Financial Crisis in Himachal Pradesh: Employees, Retirees Go Without Wages, Pensions

The employees unions, already up in arms, say the state government is awaiting an instalment of the revenue deficit grant of Rs. 512 crore from the Centre, likely to come on September 5, to clear the salaries. On September 10, when a few more grants come from the Centre, the government will pay pensions.

"The situation is likely to persist, maybe for months. We are in tough times under the current regime," says employees union leader Sanjeev Sharma.

Only last week, Chief Minister Sukhwinder Sukhu, who has been in power for the past 20 months, had announced that his Cabinet ministers, chief parliamentary secretaries, chairpersons and vice chairpersons of boards and corporations, would not draw their salaries and allowances for two months.

The situation has triggered a political slugfest with opposition BJP alleging that the state was heading for a bankruptcy.

The party says the financial crunch is a result of the Congress’s ‘Khata-khat’ politics and luxurious way of running the government with wasteful expenditure on dozens of advisors, OSDs and other appointees enjoying ‘cabinet-ranks’.

“This is a unique example which Chief Minister Sukhwinder Singh Sukhu has set for himself by denying monthly salaries and wages, usually paid on the first day of every month. This time, it’s September 4, and there are no disbursements happening. The employees have to pay rent, school fee of children, ration bills and EMIs for their loans. You (Sukhu) have no idea how difficult it is to manage” says Jairam Thakur, the Leader of Opposition.

But, Sukhu has blamed the previous BJP regime of Jairam Thakur and the Centre for the problems on the financial front, sayings it had left the state with a debt burden of Rs 76,000 cr. Himachal Pradesh now has an estimated debt of Rs 86,589 crore.

In the Rs.52,965-cr budget for the year 2024-25, the salary and pensions bill of the state is over Rs 20,000 cr. Broadly 41 percent of the state’s revenue receipts goes towards meeting the salary bill of the staff and 24 percent towards pensions.

Sukhu, in a written statement in the Assembly, claimed that the state government had raised a loan of Rs 21,366 crore during the past 18 months.

The implementation of the poll-guarantee on Old Pension Scheme (OPS) and Rs.1,500 per month to eligible women as promised in the manifesto has increased the burden on the exchequer. This has led the Centre to cut down on central funds and reduced the state’s borrowing limit also.

“We are repeatedly asking the centre to return Rs 9,200 cr of the employees’ contribution to Pension Fund Regulatory and Development Authority (PFRDA) as the state has scrapped a new pension scheme and started paying pensions under OPS. Also, the centre has not released Rs 9,042 crore payable to the state as Post-Disaster Needs Assessment (PDNA) fund,” says Sukhu

The Congress government has also inherited a liability of Rs.10,000 cr in wage revision arrears. The centre complicated the problem by cutting down Deficit Revenue Grant (DRG) and stopping GST reimbursements.

“ We are in the process of restructuring the state’s finances and cutting down subsidies on electricity and water bills .This will save Rs 1,080 cr. There will be no subsidy for the tax payers on water, electricity. They are taken out of the free PDS ration scheme. This money will be routed to fund schemes for poor and eligible only,” said the Chief Minister.

In the elections, the Congress had promised 300 units of free power.

Now, the government has decided that 125 units of free electricity, a scheme introduced by Jairam Thakur, will be available only to households in the Below Poverty Line (BPL) category. The government will save Rs. 200 crore.

Thakur, however says, "Sukhu cant pass the buck to pay salaries and wages, or disburse pensions on the central government. It is his duty to manage finances and cut down wasteful spending"

Naresh Chauhan, CM's advisor (media) admits that state's fiscal health is critical. "The Chief Minister has chosen a route of financial prudence. There are certain systemic reforms going on. Non-payment of salaries is just a temporary thing and the situation will improve in the coming days. The government employees are aware of the problems and will certainly cooperate. Sukhu ji is firm to his resolve to make the state fully self-reliant by 2027," he said.

Meanwhile the Chief Minister has told the state Assembly that salaries and wages of the employees will be released on September 5 while pensions will be paid on September 10. However from next month a new mechanism will be put in place to disburse salaries and pensions on time.