Shimla: Chief Minister Sukhwinder Singh Sukhu had urged the Union Finance Ministry that, given the state’s dire economic situation, Himachal Pradesh should receive an annual revenue deficit grant of ten thousand crore rupees. Now, the report of the Sixteenth Finance Commission has been approved by the Parliament, but the report does not contain good news for Himachal Pradesh. While the news is not good for other states of the country either, the situation will be worse for a state like Himachal Pradesh, which is already facing an economic crisis.
In fact, the Sixteenth Finance Commission has not recommended a revenue deficit grant (RDG) for the states in its report. The report states: “The Commission has not recommended a revenue deficit grant for the states. The Commission has also not recommended any sector-specific or state-specific grants.” The Commission observes that state finances in general, and tax revenue, committed expenditure, and discretionary expenditure in particular, indicate that there are ample opportunities to increase revenue and rationalize expenditure.
According to former Himachal Pradesh Finance Secretary K.R. Bharti, the RDG should have been granted, but the reasons will only become clear after the detailed report is released. It is also possible that the Finance Commission has made some other arrangement for the states. He says that the horizontal devolution for tax sharing should have increased by at least one percent. This is called the tax transfer system. In this report, the devolution in the tax transfer system is 41 percent. This means that the tax share between the states and the center will be in a 41-59 ratio. That is, the states will get a 41 percent share. Even if this were one percent higher, i.e., 42 percent, Himachal Pradesh would have benefited by a few thousand crore rupees.
What are the recommendations regarding the RDG system now?
According to the Finance Commission’s recommendations, grants for rural local bodies (RLBs) should be classified into basic and performance components. Meanwhile, grants for urban local bodies (ULBs) should be classified into basic, performance, special infrastructure, and urbanization premium components. The gross national grant allocation for the basic and performance components should be divided between rural local bodies (RLBs) and ULBs in a 60-40 ratio. The commission also recommends an 80-20 ratio for the division between the basic and performance components for both RLBs and ULBs.
What did CM Sukhwinder Singh Sukhu say?
CM Sukhwinder Singh Sukhu stated that the central government has discriminated against smaller hill states, including Himachal Pradesh. The Finance Commission has not recommended Revenue Deficit Grants (RDG) for Himachal Pradesh and other states. This will result in a loss of ₹40,000 crore for Himachal Pradesh. The discontinuation of this grant has created a critical situation for Himachal Pradesh and other smaller states. The CM said that Himachal Pradesh had received ₹35,000 to ₹40,000 crore in RDG from the 15th Finance Commission.
