Himachal Pradesh Government Faces Financial Strain Over Employee Pay and Pension Arrears

Government Acknowledges Financial Liabilities in High Court Filing

Government admits pending liabilities in High Court affidavit: Revised pay and pension benefits stalled over 4 years
Total dues stood at Rs 16,600 crore: Rs 8,045 crore released or adjusted. Government cites 78 percent of budget consumed by salaries, pensions and gratuities.

Mahesh Pathania

Shimla. The Himachal Pradesh administration has revealed that it requires Rs 8,555 crore to settle the long-overdue payments related to updated pay scales and retirement benefits for its workforce and pensioners. This acknowledgment was made in an affidavit submitted by the Finance Secretary to the High Court. The total liabilities associated with the revised pay scales and retirement benefits have reached Rs 16,600 crore, with Rs 8,045 crore already released or adjusted, leaving an outstanding balance of Rs 8,555 crore.

This information was included in the affidavit submitted by the Principal Secretary of Finance on October 14, 2025. The government indicated that these liabilities arose from the implementation of revised pay scales effective from January 1, 2016, and the issuance of updated pensions and retirement benefits through an office memorandum dated February 25, 2022. Due to the state's financial challenges, the government has chosen to address these liabilities in phased installments rather than a single payment.

In subsequent affidavits filed on February 28 and May 15, 2026, the government reiterated its financial difficulties. The May 15 submission revealed that nearly 78 percent of the budget is allocated to employee salaries, pensions, and gratuities. After accounting for mandatory expenses like interest payments and loan repayments, only about 20 percent of the budget is left for developmental activities in the fiscal year 2026-27. The government clarified that the postponement of dues was not a voluntary decision but a necessary response to the cessation of the Revenue Deficit Grant (RDG).

The affidavit also mentioned that Himachal Pradesh received Rs 37,199 crore in Revenue Deficit Grants during the 15th Finance Commission's period (2021-22 to 2025-26). However, the 16th Finance Commission did not recommend the continuation of this grant for 2026-31, nor did the state receive any alternative special grant, which has exacerbated financial pressures.

As outlined in the May 15, 2026 affidavit, the government has prioritized payments to pensioners aged over 70 and retired Class-IV employees. An office memorandum dated April 25, 2026, mandated the full release of benefits to Class-IV staff who retired between January 1, 2016, and January 31, 2022. This approach was framed as a phased, age and need-based priority system.

However, while the government presented its financial rationale, the court emphasized the statutory rights of workers. The High Court confirmed that the rights to revised pay and retirement benefits had already been established under applicable regulations. The court challenged the policy of delaying accrued benefits for extended periods or distributing them in installments, noting that delays have surpassed four years and highlighting unequal treatment among retirees.

The pressing question remains: Has the government developed a definitive, time-bound plan to settle the acknowledged balance? Employees and pensioners are now looking for a clear timeline regarding the full disbursement of their revised pay and retirement benefits.

Mahesh Pathania
Former Press Secretary to two Chief Ministers and two Governors.
Retired as Additional Director IPR