Himachal Pradesh stares at a financial crisis as the state recovers from last year’s devastating floods and deals with the cap on its borrowing limit set by the Narendra Modi government.
The Sukhvinder Singh Sukhu-led Himachal government of the Congress party is also pressing the Centre for the release of funds under the National Pension Scheme (NPS) deposits. In the absence of these funds, in last year’s budget, the Sukhu government had to make budgetary allocations for the fulfilment of the electoral promise of the ‘Old Pension Scheme (OPS)’ from the state’s own resources.
In an interview with Outlook, Sukhu said that the Centre has cut Himachal’s borrowing limit by more than half and described the situation as a “huge blow”.
Sukhu told Outlook, “The centre has reduced our borrowing limit by Rs 5,000 crore, cutting down it from Rs 14,000 Crore per annum to Rs 9,000 crore. This is a huge blow to the state already facing a fiscal crisis. If the Centre does not let us borrow, how will we survive or pay salaries and wages to the employees?”
Last year, Sukhu had reminded the Modi government about the state cabinet’s request for the Centre to release Rs 8,000 crore in deposits under the NPS as its contribution towards the Pension Fund Regulatory Development Authority (PFRDA). The amount now has already risen to Rs 9,242.60 crore. Rajasthan and Chhattisgarh —both of which were ruled by Congress at the time— also made similar requests at the time.
Union Finance Minister Nirmala Sitharaman, however, made it clear that the funds under the NPS cannot be released to the government as per the law as they are for the account-holding employees’ purposes only. She said, “If one state expects that the funds deposited with the Employees Provident Fund Organisation (EPFO) should be given to the states, if this is the expectation, then, no.”
To implement the OPS, the Sukhu government thus incurred an annual burden of Rs 800-900 crore at a time when the state is already starved of funds and debt is already bordering around Rs 80,000 crore. At such a time, the Centre also has also capped Himachal’s borrowing limits.
During the Covid-19 pandemic Centre had allowed the state to exceed the borrowing limit beyond the ceiling under the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, but, from this fiscal year, the Centre has reduced the state borrowing limit and also stopped the additional central assistance to the tunes to hundreds of crore as GST compensation.
Regarding the state’s finances, Sukhu has already met Sitharaman and Union Home Minister Amit Shah but there was no outcome.
What has come as another blow to the Congress-ruled state is the squeezing of several grants and funds under different projects relating to tourism, environmental protection, and power generation. Until the Bharatiya Janata Party (BJP) ruled Himachal, the Centre had boasted about the ‘double engine Sarkar’ bringing in mega projects like AIIMS, PGI’s satellite centre, hydro-engineering college, and two four-lane projects. Since the coming of the Congress government, however, no new mega project has been sanctioned.
In what is being as the worst blow to the state, the Centre has denied a special relief package asked by the state following the devastation of last year’s natural calamities — relentless rains, floods, landslides, and cloud-bursts resulting in 500 deaths and losses to the tune of Rs 10,000 crore.
Centre Has Not Given Any Special Flood Relief: Himachal CM Sukhu
BJP President J P Nadda, who was at Dharamshala last week, rejected Sukhu’s charge that the Centre has not helped the state in relief and rehabilitation, asserting that the Centre had given Rs 1,782 crore to the disaster-hit Himachal. Nadda at his Dharamshala rally reminded that he visited affected districts with the state leadership and also expedited financial help from the Centre. But Sukhu has countered the statement.
Sukhu told Outlook, “Barring the money from our share under the national disaster fund, the Centre has not yet released any money under the Post-Disaster Needs Assessments. We even asked the Centre to declare monsoon havoc as a national calamity and appealed to all BJP MLAs and MPs to support the government. The Centre has not given any special relief package.”
Sukhu even draws a comparison to how the BJP-ruled states like Uttarakhand and Gujarat were given special packages after natural calamities and earthquakes, such as the Bhuj earthquake, but the Himachal that faced an unprecedented calamity was not helped.
