The proposed withdrawal of the Revenue Deficit Grant (RDG) for Himachal Pradesh by the 16th Finance Commission has pushed the ruling Congress into an aggressive political stance, while placing the BJP — usually on the offensive since losing power in the state in 2022 — on the defensive.
What are Sukhu’s allegations?
Blaming the Centre for depriving the state of its “rightful” RDG, Sukhu said the move violated Article 275(1) of the Constitution. “All options to reclaim the RDG are open, but before taking any step, we will meet Prime Minister Narendra Modi,” he said. The state, he added, was expecting around Rs 50,000 crore as RDG for the 2026–31 period. Under the 15th Finance Commission, Himachal Pradesh had received around Rs 48,000 crore between 2022 and 2026.
Leaving for Delhi on Tuesday to attend a party meeting, Sukhu said he would also seek an appointment with Union minister J P Nadda. “As the Budget Session is on, I hope to meet the PM after the session,” he said before boarding the chopper.
What has the BJP said?
The BJP leadership in the state, however, defended the discontinuation of RDG. Former Chief Minister and Leader of Opposition Jai Ram Thakur, state BJP chief Rajeev Bindal, and all BJP MPs from Himachal Pradesh argued that the move was expected. Former Chief Minister Prem Kumar Dhumal advised the Sukhu government to focus on economic reforms instead of blaming the Centre.
On February 5, BJP MP Anurag Thakur, along with Lok Sabha MPs Rajeev Bhardwaj and Suresh Kashyap and Rajya Sabha MPs Sikandar Kumar and Harsh Mahajan, defended the Finance Commission’s recommendations in Delhi. Thakur said RDGs under the 14th and 15th Finance Commissions were meant to be temporary and front-loaded transition support, particularly in the aftermath of Covid-19. “States were expected to improve tax effort and rationalise expenditure to approach near-zero revenue deficits by 2025–26,” he said.
What does the Congress claim?
The RDG issue has united factions within the Congress. PWD Minister Vikramaditya Singh, often seen taking positions independent of the party line, said, “RDG is a constitutional right of the people of Himachal Pradesh. We stand united with the Chief Minister. I urge BJP leaders to join us in protecting the state’s rights.”
A Congress Cabinet minister, speaking on condition of anonymity, said political considerations behind the withdrawal of RDG “cannot be ruled out”. “The timing suggests an attempt to destabilise a government already facing a severe financial crisis,” the minister said, adding that the Centre would not ordinarily override its own Finance Commission’s recommendations. “At the same time, nobody other than the Central government can help the state,” the leader said.
On Sunday, after attending a presentation on the post-RDG fiscal impact, Sukhu told the media that approaching the court was “also an option”. He later clarified that any such decision would be taken by the Cabinet. Subsequently, the Directorate of Public Relations contacted reporters, requesting that references to legal action be avoided. The Cabinet is scheduled to meet on February 12.
The state’s debt burden has since crossed Rs 1.20 lakh crore. The 15th Finance Commission had assessed Himachal Pradesh’s revenue for 2021-26 at Rs 90,760 crore against expenditure of Rs 1,70,930 crore, leaving a deficit of Rs 80,170 crore.
What does Article 275(1) say?
Article 275(1) of the Constitution empowers Parliament to provide grants-in-aid to states in need of financial assistance. These grants, drawn from the Consolidated Fund of India, may also support development schemes for Scheduled Tribes and administration in Scheduled Areas.
Why does RDG matter?
RDGs are provided to bridge the gap between a state’s revenue expenditure and revenue receipts. According to Sukhu, Himachal Pradesh has received RDG since its formation in 1971. Finance Commission records show the first RDG of Rs 55.19 crore was awarded for 1974–79 under the 6th Finance Commission. Under the 15th Finance Commission, the state received around Rs 40,000 crore for 2021–26.
The 16th Finance Commission recommended discontinuation of RDG, citing increased tax devolution after the 14th Finance Commission and the merger of Plan and Non-Plan expenditure. It also noted that Himachal Pradesh collects significantly less tax than its potential and allocates a relatively small share of its budget to capital expenditure, prioritising salaries, pensions, subsidies and interest payments. The report described the state’s fiscal discipline as “less encouraging”, pointing to amendments to its FRBM Act, including raising the fiscal deficit target to 6% in 2022–23.
Despite discontinuing RDG, the commission placed Himachal Pradesh among states with higher tax potential for other grants such as local body and disaster relief grants for 2026–31.
What may be the consequences of the Centre’s move?
Principal Secretary (Finance) Devesh Kumar, in a presentation on the fiscal impact of RDG withdrawal, warned that the state may be forced to discontinue subsidies on electricity, water and food, review social security pensions, freeze dearness allowance payments and halt pay revision arrears. “We are heading towards a catastrophic situation,” Kumar said, estimating a resource gap of about Rs 6,000 crore in the 2026-27 fiscal, excluding development works and pending liabilities.
Chief Minister Sukhvinder Singh Sukhu on Monday termed February 1, the day Union Finance Minister Nirmala Sitharaman presented the Union Budget 2026–27 and tabled the FC-16 report in Parliament, a “black day” for Himachal Pradesh. (Image: @SukhuSukhvinder) 
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