After Restoring OPS, Debt-Ridden Himachal Hits Market For Rs 800 Cr Loan


(MENAFN- IANS) By Vishal Gulati
Shimla, June 10 (IANS) The hill state of Himachal Pradesh, whose economy largely banks on tourism, horticulture and hydropower, has accumulated a whopping debt of Rs 75,000 crore with the ever-swelling wages and a liability of about Rs 11,000 crore on account of arrears of salaries of employees and pensioners and dearness allowance from the previous government.
Despite facing a mountain of debt, the six-month-old Congress government has fulfilled the promise of implementing the Old Pension Scheme (OPS), a crucial vote bank that now drains a major amount of funds.
The OPS benefitted 1.36 lakh government employees, a crucial vote bank, but placing an annual burden of Rs 800-Rs 900 crore.
Now the impact of crucial freebies is being felt on the economy -- the state has no money to pay salaries, pension and for development projects.
For these, the government is raising an additional loan of Rs 800 crore.
Despite facing financial restrictions, Chief Minister Sukhvinder Sukhu is saying the government is actively focused on resource mobilization by initiating measures to generate additional revenue for the exchequer.
These include seeking a larger share in power projects of the Central public sector undertakings (PSUs) that have recouped their costs. The government has also conducted auctions for liquor vends, resulting in an additional 40 per cent revenue for the exchequer.
Even former chief minister and BJP leader Jairam Thakur admitted this month that the OPS issue had an impact on the electoral outcome in the state.
Official sources told IANS the government is raising a loan of Rs 800 crore mainly for development work. The Centre has imposed a limit of Rs 3,000 crore on external borrowings by the state. Also it has restricted the state's borrowing capacity for ongoing projects to Rs 4,000 crore.
Despite the precarious financial condition, the Chief Minister says the government is committed to enhancing the state's own resources and ensuring that the lack of funds does not hinder the state's progress.
He blamed the previous government for failure to release Rs 11,000 crore due to government employees as arrears.
Additionally, over 900 institutions were opened and upgraded during the last six months of the previous government, which would have resulted in an additional burden of Rs 5,000 crore on the state exchequer.
"The restriction (on new proposals for external assistance) will be in place for three years, from 2023-24 to 2025-26, and by the end of the financial year 2025-26, Himachal Pradesh will only be eligible for approval of proposals up to Rs 2,944 crore from the government of India," he said.
The Chief Minister said the state's decision to reinstate the OPS has led to a deduction of Rs 1,779 crore from the borrowing ceiling for 2022-23. Additionally, the limit of open market borrowing has been reduced by around Rs 5,500 crore as compared to the previous year.
The state government has obtained authorization for borrowing Rs 4,259 crore until December 2023, and it is expected to receive authorization for around Rs 8,500 crore.
He has been demanding a 30 per cent share from the Central government in hydropower projects set up in the state which does not have any sort of debt liabilities and also getting back approximately Rs 9,000 crore of the National Pension Scheme (NPS) as deposited with the Central government.
Expressing concern over the precarious fiscal health of the state, Sukhu, who also holds the finance portfolio, in his budget speech said, "Policies of the previous government have resulted in a debt of Rs 92,833 on every person of Himachal Pradesh. The state's budgetary resources have been adversely affected due to discontinuation of GST compensation after June, 2022.
"This will adversely affect the financial position of the state in coming years. Revenue Deficit Grant from the Central government will reduce from Rs 9,377 crore in 2022-23 to Rs 3,257 crore in 2025-26.
"Notwithstanding these challenges, the pace of development of the state will not be allowed to be adversely affected."
Now to generate the revenue, the government is turning towards nature -- to start cultivation of cannabis for industrial and non-narcotic use and felling of 'khair' (Acacia Catechu) trees for scientific management of forests.
As per the government estimates, the global market of industrial hemp in 2022 was about Rs 5,600 crore, which is expected to increase to about Rs 15,000 crore by 2027.
Also the government is banking on forestry revenue management through sustainable forest use.
The Supreme Court last month allowed the state to axe khair trees on government forest land in 10 forest divisions of the state. The annual yield prescribed is 16,500 trees and the extraction of khair will commence shortly.
The government estimates to earn Rs 1,000 crore annually from the timber of 'khair' -- one of the components of the agro-economy in the rural areas of Kangra, Una, Bilaspur, Sirmaur, Solan and Hamirpur districts.
According to Sukhu, the felling of khair trees is better for forest management and its rejuvenation, besides revenue generation for the state exchequer. Most of the khair trees are decaying due to non-extraction of the timber in time and this is a major obstacle in the direction of better forest management.
Estimating the state's growth rate of 6.4 per cent, per capita income Rs 222,227 with a growth rate of 10.4 per cent over the previous year and the state's GDP to be Rs 195,404 crore in 2022-23, a confident Chief Minister believes effective steps would be taken to develop Himachal as a 'Green Energy State' by March 31, 2026.
(Vishal Gulati can be contacted at )
--IANS
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