Already reeling under a financial crisis, debt-ridden Himachal Pradesh has suffered a jolt after the 16th Finance Commission report did not recommend Revenue Deficit Grants (RDGs) for small states, including Himachal Pradesh, as per its report tabled in Parliament.
The state earlier suffered a major economic setback with the abolition of GST compensation, and now the Central government has delivered a second severe blow by eliminating Revenue Deficit Grant (RDG).
This development is bad for the Congress government in Himachal, which will now face a political challenge amid deepening financial constraints in the fourth year of its tenure. It was understood that the Chief Minister had been planning to announce some measures in the 2026–27 state budget in favour of employees, the biggest section in the state that makes a difference in the elections, as well as for unemployed youth, who are facing harassment because of lack of job opportunities and absence of a proper employment policy despite poll promises. In other sectors, including health, the government has so far failed to provide adequate facilities due to misplaced priorities.
However, with the non-availability of RDGs, Sukhu may not even be able to discharge routine administrative responsibilities properly, leaving aside any populist measures in the run-up to the polls. The state will now lose nearly Rs 10,000 crore of finances every year because of the Finance Commission’s refusal to provide RDGs.
Chief Minister Sukhu expressed strong disappointment over the Union Budget 2026–27, stating that it had ignored the concerns of the hill state and its people. He criticised the 16th Finance Commission for failing to provide meaningful Revenue Deficit Grants (RDGs) for the state despite repeated representations, detailed memoranda, and technical submissions.
“Besides, the Finance Commission has not recommended Revenue Deficit Grants for small states, including Himachal Pradesh, which is a grave injustice and has hurt the sentiments of the people,” Sukhu said.
He said that Article 275(1) of the Constitution provides for state-specific grants from the Union Government, also known as Revenue Deficit Grants. “From 1952 up to the Fifteenth Finance Commission, these grants were regularly provided by the Centre to the states. For the first time, the 16th Finance Commission has discontinued this grant,” he said.
Sukhu cautioned that the absence of adequate RDGs would constrain Himachal Pradesh’s ability to deliver essential public services, maintain fiscal sustainability, and invest in future growth, potentially forcing difficult choices between service delivery and increased indebtedness.
Under the 15th Finance Commission, Revenue Deficit Grants amounting to approximately Rs 37,000 crore were provided. The omission of RDGs by the 16th Finance Commission overlooks structural fiscal disadvantages, including high forest and ecological cover of about 67 per cent, higher per capita cost of service delivery in mountainous terrain, and repeated natural disasters causing losses exceeding Rs 15,000 crore in recent years.
Though it is true that Himachal Pradesh has limited income sources due to its obligation to protect the green cover and ecology for the rest of the country, financial prudence could have made things sustainable had successive governments practised it. Faulty policies on ground, populist measures, and mindless spending on perks for politicians and bureaucrats have pushed the state to a point where it is forced to borrow loans merely to repay earlier ones. Currently, Himachal Pradesh is under a debt burden of over Rs one lakh crore.
The political situation for the Congress party is going to worsen due to this financial mess in the crucial final two years of its tenure. The financial mess, critics allege, has been aggravated by the present government, which has been trying its hands on complete ‘Vyavastha Parivartan’ financially and administratively, much to the dismay of all.
While the state government has been blaming the Central government for not giving Himachal requisite funds, but the people in the state holds the state administration responsible for not handling the situation properly. People question how a government, which is crying financial crisis from day one of the tenure, shell out crores of Rupees for hiring high profile advocates to deny service benefits to the deserving employees, to fight for the chairs of Chief Parliamentary Secretaries and that too when the state has a battery of over 70 Additional Advocate Generals and Deputy Advocate Generals appointed in the state, which is the highest in any government.
Similarly, critics ask how a government granting extensions, re-employment, and rehabilitation to retired officers and bureaucrats with hefty perks can justify its inability to provide jobs to youth. Reports of lavish spending on new offices, cars, and other facilities for senior officials have also invited criticism.
Social media is full of questions over the government’s priorities and its inability to effectively plead Himachal’s case before the Centre. “Earlier too, even when different parties ruled at the Centre and in the state, there was no blame game. Today, we see so much confrontation, and the state and its people are suffering because of this,” said senior citizens and retired government employees.
“There is so much financial insecurity in the state that government employees awaiting Dearness Allowance arrears feel relieved simply when they receive their monthly salaries on time,” shared a senior government officer on condition of anonymity.
Also Read: Himachal to start fourth phase of BPL survey
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