Himachal CM Sukhu Exclusive: State's Development Faces Political Roadblocks from Centre, Finances on Right Track

Struggling with the aftershocks of the Centre’s decision to scrap the Revenue Deficit Grant (RDG) and end GST compensation, Chief Minister Sukhwinder Singh Sukhu says Himachal Pradesh is facing a severe financial squeeze. However, the hill state remains firmly on the path of fiscal prudence, development-driven governance, and reforms. 

Sukhu says the Centre’s approach towards Himachal Pradesh is driven less by economics and more by politics. Financial support to Himachal has been unreasonably denied creating a broader electoral narrative that Congress governments cannot govern or deliver development as effectively as BJP regimes.

Also, after the state government implemented the Old Pension Scheme (OPS), the Congress’s first poll guarantee, which is widely seen as a key factor behind the BJP’s defeat in the 2022 elections, the Centre began squeezing the state financially by reducing funding and cutting down its borrowing limit, making governance increasingly difficult, says the CM. 

Sukhu complained, “It is surprising that we are being told the RDG has been stopped because the present government implemented the Old Pension Scheme (OPS). Halting RDG on these grounds is a betrayal of the people without assessing the hills’ needs and high costs of development compared to rich states such as Punjab and Haryana.”

Talking exclusively to Outlook at Shimla, Sukhu, said that over the last three and a half years, he has provided a corruption-free, people-oriented government to change the face of the state’s rural economy by empowering farmers and small farm-based entrepreneurship at the village level. "We fought legal battles up to the Supreme Court to secure state resources and wealth.  Despite inheriting deep financial stress, the burden of debts and liabilities worth hundreds of crores, payable to government servants, pensioners, and an un-stretchable economy, we are steadily moving toward fiscal stability through structural reforms, rural economic strengthening, and enhanced non-tax revenue generation. Our vision is well defined to make Himachal Pradesh a self-reliant economy moving away from the “loan-and-subsidy model," he maintains. 

Due to the scrapping of RDG, the state will lose ₹8,000 crore to ₹10,000 crore. Over the next five years of the 16^th Finance Commission cycle, the loss will be ₹50,000 cr.

Himachal Pradesh’s total revenue from all sources is ₹42,000 cr against an expenditure burden of ₹48,000 cr. The previous BJP government had received GST compensation of ₹16,000 cr. But, the Centre's decision to stop GST compensation has resulted in a loss of ₹25,000 crore. 

However, the chief minister maintains that a series of corrective measures initiated over the last few years has started showing its impact. The government will not let the fiscal constraints get in the way of welfare measures and development necessities. The government will raise additional resources through structural reforms and non-tax revenue generation. The government is taking difficult but necessary decisions, he adds. 

“We want Himachal Pradesh to become economically self-sustaining by strengthening its internal capacities, green initiatives, energising the rural economy, strengthening natural farming, and promoting dairy and animal husbandry,” he asserts.

The 2026–27 budget outlay has been reduced, while the Chief Minister (up to 50%), ministers, MLAs, and senior officials have taken salary cuts as part of austerity measures. The government has also banned the purchase of new vehicles, except electric vehicles, to curb expenditure.

Sukhu says that after the panchayat and local body elections, currently underway, are over, he will unveil his fiscal recovery strategy, which focuses on increasing non-tax revenue, making affordable sections pay more and giving up subsidies. There is a vast untapped potential in sectors like hydropower, tourism, green energy, water resources, and the forest-based economy.

The government will ensure that ordinary people are not made to suffer due to harsh decisions to improve the state’s economy.

Rejecting the opposition BJP's charge of corruption, the Chief Minister says, “There is not even a single case of corruption against the government. Rather, the government has resolved not to let states’ assets and public resources, like water and land, be looted. The Vyavastha Parivartan (system reforms) and anti-corruption measures have already received public endorsements in the 2024 assembly by-polls."

Further, in the Shimla Municipal Corporation, the Congress won a 2/3 majority for the first time on its own. The initial indicators suggest the Congress is likely to do well in the local urban bodies and PRI elections, he says. 

The chief minister wants investments to boost the economy and create jobs; the government encourages only those projects that are in line with its ecological sensitivity and suit the mountain geography. 

He confirmed that the state government will move ahead with the creation of new districts and soon constitute a commission headed by a retired High Court judge to determine the boundaries of new tehsils, subdivisions, and districts—a politically sensitive and economically costlier issue that previous governments had largely avoided

With the state Assembly polls due next year, does he fear ED and CBI action against the Congress government? Sukhu replies, “Using central agencies to pressure Opposition governments is the BJP’s old tactic. They tried it during the June 2024 bypolls too. There were raids and arrests. I have nothing to fear because I’ve done nothing wrong. Ultimately, it is the people who will judge our performance, not the ED or the CBI.”