Sukhvinder Singh Sukhu Warns Against Scrapping Revenue Deficit Grants, Seeks Cross-Party Appeal to PM

Himachal Pradesh Chief Minister Sukhvinder Singh Sukhu has strongly cautioned against any move to discontinue Revenue Deficit Grants (RDG), stating that such a decision would severely impact hill states like Himachal Pradesh that rely heavily on central assistance to maintain fiscal stability.

Concern Over Fiscal Stress

Addressing the issue, the Chief Minister highlighted that Himachal Pradesh already faces structural financial constraints due to its difficult terrain, limited industrial base, and higher infrastructure costs. He warned that scrapping Revenue Deficit Grants would widen the fiscal gap and hamper the state’s development initiatives.

Sukhu pointed out that the state’s revenue growth has slowed significantly in the post-GST era. “Before the implementation of GST, tax collection growth used to be around 13–14%. Now, it has come down to nearly 8%,” he said, underlining the financial strain on the state exchequer.

Impact of GST Regime

The Chief Minister emphasized that the Goods and Services Tax (GST) framework has reduced the fiscal autonomy of states, making them more dependent on central transfers. He noted that while GST was intended to streamline taxation and boost overall revenue, hill states with limited commercial activity have not experienced proportional gains.

According to Sukhu, the reduction in independent revenue sources combined with increased expenditure obligations has intensified the need for continued Revenue Deficit Grants.

Call for Cross-Party Unity

In a significant political move, Sukhu urged leaders across party lines to unite and collectively appeal to the Prime Minister for the continuation of RDG. He stressed that the issue transcends party politics and directly affects the welfare of the people of Himachal Pradesh.

“This is not about political differences. It is about safeguarding the financial interests of our state,” he said, appealing for a unified memorandum to be submitted to the Centre.

Importance of Revenue Deficit Grants

Revenue Deficit Grants are provided to states to bridge the gap between revenue receipts and expenditure. For special category and hill states like Himachal Pradesh, such grants play a crucial role in funding social welfare schemes, infrastructure projects, and essential public services.

Sukhu reiterated that discontinuing these grants would put additional pressure on the state’s borrowing capacity and could slow down ongoing development programs.

The Road Ahead

The Chief Minister indicated that the state government would formally take up the matter with the Centre and explore all constitutional and financial avenues to protect Himachal Pradesh’s interests. Political observers believe the issue could gain national attention, especially with other fiscally stressed states closely monitoring the developments.

As the debate over fiscal federalism and resource distribution intensifies, Himachal Pradesh’s appeal may spark broader discussions on how to balance national tax reforms with the unique needs of smaller and geographically challenging states.