New Delhi: A dispute that began before Independence, when plans to harness the Sutlej and Beas rivers required thousands of acres of land in what is now Himachal Pradesh, has finally ended. The Supreme Court (SC) on Friday directed Punjab and Haryana to deliver 11,973 million units of power arrears to Himachal Pradesh over 20 consecutive lean winter seasons.
The order resolves nearly 30 years of litigation over the allocation of power generated by the Bhakra-Nangal and Beas hydroelectric projects. The dispute traces its origins to pre-Independence dam projects, the reorganisation of states and decades of interim power-sharing arrangements.
A three-judge Bench headed by Chief Justice of India Surya Kant and comprising Justices Joymalya Bagchi and V Mohana arrived at a legally binding, cashless settlement in the suit filed by Himachal Pradesh in 1996.
The dispute had earlier reached the Supreme Court in 2011, when a two-judge Bench rejected Himachal Pradesh’s claim to 12% free power as an unenforceable policy decision but upheld its entitlement to 7.19% of the power attributable to composite Punjab.
The origins of the dispute (1944-1963)
The Bhakra-Nangal Hydro-Electric Scheme was first proposed in 1944 to harness the Sutlej River. The project required the submergence of about 28,000 acres of land belonging to the erstwhile princely state of Bilaspur. Subsequently, the Beas Project required the submergence of an additional 65,000 acres in Kangra district.
On July 7, 1948, a draft agreement was initiated between the Government of Bilaspur and the Government of East Punjab to establish terms for financial compensation, land and power allocation. However, the draft was never formally executed. On August 15, 1948, the Raja of Bilaspur signed the Bilaspur Merger Agreement, ceding governance authority to the Dominion Government, which formally assumed administrative control in October that year.
Bilaspur was initially administered as a Chief Commissioner’s Province under the States Merger Order of 1949. Under the Himachal Pradesh and Bilaspur (New States) Act of 1954, Bilaspur was merged with Himachal Pradesh as a Part C State. It later became part of a Union Territory under the Constitution (Seventh Amendment) Act of 1956.
Meanwhile, capital funding for the projects was structured through inter-state agreements that excluded the hill territory from major power shares. On January 25, 1955, an Inter-State Conference on the Ravi and Beas waters allocated 85% of the capital cost of Beas Unit I and 32% of Unit II to composite Punjab.
On January 13, 1959, composite Punjab and Rajasthan signed an agreement fixing their respective water storage shares in the Bhakra-Nangal Project at 84.7% and 15.2%, with composite Punjab bearing 84.7% of the electrical capital costs. This cost-sharing arrangement was reaffirmed at the sixth meeting of the Beas Central Board in 1963.
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State reorganisation and interim power sharing (1966-1995)
On November 1, 1966, the Punjab Reorganisation Act, 1966, divided composite Punjab into the states of Punjab and Haryana, created the Union Territory of Chandigarh and transferred significant territory and population to Himachal Pradesh.
Section 78 of the Act governed the apportionment of rights and liabilities relating to the Bhakra-Nangal and Beas projects among the successor states. It provided for these to be determined through mutual agreement within two years, failing which the Central Government would issue a binding order.
However, no formal apportionment was finalised. Instead, power generated from the projects was distributed on an ad-hoc basis following informal discussions convened by the Secretary of the Ministry of Irrigation and Power in 1967. Under this arrangement, Punjab received 54.5%, Haryana 39.5%, Chandigarh 3.5% and Himachal Pradesh 2.5% of Bhakra power, alongside a fixed 15-megawatt allocation from Beas Unit I.
Himachal Pradesh argued that its territorial and demographic contributions had been ignored. In October 1969, it wrote to the Government of India demanding a 7.19% share of total generated power, based on the proportion of composite Punjab’s population transferred to its jurisdiction.
Himachal Pradesh attained full statehood on January 25, 1971, but continued to challenge the interim power-sharing arrangement, including a subsequent agreement dated March 30, 1978.
Although the Northern Regional Electricity Board adopted Badarpur Thermal Power Station (BTPS) rates in June 1980 for supplies to Chandigarh, inter-state allocations remained unresolved. In 1985, the Central Cabinet issued a policy decision recognising a 12% power entitlement for ‘Home States’ hosting hydroelectric projects.
