SHIMLA, AUGUST 9: In a significant relief to industrial consumers, the Himachal Pradesh High Court has quashed the provision under which electricity duty was being levied on power generated through diesel generating sets or any other mode for captive or standby use by consumers.
A Division Bench comprising Justice Vivek Singh Thakur and Justice Ranjan Sharma, in a judgment delivered on August 7, 2026, held that the charging provision under Section 3 of the Himachal Pradesh Electricity (Duty) Act, 2009, does not empower the State to levy electricity duty on a consumer who generates electricity for its own consumption.
The judgment came on a petition filed by M/s Ruchira Papers Ltd. challenging the levy of electricity duty on electricity generated through diesel generating sets for captive/standby use. The company had also challenged the increase in the duty from 30 paise to 45 paise per unit, introduced through a notification dated September 1, 2023.
The petitioner argued that industries were often forced to operate diesel generators during power cuts to keep their units running. According to the petition, power generated through diesel generators costs almost three times the normal electricity rate, and consumers should not be penalised for resorting to captive generation when regular supply is disrupted.
The State and HPSEBL, however, defended the levy, arguing that the duty was within the State's legislative competence under Entry 53 of the State List. They also maintained that taxing diesel-generated electricity served environmental objectives by discouraging dependence on polluting fossil-fuel-based generators and encouraging cleaner alternatives.
The High Court rejected the State's interpretation of the charging provision.
The Bench noted that Section 3 of the 2009 Act covers electricity generated from any source when it is consumed by the Board, a licensee, electricity trader or generating company, or when it is supplied by these entities to a consumer. The Court found that a consumer generating electricity through its own diesel generator for its own consumption does not fall within these categories.
The Court made it clear that it was not questioning the State's constitutional competence to levy a tax or duty on electricity generated from any source, including diesel generating sets. The problem, it held, was that the charging provision of Section 3 did not actually confer that power in respect of ordinary consumers generating electricity for themselves.
Consequently, the Bench held that the rate prescribed under clause (xi) could not be charged to such consumers. It specifically quashed clause (xi) to the extent that it provided for levy of electricity duty on electricity generated through diesel generating sets or any other mode for own consumption by a consumer. The remaining provisions of the Act were left intact.
The Court accordingly allowed the petition, along with pending applications, if any.
The ruling effectively strikes at the legal basis for charging electricity duty on self-generated captive or standby power by consumers under the existing Section 3(1)(xi), while leaving the State's broader power to legislate on electricity taxation untouched.If you want, I can also turn this into a **much punchier newspaper-style version with a stronger headline and lead**, focusing on the ₹45-paise duty setback for the Sukhu government.
