Facing mounting fiscal pressure following the cessation of the Revenue Deficit Grant (RDG) recommended by the 16th Finance Commission, the Himachal Pradesh government has rolled out a series of revenue-raising measures and user charges to address an estimated Rs 6,000 crore budgetary gap.
The state has revised property tax rates across Municipal Corporations and introduced several new levies. These include a milk cess on electricity consumption, an eight per cent hike in water and sewerage tariffs by Shimla Jal Prabandhan Nigam Limited and slip charges in government hospitals implemented by Rogi Kalyan Samitis.
The Town and Country Planning Department has issued notifications amending construction rules to allow developers to utilise premium Floor Area Ratio (FAR) where previously they could not. Under the new rules, builders can purchase additional FAR at Rs 3,000 per square metre for 0.25 FAR, Rs 5,000 per square metre for 0.50 FAR, and Rs 7,000 per square metre for 0.75 FAR.
The Urban Development Department has also revised the 2014 building regulations, allowing an extra 10 per cent deviation for projects in the hospitality sector, hospitals, schools, and mixed-use developments. Officials expect these amendments to generate between Rs 150 and Rs 200 crore in additional revenue.
Further steps include higher fees for construction approvals, allowing an extra floor for parking in houses along main roads, and recognising attics as habitable spaces—measures aimed at boosting state income. Additionally, the government plans to outsource eight loss-making properties managed by Himachal Pradesh Tourism.
Property tax assessments under the new Municipal Corporation bye-laws will consider multiple factors, including location, building structure, age, occupancy, and usage. Four location-based zones have been notified: Zone-A at Rs 4.50 per square metre, Zone-B at Rs 4, Zone-C at Rs 3, and Zone-D at Rs 2.50. Tax liabilities will be calculated based on these rates alongside the type of building, whether residential or commercial.
Former HAS officer D.K. Manta highlighted that the state needs roughly Rs 48,000 crore annually to cover salaries, pensions, and debt obligations, while expected revenue is around Rs 42,000 crore, leaving a Rs 6,000 crore shortfall. He stressed that reducing non-essential expenditures, implementing austerity measures, and identifying new revenue streams are critical to addressing this gap.
Himachal Pradesh’s cumulative debt already stands at Rs 1.5 lakh crore, projected to rise by Rs 20,000–30,000 crore over the next five years. Manta warned that with the ongoing Rs 6,000 crore deficit, additional borrowing of around Rs 30,000 crore may be needed. He cautioned that total borrowings of Rs 50,000–60,000 crore in the next five years could trigger a severe economic crisis, potentially pushing the state toward insolvency by increasing debt servicing obligations by nearly 50 per cent.
Nurturing Creativity – Keekli Charitable Trust, Shimla
