Himachal CM Sukhu seeks special central aid after revenue grant cut

Sukhvinder Singh Sukhu, the chief minister of Himachal Pradesh, met Union finance minister Nirmala Sitharaman in New Delhi on Monday. During the meeting, he raised serious concerns about the financial condition of the hill state. He warned that Himachal Pradesh may face an “imminent fiscal collapse” after a key central grant was discontinued.

The issue began after the 16th Finance Commission decided to scrap the Revenue Deficit Grant (RDG) for the period 2026–31. This grant was an important source of income for Himachal Pradesh. According to the chief minister, the removal of RDG will reduce nearly 25% of the state’s revenue receipts.

Sukhu said the decision has created a big financial gap. He requested special central assistance from the Union government to help the state manage its expenses and development work.

Green bonus and revenue concerns

To deal with the financial crisis, Sukhu demanded a special annual package of ₹50,000 crore as a “Green Bonus.” He said Himachal Pradesh has protected about 67% of its land under forest cover. Because of this, the state cannot expand industries and large development projects like other states.

He argued that the state has sacrificed industrial growth to protect the environment. Therefore, it should receive financial compensation from the Centre. He said such a Green Bonus would be a first-of-its-kind support for a hill state.

Sukhu also referred to Article 275(1) of the Indian Constitution. This article allows the Centre to provide grants to states in need of assistance. He said removing the Revenue Deficit Grant goes against the spirit of cooperative federalism.

According to him, small hill states like Himachal Pradesh should not be judged using the same standards as large and industrial states. He described the “one-size-fits-all” approach as unfair and not transparent.

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Officials said that RDG made up about 12.7% of Himachal’s revenue. This is the second highest share in India after Nagaland. Losing this grant will create serious financial stress for the state government.

Sukhu said that this is the first time a Finance Commission has completely removed such support for small hill states. He added that without special help, it will become very difficult to maintain development projects and welfare schemes.

Fiscal measures and future steps

During the meeting, Sukhu informed the finance minister about the state’s efforts to control spending. He said the government has already taken several steps to improve finances.

The state is raising around ₹600 crore every year through various cesses. It has also avoided off-budget borrowings to maintain financial discipline. The government has reduced unnecessary expenses and rationalised subsidies.

Despite these steps, Sukhu said the gap created by GST-related losses and the withdrawal of RDG cannot be filled only through internal measures. He also requested that the Centre allow the state to increase its borrowing limit by 2% of Gross State Domestic Product (GSDP). This would give Himachal more flexibility to manage its financial needs.

He further asked for a separate committee to study the financial conditions of hill states. He said the special geographical conditions, limited resources, and environmental responsibilities of such states must be properly understood before making financial decisions.

Officials who were present during the meeting described the discussion as positive. They said the finance minister listened carefully to the concerns raised by the chief minister. According to them, Sitharaman assured that the Centre would sympathetically consider the demands.

The meeting is seen as important because Himachal Pradesh heavily depends on central support for development and welfare schemes. The state has limited industrial activity due to its mountainous terrain and environmental restrictions.

Experts say that if special assistance is not provided, the state may face difficulty in paying salaries, running social schemes, and continuing infrastructure projects. On the other hand, if the Centre agrees to some of the demands, it may ease the pressure on the state’s finances.

For now, the Himachal government is waiting for a response from the Union government. The coming months will be crucial in deciding how the state manages its financial challenges.

The chief minister has made it clear that protecting forests and maintaining ecological balance should not become a burden for hill states. He believes that states contributing to environmental protection must receive fair financial support.

The final decision of the Centre will determine whether Himachal Pradesh gets the special package and borrowing relief it has requested.