Editorial 2: Himachal Pradesh needs a financial boost

Context

The State requires greater financial resources to safeguard and conserve its crucial forest cover.

Introduction

This piece reflects on Himachal Pradesh’s ecological contribution and the long-standing concern that mountain States bear high environmental costs while delivering national benefits. Drawing from personal experience, expert reports, and Finance Commission debates, it highlights the need to recognise ecosystem services, correct fiscal imbalances, and ensure fair compensation for forest and ecological conservation.

Early Insights from the Hills

• Growing up in Himachal Pradesh in the 1980s, one has frequently heard a civil engineer father express concern over inadequate State budgets for building hill roads while safeguarding fragile mountain slopes.
• They recognised the importance of forests but felt the State bore a disproportionate financial burden.
• The belief was clear: since forests provide nationwide benefits, States protecting them deserve greater financial support.
• These early ideas later aligned naturally with the concept of ecosystem services when it gained prominence.

Valuing Forest Wealth and Ecosystem Services

• Similar arguments were raised by the Constitutional Conduct Group in a letter to the Chairperson of the 16th Finance Commission.
• Citing a 2025 report by the Institute of Forest Management, Bhopal, the letter estimates Himachal’s total forest wealth at ₹9.95 lakh crore.
• The annual economic value of forests is pegged at ₹3.20 lakh crore, including carbon sequestration, ecosystem services, biodiversity, water provisioning, and regulatory functions like flood control.
• These ecological contributions benefit the entire country, not just the State.

Policy Recognition but Inadequate Compensation

• India’s regulatory framework acknowledges the role of forests in ecological security and the higher costs borne by mountain States.
• However, most instruments fail to comprehensively compensate these States or support an eco-centric development model.
• As a result, States like Himachal remain financially constrained despite delivering national ecological benefits.

Fiscal Constraints and the End of Special Category Status

• Himachal Pradesh was accorded Special Category State status in 1971 due to geographical and climatic disadvantages.
• This status provided preferential financial support until it was withdrawn following the 14th Finance Commission in 2015.
• The State also enacted the FRBM Act, 2005, limiting fiscal flexibility without fully accounting for its agrarian economy and high development costs.
• Although some adjustments were made later, core constraints persist.

Evolving Forest Criteria and the Way Forward

• Finance Commissions introduced mechanisms like Green Bonus, incentive-based grants, and forest cover criteria to reward forest conservation.
• The 15th Finance Commission expanded this to “forest cover and ecology” with a 10% weightage, yet this remains insufficient.
• Current calculations ignore large ecologically vital areas such as glaciers, snowfields, cold deserts, and alpine pastures.
• The 16th Finance Commission must address these gaps through higher allocations and a more inclusive methodology, ensuring fair compensation for ecological stewardship that benefits the entire nation.

Conclusion

For sustainable and equitable development, Himachal Pradesh’s forests and ecology must be valued beyond narrow fiscal formulas. The 16th Finance Commission has an opportunity to correct past limitations by enhancing weightage, improving methodology, and acknowledging non-forest ecological assets. Adequate support will strengthen ecological security, reward stewardship, and serve the national interest in the long run.