Premium

16th Finance Commission report: SPSEs in Himachal, especially power sector, incur losses of Rs 605 crore

Says power subsidies place Himachal among those providing subsidies to large groups of consumers rather than targeting vulnerable sections; points to less spending on capital expenditure, lack of fiscal discipline.

3 min readShimlaUpdated: Feb 4, 2026 02:01 PM IST

The FC-16 further commented on the state's electricity subsidies, placing Himachal Pradesh among states that provide subsidies to large groups of consumers rather than targeting vulnerable sections. (File Photo)

The 16th Finance Commission (FC-16) report has pointed to losses of Rs 605 crore incurred by State Public Sector Enterprises (SPSEs), particularly in the power sector, and a sharp deterioration in fiscal indicators.

The FC-16, which has been criticised for remaining silent on the Revenue Deficit Grant (RDG) for Himachal Pradesh and several other states, has raised serious concerns over the financial affairs of the hill state. “The state (Himachal Pradesh) has seen its fiscal deficit rise sharply over the last two years, reaching 6.4 per cent in 2022-23 and 5.3 per cent in 2023-24,” said the report tabled in the Lok Sabha by Union Finance Minister Nirmala Sitharaman while presenting the Union Budget for 2026-27 on Sunday.

The FC-16 noted that the state government allocates only a small portion of its budget towards capital expenditure, while prioritising salaries, pensions, subsidies and interest payments.

The report, signed by Dr Arvind Panagariya, Chairman of the 16th Finance Commission, categorised Himachal Pradesh among the states whose commitment to fiscal discipline was found to be less encouraging. It specifically referred to amendments made by the state government to its Fiscal Responsibility and Budget Management (FRBM) Act, 2003.

The report observed, “While most states have adhered to fiscal targets, the commitment of some states has been less encouraging. There have been repeated amendments to the FRBM Acts of certain states to alter fiscal targets, effectively shifting the goalposts, particularly with respect to deficit and debt thresholds. For example, Himachal Pradesh amended its FRBM Act in 2023 to revise the fiscal deficit target to 6.0 per cent for the year 2022-23.”

West Bengal was also listed in the same category.

The FC-16 further commented on the state’s electricity subsidies, placing Himachal Pradesh among states that provide subsidies to large groups of consumers rather than targeting vulnerable sections. The report noted that such broad-based subsidies tend to be regressive.

“It emerges that in states that provide subsidies to large groups of households, subsidies become less progressive. States like Himachal Pradesh, Tamil Nadu, Punjab, Karnataka and Rajasthan, which provide power subsidies to large groups, have somewhat more regressive benefits that flow disproportionately to higher consumption households,” the report stated.

Story continues below this ad

In contrast, the Commission observed that states such as Kerala, Goa, Gujarat and Odisha follow a more targeted approach by restricting free power to specific groups, including SC/ST households or consumers with very low monthly consumption. According to the report, such designs help improve the quality of life of vulnerable populations while limiting fiscal impact.

The Commission also noted that Himachal Pradesh has suggested giving 2.5 per cent weight to dense forest cover, 5 per cent to initiatives taken for the Green Credit Programme, and another 5 per cent to forest cover as a proportion of the total geographical area under this criterion.

The state has also suggested using a composite indicator of socio-economic factors such as health, education, rural electrification, and self-employment, etc.

The 16th Finance Commission has made an allocation of Rs 2,384 crores under State Disaster Response Fund for 2026 to 2031:

Story continues below this ad

2026-27	Rs 431 Cr
2027-28	Rs 453 Cr
2028-29	Rs 476 Cr
2029-30	Rs 500 Cr
2030-31	Rs 524 Cr
Total	Rs 2,384 Cr

Saurabh Parashar

Saurabh Parashar is an Assistant Editor at The Indian Express, primarily responsible for the publication’s coverage of Himachal Pradesh. He is a seasoned journalist with over 17 years of experience in print media, specializing in crime, legal affairs, and investigative reporting. Professional Background Education: He holds a Master’s degree in Mass Communication from Guru Jambheshwar University of Science & Technology (Hisar) and a Law degree from Himachal Pradesh University (HPU), Shimla. This legal background significantly informs his reporting on complex judicial and administrative matters. Career Path: Before joining The Indian Express in 2017, he spent 12 years with The Times of India. Core Beats: His primary focus is the socio-political landscape of the hill state, with a specific emphasis on the environment, forest conservation, drug menace (specifically "Chitta"), affairs related to tribal and archaeology and the unique challenges of governance in high-altitude regions. Recent Notable Articles (Late 2025) His recent reporting highlights the critical intersection of policy, law, and social safety in Himachal Pradesh: 1. "Himachal’s battle against Chitta: Why the border areas are most vulnerable" (Late 2025): An investigative look at the transit routes from Punjab and the impact on local youth. 2. "Shimla ropeway clears key hurdle as 820 trees face the axe :According to the Forest Survey of India’s 2021 assessment, 47.21 percent of Shimla’s 5,131 sq km geographical area is under forest cover (Nov 17, 2025). 3. "Himachal to handover 2.7427 ha of non-forest land for Shimla Ropeway: Given the land’s non-forest nature, RTDC and the state will not require permission from MoEFCC" (Nov 18, 2025) 4. "How the centuries-old Jodidara tradition is fading in Himachal’s Trans-Giri region: Jodidara: a form of fraternal polyandry—has long been part of Hatti tribal culture in the Trans-Giri region of Himachal Pradesh and adjoining Uttarakhand. It is believed to have evolved to prevent division of ancestral land and maintain unity among brothers in the harsh, mountainous terrain" (Aug 18, 2025) Legal & Agricultural Affairs "Kisan Sabha hails SC’s setting aside Himachal HC order to remove orchards from forest land" (Dec 18, 2025): Covering a major Supreme Court victory for farmers, where a High Court order to remove fruit-bearing apple orchards was overturned. "Himachal Cabinet nod to new tourism policy; focus on home-stays in tribal areas" (Dec 11, 2025): Detailing the legislative push to decentralize tourism and bring economic benefits to Lahaul-Spiti and Kinnaur. 3. Governance & Environment "Forest rights and development: Why Himachal is seeking more leeway from Centre" (Dec 19, 2025): Reporting on the legal hurdles faced by the state in infrastructure projects due to the Forest Conservation Act. "Cloudbursts and resilience: How Himachal’s remote villages are building back better" (Nov 2025): Following up on the long-term rehabilitation efforts after monsoon-related disasters. Crime especially cyber crimes, crypto currency etc: crypto currency: "Agents in uniform, motivational speeches, lavish parties: How a Himachal crypto con went unnoticed:A serial conman, a ‘Nelson Mandela Nobel Peace Award winner', and retired policemen got together to pull off a Rs 1,740-crore fraud" (Nov 10, 2023) Signature Beats Saurabh is recognized for his tenacious reporting on the state's drug epidemic. His deep familiarity with the topography and tribal culture of Himachal allows him to report from remote locations like Spiti, Pangi, Shillai, which are often overlooked by national media. His legal expertise makes him a primary choice for covering the Himachal Pradesh High Court on issues ranging from local body elections to environmental PILs. X (Twitter): @saurabh_prashar . ... Read More

Stay updated with the latest - Click here to follow us on Instagram

Tags:
Himachal Pradesh

Loading Taboola...