Shimla
In a strong reaction to the likely abolition of the Revenue Deficit Grant (RDG), Himachal Pradesh Chief Minister Sukhvinder Singh Sukhu said that scrapping the grant is not merely a government issue but a serious blow to the rights of the people of the State. He warned that the move could push the hill State into long-term financial distress.
A detailed presentation on the State’s financial position and the impact of RDG abolition was made by the Finance Department before the Chief Minister, Deputy CM Mukesh Agnihotri, Speaker Kuldeep Pathania, Cabinet Ministers, MLAs, senior officers, and members of the media. The Chief Minister expressed disappointment over the absence of BJP MLAs, stating that they should have attended to better understand the gravity of the fiscal crisis.
He said the recommendations of the Sixteenth Finance Commission of India would have far-reaching consequences on the State’s economy and upcoming budget. According to him, once RDG is discontinued, reclaiming it in the future would become nearly impossible. He added that Himachal Pradesh is among the worst affected States, as nearly 12.7 percent of its total budget depends on RDG — the second highest share in the country.
Highlighting structural challenges, the Chief Minister stated that after the implementation of GST, tax growth has slowed to around 8 percent compared to 13–14 percent earlier. Being a producer State with a small population of 75 lakh, Himachal has suffered under the consumer-based GST regime, which has also curtailed the State’s taxation powers.
He further demanded at least 50 percent royalty on power projects that have repaid their loans and sought the return of projects that have completed 40 years of commissioning. He also pointed out that ₹4,500 crore in BBMB arrears have remained unpaid since 2012 despite a Supreme Court verdict. The State is also fighting a legal battle to reclaim the Shanan Power Project from Punjab after the expiry of its lease.
The Finance Department revealed that while the State’s own revenue stands at around ₹18,000 crore, committed expenditure — including salaries, pensions, subsidies and loan repayments — is about ₹48,000 crore. With predicted central tax devolution of ₹13,950 crore and borrowing of ₹10,000 crore, total available resources would reach only around ₹42,000 crore. This leaves a significant gap of nearly ₹6,000 crore for 2026–27, even before accounting for developmental works and pending liabilities.
Officials noted that RDG was a constitutional provision under Article 275(1) and had acted as a financial lifeline for hilly States like Himachal Pradesh, which was granted Special Category Status due to its geographical and fiscal constraints.
Concluding, the Chief Minister said the impact of RDG abolition would not just affect the present government but would severely strain future governments as well, calling it a grave injustice to the people of the State.
