‘Single Yardstick Unfair’: CM Raises Hill State Concerns with Union Finance Minister
The Union government’s decision to discontinue the Revenue Deficit Grant (RDG) has deepened Himachal Pradesh’s financial strain, with Chief Minister Sukhvinder Singh Sukhu warning that the shrinking central support is widening the state’s revenue gap at a time when expenditure pressures remain high.
Raising the issue with Union Finance Minister Nirmala Sitharaman, the Chief Minister said the formula adopted by the Finance Commission does not adequately account for the unique challenges faced by small and hill states like Himachal Pradesh. He argued that applying a “single yardstick” for all states is unfair, especially when geographical constraints significantly increase the cost of delivering basic services in mountainous regions.
According to the state government, the Revenue Deficit Grant — a critical lifeline to bridge the gap between revenue expenditure and revenue receipts — has been progressively reduced during the current Finance Commission cycle. Officials maintain that this reduction, coupled with declining GST compensation, has severely constrained fiscal space. The end of the GST compensation regime has further aggravated the situation, as the state continues to face structural revenue limitations due to its limited industrial base and dependence on central transfers.
The Chief Minister pointed out that Himachal’s expenditure commitments — including salaries, pensions, interest payments, and social welfare schemes — consume a major portion of its budget. At the same time, revenue generation remains modest compared to larger states. He said that hill states incur higher per capita costs in building roads, maintaining health facilities, providing education, and ensuring connectivity in remote areas. Despite these challenges, the state is expected to maintain fiscal discipline under the same norms applied to economically stronger states.
Chief Minister urged the Centre to reconsider the RDG allocation formula and restore adequate compensation for GST losses. He also sought special consideration for hill states in view of environmental vulnerabilities, disaster management needs, and limited avenues for revenue augmentation.
The issue assumes significance as Himachal has already been grappling with a tight financial position. The government has previously flagged concerns over borrowing limits and fiscal deficit targets, stating that strict caps restrict development expenditure. The latest communication to the Union Finance Ministry signals that the state intends to push for a more flexible and equitable financial framework.
