Himachal Pradesh's Land Revenue Levy on Hydropower Projects Faces Strong Opposition
The Himachal Pradesh government's recent notification to impose a land revenue levy on hydropower projects is encountering significant resistance from the power sector. Independent power producers and Central public sector undertakings (CPSUs) have voiced strong objections, with threats of legal action if the move is enforced.
Details of the Proposed Levy
As per the government notification, hydropower projects in the state will be required to pay land revenue based on the average market value of the land they occupy. The levy is set to range between one and two percent, depending on the valuation of the land. This decision aims to generate additional revenue for the state but has sparked controversy among industry stakeholders.
Opposition from Central PSUs and Independent Producers
An official from Sutlej Jal Vidyut Nigam, a Central PSU, stated that payment of land revenue is not permissible under the existing regulatory framework. The official emphasized that such a levy would require agreement from both the state and central governments, as well as examination by the Central Electricity Regulatory Commission to factor it into tariffs. "Unless all three stakeholders are on the same page, there is no question of a CPSU paying land revenue," the official said, adding that the company would approach the court if pressured to comply.
Furthermore, the official highlighted that any additional levy would ultimately be passed on to consumers through higher electricity tariffs. "No company will pay it from its profits. According to the government's own assessment, we may have to pay over Rs 200 crore annually. Absorbing this amount will severely affect the company's development and expansion plans," he explained.
Concerns from Independent Power Producers
Independent power producers have also expressed strong reservations. Rajesh Sharma, president of the Bonafide Hydro Developers Association, pointed out that tariffs for commissioned projects are fixed for 40 years, leaving no financial headroom for additional levies. "Asking us to pay anything over and above existing liabilities is simply not viable," Sharma stated.
He added that the hydropower sector is already under strain due to repeated natural disasters, such as the floods in 2023 and 2025, which caused heavy losses without compensation. "Insurance premiums have risen sharply and wage costs have increased. There is no scope to pay any additional amount and if forced, we will move the court," Sharma warned.
Historical Context and Legal Precedents
Notably, this is not the first time the Himachal Pradesh government has attempted to impose additional charges on hydropower projects. In 2023, a similar move to levy a water cess was struck down by the court as unconstitutional. This historical precedent adds weight to the current opposition, with industry players confident in their legal standing against the new land revenue levy.
The ongoing dispute underscores the challenges in balancing state revenue generation with the financial viability of critical infrastructure projects. As tensions escalate, the outcome could have significant implications for Himachal Pradesh's energy sector and consumer electricity costs.
