Nagaland Chief Minister Dr Neiphiu Rio calls on Union Finance Minister Nirmala Sitharaman in New Delhi on July 16. During the meeting, the Chief Minister sought the Union Government’s support for the State's fiscal and developmental priorities. (Photo: X/@Neiphiu_Rio)
Moa Jamir
Kohima | July 16
The State's fiscal health, alongside key infrastructure and development priorities, figured prominently as Chief Minister Dr Neiphiu Rio led another round of engagements with Union Ministers in New Delhi, seeking Union’s support amid an increasingly constrained fiscal landscape for Nagaland.
On July 16, CM Rio met Union Finance Minister Nirmala Sitharaman and sought consideration following the discontinuation of Revenue Deficit Grants (RDGs), besides requesting support under the Special Assistance to States for Capital Investment (SASCI) scheme for the State's developmental priorities.
"Called on the Hon'ble Union Finance Minister... Sought her consideration following the discontinuation of RDGs, and for support under SASCI for our developmental priorities. Grateful for her guidance and support," he posted on X.
The meeting comes against the backdrop of the 16th Finance Commission's recommendations, under which Nagaland is set to lose RDGs, a major source of fiscal support for the State over the years, while share of the divisible pool of Central taxes is also reduced.
This is not the first time the State Government has raised the issue. Apart from frequent visits to New Delhi, the Chief Minister had highlighted Nagaland's "serious fiscal challenge" at the 73rd North Eastern Council (NEC) Plenary in Shillong on June 4, urging the Union Government to provide annual special grants during the 16th FC award period to ensure fiscal stability and continuity in governance and essential public service delivery.
On Thursday, CM Rio, accompanied by Deputy Chief Ministers TR Zeliang and Y Patton, also called on Union Minister for Road Transport and Highways Nitin Gadkari to seek support for Nagaland's national highway priorities.
The delegation sought expeditious implementation of pending National Highway projects, declaration of the Foothill Road and other strategic corridors as National Highways, and improved road connectivity across the State, he informed in another update on X.
A day earlier, CM Rio and Patton met Union Minister for Ports, Shipping and Waterways Sarbananda Sonowal to discuss the development of inland waterways, enhanced connectivity and opportunities for economic development in Nagaland.
Explained: Why Nagaland is facing a fiscal crunch
The Chief Minister's latest meetings with Union Ministers come at a critical juncture for Nagaland's finances.
Presenting the 2026–27 Budget on March 26, CM Rio cautioned that Nagaland would face a more challenging fiscal environment under the Sixteenth Finance Commission (2026–31), even as he described it as a roadmap towards "Developed Nagaland @2047."
He informed the Assembly that Nagaland's share in Central taxes had been reduced by about 15% in relative terms from 0.569% to 0.481%, bringing the State's projected devolution for 2026–27 down to Rs 7,341 crore from an estimated Rs 8,684 crore under the previous formula.
The bigger concern, however, is the discontinuation of Post- RDGs. Under the 15th FC (2021–26), Nagaland received Rs 21,249 crore in RDGs or around Rs 4,248 crore annually, besides Rs 525 crore in State-specific grants.
No RDGs have been recommended under the 16th FC, creating a substantial gap in assured fiscal support.
Earlier in February, Cm Rio claimed that withdrawal of RDGs could cost Nagaland around Rs 8,000–9,000 crore annually, severely affecting development activities and even government salary payments.
He also informed the Assembly that he had submitted a representation to Union Finance Minister on February 4, seeking grants-in-aid to cover the impending revenue deficit. Safeguarding Nagaland's unique constitutional position and ensuring fiscal stability were cited as the basis for the request. No formal response from the Union Government has been made public so far.
Meanwhile, the 16th FC has also revised the devolution formula, reducing the weight accorded to income distance, area and demographic performance, potentially reducing Nagaland's share further.
Although local body grants have increased from Rs 1,038 crore to Rs 1,364 crore over the next five years, these are specified tied transfers, not assured funds.
While the State's Own Tax and Non-Tax Revenue is projected to increase to Rs 2,714.44 crore in 2026–27, this remains inadequate to bridge the expected gap.
The lifting the Prohibition Act could immediately augment revenues, but the issue remains politically and socially contentious.
Likewise, despite a tripartite MoU on oil and gas exploration in the disputed Assam-Nagaland border belt, meaningful revenue is unlikely in the near term because of legal, political and operational hurdles.
In March, Nagaland was allocated Rs 3,880 crore under the "Pride of Hills: Special Development Assistance for the Hill States" scheme for 2026–27.
However, it remains unclear whether such assistance will continue beyond the current financial year or sufficiently cushion the loss of RDGs.
Austerity measures directing departments to rationalise expenditure and prioritise essential spending is also in place.
Consequently, frequent visits to New Delhi have become an integral part of the State Government's strategy to secure additional assistance from the Union Government through whatever avenues are available.
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