Himachal Pradesh Confronts Rs 10,000 Crore Annual Financial Crisis from Finance Commission Recommendations
In a stark warning from Shimla, Himachal Pradesh deputy chief minister Mukesh Agnihotri has declared that the state is poised to suffer an annual financial loss exceeding Rs 10,000 crore due to the recommendations of the 16th Finance Commission. Criticising the Central government's Budget, Agnihotri described this move as a "long-term crisis" that fundamentally weakens the state's financial structure and stability.
A Double Blow to the Hill State's Economy
Agnihotri termed the situation a "double blow" to the economy of Himachal Pradesh, a hill state with unique geographical challenges. The first significant hit came with the cessation of goods and services tax (GST) compensation, which has already placed considerable strain on the finances of mountain states that have limited revenue sources and high operational costs.
The second, and more severe impact according to the deputy chief minister, is the abolition of the revenue deficit grant (RDG). This grant served as a vital institutional support mechanism for states like Himachal Pradesh, helping to bridge fiscal gaps and ensure balanced development.
Policy Injustice and Federal Structure Concerns
"Ending RDG is policy injustice that undermines the federal structure," Agnihotri underlined during his assessment. He highlighted that a substantial portion of Himachal Pradesh's Rs 58,000 crore budget is already committed to essential expenditures including salaries, pensions, and other mandatory outlays, leaving little room for developmental initiatives.
Over the last five years, Himachal Pradesh received approximately Rs 38,000 crore through the revenue deficit grant mechanism. Considering inflation and ongoing economic shifts, the state had anticipated this support to potentially rise to Rs 50,000 crore in the coming years. The abrupt removal of this financial lifeline now threatens numerous ongoing developmental projects and welfare schemes that directly impact the state's residents.
Constitutional Obligation Versus Political Silence
Agnihotri stressed that Himachal Pradesh's dependence on Central assistance should not be viewed as a weakness, but rather as a constitutional obligation necessitated by its unique geography and strategic border location. Since the state's formation in 1952, there existed a national consensus on providing special financial support to border and mountain states to ensure equitable development across the country.
Launching a scathing attack on the state's BJP MPs and former chief minister Jairam Thakur, the deputy chief minister accused them of remaining conspicuously silent and failing to adequately protect Himachal Pradesh's financial rights and interests. He demanded that these political representatives clarify whether they stand with the Central government's policies or with the interests of the state they represent.
Public Trust and Economic Consequences
The deputy chief minister issued a stern warning that public trust cannot forgive inaction on a matter causing such substantial economic damage. With an annual loss projected at Rs 10,000 crore, the financial implications extend beyond mere statistics to potentially affect infrastructure development, social welfare programs, and the overall economic health of the state.
This financial restructuring comes at a critical juncture when mountain states like Himachal Pradesh face additional challenges related to climate change, tourism fluctuations, and infrastructure maintenance in difficult terrain. The loss of institutional financial support mechanisms could have cascading effects on the state's ability to maintain essential services and pursue developmental goals.
