The controversy over the discontinuation of the Revenue Deficit Grant (RDG) has intensified in Himachal Pradesh, with Chief Minister Sukhvinder Singh Sukhu describing the grant as a constitutional right of the people, while the BJP has maintained that the Revenue Deficit Grant was only a temporary support mechanism and not a permanent entitlement.
Speaking after a presentation on the impact of the 16th Finance Commission, Sukhu said the report would have long-term consequences for the state’s economy, including its upcoming budget. He asserted that the abolition of the Revenue Deficit Grant was not an issue of the incumbent government but one that directly affects the rights and financial security of the people of Himachal Pradesh.
“Abolition of Revenue Deficit Grant is not the issue of a government, but a matter of the rights of the people of the State. Once this provision is gone, it will be difficult to reclaim these rights,” the Chief Minister said. He added that the state government was prepared to go to Delhi along with BJP MPs and MLAs to meet the Prime Minister and jointly raise the issue. Sukhu also expressed disappointment that BJP MLAs did not attend the presentation despite being invited.
The Chief Minister said the Revenue Deficit Grant has been scrapped for 17 states, but Himachal Pradesh is among the worst affected, as around 12.7 per cent of its total budget depends on the grant, the second-highest proportion in the country. He said the withdrawal has exposed the financial vulnerability of hill states, which face higher costs and limited avenues for revenue generation.
Linking the crisis to the post-GST regime, Sukhu said the state’s tax collection growth has declined to around 8 per cent from 13–14 per cent before GST. As a producer state with a population of about 75 lakh, Himachal Pradesh has been hit hard by the consumer-based tax system. He added that the state has also lost its authority to levy several taxes after GST, weakening its fiscal autonomy.
Calling for political unity, the Chief Minister said all parties must fight together for the state’s interests. He demanded that the Centre ensure at least 50 per cent royalty on hydropower projects that have repaid their loans and return power projects that have completed 40 years of commissioning to the state. Sukhu also raised the issue of Rs 4,500 crore in BBMB arrears, which he said have not been released since 2012 despite a Supreme Court verdict, and said the state is pursuing a legal battle to regain the Shanan Power Project from Punjab after the expiry of its lease.
Sukhu said the state government is working towards making Himachal Pradesh self-reliant and has undertaken measures for resource mobilisation since assuming office. He said the state has generated Rs 26,683 crore from its own resources, but this remains insufficient due to limited revenue sources such as river waters, forests and tourism. He assured that welfare schemes would continue and that resource mobilisation efforts would not put an additional burden on the common man.
The Chief Minister also said the state has raised the issue of open forest before the 16th Finance Commission, which has accepted a share for it. He added that the Commission has also agreed to provide funds for disasters caused by landslides, whereas earlier provisions were limited to droughts and cyclones.
Meanwhile, the BJP rejected the state government’s criticism, reiterating that the Revenue Deficit Grant was conceived as a transitional support to help fiscally stressed states manage short-term gaps. Union Minister for Culture and Tourism Gajendra Singh Shekhawat, addressing the media in Shimla, said RDG was never intended to be a permanent arrangement.
He said successive Finance Commissions extended Revenue Deficit Grant with caution and that during the 15th Finance Commission period, particularly during the COVID-19 pandemic, the grant was front-loaded at unprecedented levels to help states recover. Shekhawat said Himachal Pradesh received higher Revenue Deficit Grant support in recent years compared to earlier cycles, along with a clear message to strengthen its revenue systems and adopt fiscal discipline.
The Union Minister said that fiscal deficit is the gap between revenue and expenditure and cannot be addressed through political blame. He added that under the new Finance Commission formula, tax devolution to states has increased structurally and Himachal Pradesh’s share has also gone up. With better fiscal management, he said, states can offset the tapering of RDG without compromising development.
Shekhawat also flagged the rising debt burden of the state, noting that Himachal Pradesh’s debt-to-GDP ratio has crossed 40 per cent. He said this should be treated as a warning for corrective financial planning rather than political confrontation.
