Faced with a high debt stress of over Rs 80,000 crore, Himachal has urged the 16th Finance Commission to grant liberal funds in view of the mounting pension liability of the state government due to the retirement of a large number of employees every year.
The expenditure on salary, pension and interest payment was 46.33 per cent of the total expenditure of the state government in 2023-24. The number of pensioners in the state at present is 189,466, which is expected to rise to 2,38,827 in 2030-31. This will result in an annual pension burden of around Rs 20,000 crore.
The annual salary and pension bill of the cash-strapped Himachal Government has mounted to Rs 26,722 crore amidst a grave financial crisis looming large in view of the Goods and Services Tax (GST) allocation from the Central Government coming to an end.
The restoration of the old pension scheme (OPS), one of the election guarantees of the Congress to employees, will aggravate the financial crisis in the coming years. “The salary continues to be the largest expenditure component at 25.13 per cent of the total expenditure of the state in 2024-25,” reads the memorandum submitted to the 16th Finance Commission, which visited the state early this week.
Interestingly, 60 per cent of the salary burden of the government employees is of the Health and Education departments. Though a few regular appointments are being made in the government sector, due to the retirement of a large number of employees, the pension burden has been on the rise. The main reasons for this has been the grant of enhanced retirement benefits, as per the Pay Commission recommendations, release of dearness allowance (DA) and increasing life expectancy.
The employees’ ratio to the total population in Himachal is amongst the highest in the country while the state has a few revenue generating sources. At present, there are 2,42,877 state government employees and Rs 9,000 crore arrears are yet to be paid to them.
The financial health of the state becomes even more worrisome as the GST allocation to the state will end this year. The state will find it exceedingly difficult to foot the Rs 26,722 crore salary and pension bill as the Central GST allocation, which was Rs 1,293 crore in 2022-23, is going to end. The state government has tried to justify the hefty salary burden of its employees by stating that a huge investment has been made in the health and education sectors and major reforms have been taken to ensure quality services.