On his part, Sukhu announced a Rs 4,500 crore relief package out of the state’s budget and distributed cash relief to the affected families. He reached out to almost every single affected family during his visits to the affected areas.
Sukhu told Outlook, “Despite our limited resources, the affected people were provided Rs. 5,000 as house rent in rural areas and Rs. 10,000 in urban areas. The compensation for a completely damaged house was increased to Rs. 7 lakh from Rs. 1.30 lakh. For partial damage to the house, the compensation amount has been increased to Rs. 1 lakh.”
Centre’s Roadblock To Increasing Revenue From Cess
Himachal’s expenditure on salaries has already gone up from Rs 11,641 crore in 2021-22 to Rs 15,669 crore in the revision of pay scales. The pension bill is also as high as Rs 9,283 crore.
In fiscal terms, out of every Rs 100 spent, Rs 26 is spent on salaries/wages, Rs 16 on pension, Rs 10 on interest payment, Rs 10 on loan repayment, Rs 9 on grants to autonomous institutions, and only Rs 29 are left to be spent on other activities, such as capital expenditure. Thus, any cut in the Centre’s grants is bound to hit the state’s development adversely.
Last year, the Sukhu government passed the Himachal Pradesh Water Cess on Hydropower Generation Bill, 2023, to levy cess on the water drawn from the rivers used for power generation as a measure to raise additional resources to the tune of Rs 3,000 crore per year. The Centre reacted fiercely to the move. The Centre shot off a letter to the Chief Secretary and termed the move as “illegal and unconstitutional”, jeopardising the effort.
The Centre also told the central public sector undertakings (PSUs) of NHPC, NTPC, and SJVN Ltd to not pay the water cess and instead seek a legal resource against the state government’s decision. The instruction came even though the Uttarakhand government and the Jammu and Kashmir administration have already done it.
The Case Of Punjab In State-Centre Tussle
The story of Aam Aadmi Party (AAP)-ruled Punjab is very different from Himachal Pradesh.
During a protest staged by the Kerala government at Jantar Mantar, New Delhi against alleged discrimination in federal funds, Punjab Chief Minister Bhagwant Mann cited examples of the Centre’s purported attempts to deny Punjab its rights and blockage of funds under the National Health Mission (NHM), Ayushman Bharat, and special assistance.
Mann said, “Punjab was facing a potential reduction in central grants due to non-compliance with mandated standards for Ayushman Bharat health and wellness centres but it’s because they want the state to Modi’s photos which we have said ‘no’ to.”
The AAP has said that there is a lot of hassles in releasing Punjab’s share of the rural development fund (RDF), which the party says has affected the development of rural areas in the state.
“As of now, we have total dues of about Rs 8,000 crore pending with the Centre, of which Rs 6,500 crore alone is RDF. We need to develop rural roads, improve infrastructure like mandis, but the Centre is not letting us do this. The condition of rural roads and these mandis are quite bad,” said Malvinder Singh Kang, AAP Chief Spokesman in Punjab.
Kang also referred to GST disbursements which the Centre has totally monopolised. The money is released for the BJP-ruled states but non-BJP states are made to suffer and keep waiting, said Kang.
Kang told Outlook, “Is this the way you want to strengthen the federal structure of the country as Prime Minister Modi ji talks about in the Parliament?”
During the protest in Delhi, Mann also referred to the state’s demand for international airports at Mohali and Amritsar because of high traffic from Punjab, which sends hundreds of people to foreign countries.
Even in the case of stubble burning, Mann wrote to the Centre to ask for funding to curb the problem but the demand was turned down. He had proposed a share of Rs 1,500 per acre from the Centre — Rs 500 each by the Centre, Punjab, and Delhi governments.
The cash-strapped Punjab had also suffered a blow due to the Centre’s decision to slash its borrowing limit by Rs 18,000 crore Punjab’s borrowing limit has been cut down from Rs 39,000 crore to Rs 21,000 crore as a consequence of the Punjab government’s decision to enforce the Old Pension Scheme as that could result in stopping the contributing Rs 3,000 crore annually to the Pension Fund Regulatory and Development Authority (PFRDA).
