees to 62.58 bln rupees. "In 2025-26, the revenue deficit grant will be reduced by another 30 bln rupees to a mere 32.57 bln rupees, which will make it even tougher for us to meet our needs," he said.

 

Sukhu, who heads a Congress party-led government, also said that Himachal Pradesh is yet to receive 90.42 bln rupees under the Post Disaster Need Assessment from the Centre for the damage suffered to bridges and other infrastructure during the last monsoon. "Despite repeated pleas, the Centre has also not returned 92 bln rupees lying with it as part of the new pension scheme deduction. We have also stopped getting GST compensation from the Centre, which has reduced our revenue by almost 25-35 bln rupees 

annually," he said.

 

The chief minister also said that following the restoration of the Old Pension Scheme, the state's borrowing limit too has been reduced by 20 bln rupees. The government had introduced the defined-contribution New Pension System on Jan 1, 2004, replacing the defined benefit pension scheme. All states, except Tamil Nadu and West Bengal, joined the new plan.

 

Himachal Pradesh decided to go back to the Old Pension Scheme, which is costlier, when the Congress-led government came to power in the state in 2023. 

 

A study in the Reserve Bank of India's September bulletin had estimated that in the long run, the shift to the Old Pension Scheme may increase the government's pension spending by over 4.5 times of the outgo under the New Pension Scheme. The research paper, which reflected the views of RBI officials, called the move fiscally unsustainable.

 

As per Himachal Pradesh's Budget documents for 2024-25 (Apr-Mar), the state raised the estimate of expenditure towards pensions in the current fiscal to 102.54 bln rupees, up 10% from the revised estimate of 93.18 bln rupees for 2023-24. Himachal Pradesh's pension expenditure is estimated to be 17% of the total expenditure of 584.44 bln rupees for 2024-25. For 2023-24, at 93.18 bln rupees, the state spent 14.7% of its total expenditure for pensions. 

 

The state's fiscal deficit is estimated to expand to 4.75% of the gross state domestic product in 2024-25 from 4.61% of GSDP in 2023-24. This is beyond the Centre's mandate for states to maintain a fiscal deficit of below 3.5% of GSDP. 

 

The Centre's Budget for 2023-24 lowered the fiscal deficit limit for the states to 3.5% of GSDP, including 0.5% linked to power sector reforms. A part of states' borrowing is also tied to the adoption of the New Pension Scheme, which has led to Himachal's borrowing being lowered by another 20 bln rupees as it has switched back to the old pension plan. 

 

The GST compensation, on the other hand, was discontinued in June 2022. When the GST regime was introduced in 2017, the Centre had promised to protect 14% revenue growth for states for the first five years by levying a cess on some luxury items.

 

Owing to the strained finances of the state, the government had also withdrawn the power subsidy earlier in July this year. Now, only the people belonging to below poverty line, and those covered under Integrated Rural Development Program, and weaker sections will get this subsidy. With mounting expenses, the state's revenue receipts are estimated to grow only 4.2% to 421.53 bln rupees in 2024-25 from 404.46 bln rupees in 2023-24.  End

 

Reported by Priyasmita Dutta

Edited by Vandana Hingorani

 

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