Shimla: Despite a Union government missive “disincentivising” states imposing water cess on hydropower projects in their area and opposition from power project companies, the Sukhwinder Singh Sukhu government has decided to stand by its decision to levy water cess on hydropower projects in the state, ThePrint has learnt.
In a statement filed in Himachal Pradesh high court Wednesday, the state government maintained that The Himachal Pradesh Water Cess on Hydropower Generation Bill, passed in assembly in March, was completely legal. It has also added that the Centre had given certain powers to the state to frame rules to manage water and its sources, and that the state had enacted the law to levy water cess using those powers, a government official aware of the development said.
The High Court has listed the matter for 16 August.
The state’s response was contrary to feedback received from stakeholders during a meeting held last week, a second senior official told ThePrint.
The meeting had been attended by public sector undertakings (PSUs), big private hydropower facilities and smaller private players. Central government PSUs had reiterated that they would tow the Centre’s line on the cess issue, the official added.
In a letter to state chief secretaries dated 25 April, R. P. Pradhan, director, Union Ministry of Power, had written, “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.” ThePrint has a copy of the letter.
The Punjab government’s state power corporation limited — which owns the Shanan power project located in Himachal — had also participated in the meeting. However, it toed the Punjab line and opposed the water cess citing a violation of laws.
Ownership of Shanan Power House was given to Punjab during 1966 reorganisation, but it is located in Himachal Pradesh. The Himachal govt has said it ‘won’t renew’ land lease which expires in March 2024.
On 16 March this year, the Congress government in Himachal 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.
Under the new law 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.
Following opposition from Punjab and Haryana and the Centre’s “disincentivising” communication, the state cabinet decided to form a panel headed by the state’s power secretary Rajeev Sharma, with representatives from the Jal Shakti, law and finance departments.
Punjab and Haryana are opposing the cess because it will also be applicable to the Bhakra Beas Management Board, which also supplies power to these states. Both states have passed resolutions in their respective assemblies opposing the cess.
A few power project companies, including hydropower giant SJVNL, also challenged the cess in the Himachal Pradesh High Court. During last week’s meeting, these companies are learnt to have said that since the matter is subjudice, the state government should wait for the court decision and hold any decision on the water cess till then.
However, the small hydropower project players have steadfastly opposed the water cess.
Speaking to ThePrint, Rajesh Sharma, president, Bonafide Himachali’s Hydro Power Developers Association, asked, “Why is this cess being charged from small hydropower projects? We are already under financial stress, more such levies would make us unviable.”
According to him, there are 111 commissioned small HEPs in the state, generating over 2600 million units of power per year, of which 339 million units per year —worth Rs. 223.60 crore — go to HPSEBL as free power.
Responding to the concerns, Sharma told ThePrint that the government had heard all stakeholders. “Hydropower developers apprised the panel about their reservations and suggestions. Some of them talked about lowering the cess rate,” he said.
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Water war
Meanwhile, the state government Monday issued a notification for the formation of the Water Cess Commission, comprising a chairperson and four members. According to the notification, which ThePrint has seen, the salary of the chairperson has been fixed at Rs 1.35 lakh per month, while the members will get Rs 1.20 lakh per month.
The commission will be formed under the Water Cess Act to levy the cess as well as address related issues. So far, the Jal Shakti department is managing this. About 125 hydropower projects have reportedly registered themselves under this act with the department. However, registration under the act does not mean agreeing to pay the water cess.
Central PSUs have submitted in court that the cess being imposed by Himachal Pradesh was unconstitutional.
In 2019, a parliamentary standing committee on energy in its report on hydropower had reportedly 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 had stated that there was “no rationale in levying such cess as the water goes back into the rivers”.
Under the Himachal Pradesh’s hydropower policy, power projects give 12-15 per cent free power as royalty to the state.
Speaking on condition of anonymity, a third Himachal government official said that the government had enacted the cess law and this is within its legal capacity. According to the official, the cess was brought in to generate revenue and the state would not go back on this.
(Edited by Poulomi Banerjee)
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