Shimla, Feb 4,
Himachal Pradesh is preparing for a rare special sitting of the State Assembly as the discontinuation of the Revenue Deficit Grant (RDG) threatens to redraw the state’s fiscal architecture from April 2026 onward.
The Council of Ministers is expected to deliberate on the issue in its February 8 meeting, with indications that a special Assembly session could be convened after February 15 — even before the regular Budget Session.
At the core of the crisis is the decision following the recommendations of the Sixteenth Finance Commission to discontinue RDG beyond March 31, 2026 — effectively ending a financial support stream that has sustained Himachal’s revenue deficit structure for years.
Rs 37,199 crore cushion ends
Under the Fifteenth Finance Commission award (2021–22 to 2025–26), Himachal Pradesh was sanctioned approximately Rs 37,199 crore as Revenue Deficit Grant. However, the grant followed a tapering trajectory:
Rs 10,249 crore in 2021–22
Rs 9,377 crore in 2022–23
Rs 8,058 crore in 2023–24
Rs 6,258 crore in 2024–25
Rs 3,257 crore in 2025–26
After that — the support ceases completely.
For a hill state with limited industrial base and high committed expenditure, the withdrawal of RDG represents not just a fiscal adjustment but a structural shift.
Cabinet to examine bureaucratic handling
Senior ministers are understood to be dissatisfied with how the state’s case was presented before the Sixteenth Finance Commission. The Council of Ministers is expected to review whether adequate efforts were made to push for:
A revenue deficit formula sensitive to hill-state constraints
Settlement of long-pending inter-state financial disputes involving Punjab, Haryana and the Bhakra Beas Management Board
There is also concern over Himachal’s declining share in the national divisible pool, now reportedly below one percent — lower than Haryana, Uttarakhand and even Goa — intensifying fiscal stress.
Call for political consensus
Principal Media Advisor to the Chief Minister, Naresh Chauhan, said the discontinuation of RDG reflects disregard for Himachal Pradesh’s financial realities. According to him, the Chief Minister is keen that both ruling and opposition members deliberate collectively in the Assembly and evolve a unified strategy.
The special session, if convened, will aim to build political consensus before the 2026–27 Budget exercise begins.
Budget size may shrink
Government sources indicate that the annual plan outlay for the coming financial year could see compression. The matter is expected to figure prominently in MLA priority meetings scheduled for February 6 and 7.
Nearly 60 percent of Himachal’s annual budget is already consumed by committed liabilities — salaries, pensions, loan repayments and interest payments. With RDG ending, the proportion of revenue expenditure is likely to expand further, reducing fiscal space for capital works and development schemes.
If corrective measures are not devised, the 2026–27 state budget — effective April 1 — may be smaller in size compared to the current fiscal year.
Resource mobilisation begins
In parallel, the Finance Department has initiated steps to augment resources. Finance Secretary Abhishek Jain has directed banks to immediately transfer unclaimed government balances lying in inoperative accounts and in the RBI’s Depositor Education and Awareness Fund to the State Treasury head.
Banks have been instructed to ensure prompt compliance to facilitate proper budgeting, accounting and auditing. The government has clarified that any funds transferred erroneously will be refunded after verification.
A structural fiscal turning point
The proposed special Assembly sitting is shaping up to be more than a political discussion. It could mark a defining moment in Himachal’s fiscal trajectory — determining whether the state negotiates fresh institutional safeguards, restructures its expenditure model, or moves toward greater borrowing dependence.
With the RDG tap set to close after March 2026, the coming weeks may decide how the mountain state recalibrates its financial future.
About the Author
The HimachalScape Bureau comprises seasoned journalists from Himachal Pradesh with over 25 years of experience in leading media conglomerates such as The Times of India and United News of India. Known for their in-depth regional insights, the team brings credible, research-driven, and balanced reportage on Himachal’s socio-political and developmental landscape.
