After Karnataka, Himachal Pradesh is now bearing the brunt of the Congress government’s freebies policy as the state coffers have dried up and the administration must find alternative methods to produce revenue. Therefore, the century-old Hotel Wildflower Hall, which is around 12 kilometres from Shimla, is going to be leased by the Himachal Pradesh government. The prized property located in a beautiful neighborhood, will be up for sale again after the state was able to take its possession in January of last year following two decades of legal battle.
It was first built by Lord Kitchener in 1902, under the British Raj and covers 100 acres in the middle of a lush deodar forest. The state cabinet approved the employment of a consulting firm to lease out the property during a meeting on 15th February, which was chaired by Chief Minister Sukhvinder Singh Sukhu. Industries minister Harshwardhan Chauhan stated, “The cabinet had approved hiring a company to work out further modalities. The company will decide on the best way to lease out the property which would be soon given on lease to highest bidder.”
The administration has been evaluating means to locate a suitable partner to run the luxury hotel since regaining control of the property to help the state, which is currently enduring financial difficulties, generate income. Sukhu also implemented a 2005 arbitration award which mandated that the Wildflower Hall and the surrounding deodar forest be turned over to the Himachal Pradesh Tourism Development Corporation (HPTDC) in June 2023.
The Oberoi Group now operates the property as a world-class, upscale resort, and the government is eager to entice companies from the hospitality sector to lease it. For nearly two decades, the Himachal Government and East India Hotels Ltd (EIHL) have been involved in a judicial battle over control and profit-sharing of the colonial-era hotel. The state government has declared that it is open to consider Oberoi Group’s claim to operate the property, however, it prefers that the company compete with other hotel chains for the Wild Flower Hotel lease, as the government will be accepting bids from all over the world.
History and legacy
GHM Batten, the Earl of Lytton’s private secretary, was the initial owner of Wildflower Hall, per the documents. The structure was completely destroyed by fire. Lord Kitchner, who was the Indian military’s commander-in-chief at the time, obtained the building’s lease from its proprietor after Batten restored it. After his return to England in 1909, the house was sold to a British couple, who demolished it in 1925 to build a 37-room, three-story hotel.
The Government of India occupied the land after independence and began an agricultural school there which lasted until 1973, when it was turned over to the HPTDC to be used as a hotel. Eleven cottages, four rooms, a multipurpose hall and a green room were constructed by the department. A short circuit then caused the structure to burn down on 5th April 1993. Nevertheless, the HPTDC continued to maintain the cottages and four additional rooms that had withstood the incident until the government and the Oberoi Group entered into a joint venture to reconstruct Wildflower Hall as a premium hotel.
The hotel was burnt down in 1993 and was completely gutted. The state administration made the decision to explore multiple options for reopening the hotel. However, the property dispute came to the fore when international tenders were requested to redevelop the building into a five-star hotel. The state government chose to collaborate with East India Hotels Limited, a flagship business of the Oberoi Group, which also took part. A firm named Mashobra Resort Limited was established as part of the joint venture with the goal of constructing the five-star hotel in four years. The corporation was forced to pay the state government an amount of Rs 2 crore annually for failing to comply.
The land was transferred by the government in 1996 in the company’s name. However, they were still unable to prepare the hotel for usage six years later. Citing concerns about “selling Himachal’s interests,” the Bharatiya Janata Party government led by PK Dhumal then ended the agreement on 6th March 2002, quoting a breach of terms amid ongoing issues like the hotel’s non-functionality within the required six years as well as the town and country planning department’s failure to regularize 57 rooms. The business law board heard a challenge to this government verdict and decided in favor of the corporation. The government appealed the ruling to a single high court bench.
On 17th November 2023, the high court dismissed the government’s submission and asserted that the Oberoi Group had not complied with the arbitration decision within the allotted three months. As a result, the state government was qualified to assume ownership and control of the hotel. The case was assigned to the arbitrator by the court in order to be settled. The government’s 2005 decision to terminate the contract with the corporation and give it the right to reclaim the land was upheld by the arbitrator.
The Oberoi Group challenged the single bench’s ruling in a move to the court, but the company’s appeal was denied. Even though the Oberoi group had approached the Supreme Court, it reiterated the high court’s judgment in January 2024.
Economic crisis jolts Congress-ruled Himachal Pradesh
Similar to Karnataka, a serious economic problem has been plaguing Himachal Pradesh under the Congress regime. The party, staking its claim to victory on “freebies,” before the 2022 assembly elections in the state offered free electricity up to 300 units per month to every household and Rs 1,500 per month to women aged 18 to 60. The party also vowed to establish the Agriculture and Horticulture Commission, restore the Old Pension Scheme (OPS) for government workers and set a minimum procurement price for fruits, particularly apples, after consulting with farmers and horticulturists.
