Himachal Budget 2014 – Do we have a choice?

Not that the heavily leveraged Himachal Pradesh budget has any scope for incorporating much of the public views to make it a public centric budget but the contagious AAP flue has forced the state government here to seek suggestions from the general public, industries, trade and farmers associations so as to reflect that views of all stakeholders have been taken on board.

In a publically released communiqué yesterday, Dr Shirkand Baldi, principal secretary Finance announced that the process for formulation of the 2014-15 state budget had commenced and suggestions were being invited.

ChoicesThe real question before us actually is – Do we have a choice?

For an oversized government, no political party in Himachal Pradesh is willing to come to grips with the grave financial situation that the state faces.

The biggest non-productive expenditure the state incurs is on employee salaries. Only a glimpse at the 2013 budget will reveal that of the total budget of Rs 21,767 crore, Rs 6956 crore was required for paying salaries.

In percentage terms it works out to 30.30 percent of all budgeted expenditure.

One need not look any further. Even a 10 percent cut in this expenditure would release Rs 695.6 crore for more productive development works.

For a state that has lost its sway in reigning in runaway expenditure, a salary cut is unthinkable, but even a salary and pension freeze, would be a breather.

Other than the Rs 6956 crore that the 2013-14 budget kept aside for salaries, another Rs 2839 crore was marked for pensions.

However the midterm budget appraisal papers placed before the state assembly during the monsoon session in August 2013 showed that the pensions bill was likely to increase to Rs 3146.09 crore, an increase of Rs 306.17 crore over the March 2013 budget estimate.

An Rs 10,102 crore outgo in a budget of Rs 21767 crore, which is 46.41 percent is the largest pie in the cake.

That not all, with lifespan increasing and untamed inflation ruling the day, the salary and pension bill is only going to rise.

The other day Mr Avay Shukla, the former additional chief secretary, pointed out an interesting fact that Himachal Pradesh with just 0.5 percent of the country is host to 3% of the country’s IAS Cadre.

And the more high wage earning retired babu’s the state re-employs that much higher the salary bill rises. how do you budget

One could argue that a 46.41 percent bill on salaries and pensions is manageable provided the rest is available for improving infrastructure, setting up newer and better urban centers, improving off-season agriculture productivity, encouraging mountain environment conducive industries such as tourism, food processing and IT – something which would empower the people with better livelihood options but there is very little maneuverability for it.

The heavy debt the state has raised over the years to meet its commitment liability incurred a cost of Rs 2431 crore on interests and Rs 1714 crore towards loan repayment.

Paying an estimated Rs 14,247 Crore for 2013-14 on salaries, pensions, interests and loan repayments takes up 65.45 percent of the entire budget.

The midterm budget reappraisal laid down under the HP Fiscal Responsibility and Budget Management Rules (FRBM) report by chief minister Virbhadra Singh, who is also the finance minister, during the monsoon session in August showed that the year’s revenues were likely to fall short by Rs 2086.08 crore and the expenditures were likely to overshoot by Rs 505.98 crores.

The year’s fiscal deficit which at the start of the financial year was project at Rs 2324.19 crore was expected to more than double to 4820.43 crore.

The finance department which was banking on receiving Rs 1113.03 crore from Bhakra Beas Management Board to sure up revenues on account of power arrears due, had come unstuck as the states asked to cough up the dues were not paying the amount.

It is an open secret that the state is failing to achieve its annual plan targets and the chief minister has knocked the doors of Prime Minister Manmohan Singh at least three time demanding Rs 2100 Cr as special grants. He has even followed it up with Finance Minister PC Chidambaram but nothing has come through.

On a day when the Virbhadra Singh government completed a year on office (25 December, 2013) when he was questioned about it, the chief minister responded by saying that things take time and funds were in pipeline.

No matter what the chief minister says, the central government has not even released any calamity relief for the natural disaster that hit Kinnaur last summer. The state has made a Rs 1972.08 crore calamity relief case.

money-budget_fit_300x300A state which is out with a begging bowl to meet its committed liabilities, can it offer choices to its citizens to have a say in budget making.

Where Srikant Baldi, the finance secretary, has asked the industries department to start discussion with industry associations and agriculture and horticulture departments to elicit views of the farming community, so as to take all stakeholders and general masses on board in the exercise budget making that would help to make it more people centric and closer to aspirations of the people.

“It would help the government to frame such policies and programmes which are more development and people oriented,” says Dr Badli.

The suggestions need to reach the [email protected] or [email protected] by 20 January.

Some suggestions that would certainly not find any favour with the Finance Secretary or the political masters could be: 

  • Adopt a wage and pension freeze for all employees and pensioners.
  • Downsize the government. Start from the top. (Big government not only provides bad governance but also stifles growth)
  • Reduce the fleet of government vehicles – outsource government transport to hiring taxis. 
  • Increase rentals for government housing in urban areas and stop subsidizing it for people who can otherwise also afford it. (Stop letting out government housing to those who own private houses in the towns/Cities of their posting). 
  • For most services permit self attesting and do away with filing of affidavits, an exercise which is only a harassment for the general public and a money spinner for notaries and others associated with the job. Put some trust in the Citizen – link self attesting to Aadhar.
  • Increase investment in off-season vegetable / flower growing and food processing. 
  • Focus more attention on inviting IT industry into a state that has a natural advantage for it.
  • Announce a ban for  new Cement Units. It is only damaging the states USP of being a clean and green state.
  • Review allotment of hydropower projects at places where rural livelihoods are at risk and have pitched the community against the project promoter.
  • Review the investments being made in public education for results don’t seem to be being achieved. Enrollments in government institutions are falling and some schools have simply become financially unviable to maintain. 

The list could go on and on but again the fundamental question remains:

Do we have a choice in formulating the state budget?

Join the Conversation


  1. says: M.L.Verma

    The state is passing through worst fiscal mismanage period as state government did not bother to spoil its meager resources after hiking salary of Ministers and Member of Assembly, keeping state coffer open to any number of parliamentary and chief parliamentary sectaries. Elevating number of party leaders who lost election to government helms offering them coveted posts as chairnmen and vice chairmen.

    You rightly said that government is moving in-front of center with begging bowl. Who bother of meeting the both end it is just eye wash. Thank gods state government this time could not blame last BJP Rule for finical mis-management or offering it empty coffer it.

    Resource less state budget could levy tax on the people of this state but thanks to on coming Lok Sabha election as it could not immediately announce such hard measure for sake of vote in election.

    There is hue and cry to increase good and passengers taxes state government had already given 30 percent hike in the HRTC fare. Levy charge are being enforced on the people by various means.

    The government employees is thriving on the major piece of cake so state government should ask them to be accountable to people at least.

  2. says: raman

    Thats a prtty informative article…. would be great if you can also publish a break up of revenue along with some analysis on loss making state institutions….

  3. There is another point that I need to add that two decisions of the HP High Court about asking the government to implement all recommendations of Shetty Commission for the judiciary and about extending pensionary benefits to all employees of state public sector undertakings (SPSU), some of which are in heavy losses, when implemented, would only increase the committed liability bill of the state and further shrink the cake for the common man and his needs.

    Top bureaucrats estimate that the pensionary benefits to SPSU employees alone would cross Rs 500 crores.

  4. says: ashish

    Wonderfully written analysis of the CURRENT DEPLORABLE fiscal situation of HP. What’s more threatening for HP is that it’s one of those few states in the country which went ahead with the populist Food Security Act – it’s now required of it to keep paying up its part of share continuously for the long time to come … “final nail in the coffin..”

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