‘Weak tax, high expenditure patterns behind RDG discontinuation’: Anurag Thakur counters Sukhu’s claim on RDG

Thakur said the commission did not recommend continuing it due to weak tax efforts and high committed expenditure patterns observed in several states, including Himachal. “I appeal to the people to not be misled by Congress’s hollow claims. 16th FC data shows Himachal’s devolution has increased by nearly Rs 2,388 crore. The real challenge is restoring fiscal discipline, improving tax effort and investing in our future.”

According to budget estimates for 2025-26, Himachal’s post-devolution receipts rose from Rs 11,561.66 crore to Rs 13,949.97 crore, marking a gain of nearly Rs 2,388 crore.

Thakur said the RDG under 15th Finance Commission was front-loaded to help states recover from COVID-19, designed as a time-bound transitional measure to bring deficits close to zero by 2025-26.

The 16th Finance Commission, after reviewing outcomes, concluded that despite large RDG transfers, many states failed to strengthen revenue collection or rationalise expenditure. Continuing RDG would create “distorted incentives” and weaken pressure for structural reforms, Thakur said.

Thakur said the Modi government does not discriminate against states, noting that several opposition-ruled states also benefited from 16th Finance Commission horizontal redistribution formula. The revised criteria increased weightage for population/demographic performance and added a 10 per cent weightage for GDP contribution, while reducing weightage for area.

Thakur compared Himachal with Uttarakhand to illustrate why 16th Finance Commission discontinued general RDG. He said, “Himachal recorded a fiscal deficit of ~5.3 per cent and revenue deficit of ~2.6 per cent, while Uttarakhand posted a fiscal deficit of ~2.5 per cent and a revenue surplus of ~1.1 per cent. Himachal’s liabilities stood at ~42.8 per cent of GSDP, compared to Uttarakhand’s ~25.5 per cent. Himachal’s apex share was relatively lower, indicating more spending on revenue and debt servicing than productive investment.”

Congress continues to attack Budget

Congress leaders on Monday continued to criticise the Union Budget, alleging that key decisions of the Centre would severely weaken the state’s financial health. Deputy Chief Minister Mukesh Agnihotri said the discontinuation of the Revenue Deficit Grant (RDG), coupled with earlier withdrawal of GST compensation, would result in an annual financial loss of over Rs 10,000 crore to the state.

Addressing the media, Agnihotri termed the move a “double blow” to Himachal’s economy, stating that the hill states with limited revenue sources were already struggling after the GST compensation ended. “The abolition of RDG… an institutional safeguard for states like Himachal, has now delivered a second severe shock.” He said it is a long-term crisis rather than a temporary setback.

He said with a total state budget of around Rs 58,000 crore, a major share was already committed to salaries, pensions and mandatory expenditures.

Over the last five years, Himachal had received about Rs 38,000 crore through RDG, and the state had expected this figure to rise to nearly Rs 50,000 crore in view of inflation and rising costs.

The deputy CM called the decision a policy injustice and said it undermined the spirit of federalism.

HPCC president Vinay Kumar said the RDG was discontinued to settle political scores with the Congress government for implementing the Old Pension Scheme (OPS). He said the OPS will continue. The budget lacked direction and failed to provide disaster relief, tourism support, or assistance for agriculture, horticulture and hydropower, he said.

HPCC spokesperson Sanjeev Gandhi said the Centre “fooled” people with symbolic announcements like Himalayan and hiking trails, while remaining silent on natural disaster compensation.