Additionally, it promised to establish mobile clinics in every hamlet and provide one lakh government jobs. Furthermore, the party’s manifesto assured interest-free loans to young people and provision of Rs 10 crores to be distributed to all assembly segments to help the youth to develop start-up units. The commitments which were made solely to entice voters are now depleting the state’s budget.
The state government in last November decided to issue an extra Rs 500 crore loan, which was part of its Rs 6,300 crore borrowing limit expected to run out by December to meet the state’s developmental demands. The loan has a 15-year term and is due back on 13th November 2029. The financial burden is significant, though, especially given that the government found it difficult to fulfill its monthly obligations of almost Rs 2,000 crore for pensions and salaries. A sharp fall in the state’s revenue sources made matters worse, especially after the centre reduced its GST allocation and anticipated to cut the revenue deficit grant from 2025.
The administration even went so far as to postpone salary and pensions in an attempt to control the crisis. Given its dire financial situation, the Himachal Pradesh government was unable to pay its emplyees and pensioners any money in August of last year which affected 391,000 people. With Rs 1,200 crore set aside for salaries and wages and Rs 800 crore for pensions, the total monthly commitment comes to about Rs 2,000 crore. According to reports, this is the first instance in the state’s history where government employees and retirees have not received their rightful amount.
However, Sukhu argued that the state was not experiencing a financial crisis and that the government was unable to make the payments on schedule due to some fiscal prudence difficulties. Leader of the Opposition Jai Ram Thakur, however, countered that despite the Congress government’s record-breaking Rs 2,400 crore in loans, the state government was on the verge of financial collapse. Even though the treasury occasionally experienced deficits during previous administrations, pay and pensions were never postponed.
Congress introduces fresh taxes
In September of 2024, the Himachal Pradesh Vidhan Sabha approved an amendment bill to impose an environment tax on energy use that ranges from 2 paise to Rs 6 per unit and a milk tax of 10 paise per unit. The Himachal Pradesh Electricity (Duty) Amendment Bill 2024, which aimed to alter the Himachal Pradesh Electricity (Duty) Act, 2009 by adding Sections 3-A for the introduction of milk cess and 3-B for the environment cess was approved by the house by a voice vote.
The administration has already burdened the average citizen, according to opposition leader Jai Ram Thakur, by raising the price of diesel by Rs 7 per litre, cutting off 125 units of free power, and abandoning the election promise to provide 300 units of free power to consumers. According to him, the Sukhu government has also increased the price of tap water in rural regions from Rs 10 to Rs 100.
“The state government claims that it will turn Himachal into a Green energy state and yet imposes heavy cess on the electric vehicle charging stations,” voiced BJP member Trilok Jamwal. Notably, the government of Himachal Pradesh made the decision to eliminate the free drinking water program in rural regions and the free travel program for all police officers. The development transpired in last August.
The cabinet made the decision to impose a monthly charge of Rs 100 on rural residents with household connections who had previously been receiving free water supplies. The free power subsidy for all income tax payers was eliminated by the financially strained government. The Congress government, even considered additional options to cut off subsidies for the well-off segment of society due to a serious economic shortage.
On the other hand, the government was perceived as being regressive when it decided to impose a cess on hydro projects to raise an estimated Rs 4,000 crore. This decision impacted minor projects and participants in particular and hindered the government’s efforts to push for hydro. The imposition of a cess on the hydro industry is terrible news, according to a power analyst who works closely with power regulators. According to another expert, the cess is an act of desperation and added that it’s regrettable that he state appeared to have given in to the lobbying of larger hydro companies. Moreover, home states usually receive 12% of the free power. The double whammy could therefore hamper the government’s hydro effort.
The government even considered legalizing the production of cannabis for industrial and medical uses to solve its financial problems, in September of last year. “A committee has been formed to consider legalising controlled cultivation of cannabis. The step will also strengthen the state’s economy,” minister Vikramaditya Singh conveyed. The five-member group, led by state revenue minister Jagat Singh Negi, also called for regulation changes in April 2023 to permit the growing of cannabis for the plant’s fiber and low-intoxicant seeds. The report was also presented to the state assembly by Chief Minister Sukhvinder Singh Sukhu.
It’s interesting to note that the Congress government’s troubles intensified when it had to focus on the growing economic difficulties in July 2024 as it attempted to get around the crutch of loans. The development coincided with the central government lowering the borrowing cap for Himachal by Rs 5,500 crore.
Conclusion
Congress appears to be inspired to repeat its error and plunge the state into an economic abyss rather than learn from it. It has yet to recognize that while freebies might help win elections, they are detrimental for the welfare of the state and its citizens. The party that destroyed Karnataka’s economy in order to garner votes has been doing the same in Himachal Pradesh. They first introduce freebies, then put additional responsibilities on taxpayers to fulfill their irrational promises, damaging the taxpayer’s budget and destroying the state coffers. Freebies and similar programs might seem at first to be voter-friendly, but in reality, they harm taxpayers and have an adverse effect on their development.
