In an unusual development, Himachal Pradesh Governor Shiv Pratap Shukla on Monday wrapped up his 50-page speech to the state Legislative Assembly in just two minutes. He skipped a portion of the prepared speech, saying it contained remarks about a “constitutional institution” that he did not wish to read.
At the beginning of the Budget Session in the House, Shukla informed members that he would not read paragraphs 3 to 16 of the speech.
“I think there are comments on a constitutional institution from paragraph 3 to 16, and I do not think I should read it,” he said. He further added that from paragraph 17 onwards, the speech mainly listed the government’s achievements, which could be discussed by the members.
Earlier, the governor told the members that the session had been called to pass supplementary demands for grants for 2025–26, the budget for the financial year 2026–27, and to take up important legislative business. The portion he skipped focused on the Revenue Deficit Grant (RDG).
According to text, the RDG has been very helpful in covering the revenue gap of smaller states, particularly Himachal Pradesh. However, it said the 16th Finance Commission had recommended withdrawal of the RDG, which it described as being against the spirit of Article 275(1) of the Constitution. The prepared speech, which was treated as read, said the Finance Commission presented combined revenue and expenditure estimates of several states, instead of showing them separately. Because of this, Himachal Pradesh’s specific financial needs and revenue deficit were not clearly reflected.
He also said India’s federal structure is based on fiscal balance and cooperative federalism. Smaller and hill states like Himachal Pradesh depend on constitutional transfers such as the RDG. Due to difficult terrain, limited revenue sources and higher administrative costs, the state cannot meet essential public service expenses on its own.
It noted that the withdrawal of RDG not only weakens fiscal autonomy and deepens regional inequality, but also undermines the spirit of federalism by forcing smaller states into financial distress and excessive dependence on discretionary support from the Centre. The speech pointed out a “clear difference” between the recommendations of the 15th and 16th Finance Commissions. The 15th Finance Commission had recommended around Rs 48,630 crore as RDG for six years from 2020–21 to 2025–26, but the 16th Finance Commission has completely discontinued it.
According to the text, grants for urban local bodies have been decreased from Rs 855 crore to Rs 435 crore. At the same time, there has been an increase in the share of central taxes, grants to rural local bodies and other special grants. Even so, the deficit has been estimated at around Rs 33,195 crore, and it is believed to be much higher in real terms.
The address described the withdrawal of the RDG as a matter of “serious concern” for small and hill states. For Himachal Pradesh, the RDG made up about 12.7 per cent of its revenue, the second highest share in the country after Nagaland. It warned that the state’s economy would suffer heavy losses due to this decision.
He concluded by saying that ending the RDG would lead to a shortage of essential funds needed for development works, social welfare schemes and disaster management in the state.
Also read: RDG slash makes 2026-27 budget a tightrope for Sukhu
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