CHANDIGARH: Ahead of the 2026–27 Himachal Pradesh Budget, Chief Minister Sukhvinder Singh Sukhu met Union Finance Minister Nirmala Sitharaman on Monday and warned of an “imminent fiscal collapse” following the 16th Finance Commission’s decision to scrap the Revenue Deficit Grant (RDG) for 2026–31. He sought a financial package under special central assistance to bridge the projected revenue deficit for the financial year 2026–27.
Sukhu said the discontinuation of RDG would have far-reaching adverse consequences on the state’s financial health. He stressed that Himachal Pradesh cannot be compared with larger states whose RDG support has also been withdrawn.
According to him, RDG constituted about 12.7 percent of the state’s finances, the second-highest share after Nagaland. While bigger states may absorb such a shock, he said, Himachal’s smaller, hill-based economy cannot withstand the withdrawal. He added that assessing all states on a single yardstick was neither healthy nor transparent.
Terming the move as undermining the spirit of cooperative federalism, Sukhu cited Article 275(1) of the Constitution of India, which provides grants to states unable to bridge the gap between revenue receipts and expenditure. He said this was the first time a Finance Commission had completely ignored developmental needs of small hill states.
The Chief Minister informed Sitharaman that over the past two to three years, the state had taken several fiscal corrective measures. He said Himachal Pradesh suffered revenue
losses due to the implementation of GST and that, despite raising tax rates where feasible and rationalising subsidies, the revenue deficit gap remained unbridgeable.
Hill state economies need to be assessed: CM
Sukhu urged the finance minister to constitute a committee to assess the economies of hill states and recommend corrective measures. Sitharaman assured sympathetic consideration of the state’s demands.