The Central Government rejected Himachal Pradesh’s statutory claim in 1994, while a tripartite conference convened in 1995 ended without an agreement.
Himachal moves Supreme Court (1996-2011)
Following the administrative rejections, the Himachal Pradesh government filed a suit in 1996 seeking four primary reliefs. These included a 12% share of net power, free of cost, from the dates of project commissioning under the Home State policy; a 7.19% share of total power generated from November 1, 1966, based on population transfer ratios; and financial compensation of Rs 2,199.77 crore for historical non-supply, along with interest and litigation costs.
In 1999, the court framed the central issues. A year later, the Central Government submitted the master administrative file containing the April 17, 1967 record as secondary evidence.
In September 2011, after extensive proceedings and unsuccessful mediation efforts, the Supreme Court delivered a declaratory decree rejecting Himachal Pradesh’s claim to 12% free power as an unenforceable policy decision.
However, the court upheld its statutory entitlement under Section 78 of the 1966 Act, ruling that Himachal Pradesh was entitled to 7.19% of the power attributable to composite Punjab. This translated into 6% of the total power generated from the Bhakra-Nangal Project from November 1, 1966; 5.752% from Beas Unit I from its commissioning date; and almost 3% from Beas Unit II from its commissioning date.
The court fixed the shares of Punjab and Haryana at 51.8% and 37.5%, respectively, while dismissing all claims against Rajasthan on the ground that it was never part of composite Punjab. The Central Government was directed to calculate the exact energy arrears within six months.
Also Read: Water-sharing dispute: Punjab & Haryana HC adjourns review plea to 20 May, Mann claims victory
Why the 2011 verdict remained unimplemented (2011-2026)
While the 2011 judgment settled Himachal Pradesh’s entitlement, the calculation and settlement of its outstanding power dues remained unresolved.
In October 2011, the Ministry of Power constituted a three-member technical committee. However, that same month, the ministry issued an order revising power allocations prospectively from November 1, 2011.
On July 5, 2013, the Central Government submitted a computational affidavit to the court, calculating Himachal Pradesh’s cumulative energy shortfall between November 1, 1966, and October 2011 at 13,066 million units, covering the Bhakra-Nangal Project and the two Beas units.
The monetary arrears were then estimated at around Rs 1.5 crore, while Himachal Pradesh’s unreimbursed capital cost and modernisation liability was quantified at Rs 111.5 crore.
Several mediation efforts led by the Attorney General for India, beginning in 2014, failed to produce a signed agreement. Formal reports were filed in 2015, followed by further discussions in 2017. The failure of these efforts was recorded in a court office report dated July 9, 2019.
Final push towards settlement
The court revived active hearings in July 2020. In 2021, Punjab filed four interlocutory applications seeking market purchase data.
Fresh momentum came in September 2024, when Attorney General R Venkataramani presented a new settlement note. Punjab and Haryana responded over the next two months. Following meetings convened by the Attorney General in December 2024, the court granted the parties a “last opportunity” in February 2025 to reach an agreement.
In February 2026, the Ministry of Power obtained audited loan repayment data from the Comptroller and Auditor General (CAG) of India, updating Himachal Pradesh’s historical capital cost liability to Rs 420.77 crore up to the financial year 2025-26.
Himachal Pradesh and Haryana accepted the Attorney General’s proposed cashless settlement framework during hearings in July and August 2026. Punjab, however, filed objections on August 24, seeking a 30-year discharge window, a deduction of 1,972 million units for historical concessional supplies and valuation of the arrears at Operation and Maintenance (O&M) rates.
In Friday’s judgement, the Supreme Court rejected Punjab’s objections as “vague” and “superficial attempts to relitigate settled issues”. It noted that the historical concessional supplies had already been accounted for in the CAG-backed capital liability calculations and refused to value past arrears using the prevailing O&M rate of 79 paise per unit.
The court directed Himachal Pradesh to pay the Bhakra Beas Management Board (BBMB) standard annual operational charges for the energy received during each tranche. By extending the disbursement period from 15 to 20 years, the court gave Punjab and Haryana additional time to discharge their liabilities while making its directions binding.
(Edited by Anupama Yadav)