Balancing the books

HIMACHAL Pradesh has made a bold move by withdrawing power subsidies to large industries, aiming to save around Rs 700 crore annually. For a state grappling with fiscal challenges, this decision underscores a necessary shift towards fiscal discipline. However, it also raises questions about its impact on the industrial sector, which has long benefited from lower electricity rates compared to neighbouring states. The state government's decision is pragmatic. Industries will still enjoy relief through reductions in electricity duty, ranging from 2.5 per cent to 9 per cent, cushioning the blow for businesses operating in cement, stone-crushing and other sectors. Additionally, Himachal’s power tariffs remain lower than in states like Punjab, Haryana and Uttarakhand, ensuring the state’s competitive edge in attracting industrial investment.

The withdrawal of subsidies on 125 units to domestic consumers using over 300 units of electricity is another step that the government has taken to balance its books. This cut should goad middle-class households towards adopting energy-saving practices to blunt the blow of higher electricity costs. The government would do well to encourage responsible power consumption to reduce their bills. On the other hand, subsidies for low-consumption households remain in place, ensuring that the most vulnerable sections of society remain shielded.

Himachal’s reliance on tourism, mining and power generation for revenue is a double-edged sword. While these sectors are vital for the state’s economy, sustainable and balanced growth is essential. The government must now tread carefully, ensuring that fiscal prudence does not come at the cost of long-term industrial and public welfare. The long-term impact could be an economic downturn if industries choose to migrate elsewhere. Additional measures to retain industrial investment and protect employment are necessary to maintain Himachal’s economic stability.