Himachal Pradesh's ₹1 Lakh Crore Debt Dilemma: Deputy CM Mukesh Agnihotri Panel Urges Centre For Waiver And PSU Reforms

In a bold and unprecedented move, the Cabinet Sub-Committee chaired by Himachal Pradesh Deputy Chief Minister, Mukesh Agnihotri has submitted a comprehensive report urging the Union Government to waive off the state’s burgeoning debt of ₹1 lakh crore. The panel has also called for the merger or closure of loss-making public sector corporations, marking a decisive shift in the state’s fiscal thinking. While these recommendations are rooted in fiscal pragmatism, their implementation will require “Strong Political Will ”, bureaucratic resilience, and central government cooperation.

Anatomy of the Crisis: Debt Spiral in a Small State

Himachal Pradesh is grappling with a serious debt crisis. With mounting borrowings over the years, an ever-expanding salary and pension bill—nearly 60% of the state’s revenue receipts—and limited avenues for revenue augmentation, the state is teetering on the edge of a financial precipice. Recurrent natural disasters, including floods and landslides, have further strained its coffers, forcing frequent overdrafts and a dependence on central devolutions.

The panel’s demand to waive off ₹1 lakh crore is not merely symbolic—it reflects the desperate fiscal position of the state. The debt-GSDP ratio has crossed 42%, breaching fiscal responsibility limits and compromising capital expenditure (creation of assets) and development works. Economic experts opine that in view of centre’s apathy, it amounts to day dreaming to expect any relief vis-à-vis debt waiving off which can be attributed to  a possible  “latent game plan” to completely squeeze state’s finances  to create maximum resentment amongst people and employees thereby selling a political agenda that Sukhu government is incompetent. The desperation of BJP emanates from the humiliation suffered by center after the flop show of “Operation Lotus” to destabilize Sukhu government which must be careful in future.

Recommendations of the Agnihotri Committee;

The committee has made some path breaking recommendations: Debt Waiver by Centre: It has called upon the Union Government to consider writing off the entire debt burden, citing Himachal’s strategic location, its role as a buffer border state, and the fact that it contributes to national ecological balance as a green state. It also referenced the special category status Himachal once enjoyed, and argued that the Centre must now show magnanimity to preserve the financial health of a small hill state. Merger or Dissolution of Loss-Making PSUs: The report has identified numerous state-run corporations—such as Himachal Road Transport Corporation (HRTC), Himfed, HP Agro Industries Corporation, and HP State Industrial Development Corporation—as bleeding units that drain the exchequer annually. It has advocated for either merging them with more efficient units or outright dissolution, followed by asset monetisation.

These are bold proposals that aim to reduce financial waste and unlock state resources for development purposes. But the challenge lies in execution.

Strategy for Implementation: Balancing Vision with Ground Reality;

1st. Central Negotiations with Political Nuance. The first and foremost step for the Himachal Government is to initiate formal, structured dialogue with the Union Finance Ministry. Chief Minister, Sukhvinder Singh Sukhu must personally lead the delegation, involving all-party support to convey unity and urgency. To bolster its moral claim, the state can cite precedents like farm loan waivers and restructuring of debts for other special category states like Jammu & Kashmir and the North-Eastern region.

A pragmatic approach could involve seeking at least a partial waiver or long-term restructuring of debt, rather than an outright write-off. The state can offer to commit to fiscal prudence, efficient PSUs, and transparent governance in return.

2nd, Phased Merger of PSUs with Audit Trail. Shutting down or merging loss-making PSUs is a politically sensitive issue. The state must undertake a CAG-audited financial review of each corporation, followed by a phased action plan that safeguards employee rights through VRS packages, re-skilling, or redeployment. The government must proactively communicate with unions and stakeholders, to avoid unrest.

A task force with financial, legal, and HR experts should be set up to execute PSU rationalisation. Simultaneously, asset monetisation of unused properties, godowns, vehicles, or land should be conducted with complete transparency to raise funds for development projects.

3rd, Institutional Reforms and Fiscal Prudence. The Agnihotri Committee's intent should be supported with wider reforms—digital audits, performance-based budgeting, GST compliance by local bodies, and stronger accountability for departments like PWD, Transport, and Irrigation.

The state can also explore PPP models in tourism and hydropower, rationalise subsidies without compromising welfare, and aggressively pursue pending central funds, disaster relief grants, and externally aided projects.

Fallout and Political Implications If Implemented?

 Political Backlash from Unions and Employees. Merging or closing PSUs will inevitably lead to resistance from employees and unions, particularly from the powerful transport and cooperative sectors. Any perceived threat to job security may trigger agitations. The ruling Congress must brace for discontent within its own support base and counter it with persuasive engagement and compensation packages.

 Potential Rift with Centre. If the demand for debt waiver becomes a political flashpoint between the Congress-led state and the BJP-led Centre, it might lead to a confrontational federal relationship. Himachal must avoid posturing and instead focus on presenting an apolitical, data-backed argument, possibly supported by opposition MLAs in the Assembly.

 Political Windfall If Central Relief Comes. If the Union Government agrees—wholly or even partially—to waive or restructure Himachal’s debt, it will be seen as a big success of the Sukhu-led government. It could politically rejuvenate the Congress in the hill state and shift the narrative from administrative fatigue to proactive governance.

Economic Stability and Investor Confidence. Implementing these recommendations successfully could restore fiscal balance, free up resources for capital expenditure, and boost investor confidence, especially in sectors like tourism, pharma, and green energy. It would also improve Himachal’s ranking in fiscal performance and ease of doing business.

 Long-term Reforms as Legacy. In case, the government manages to execute PSU reforms with sensitivity and foresight, it could set a template for other small states battling similar challenges—such as Uttarakhand, Mizoram, or Nagaland. It would establish the Congress regime in Shimla as one with vision and execution capacity.

Conclusion

The report of the Cabinet Sub-Committee led by Deputy Chief Minister, Mukesh Agnihotri is both timely and transformative. It offers not just a diagnosis but a roadmap to cure Himachal’s chronic fiscal illness. However, the recommendations must now be matched by political courage, bureaucratic clarity, and strategic engagement with the Centre.

If Chief Minister Sukhu’s team can turn this document into action, Himachal could transition from a debt-ridden hill state to a financially prudent, reform-oriented model for others. The stakes are high—but so is the opportunity.

(Writer is senior political analyst and strategic affairs columnist based in Shimla)