HP High Court Terms Water Cess Unconstitutional, Dashing the Sukhu Government's Hope of Coughing Up Rs 2600 Crore Income Every Year

: Category: Latest; Published: 05 March 2024

KuldeepChauhan,Editor-in-Chief,HimbuMail

Shimla: In a major blow to the Sukhwu government, the Himachal Pradesh High Court has ruled against the state's water regulation, deeming it unconstitutional.

The regulation, aimed at imposing a water cess on operational power projects in HP, was intended to bolster the government's coffers with an annual revenue of Rs 2600 Crore.

However, this move has faced strong opposition and legal challenges from 39 power producers both private and CPUs including NHPC and NTPC, culminating in the High Court's decision, which underscores the government's setback in its revenue-generation efforts.

The Division bench of the Himachal Pradesh High Court, comprising Justice Tarlok Singh Chauhan and Justice Satyen Vaidya declared the state government's legislation on water cess unconstitutional.

The legislation, known as the Himachal Pradesh Water Cess on Hydropower Electricity Generation Act, 2023, was deemed to exceed the state government's legislative competence according to Articles 246 and 265 of the Constitution of India.

The court found several flaws in the legislation, including the failure to specify the measure of tax, which is essential for any taxing statute.

Additionally, it criticized the lack of clarity in the delegation of power to fix rates of the levy to the Government of Himachal Pradesh, without adequate legislative policy or guidance.

As a result of this ruling, the Himachal Pradesh Water Cess on Hydropower Electricity Generation Act, 2023, along with its associated rules, has been quashed and set aside.

Sections 10 and 15 of the Act, applicable to existing projects, have also been declared ultra vires the Constitution and have been nullified.

The court's decision is expected to have significant implications for the state government's revenue-generation efforts through water cess on hydropower electricity generation projects.

Chief Minister Sukhu has cited examples of BJP-ruled states of Uttarakhand, including Jammu and Kashmir, where water cess fee was being charged.

The state government has constituted the 5-member Commission to ground the new legislation charging water cess from the power producers in the state.

It remains to be seen whether the state moves to the Supreme Court citing examples of other states and its efforts to generate its own sources of income to make Himachal Atam-Nirbhar.

A heated legal battle has brew as several state governments attempt to impose additional charges on electricity generation, sparking a showdown with the Central Government.

The Ministry of Power has notified states and UTs, declaring such charges as illegal and unconstitutional under various Constitutional provisions.

States have proposed development fees, water cess, and funds on electricity generation, including hydropower, renewables, and thermal power.

However, the Central Government has strongly opposed these initiatives, arguing that they are financially burdensome and violate constitutional provisions.

In Himachal Pradesh, the government has issued notices to power producers, including SJVN, NHPC, and NTPC, as part of its plan to generate over Rs 2600 Crore annually through water cess.

However, the Center contends that states lack the authority to impose taxes or duties on electricity generation.

The Ministry of Power has highlighted constitutional provisions, emphasizing that states cannot levy taxes on the generation or inter-state supply of electricity.

This has sparked a legal dispute between several states and the Center, with the latter demanding the immediate removal of such charges.

The Center's firm stance has put the issue in the spotlight, stirring political and legal debates ahead of the 2024 Lok Sabha Polls.

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Sword of Uncertainty Over Six CPSs’ Fate Temporarily Lifted: Relief for Sukhu Government

In a major relief to the Himachal Pradesh government, the Supreme Court has stayed the High Court’s directive to initiate disqualification proceedings against six MLAs who were appointed as Chief Parliamentary Secretaries (CPSs).

This decision, welcomed by Chief Minister Thakur Sukhvinder Singh Sukhu, has brought a temporary reprieve to his administration, which was grappling with the political and legal ramifications of the High Court’s order.

The Himachal Pradesh High Court had earlier quashed the appointments of the six CPSs, deeming them unconstitutional, and directed the Assembly Speaker to initiate disqualification proceedings under the anti-defection law.

However, the Supreme Court’s stay has effectively paused the implementation of this directive, offering the government some breathing space to strategize its next legal move.

CM Sukhu Hails Supreme Court’s Clarity

Speaking to media persons in New Delhi, CM Sukhu expressed his satisfaction with the Supreme Court’s interpretation, which he said provided much-needed clarity on the matter.

"The relief granted by the Supreme Court is significant, and we will deliberate on the next steps after considering all legal aspects,” he said.

The Chief Minister also emphasized that the apex court’s interpretation differed from paragraph 50 of the High Court’s verdict, which had been the basis of the controversial directive.

Opposition’s “Childish” Behavior Criticized

Shifting his focus to the opposition, Sukhu took a sharp jab at their tactics, describing their behavior as “childish” and lacking focus on real issues.

“There are no controversies here, but their behavior is simply immature. From toilet tax to ‘Samosa Politics,’ they are just distracting from the real issues,” he said.

Sukhu accused the opposition BJP of attempting to create diversions because of its failure to make a dent in the Congress’s strength during the Vidhan Sabha elections.

“Their ‘Operation Lotus’ was decisively rejected by the people, and Congress retained its 40-seat strength. Now, they resort to personal attacks to divert attention from our welfare schemes,” he added.

Relief Amid Mounting Challenges

The Supreme Court’s stay on the High Court’s order has momentarily eased the pressure on the Sukhu government, but the sword of uncertainty continues to hang over the six MLAs who served as CPSs.

With questions around their appointments still unresolved, the case remains a legal minefield.

The CPS appointments had drawn criticism for allegedly violating constitutional provisions, which prohibit the creation of such posts without legislative backing.

The High Court’s scathing remarks and the directive for disqualification had added fuel to the controversy, creating a storm in the state’s political landscape.

While the Supreme Court’s intervention provides temporary relief, the Sukhu government must now prepare for a protracted legal battle to defend the appointments and protect its legislative majority.

Opposition’s Counterattacks

The BJP, meanwhile, has been quick to pounce on the issue, accusing the government of flouting constitutional norms for political convenience. Party leaders have argued that the CPS appointments were a backdoor way to reward loyalists, a claim that Sukhu has staunchly denied.

The opposition’s attacks, combined with the ongoing legal scrutiny, highlight the precarious nature of the government’s position. For now, the Supreme Court’s decision is a welcome pause, but the final word on the matter could still have far-reaching consequences for the political stability of Himachal Pradesh.

Sukhu’s Call for Responsibility

Amid the controversy, Sukhu reiterated his commitment to governance and welfare. He called on the opposition to act responsibly and raise issues that matter to the common man.

“Significant progress has been made in improving the socio-economic status of the underprivileged during this tenure, and that remains our priority,” he stated.

With the legal wrangling far from over, the fate of the six CPSs—and the stability of the Sukhu government—remains inextricably tied to the unfolding courtroom drama.

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HP High Court Terms Water Cess Unconstitutional, Dashing the Sukhu Government's Hope of Coughing Up Rs 2600 Crore Income Every Year

The Division bench of the Himachal Pradesh High Court, comprising Justice Tarlok Singh Chauhan and Justice Satyen Vaidya declared the state government's legislation on water cess unconstitutional.

Additionally, it criticized the lack of clarity in the delegation of power to fix rates of the levy to the Government of Himachal Pradesh, without adequate legislative policy or guidance.

It remains to be seen whether the state moves to the Supreme Court citing examples of other states and its efforts to generate its own sources of income to make Himachal Atam-Nirbhar.

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