On November 18, a single-judge Bench of the Himachal Pradesh High Court ordered the attachment of Himachal Bhawan, in the heart of New Delhi, to ensure that the state paid its Rs 150 crore dues over the unfinished Seli Hydro Electric Power Project.

The next day, the High Court directed the closure of 18 loss-making Himachal Pradesh Tourism Development Corporation hotels, terming them ‘White Elephants’, and citing the state government’s inability to pay dues to the corporation’s retired employees.

While the state government has announced that it would challenge both the decisions, these are set to mount pressure on Chief Minister Sukhvinder Singh Sukhu’s administration – which is already under the microscope over fulfillment of Congress guarantees, that helped the party come to power, and that are proving a stretch on the state’s resources given its estimated debt of Rs 86,589 crore.

This puts the per capita debt for Himachal Pradesh’s population of 77.56 lakh at Rs 1.17 lakh.

In an admission of the financial strain, Sukhu said during the Monsoon Session of the Assembly in August: “For every Rs 100 spent by the government this fiscal year, Rs 25 goes towards salaries, Rs 17 towards pensions, Rs 11 towards interest payments, Rs 9 towards debt repayment, Rs 10 towards grants for autonomous institutions… Only Rs 28 is left for capital expenditure and other activities.”

The Finance Department estimates that Himachal requires approximately Rs 2,000 crore annually just to meet salary (Rs 1,200 crore) and pension (Rs 800 crore) obligations towards government employees and retirees. Additionally, about Rs 9,200 crore in New Pension Scheme contributions have not been released by the Pension Fund Regulatory and Development Authority.

In a written reply during the Monsoon Session, Sukhu revealed that the state borrowed Rs 21,366 crore over the last three financial years (2022-25) and an additional Rs 2,810 crore from the Department of Pension and Pensioners’ Welfare.

A senior Finance Department official told The Indian Express, “The real challenge will begin in the fiscal year 2025-26, when the state will receive nearly half the Revenue Deficit Grant compared to the current fiscal year (2024-25) – from Rs 6,258 crore, disbursed monthly and quarterly by the central government, to Rs 3,257 crore.”

Already, the cessation of GST compensation has led to an annual revenue loss of Rs 2,500-3,000 crore for the state.

The Finance official said that to address the anticipated financial strain, the government is attempting to streamline resources by “rolling back subsidies, including free electricity for industries and general consumers (except Below Poverty Line households), and introducing new cesses, such as the environment and milk cess”.

If the government does revoke the subsidy of free electricity up to 125 units for non-BPL consumers, which could generate Rs 200 crore in revenue, it would signal that its poll promise to hike the free units to 300 was unlikely to be fulfilled in the near future.

The other poll vows by the Congress are also straining the state’s resources – including the Congress’s assurance to bring back the Old Pension Scheme, which has constrained the state’s borrowing capacity by approximately Rs 2,000 crore; and the Indira Gandhi Sukh Samman Nidhi Yojna, providing Rs 1,500 monthly to eligible women above 18 years, which has added an annual financial burden of Rs 800 crore. Together, these schemes are estimated to cost Rs 1,800 crore annually.

A senior Finance Department official said that while bringing back OPS may not hurt the state immediately, welfare schemes like the cash payout are a concern.

As of September, only 28,249 of the 7.88 lakh women registered for the Indira Gandhi Priya Sukh Samman Nidhi Yojana had been found eligible, and the payout in October was Rs 91.62 lakh. With more women expected to qualify, that amount will shoot up.

In August, as a temporary measure, Sukhu deferred salaries and allowances for Cabinet ministers, chief parliamentary secretaries, and board chairpersons for two months. The following month, he announced that government salaries and pensions would be credited only by the 5th and 10th of every month, sparking protests over pending Dearness Allowance payments. While September’s payments were made on time, sustainability remains uncertain.

The options to raise revenues, however, remain limited. A Sukhu government proposal to introduce a water cess on hydropower projects, aiming to generate Rs 2,000-4,000 crore annually, was struck down as “unconstitutional” by the High Court in March 2024.

Another policy, of sewage charge of Rs 25 per seat per month for establishments using their own water sources, dubbed the ‘Toilet Tax’, was partially rolled back within hours after it ran into controversy.

The Himachal government claims to have had more success with its new excise policy for 2023-24, which it says has earned it Rs 665 crore – contrasting this to Rs 445 crore which he says the previous BJP government earned via excise tax during its entire five years.

Accusing the Sukhu government of “failure on all fronts”, senior BJP leader Randhir Sharma said the CM was busy “promoting his favourites”, even as people were burdened by cess. The “favourites” charge was a dig at another blow by the court to Sukhu, striking down his appointment of six leaders as chief parliamentary secretaries.

Revenue Minister Jagat Singh Negi said that rather than the Sukhu government, the BJP should look closely at its own regime under Jairam Thakur. “In 2018-22, there was a chance to bring the economy of the state on the right track but Jairam Thakur lost the opportunity by rewarding freebies to the rich in Himachal. The BJP government consumed a large share of the Revenue Deficit Grant and misused it,” Negi said, adding that all Opposition-ruled states such as Kerala and Punjab are “striving for funds”.

“The government of Kerala recently approached the Supreme Court against the Central government. We have put our side strongly before the 16th Finance Commission recently in Shimla. Besides it, we are expecting that the Centre will release Rs 9,000 crore in disaster financial aid to us. In 2023, Himachal Pradesh witnessed some of its worst disasters due to incessant rains, landslides throughout the state… In 2024, rampant cloudbursts caused losses of approximately Rs 1,500 crore.”