HP considers raising retirement age to ease ₹800 cr budget strainHimachal cabinet to discuss raising retirement age of govt employees to 59 years.
Shimla: Facing mounting fiscal pressure and a sharp cut in federal support, the Himachal Pradesh govt will on May 5 consider a proposal to increase the retirement age for state employees from 58 to 59 in a bid to avert a projected ₹800 crore financial burden this year.
The measure is part of a set of cost-containment recommendations submitted by a cabinet subcommittee led by deputy chief minister Mukesh Agnihotri. The committee's report comes amid a worsening economic outlook for the hill state, which has seen its revenue deficit grant from the Centre drop from ₹8,058 crore in financial year 2023-24 to ₹3,257 crore for the 2025-26 fiscal.
However, the proposed one-year extension in the retirement age comes with a political trade-off: it may hamper the state's ability to deliver on a key election promise of providing 1 lakh jobs annually to more than 8 lakh unemployed youth. Himachal Pradesh's debt burden has crossed ₹1.04 lakh crore, compelling the state to consider structural pension reforms. Among the recommendations: ending the option for retiring employees to commute 40% of their pension, and raising the minimum qualifying service for full pension from 20 years to 25 years.
Since returning to power in Dec 2022, the Congress-led govt has reintroduced the old pension scheme (OPS), prompting nearly 1.17 lakh govt employees to shift from the national pension scheme (NPS). This decision has increased the state's monthly pension outlay significantly, and it now stands at ₹800 crore for 1.89 lakh retirees, in addition to ₹1,200 crore in salaries for 2.42 lakh active employees.
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The cabinet subcommittee also suggested linking the retirement of education department staff to the end of the academic session, rather than their birthdays. This would allow the govt to delay lump-sum retirement benefits for a few additional months. The May 5 cabinet meeting is expected to weigh the political and economic implications of these proposals as the state searches for ways to stabilise its finances without stalling its employment commitments.
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