The presentation was made in the presence of Chief Minister Sukhvinder Singh Sukhu, Deputy Chief Minister Mukesh Agnihotri and all other Cabinet ministers and Congress MLAs. (Image: @SukhuSukhvinder)
Asserting that the discontinuation of the Revenue Deficit Grant (RDG) will amount to an “abysmal injustice” to the people of Himachal Pradesh, Principal Secretary (Finance) Devesh Kumar, in a detailed financial presentation on Sunday, outlined a grim fiscal roadmap the state might be forced to adopt in the financial year 2026-27.
Listing the likely fallout of the withdrawal of RDG, Kumar indicated that the state could be compelled to discontinue all major subsidies, including those on electricity, water and food, review social security pensions, freeze Dearness Allowance (DA), halt pay revision arrears, and discontinue pension allowances altogether. Presenting the fiscal impact assessment, Kumar warned about an impending financial breakdown.
“We are heading towards a catastrophic situation. Himachal Pradesh is a chronically revenue-deficient state and was never economically self-sufficient. The state has remained dependent on the central government for meeting its expenditure commitments. It will be extremely difficult to manage the financial affairs of the state in the absence of RDG. There is a clear, significant resource gap of about Rs 6,000 crore, excluding developmental works, pending liabilities, state schemes, etc., for FY 2026-27,” he said, making a detailed presentation post-impact of discontinuation of RDG on the state.
The presentation was made in the presence of Chief Minister Sukhvinder Singh Sukhu, Deputy Chief Minister Mukesh Agnihotri and all other Cabinet ministers and Congress MLAs.
For the grant period of 2021-26, the 15th Finance Commission had allocated an RDG of Rs 40,000 crore.
Noting that the state’s borrowing pattern underscores its structural dependence, Kumar said, “Every year, the state has to borrow around Rs 10,000 crore, and annually about Rs 1,300 crore is paid as interest on previously availed loans. Since its inception, the state has largely run on borrowed resources.”
Citing 16th Finance Commission projections, Kumar highlighted the structural deficit historically acknowledged at the national level. “The 15th Finance Commission had assessed Himachal Pradesh’s revenue for 2021-26 at Rs 90,760 crore and expenditure at Rs 1,70,930 crore, leaving a deficit of Rs 80,170 crore.”
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“This deficit,” he said, “was bridged through tax devolution of Rs 35,064 crore, RDG of Rs 17,199 crore and other grants of Rs 9,714 crore.”
Kumar further noted that grants worth Rs 4,407 crore under “other grants” were not accepted by the Centre. “No such revenue-expenditure assessment or compensatory calculations are available in the 16th Finance Commission report.”
RDG loss impact
Discontinuation of all subsidies
Proposal to discontinue food subsidy, citing BPL families get free ration under Central schemes
Withdrawal of power subsidy can save nearly Rs 1,200 crore annually
Social Security pensions to be reviewed. At present, Rs 1,661 crore is required; proposing Rs 500 crore. Beneficiaries’ numbers and eligibility need to be reviewed
Dearness Allowances (DA) have to be frozen at current level
NO DA/pay and DA/pension revision arrears can be paid
Discontinuation of pension allowance and brought to zero
Adoption of Unified Pension Scheme, revival of New Pension Scheme can be considered for future recruitment to avail additional borrowing of about Rs 1800 crore per annum
State’s Resources Analysis
State’s resources stand at about Rs 18,000 crore, and committed expenditure is around Rs 48,000 crore (salary and allied, pension, internet, repayment, subsidies, social security pension, etc,.)
Share in central taxes devolution Rs 13,950 crore
State’s resources after including Rs 10,000 crore borrowing: about Rs 42,000 crore
Resource gap was being filled through RDG until now, but due to RDG discontinuation, there is a resource constraint for meeting budgetary allocation
Due to financial constraints, development/capital expenditure is unlikely to be possible from state’s resources
State can carry out limited developmental expenditure through Centrally Sponsored Schemes and Externally Aided Projects
Liabilities’ analysis
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State won’t be able to defray pay/pension revisions arrears of about Rs 8500 crore
Won’t be able to pay DA/DR arrears amounting to Rs 5,000 crore
Won’t be able to release further DA/DR instalments
Developmental works, etc., are likely to rollover the next financial year , amounting to Rs 2,000 crore
Will be difficult to provide matching grants for CSS and EAPs
Will be difficult to clear pendency of HIMCARE, SAHARA and MIS, etc
Huge liability on account of court orders of about Rs 1,000 crore
Conclusion
Suggestive measures cannot be done overnight or in a short span
Even if these measures and reforms about increasing revenue and decreasing expenditure are undertaken, resources gap will still exist, and RDG has been a saviour in this regard. This is the very reason why hilly states like Himachal were recognised and given special category status
Himachal was formed on aspirations of the public and not as a financially viable unit
Impact of recommendations is not confined to incumbent government, but adversely affects subsequent governments
In nutshell, this is ‘Abysmal Injustice’ with the people of Himachal Pradesh
(Source: Presentation made by Principal Secretary, Finance, Devesh Kumar)
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
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