Shimla: Amid the Himachal Pradesh’s tussle with Punjab and Haryana over water cess on hydropower projects, the Union government’s missive “disincentivising” states imposing such cess, and pushback from power developers, the hill state is set to constitute a panel to discuss the issue with power generation companies.
The state cabinet Tuesday decided to form a panel headed by the state’s power secretary Rajeev Sharma, with representatives from the Jal Shakti, law and finance departments. “The government has decided to form a committee. We will discuss this issue with power developers,” Sharma told ThePrint.
On 16 March, the Congress government led by Chief Minister Sukhvinder Singh Sukhu passed The Himachal Pradesh Water Cess on Hydropower Generation Bill in assembly to levy water cess on hydropower projects in the state.
The state government will bear the cost incurred by the state power generation companies, while other players such as the Satluj Jal Vidyut Nigam Limited (SJVNL), the National Thermal Power Corporation (NTPC), and the National Hydroelectric Power Corporation (NHPC) will have to pay the cess.
A few power project companies, including hydropower giant SJVNL, challenged the cess in the Himachal Pradesh High Court, following which, on 26 April, the HC issued notice to the state government in the matter. The matter has been listed for further hearing on 28 June.
A Jal Shakti department official, who did not wish to be named, told ThePrint that around 90 hydropower development companies have registered themselves under the new Act with the state government for water cess, including NTPC and NHPC.
However, a senior state government official, requesting anonymity, said: “The government overlooked certain aspects…This panel should have been formed before imposing the cess.”
“After the Centre termed it illegal, parliamentary panel has also discouraged it, big players would not like to negotiate. Now, the Himachal government is on the backfoot,” the official added.
In 2019, a parliamentary standing committee on energy in its report on hydropower had categorically said that levying water cess “could affect the viability of hydropower projects”. Underlining that certain states levy a water cess for every cubic meter of water, the report stated that there was “no rationale in levying such cess as the water goes back into the rivers”.
A SJVN official, requesting anonymity, told ThePrint: “Since the central government has declared it as illegal and unconstitutional, there is nothing left for the discussion. We have also challenged it in the court.”
However, Rajesh Sharma, president of the Bonafide Himachali Hydro Power Developers Association — an association of independent and small hydropower developing firms in the state — said that the decision to set up the panel is a welcome step.
“We are hopeful, the government will understand the matter completely. Talks can resolve any issue. We will make our point clear to the committee,” Sharma told ThePrint.
The Bill & panel formation
In February, Sukhu claimed that the state had financial liabilities of over Rs 91,000 core. The cess was proposed to raise the revenue of the state and would have fetched Rs 4,000 crore from 172 hydropower projects, according to the state government’s expectations.
Himachal provides water and power to Punjab, Haryana, Rajasthan, Delhi, Chandigarh Uttar Pradesh, Goa, Delhi, and Jammu & Kashmir.
A week after the hill state passed the Bill in March, both Haryana and Punjab passed resolutions in their respective assemblies against the proposal. Sukhu held discussions with his Punjab counterpart Bhagwant Singh Mann in March and Haryana CM Manohar Lal Khattar in April to assure them that there will be no monetary loss to the two states. However, the states didn’t budge from their stance.
Thwarting one of the biggest revenue generation moves of the cash-strapped state, on 25 April, R. P. Pradhan, director, ministry of power, in a letter to chief secretaries of all the states, said: “Any tax or duty on the generation of electricity, which encompasses all types of generation such as thermal, hydro, wind, solar, nuclear, etc. is illegal and unconstitutional.”
Naresh Chauhan, principal adviser to the CM, said Tuesday that the government is finding ways to revive the state’s economy which is in shambles. “We want the benefit of the state. We want all sides to be heard. The panel will discuss the issue and ensure the water cess is imposed smoothly,” he told ThePrint.
S. N. Verma, former managing director of Uttarakhand Jal Vidyut Nigam Limited (UJVNL), told ThePrint Tuesday: “The hydropower projects do not consume water to produce electricity, they use the kinetic energy of water flowing through a turbine. Imposing water cess is a flawed idea which could affect the sector adversely.”
Despite the state government’s assurance that the cess won’t impact consumers with the power generation companies bearing the burden, the latter had called the decision “impractical”.
In a statement released on 31 March, the Himachal Pradesh Electricity Regulatory Commission (HPERC) had said: “Water cess would impact consumers by Rs 1.20-1.30 per unit in addition to the current tariff.”
However, the state government cushioned the burden by announcing that it would pay subsidies to the state electricity board, which had filed a petition before the HPERC in February to raise the tariffs.
(Edited by Anumeha Saxena)
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