Shimla, March 2026 — In an unprecedented move reflecting a deepening financial crisis, the Sukhvinder Singh Sukhu-led Himachal Pradesh government has presented a “shrinkage budget” for the 2026-27 fiscal year. Marking a historic first, the state’s overall budget outlay has contracted, forcing the administration to defer salaries for the Chief Minister, Cabinet members, and MLAs to stave off a mounting debt trap.

The Shrinking Purse: A ₹3,586 Crore Cut

For the first time in the state’s history, the Himachal Pradesh budget saw its total outlay decrease compared to the previous year. Last year’s budget stood at ₹58,514 crore; this year, it has shrunk by ₹3,586 crore to a total of ₹54,928 crore.

Chief Minister Sukhu attributed this drastic reduction to a “serious financial situation” inherited from the previous regime, combined with the discontinuation of the Revenue Deficit Grant (RDG) and the end of GST compensation from the Central Government.

Austerity at the Top: Salary Deferrals for 6 Months

To lead by example in tackling the revenue crisis, the Chief Minister announced temporary salary deferments for the next six months. The structure of these cuts is tiered:

• Chief Minister: 50% salary deferment.
• Deputy CM & Cabinet Ministers: 30% salary deferment.
• MLAs & Political Appointees: 20% salary deferment.

Sukhu termed the move a testament to his government’s “himmat” (courage) to address the fiscal instability left behind by the previous BJP administration. He emphasized that in such a grave financial climate, leadership must be the first to contribute to the state’s recovery.

Assembly Chaos and the “Debt Trap” Blame Game

The budget session erupted in chaos following the announcement. The opposition BJP, led by former CM Jairam Thakur, dubbed it a “Back Gear Budget.” The House saw a heated 20-minute standoff and a walkout as the Chief Minister accused the BJP of pushing Himachal into a debt trap by failing to settle outstanding loans during their tenure.

Sukhu further slammed the Central Government for allegedly denying Himachal its rightful assets, including the Shanan Power Project and a 12% free power share, which he claims would have mitigated the current crisis.

The Road Ahead: Cutting “Unproductive” Expenses

Despite the contraction, the government has allocated ₹500 crore to complete 300 unfinished projects identified across the state. To streamline resources, the Chief Minister also announced:

• A drive to reduce “unproductive expenditure.”
• The closure of “unwanted institutes” opened by the previous government.
• Optimizing the use of existing buildings rather than leaving them idle.

Bottom Line

Himachal Pradesh’s historic budget cut signals a transition from expansion to survival. By deferring the salaries of its top leadership, the Sukhu government is attempting to project moral authority while grappling with a systemic revenue deficit. With the “Safety Net” of GST compensation gone, the hill state now faces the daunting task of navigating its way out of a debt trap without the usual support from the Center.