Dehradun: In a major relief to hydropower companies, the Uttarakhand High Court, while hearing a reference order, has struck down the state government's bid to impose a tax on electricity generation.
A single bench of Justice Alok Kumar Verma held that the levy under the Uttarakhand Water Tax on Electricity Generation Act, 2012, was beyond the state's jurisdiction and that the imposition of such a tax lay solely with the Centre. The Act had imposed a water tax of 2 to 10 paise per unit depending on plant capacity.
The verdict came after years of litigation. Earlier, a single bench had upheld the law and dismissed petitions by companies, including Alaknanda Power Project Pvt Ltd, THDC, NHPC, Swati Power Project, Bhilangna Hydro Power Project, and Jaiprakash Power Ventures. It observed that the tax was levied not merely on the usage of water, but specifically on the generation of electricity utilising water, an enactment deemed to fall within the constitutional framework.
The firms appealed, leading to a division bench split between then Chief Justice Vipin Sanghi and Justice Ravindra Maithani. The matter was then referred to Justice Verma, who delivered the ruling on Monday.
Background of the Case
Hydropower projects were invited to Uttarakhand after the state's formation, with agreements ensuring 12% of generated electricity free to Uttarakhand and the rest sold to Uttar Pradesh. The 2012 tax law had sparked industry pushback, with companies arguing it violated constitutional limits on state powers.
Implications of the Ruling
With the High Court's latest ruling, the state's attempt to tax electricity generation has been decisively quashed, providing significant relief to hydropower companies operating in Uttarakhand.
