Centre turns off tap on Himachal’s water cess plan to generate revenue

Union energy ministry’s letter reiterates that additional charges and duties cannot be imposed on electricity production as such fee on power generation falls outside the purview of the states.

The Centre has shot down the Himachal Pradesh government’s bid to generate ₹1,800 crore by imposing water cess on hydel companies, terming any additional charges or duties on power generation unconstitutional.

In a letter to all state chief secretaries on October 25, the Union energy ministry reiterated that no state has the authority to impose water cess. (HT file photo)

In a letter to all state chief secretaries on October 25, the Union energy ministry reiterated that no state has the authority to impose water cess.

The development comes after the Sukhvinder Singh Sukhu-led Congress government alleged that the BJP-led central government is yet to act on its demand for a ₹12,000-crore flood relief package to tide over losses due to the damage to infrastructure this monsoon.

This is not the first time that the Centre has warned the state governments against imposing water and power cess. On April 25, too, it had cited Articles 286, 287, and 288 of the Constitution, emphasising that imposing such fee on thermal, hydro, wind, and solar power generation is beyond the jurisdiction of the states.

Yet, the state government enacted the Himachal Pradesh Water Cess Hydro Power Generation Act, 2023, and set up a commission to oversee tax collection.

The Himachal Pradesh Water Cess Commission issued notices to 173 power-producing companies to collect cess amounting to ₹871 crore for the period from March to July this year.

While three private power companies complied, public sector companies moved the Himachal Pradesh high court, where the case is pending.

Neighbouring Punjab and Haryana also opposed the water cess. Himachal Pradesh had imposed the cess after Uttarakhand and Jammu and Kashmir took a similar initiative.