‘Abolition Of Revenue Deficit Grant Leads To Financial Crisis In Himachal Pradesh’, Says Finance Secretary

Shimla: Presenting a grim scenario, the Finance Department of Himachal Pradesh has stated that the government treasury will be unable to provide dearness allowance (DA) in the coming days. It has also been stated that in the future, the Unified Pension Scheme (UPS) will have to be considered for new recruitments instead of the Old Pension Scheme. This comes in the face of the Sixteenth Finance Commission abolishing the Revenue Deficit Grant (RDG) on which the hill state’s economy has largely relied.

Finance secretary Devesh Kumar presented the harsh facts leaving everyone worried during his presentation before the Chief Minister Sukhwinder Singh Sukhu, Deputy Chief Minister Mukesh Agnihotri and representatives of the ruling and opposition parties.

Himachal Pradesh is stuck in a debt trap. According to the Finance Department report, the loan limit is Rs 10,000 crore. An amount of Rs 13,000 crore is needed to repay the loan and interest in the next financial year. Now, Rs 3,000 crore will have to be paid from the budget, Kumar said.

He stated that after the RDG ends, the DA for the employees will have to be frozen and the government will not be able to pay arrears.

“When the OPS was implemented, Himachal Pradesh faced the burden of an additional loan of Rs 1,800 crore. The UPS will have to be considered for future employee recruitment. Additionally, posts lying vacant for two years will have to be abolished. The government is in no position to recruit new employees. Currently, the existing staff will have to be rationalised. It is recommended to close 30% of existing institutions. The government is in no position to start any new projects. Many state schemes will have to be discontinued,” he said.

He added, “The central government has set up a new pay commission and Punjab will also implement it. The situation in Himachal is such that we cannot even consider a pay revision, let alone a new one. We will not be able to provide any subsidy to the Himachal Road Transport Corporation (HRTC). It is advisable to charge water and electricity bills. The Market Intervention Scheme (MIS) subsidy will also have to be reduced to zero.”

The Finance Department's presentation explained the future impact of the abolition of the RDG. Devesh Kumar explained that Himachal Pradesh received Rs 37,199 crore in RDG from the 15th Finance Commission for five years. This had provided support to Himachal's treasury.

He pointed out that Himachal Pradesh's own resources are limited. A large portion of the budget is spent on employee salaries, pensions, interest payments on loans and repayment of principal. The situation has now become such that the state government can neither provide DA benefits to employees nor is it possible to pay arrears. The presentation stated that Rs 8,500 crore in arrears from the previous Pay Commission is owed to employees and pensioners. Furthermore, Rs 5,000 crore in DA and DR arrears remain pending, which the government has been unable to pay.

The finance secretary commented, "I would like to point out that we will not be able to pay this amount because we simply do not have the funds. Furthermore, we are in no position to pay DA and Dearness Relief (DR) in the future.”

He underlined that development work will be affected. The situation is such that the government is unable to pay the outstanding payments for schemes like Himcare and Sahara, amounting to Rs 400 to Rs 500 crore. He added that bills totalling approximately Rs 2000 will be paid in the next budget.

Expressing his worries, Kumar said, “We will not be able to pay the MIS funds, and the prospects for further operations are limited. We will have to pay approximately Rs 1000 crore arising from High Court orders related to service matters."

The finance secretary explained that due to the abolition of the RDG, the state government faces a crisis in providing subsidies. He said that all subsidies will have to be reduced to zero including the power subsidies. “This fiscal year, Rs 1,200 crore was provided as power subsidies. It is not possible to continue providing this. This fiscal year, Rs 1,661 crore were spent on social security pensions. Some measures will have to be considered for this as well,” he added.