Blow to Himachal’s finances as RDG ends; ‘black day, says Sukhu

“The demolition of RDG is a direct violation of Article 275(1) of the Constitution of India. We are examining all the legal aspects. We will discuss the issue in the next Cabinet meeting and take a decision,” he said.

Later, in statement he said that from 1952 up to the 15th Finance Commission, “these grants were regularly provided by the Centre to the states.

“However, for the first time, the 16th Finance Commission has discontinued this grant. It is sad that this omission overlooks structural fiscal handicaps, 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,” he said.

The chief minister said the state had expected targeted support for hill-specific priorities such as hydropower development, eco-tourism, road and rail connectivity and compensation for revenue losses arising from GST implementation.

“The absence of adequate RDGs will 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,” he said.

Sukhu said he found no significant announcement for Himachal Pradesh in the Union Budget. “My primary focus was on RDG and the 16th Finance Commission. Sadly, both have disappointed us,” he said, adding in name of grants and financial assistance, the hill state has been given a “jhunjhuna (a rattle)”.

He said that he had met the Chairman of the 16th Finance Commission, Dr Arvind Panagariya, four times and had also held multiple meetings with the Union Finance Minister Nirmala Sitharaman, urging them to enhance RDG for Himachal Pradesh. “We were expecting around Rs 50,000 crore as RDG during the 16th Finance Commission period, slightly higher than the Rs 40,000 crore allocated by the 15th Finance Commission,” Sukhu said.

He said that under the 15 Finance Commission, Himachal Pradesh had received approximately Rs 37,000 crore as RDG. Even during the transition period, when there was a delay in submission of the Fifteenth Finance Commission’s report, an interim assistance of ₹11,431 crore was provided. “The complete withdrawal of RDG now ignores the fiscal realities of hill states,” he added.

The RDG grant has witnessed gradual tapering — from Rs 10,949 crore in 2021–22 to just Rs 3,257 crore in 2025–26.

He also expressed concern that the allocation of Rs 1.5 lakh crore for interest-free loans to states had not been enhanced and that stringent conditions attached to it disadvantage smaller hill states. He said the discontinuation of GST compensation had resulted in significant annual revenue losses for Himachal Pradesh.

“As a special category hill state with fragile ecology, frequent natural disasters and a limited revenue base, Himachal Pradesh requires stronger and sustained fiscal support. A clear framework for continued RDGs beyond the current Finance Commission period is critical,” he said.

Sukhu underlined that nearly 90 per cent of Himachal Pradesh’s land is mountainous, with only about 10 per cent suitable for industrial activity, severely limiting the state’s revenue-generation capacity.

“Hill states incur much higher costs due to difficult terrain, scattered habitations, harsh climatic conditions, and expensive infrastructure development. Financial devolution to hill states should be at least double their population share to ensure equity,” he said.

Sukhu also criticised the GST regime, saying it had adversely affected the state’s finances, and flagged the impact of Free Trade Agreements on apple growers, who form the backbone of Himachal’s rural economy.

The Budget failed to respond to the critical issues confronting the nation, particularly unemployment, poverty and escalating prices, he said.

“Apple growers of Himachal Pradesh, who make a vital contribution to the state’s economy of around Rs 5,000 crore and support thousands of families, have received no recognition in the Union Budget,” said the chief minister.

The Budget also lacked substantive measures to address persistent challenges in the agriculture sector, including inadequate support prices and insufficient investment in advanced farming practices, infrastructure and modernisation.

“Himachal Pradesh, like several other states, continues to face difficulties as the Budget appears to favour the wealthy over common Indian citizens,” he said.

Sukhu further said the Budget had ignored the long-pending demand for expansion of the rail network in Himachal Pradesh, with no allocation made for key projects such as the Bhanupali-Bilaspur and Baddi-Chandigarh lines.

He alleged that MGNREGA, a demand-driven scheme, had been weakened, resulting in a loss of nearly Rs 900 crore to Himachal Pradesh. He also highlighted the state’s role in sustaining major rivers — Yamuna, Sutlej, Beas, Ravi and Chenab — without adequate compensation.

Sukhu reiterated his demand for a dedicated ‘Green Fund’ for hill states to compensate them for preserving forests, biodiversity and ecological services that benefit the entire country. He said this demand had also been raised with the Prime Minister.

He further sought state-specific grants for disaster management, relief from the debt trap, enhanced funding for local bodies, and special provisions tailored to the unique needs of hill regions.

Accusing the Centre of systemic discrimination, Sukhu said the BJP MPs from Himachal Pradesh appeared to believe that safeguarding the state’s interests was solely the responsibility of the state government.

“The Centre has betrayed the people of Himachal Pradesh. The removal of RDG pushes hill states into a grave fiscal crisis and undermines the spirit of cooperative federalism,” he said.