Himachal CM rushes to Nirmala Sitharaman as debt crosses ₹1 lakh crore, seeks bailout from Centre
Shimla / New Delhi, 20 March 2025
Facing a mounting financial crisis with debt crossing ₹1 lakh crore, Chief Minister Sukhvinder Singh Sukhu on Thursday made an urgent pitch to Union Finance Minister Nirmala Sitharaman seeking a bailout.
Sukhu requested the Centre to ease borrowing restrictions and allow Himachal Pradesh to access external aid, especially from the World Bank, to prevent stalled projects from turning into abandoned assets.
During his meeting in New Delhi, Sukhu strongly urged Sitharaman to review the Department of Expenditure’s cap on external borrowings, blaming it for choking the state’s cash flow and stalling critical infrastructure projects.
“Many projects are stuck midway as funds have dried up. The cap has pushed the state towards a deeper financial mess,” he reportedly told the Finance Minister.
The Chief Minister, last week, had presented a ₹58,524 crore budget for 2025-26 in the Vidhan Sabha, which left the state staring at a fiscal deficit of over ₹10,534 crore. Sukhu had announced a slew of new schemes, further tightening the financial rope.
This fresh push for external borrowings aims at keeping the state afloat and fulfilling his commitments to employees and pensioners, especially regarding arrears.
Seeking an urgent breather, Sukhu also requested approval for Himachal’s reconstruction and rehabilitation proposal under a new multilateral funding window of the World Bank—over and above the borrowing ceiling imposed by the Ministry of Finance.
Worried over the shrinking Revenue Deficit Grants, the Chief Minister admitted that despite the state’s attempts to mobilize additional resources, it isn’t enough to meet the growing budgetary obligations for 2025-26.
Sukhu demanded permission for additional borrowing up to 2 percent of the state’s Gross State Domestic Product (GSDP) to bridge the gap.
"High-altitude, tough terrain and unpredictable weather escalate construction costs here. Himachal deserves special consideration for additional central resources," Sukhu argued, pointing towards the rising cost of infrastructure development in the hill state.
As the current financial year draws to a close, the Chief Minister is desperately trying to position himself on a better financial footing.
All pleas to get the state’s rightful share in the Revenue Deficit Grant (RDG) have been cut down to dismal levels, much below expectations.
The state’s share of GST compensation is still awaited, while the Centre is sitting on a whopping ₹10,500 crore deposited by Himachal under the New Pension Policy (NPS).
The amount is crucial to honour Sukhu’s commitment of paying Old Pension Scheme (OPS) to lakhs of pensioners.
Adding to the financial mess, the faltering states of Haryana and Punjab are not releasing Himachal’s pending arrears on account its share of 7.19 per cent in BBMB projects, despite a clear Supreme Court order directing immediate payment. The arrears now stand at over Rs4200 crore.
Ironically, the government spokesperson did not clarify whether CM Sukhu reiterated these crucial pending demands for release of the state’s dues before the Union Finance Minister.
The financial pinch has deepened with the Centre slashing revenue deficit grants, forcing the debt-ridden state to knock on Delhi’s door once again.
Officials accompanying the CM—Chief Secretary Prabodh Saxena, Principal Advisor Ram Subhag Singh, and Resident Commissioner Meera Mohanty—briefed the Union Ministry on the worsening fiscal scenario.
Union Finance Minister Nirmala Sitharaman assured the CM of sympathetic consideration, but the real test lies ahead as Himachal stares at an uphill fiscal battle.
With debt now breaching the ₹1 lakh crore mark, Himachal is fast sliding into a financial quagmire.
Political observers say Sukhu’s appeal to the Centre may be his last shot at preventing a full-blown fiscal crisis as more borrowins mean more debt burden.
Whether the Centre bails the hill state out remains to be seen. But insiders say the Centre wants to keep the Sukhu government at edge.
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