Himachal Pradesh water cess may raise power tariffs in neighbouring states
The Himachal Pradesh government’s move to impose a water cess on hydropower projects will raise power tariffs by at least ₹1 per unit, which may be contested by states such as Punjab that buy the power
The Himachal Pradesh government’s move to impose a water cess on hydropower projects will raise power tariffs by at least ₹1 per unit, which may be contested by states such as Punjab that buy the power, even as the Centre mulls reviewing the existing policy that grants 12% free power to the host state if such unjustified levies are imposed, officials said.
The Himachal Pradesh government on March 14 initiated the formal legislative process to replace with a law the Himachal Pradesh Water Cess on Hydropower Generation Ordinance that was promulgated on February 15 to impose a levy on hyd-el power generated in the state. The cess fetches about ₹4,000 crore revenue annually.
The move will be applicable to 172 hydropower projects in Himachal Pradesh (HP) with total power generation capacity of 10,991 MW, HT reported on Tuesday quoting HP deputy chief minister Mukesh Agnihotri. While the state government assured residents of Himachal that the levy would not impact consumers of electricity in the state -- the national hyd-el policy allows 12% free power to the host state -- it will raise power bills of consumers in neighbouring Punjab, Haryana, Chandigarh, Rajasthan and Delhi, an official in one of the affected states said requesting anonymity.
Punjab may challenge the decision of the HP government, a Punjab government official said. The state government has asked the Punjab State Power Corporation Limited (PSPCL) to study the financial impact of the move and the legality of imposing water cess on national resources such as river water.
“Punjab is a riparian state and has a right to (the) river water,” the official said on condition of anonymity, adding that the state will strongly oppose it. “The levy will put an annual financial burden of ₹800 crore on Punjab as the power from Bhakra Beas Management Board (BBMB) will became costlier by ₹1 per unit,” he added. BBMB regulates supply of water and power from Bhakra Nangal and Beas Projects to Punjab, Haryana, Rajasthan, Himachal Pardesh, Delhi and Chandigarh.
“We are examining the act [legislation]. I have not got the final calculations… It’s going to impact us by almost ₹800 crore annually. We are going to take further action after consultation with the government, as this cess is undesirable and infringing our riparian and other rights,” said PSPCL chairman and managing director Baldev Singh Sran.
Two Union government official said on condition of anonymity that no state should try to monopolise national resources such as water, which is not only against the principle of cooperative federalism, but also anti-investment. “While the Centre will take an appropriate decision on this matter, the policy provision for 12% free power to the host state would certainly requires a revisit in the light of this cess that would jeopardise viability of hydro power project,” one of the two added.
An email sent to the spokesperson of the Union power ministry elicited no response.
“Commenting on Hydro Power issues, the Standing Committee on Energy in January 2019 also asked the central government to review the matter as levy of water cess puts additional burden on the already stressed sector,” the second official said. The committee questioned the rationale in levying such cess by certain states as the water used by the hydro power pants goes back into the rivers as water is not used for a consumptive purpose. However, the HP government cited the examples of Uttarakhand and Jammu & Kashmir, which have levied a similar cess to justify its action.
According to the 43rd report of the committee, “Water just passes through the turbines and goes to the river again. The Committee found that imposition of water cess is not fair considering the provision of 12% of free power to the respective States from the hydro power projects.”
While introducing the Bill in the Assembly, Himachal deputy CM Mukesh Agnihotri said the bill has been brought on the basis of similar ones in Uttarakhand and Jammu and Kashmir. He said some people moved the court against the Bill in Uttarakhand and Jammu and Kashmir but that the courts rejected their plea. Chief Minister Sukhvinder Singh Sukhu said the bill has been brought after serious consideration.
Abhishek A Rastogi, author and constitutional legal expert on tax-related matters said, “Imposition of water cess will lead to litigations and hinder growth of a clean energy source, particularly for those states that levy water cess. It is also a losing preposition as new projects may opt to invest to other more investor-friendly states.”