Himachal Government to raise Rs 1,000-crore loan :

1.The Finance Department today issued a notification for raising two long-term loans worth Rs 500 crore each.The auction for the loans will be held on February 25 while the money will come into the government treasury on February 26.

2. With the raising of these loans, the current regime has exhausted its loan limit for the financial year 2019-20. The government has decided to raise a loan of Rs 1,000 crore, exhausting the loan limit of Rs 5,000 crore for the current financial.

3.The reason cited for raising the loan is to meet the development needs of the government. However, sources said the 5 per cent dearness allowance (DA), announced by Chief Minister Jai Ram Thakur on January 26, is yet to be given. The total expenditure likely to be incurred on the DA to three lakh employees is likely to be around Rs 280 crore.

4. While the stream of one loan of Rs 500 crore is 14 years, returnable by 2033, the other has to be repaid by 2034. The grave financial health of the government has been an issue of concern. The cash-strapped government has largely been dependent on the Centre for most of its needs. In fact, a majority of the scheme are Centrally sponsored, be it for road construction, housing, electricity or forest sectors.

5. The issue of loan raising by the BJP is bound to echo during the budget session commencing on February 25. The Opposition Congress has been accusing the BJP regime of indulging in wasteful expenditure. It has also tried to hit out at Prime Minister Narendra Modi for failing to provide a special financial assistance to the hill state, despite calling it his second home.

Way Forward :

There is a need to formulate a mechanism and funding pattern for providing special financial assistance  to Himalyan state like Himachal. An intensive study is required for that and  agencies like Finance commission and CAG would send some concerned experts to states before finalizing response mechanism and funding pattern.

However Himachal Pradesh has made credible progress in adhering to macro economic parameters. Hydro electric is a major source of revenue for the state but its full potential could not be realized due to the fact that the centre does not recognise hydel projects beyond a certain threshold as renewable energy projects. Also huge progress has been made in the last ten years  to bring down the  GSDP ratio to  38 % but this this ratio is unsustainable.

A lot  more is required  to be done to further bring down the ratio to atleast  further 8 – 10 % by making debt reduction plan to reduce the debt atleast 1,200 crore or more. It cannot be done overnight  but medium term plan should be made to achieve fiscal deficit target.