Himachal CM Urges Centre for Financial Support Amid Revenue Deficit Concerns
In a crucial meeting held in New Delhi on Monday, Himachal Pradesh Chief Minister Sukhvinder Singh Sukhu engaged with Union Finance Minister Nirmala Sitharaman to advocate for a special financial package. This initiative aims to mitigate the anticipated revenue deficit projected for the financial year 2026–27, highlighting the state's urgent need for central assistance.
Discontinuation of Revenue Deficit Grant Sparks Alarm
During the discussions, Chief Minister Sukhu voiced deep apprehension regarding the discontinuation of the revenue deficit grant (RDG). He emphasized that this move could severely undermine the financial stability of Himachal Pradesh, a hill state with unique economic vulnerabilities. Sukhu pointed out that the state's RDG contribution stands at 12.7%, ranking as the second highest in India, only behind Nagaland.
Unlike larger states that might absorb such financial shocks, he argued that Himachal's economy, constrained by its hilly terrain, lacks the resilience to cope with the withdrawal of this critical support. This situation, he described, runs contrary to the principles of cooperative federalism, as it overlooks the developmental needs of smaller hill states.
Constitutional and Fiscal Arguments Presented
Sukhu referenced Article 275(1) of the Constitution, which mandates grants for states struggling to bridge gaps between revenue receipts and expenditures. He noted that this marks the first instance where a Finance Commission has seemingly disregarded the requirements of such states, potentially setting a concerning precedent.
To bolster his case, the Chief Minister highlighted the state government's commitment to fiscal discipline. No off-budget borrowing has been undertaken in recent years, and approximately Rs 600 crore is generated annually through various cesses. Despite efforts to increase taxes and rationalize subsidies, persistent revenue losses due to the goods and services tax (GST) continue to strain the state's finances.
Call for Reassessment and Assurance from Centre
In response to these challenges, Sukhu urged the Central government to establish a committee dedicated to reassessing the financial hurdles faced by hill states like Himachal Pradesh. This committee would aim to develop tailored solutions that address their specific economic constraints and ensure sustainable development.
Union Finance Minister Nirmala Sitharaman provided reassurance during the meeting, stating that the demands put forth by Himachal Pradesh would receive sympathetic consideration. This acknowledgment offers a glimmer of hope for the state as it navigates its fiscal uncertainties, with further discussions expected to shape future policy decisions.
The meeting underscores the ongoing dialogue between state and central authorities on fiscal federalism, with Himachal Pradesh seeking to secure essential support to maintain its economic stability and growth trajectory in the coming years.
