The 16FC report has brought a “mixed bag” of fiscal news for Himachal Pradesh. While there is a significant surge in direct Disaster Management Grants, the state faces a severe “structural shock” due to the discontinuation of the Revenue Deficit Grant (RDG), which has historically been the lifeline of the state’s budget.
Here is the detailed summary of what Himachal Pradesh (HP) stands to gain and lose over the next five years.
1. The Disaster Management “Gain” (₹2,682 Crore)
The Commission has acknowledged the “Extreme Risk” profile of the Himalayan region, resulting in a substantial allocation.
| Fund Category | Total Allocation (₹ Crore) | Union Share (90%) |
State Share (10%)
|
| SDRF (Response & Recovery) | 2,146 | 1,931 | 215 |
| SDMF (Mitigation) | 536 | 482 | 54 |
| Total Five-Year Corpus | 2,682 | 2,413 | 269 |
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The “Himalayan Bonus”: HP continues to enjoy the 90:10 funding ratio. While most of India pays 25% of the disaster bill, HP only pays 10 paise for every rupee spent.
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Mitigation Focus: For the first time, nearly ₹536 crore is “locked” for long-term projects like landslide stabilization and seismic retrofitting, preventing these funds from being diverted to routine relief.
2. The “Structural Loss”: Discontinuation of RDG
This is the “Black Day” mentioned by the state leadership. The 16FC has opted to discontinue the Post-Devolution Revenue Deficit Grant (PDRDG), which the 15th Commission had provided to bridge the gap between a state’s expenditure and its limited revenue.
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The Impact: HP was one of the largest beneficiaries of RDG. The sudden removal of this grant creates a fiscal holeestimated at over ₹5,000–₹7,000 crore annually.
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The State’s Argument: HP argued that its high cost of service delivery (mountainous terrain) and ecological contribution (67% forest cover) make a deficit inevitable. The 16FC, however, has pivoted toward rewarding “performance” and “own-tax revenue” rather than “deficit-filling.”
3. Horizontal Devolution: The “Forest & Ecology” Factor
HP pushed for an increase in the weightage for Forest and Ecology (currently 10%).
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The Status: The 16FC has maintained a significant weightage for this, but also introduced Contribution to GDP(replacing “Tax Effort”) and Demographic Performance.
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HP’s Share: HP’s share in the central tax pool remains relatively stable (approx 0.83%), but the loss of RDG means the total “transfers” to the state will likely decrease in real terms compared to the 15FC period.
4. Gains in Local Body Grants (₹3,792 Crore)
The state has secured a decent envelope for its Panchayats and Municipalities, which are critical for grassroots disaster resilience.
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Rural (Panchayats): ₹3,370 Crore
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Urban (ULBs): ₹422 Crore
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The Catch: 20% of these funds are now “Performance-Linked.” To get the full amount, HP’s local bodies must demonstrate improvements in property tax collection and digital accounting.
Summary Table: The Net Impact
| Parameter | Under 15FC (2021-26) | Under 16FC (2026-31) | Verdict |
| Disaster Funding | ~₹2,200 Cr | ₹2,682 Cr |
GAIN (+₹482 Cr)
|
| Revenue Deficit Grant | Substantial | DISCONTINUED | SEVERE LOSS |
| Cost Sharing Ratio | 90:10 | 90:10 | RETAINED |
| Tax Devolution Share | 0.83% | 0.84% | STABLE |
The devastating 2023 monsoon losses of ₹15,000 crore in Himachal Pradesh and the fiscal strain of the Joshimath crisiswarn us that mountain states cannot be governed by the same economic yardstick as the plains. These past events tell us that while a ₹2,682 crore disaster corpus is a shield, the loss of the Revenue Deficit Grant is an anchor that could drag down our overall resilience. Our ongoing initiatives in ‘Performance-Linked Governance’ prove that we are ready to modernize, but history warns us that if we do not find a way to monetize our ‘Green Services’ (Forest & Water) today, we will be forced to exploit our fragile ecology to bridge the budget gaps of tomorrow.
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