SC suspends the High Court’s ruling regarding the return of water cess

The Supreme Court of India has granted the Himachal Pradesh government much-needed respite as it has stayed an order from the Himachal Pradesh High Court compelling it to reimburse water cess imposed on the state’s hydropower businesses.

A bench headed by Chief Justice of India DY Chandrachud issued notice to National Thermal Power Corporation and others in response to a plea filed by the State of Himachal Pradesh challenging the high court’s March 5 ruling. The subject was scheduled for further hearings on July 11.

In its ruling from May 17, the Bench said, “The direction in the impugned judgments and orders for refund of the cess collected shall remain stayed, pending further orders.”

The state, which planned to make almost Rs 2,000 crore a year from the water cess on more than 170 hydroelectric projects in the state, is much relieved by the stay ruling.

Within four weeks, under the Himachal Pradesh Water Cess on Hydropower Electricity Generation Act, 2023, water cess revenue obtained from hydel projects had to be refunded by the high court. The notifications that the state government and the Himachal Pradesh State Commission for Water Cess on Hydropower Production had sent to the power production corporations had also been overturned by the HC.

In addition to Himachal, Uttarakhand, J&K, and Sikkim have enforced water cessations on hydropower output; however, the Union Power Ministry has declared these unlawful, and several power providers have contested their legitimacy.

The water cess imposed on hydropower producing corporations was declared illegal and beyond the state’s legislative jurisdiction by the Himachal Pradesh High Court, which also set it aside.