The Sukhvinder Singh Sukhu-led Congress government’s flagship poll promise, the Old Pension Scheme (OPS), has hit a fiscal wall. Following the discontinuation of the revenue deficit grant (RDG), the state finance department has issued a warning: The OPS is no longer sustainable.
In a high-level presentation on February 8, the department recommended a switch to the Centre’s Unified Pension Scheme (UPS) to prevent a total collapse of the state’s treasury.
The shift is not merely a policy suggestion but a financial necessity. Adopting the UPS, a hybrid under the New Pension Scheme (NPS) framework, is seen as the only key to lifting Centre-imposed restrictions on an additional ₹1,800 crore in borrowings.
Poll guarantee vs fiscal reality
Despite the mounting pressure, chief minister Sukhu has reaffirmed his political commitment. “As long as there is a Congress government in Himachal Pradesh, OPS will not be stopped,” Sukhu said.
However, the finance department’s data tells a different story. Principal secretary, finance, Devesh Kumar pointed out that implementing the OPS immediately burdened the state with ₹1,800 crore in additional loans.
The department has now clarified that for all future recruitments, the UPS must be considered. The state is currently caught in a debt trap where it needs ₹13,000 crore just to service existing loans and interest next fiscal, surpassing its annual loan limit of ₹10,000 crore. This leaves a ₹6,000 crore hole that must be plugged directly from a shrinking budget.
{{/usCountry}}The department has now clarified that for all future recruitments, the UPS must be considered. The state is currently caught in a debt trap where it needs ₹13,000 crore just to service existing loans and interest next fiscal, surpassing its annual loan limit of ₹10,000 crore. This leaves a ₹6,000 crore hole that must be plugged directly from a shrinking budget.
{{/usCountry}}Austerity drive: Subsidies, jobs hit
The end of the RDG, which accounted for 12.7% of Himachal’s budget (the second highest in the country), has forced the finance department to propose a series of drastic measures, including a freeze on dearness allowance (DA) and the inability to pay ₹5,000 crore in pending DA/DR arrears; the abolition of posts vacant for over two years and halting new recruitments.
The department has also suggested subsidy withdrawal by proposing moving to “actual charges” for water and electricity by removing all subsidies, and ending financial support to the Himachal Road Transport Corporation and the market intervention scheme (MIS).
It has recommended closing 30% of existing government institutions and rationalising current staff.
Employee unions have reacted sharply to the news. Sanjeev Sharma, former president of the Secretariat Employees Union, suggested increasing the retirement age to defer liabilities rather than scrapping guarantees.
Meanwhile, Mamaraj Pundir of the All India National Educational Federation blamed fiscal mismanagement for using the crisis as an excuse to waive employee liabilities.