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Himachal

Economy hit by Covid crisis, HP govt struggling to repay ₹800-crore loan

June 17, 2020 06:00 AM

Economy hit by Covid crisis, HP govt struggling to repay ₹800-crore loan
TAILSPIN: State unable to execute projects funded by Centre due to sharp decline in collection of GST

Gaurav Bisht

gaurav.bisht@hindustantimes.com

SHIMLA : Its economy hit hard by the Covid-19 outbreak, the Himachal Pradesh government is unlikely to meet its deadline to repay a ₹800-crore loan to the Centre by June 27 and risks paying penalty of around ₹50 crore, a finance department official has said.

Executing projects funded by the Centre in the 90:10 ratio is also likely to be difficult because of decline in goods and services (GST) tax collection.

The state is largely dependent on Central grants for developmental works and gets nearly ₹6,500 crore for its shares in different central taxes, GST and sales tax.

So far this year, it has just received a part of the share in April. “Hardly any tax has been collected. State revenues have declined drastically, we are unable to pay the instalments this quarter. The government pays nearly ₹800 crore in quarterly instalments for various loans for developmental activities to the Centre. We have to keep some money in our coffers as buffer,” said the finance department official who wished to remain anonymous.

With a budgetary outlay of ₹49,131 crore this year the government was expecting an 11% increase in revenues before the Covid-19 outbreak sent the economy in a tailspin.

SGDP also likely to see a dip

The state gross domestic product (SGDP) is also likely to see a dip as most businesses have been closed for about three months.

An analysis of the state’s expenditure reveals that the government will be spending ₹13,099 crore on salaries, ₹7,266 crore on pensions and ₹4,931.92 crore on repayment of loans and interests during the current financial year.

Besides, several state-funded projects are at the execution stage. Income in the first quarter of this fiscal is negative.

The only relief Himachal received was the revenue deficit grant received from the Centre of ₹950 crore each for May and June.

GST share of ₹612 crore was also received in February and now revenues from liquor sales have started coming in.

Borrowing limits have also been increased by 3% through an amendment in the Fiscal Responsibility and Budget Management (FRBM) Act.

Shopkeepers want electricity, water bill waiver

With business almost at a standstill after the Covid-19 outbreak, the business community in Shimla is demanding waiver on electricity and water bills.

Shimla Beopar Mandal president Inderjit Singh said, “As we are hardly getting any business, the government should waive off water and electricity bills. It should also defer EMI payments. Hoteliers in Shimla have refused to resume operations since there are no tourists.”

Hoteliers have already approached the government asking them to waive off electricity and water bills. They have also demanded waiving off the sewerage cess

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