Himachal Pradesh’s debt trap: Cabinet panel’s wake-up call & the road ahead

In a bold and unprecedented move, the Cabinet Sub-Committee chaired by Himachal Pradesh Deputy Chief Minister Mukesh Agnihotri has laid the foundation for a potential financial turnaround in the state. The committee’s recent report, filled with concrete and transformative recommendations, signals a shift toward fiscal discipline and long-overdue reform. However, converting these recommendations into action will require more than vision—it will demand strong political resolve, bureaucratic resilience, and meaningful cooperation from the Centre.

The first test lies in the state government’s ability to open a structured dialogue with the Finance Ministry. Chief Minister Sukhvinder Singh Sukhu must take the lead in these negotiations, ideally with an all-party delegation to emphasise the seriousness and political unity behind the appeal. Himachal Pradesh’s argument for financial relief could gain credibility by drawing parallels with precedents such as the debt restructuring and farm loan waivers granted to states like Jammu & Kashmir and those in the Northeast. Rather than demanding a complete debt write-off, the state may find a more practical solution in requesting a partial waiver or long-term restructuring of its staggering Rs 1 lakh crore debt. In return, it can offer a credible commitment to fiscal prudence, PSU reform, and transparent governance.

But reform will not be easy. The committee has also recommended the rationalisation of loss-making Public Sector Undertakings (PSUs)—a politically sensitive subject in a state where employment concerns run high. The government plans to start with a financial review of each PSU, audited by the Comptroller and Auditor General. Based on the findings, a phased merger or shutdown strategy may follow, ensuring that employees are not left in the lurch. Voluntary retirement schemes, reskilling programs, or redeployment will be essential to protect livelihoods and minimise resistance. To execute these steps effectively, a dedicated task force of financial, legal, and HR experts is expected to be formed. At the same time, the state is looking to generate funds through asset monetisation by selling or leasing unused land, buildings, vehicles, and other infrastructure in a transparent and accountable manner.

Institutional reform, the third cornerstone of the plan, is expected to run parallel to these changes. The Sub-Committee has underlined the importance of digital audits, performance-based budgeting, and improved compliance with GST norms, especially at the level of local bodies. Departments such as Public Works, Transport, and Irrigation will be brought under tighter fiscal scrutiny. Subsidy distribution may be rationalised to better target genuine beneficiaries without compromising the welfare of the poor. The state is also considering the use of public-private partnerships to revitalise sectors like tourism and hydropower, while aggressively pursuing pending grants from the Centre, disaster relief funds, and support for externally aided projects.

If these bold steps are implemented, political consequences are inevitable. The recommendation to reform or close down PSUs will likely face strong opposition from unions and employee groups, especially in the powerful transport and cooperative sectors. Any perception of job insecurity could lead to unrest. In addition, the demand for a debt waiver may escalate political tensions between the Congress-led government in the state and the BJP-led government at the Centre. To avoid political posturing, the state must present an apolitical, data-driven case for debt relief, ideally with bipartisan support from the Assembly to strengthen its moral and constitutional claim.

Yet, if the Sukhu government manages to implement these reforms with sensitivity and foresight, Himachal Pradesh could emerge as a national model for financial discipline and administrative reform. Smaller states like Uttarakhand, Mizoram, and Nagaland, which face similar fiscal constraints, may draw inspiration from Himachal’s example.

The Cabinet Sub-Committee’s report, under the leadership of Mukesh Agnihotri, is not just a warning about the gravity of the state’s debt crisis—it is a roadmap for recovery. Whether the government can rise to the occasion and transform intent into implementation will determine whether Himachal continues to teeter on the edge of financial instability or takes a bold leap towards sustainable growth. The stakes are high—but so is the opportunity.

(Writer is a veteran

columnist based in Shimla)

Himachal Tribune