For the first time ever, the chief ministers of the 10 hill and Himalayan states of India gathered in Mussoorie with a view to discuss development challenges and collectively place newer norms of devolution of financial resources before the Fifteenth Finance Commission. In 2002, as the chief economic adviser to the government of Sikkim, I had prepared a 24-page comprehensive document to hold a similar conclave in Sikkim. However, the then political leadership seemed to have not understood the criticality of such an exclusive interaction. Sikkim missed a major opportunity to be the flag bearer for the mountain states in India’s complex federal polity. So the full credit this time deservingly went to sagacious Trivendra Singh Rawat, chief minister of Uttarakhand.

The seven crucial issues that came up for discussion in this conclave in the presence of Finance Minister Nirmala Sitharaman, Chairman of the Finance Commission NK Singh and NITI Aayog Vice-Chairman Rajiv Kumar were related to the restoration of the special category status given to all hill and mountain states; constricted development manoeuvrability and related cost disabilities; green bonus to these states for sustainably providing unprecedented level eco-services; newer development direction in the absence of the five-year plans after the dissolution of National Planning Commission in 2014 and setting up of the Ministry of Himalayan Development; natural disasters and hazard vulnerability risk; lagging infrastructure; and innovative formula and criteria for funds devolution for these states.

In 2014, the Fourteenth Finance Commission report discontinued the special category states criteria that had been in place since the mid-1960s, and these states stopped receiving extraordinarily liberal central grants. Sikkim lost out on transfers to the extent of INR99,400 million. Nagaland suffered equally harshly. The conference deliberated on the issue of limited fiscal resources and relatively higher revenue expenditure incurred in providing basic amenities and services to the citizens. It appealed to the Fifteenth Finance Commission to provide these states with a liberal revenue deficit grant to bridge the revenue-expenditure gap.

Innovative criteria

A range of innovative criteria was proposed. The chief minister of Manipur N Biren Singh proposed forest cover as an indicator for devolution, that is the relative area of forest cover as a percentage of the total land as the basis for calculating each state’s fund share. Jai Ram Thakur, chief minister of Himachal Pradesh, proposed that the division of central tax should be based on the progress of the flagship programmes, forest area, scattered population and geographical conditions. The chief minister of Meghalaya Conrad Sangma opined that the formula for horizontal devolution should provide sufficient weightage at 15 percent to the ecosystem services along with weightage to Scheduled Tribe population.

The chief minister of Mizoram TJ Lalnuntluaunga said that the weightage and criteria for determination of shares of taxes should be to the extent of 25 percent, 40 percent, 7.5 percent, 10 percent, 10 percent. Similarly, it should be 7.5 percent for population, income distance, fiscal discipline, area, forest cover and historical infrastructure gap, respectively. The chief minister of Sikkim Prem Singh Tamang elaborated on India emerging as a global power. Despite the huge debt and extensive liability, his government inherited from its predecessor, he pledged to accomplish the idea of making Sikkim the 'Green Growth Pole' of eastern India. He urged that programmes like the Border Area Development Programme and critical agencies like the Border Road Organisation be reoriented and made more comprehensive and modern in technical knowhow with the induction of advanced technology. He floated the idea of a National Importance Project Fund aimed at making the entire Himalayan region inter-connected, developed and secured and integrated with the rest of India.

The finance minister said mass migration from the mountain states was a severe national security threat as locals no longer inhabited these villages. There need to be incentives for people to continue living in the border areas through the development of roads, schools and hospitals. States which do not have an avenue to earn carbon credit could buy carbon credits from the Himalayan states, she said.

The chairman of the Finance Commission, while stating the need for enhancing the role of local regulatory bodies like panchayats and urban local bodies, asked the states to focus on strengthening these pillars of governance. The Finance Commission may focus on developing monetary performance criteria, including parameters like water availability, achieving Sustainable Development Goals and better outcomes of development.

Green bonus

With a geographical coverage of over 530,000 sq km, that is more than 16 percent of India's total area, this region lying between the Indus and Brahmaputra river systems hosts over 50 million people. Though endowed with rich natural resources, not being able to harness them for development makes a strong case for 'green bonus'. Triggering a new line of discourse, the memorandum mentioned that India’s national accounting system did not have any standard to capture the value provided by ecosystems. From agriculture to health and well-being, ecosystems provide crucial resources and services that underpin the economic life of people worldwide, the ecosystems in these mountains have economic benefits at the local, national, regional and international levels. Current national policies regard ecosystem conservation as an aspirational statement, and make financial allowances as a gesture of goodwill rather than as a matter of rightful compensation for the tangible and intangible eco-services being rendered.

Some of these recommendations did figure in the MS Swaminathan and SZ Qasim Report on Himalayas; National Mission for Sustaining the Himalayan eco-system under National Action Plan on Climate Change in 2010; Prime Minister's Task Force on Hill States in 2010 and also ICIMOD’s Hindu Kush Himalaya Assessment Report 2019. Taking cognisance of these aspects, NITI Aayog constituted the Himalayan State Regional Council for Sustainable Development in 2018. For the Himalayan states, the next Finance Commission report could be a turning point.