Shimla: Himachal Pradesh is facing a "major catastrophe" that could force the mass closure of govt institutions and the freezing of employee wages after a central committee recommended scrapping a critical financial lifeline for the Himalayan state.Chief minister Sukhvinder Singh Sukhu on Sunday vowed to launch a legal and political "battle" against the 16th Finance Commission's recommendation to discontinue the Revenue Deficit Grant (RDG) that currently accounts for 12.7% of the state's total budget, the second-highest dependency in India. "We are warriors and will fight this as a battle," Sukhu said, following a grim financial presentation that outlined a state headed toward insolvency. "If the RDG is stopped today, it will not be available tomorrow. This is about safeguarding our legitimate rights."A Fiscal 'Death Spiral'The state's finance department delivered a stark assessment of the crisis. For the 2021-2026 period, the state projected a deficit of Rs 80,170 crore, previously plugged by central grants. Without the RDG, Himachal Pradesh faces a resource gap of Rs 6,000 crore rupees for the 2026-27 fiscal year alone. The state's total available resources sit at Rs 42,000 crore, while committed liabilities — salaries, pensions, and debt servicing — already exceed Rs 48,000 crore.Proposed 'Austerity' MeasuresTo prevent total collapse, the finance department has recommended a series of drastic measures that would fundamentally alter the state's social contract. The measures include wage freezes (a total freeze on dearness allowance (DA) and a ban on future pay commissions or salary revisions), subsidy cuts (the complete discontinuation of subsidies for electricity, water, and food, as well as the removal of bus fare concessions), job losses (the abolition of all govt posts vacant for more than two years and a 30% downsizing or closure of existing govt institutions), and privatization (the sell-off of power distribution companies (discoms) and the merger or privatisation of public sector undertakings).The GST SqueezeCM Sukhu highlighted that Himachal Pradesh, as a "producer state", has been uniquely disadvantaged by the implementation of the goods and services tax (GST). Because GST is a consumption-based tax, HP's small population of 75 lakh has seen tax collection growth plummet from 14% to just 8%. This has severely limited the state's ability to generate internal revenue to offset central cuts.Demands for Central InterventionThe state govt demands the return of aging power projects and a 50% royalty on fully repaid hydroelectric ventures. Sukhu also pointed to Rs 4,500 crore in unpaid arrears from the Bhakra Beas Management Board (BBMB) dating back to 2012.The CM has offered to meet with Prime Minister Narendra Modi, alongside opposition BJP lawmakers from the state, to seek a reversal of the commission's findings before they receive final approval. "The BJP cannot compare us to 16 other states whose grants were stopped," Sukhu said. "Those states have the resources and tourism infrastructure to survive; we do not."MSID:: 128071926 413 |