Himachal’s fiscal deficit breaches prescribed limits; 86 pc revenue spent on salaries and subsidies

Shimla: The Comptroller and Auditor General of India (CAG) on Thursday painted a worrying picture of Himachal Pradesh’s financial health, flagging the rapidly rising debt burden, breach of fiscal deficit limits and shrinking availability of funds for developmental and capital expenditure.

The CAG report for the financial year 2024-25, tabled in the state Assembly by Chief Minister Sukhvinder Singh Sukhu, said the state’s fiscal deficit had crossed the prescribed limits under the Fiscal Responsibility and Budget Management (FRBM) framework.

The state’s revenue deficit stood at Rs 6,804.61 crore, equivalent to 2.94 per cent of the Gross State Domestic Product (GSDP), while the fiscal deficit touched Rs 12,611.05 crore, or 5.44 per cent of the GSDP.

According to the report, the state government failed to keep these deficits within the targets prescribed under the FRBM Act.

The state’s outstanding liabilities were also significantly higher than the targets recommended by the 15th Finance Commission and the state’s own budget estimates.

The audit report highlighted that as much as 86 per cent of the state’s total revenue receipts were being consumed by committed expenditure and subsidies, leaving only a small portion available for infrastructure development and capital investment.

Salaries, pensions and gratuity alone accounted for around 70 per cent of the revenue expenditure, it said.

The CAG also raised concerns over the increasing expenditure on power subsidies and debt relief measures, saying that such commitments were putting additional pressure on the state’s finances.

With only about 14 per cent of revenue resources left for developmental activities and capital expenditure, the state faces constraints in creating infrastructure and making long-term investments, the report noted.

The CAG said that Himachal Pradesh’s economy registered a growth of 9.20 per cent during 2024-25.

However, the state’s contribution to India’s GDP stood at only 0.70 per cent and has declined over the past five years, which the national auditor described as a matter of concern.

The state witnessed a 4.34 per cent increase in revenue receipts, aided by Goods and Services Tax (GST) collections and its share in central taxes.

Non-tax revenue also increased by 22.40 per cent.

Despite the improvement in some revenue streams, the CAG said that Himachal Pradesh continued to remain heavily dependent on grants from the Centre.

The report also flagged certain irregularities in the management of government funds.

It said that funds collected through levies such as the milk cess, environment cess and Building and Other Construction Workers Welfare Cess were kept outside the government account.

According to the CAG, this amounted to a violation of Article 266 of the Constitution, which lays down provisions relating to the Consolidated Fund and Public Account of India and the states.

The auditor also pointed to delays in the submission of utilisation certificates by local bodies, departmental undertakings and autonomous institutions.

It further expressed concern over the excessive use of the budget head ‘Object Head 20 – Other Charges’, saying this affected transparency in financial reporting.

The CAG, however, acknowledged the implementation of the Single Nodal Agency (SNA) and SNA SPARSH mechanism for tracking funds under centrally-sponsored schemes as a positive step, though it said their full implementation was still pending.

Warning of the long-term implications of rising debt and limited capital investment, the CAG advised the state government to strengthen its revenue mobilisation, exercise greater control over expenditure and undertake structural reforms to restore fiscal stability.

The findings come at a time when the Sukhvinder Singh Sukhu-led state government has been projecting its efforts to improve the state’s financial position as part of its broader agenda of bringing a “system change” in governance and administration.

IANS