Srinagar| Oct, 29: The High Court of Jammu and Kashmir and Ladakh has struck down provisions of the Jammu and Kashmir Water Resources (Regulation and Management) Act, 2010, that imposed water usage charges on hydropower projects, declaring them unconstitutional.
A division bench comprising Justices Rajnesh Oswal and Sanjay Dhar ruled that the charges imposed on independent power producers amounted to an impermissible tax on electricity generation, which fell outside the legislative competency of the Union Territory legislature.
Allowing a batch of petitions filed by independent power producers—including Mass N Energy Pvt Ltd, Magpie Hydel Construction Operation Industries Pvt Ltd, and Choudhary Power Projects Pvt Ltd—the court also quashed all related demand notices issued by the government since 2010.
The power companies were represented by senior advocate Pranav Kohli, advocate Shariq J Reyaz, and others, while senior additional advocate general A R Malik and deputy solicitor general T M Shamsi appeared for the administration.
Examining the constitutional limits, the bench observed that while the state or Union Territory legislature possesses the power to regulate water under Entry 17 of List II of the Constitution, it lacks the authority to levy a tax on electricity generation.
The court pointed out that the charges were calculated based on the height of the water head and turbine propulsion rather than the actual volume of water consumed. Consequently, the bench concluded that the levy was essentially an indirect tax on power generation rather than a regulatory fee for water usage.
The high court also rejected the administration’s argument that the 2010 enactment gained parliamentary backing and protection under the Jammu and Kashmir Reorganisation Act, 2019. Relying on Supreme Court precedents, the bench held that an unconstitutional and invalid law from its inception cannot be validated retroactively through subsequent parliamentary adoption.
Characterising the administration’s defence as “an attempt in desperation,” the court noted in its 50-page order: “If we have a look at the provisions of the Jammu and Kashmir Reorganisation Act, it becomes clear that what is being provided under the said Act is saving of certain state enactments and repeal of certain others.”
“The impugned enactment, to the extent it imposes water usage charges upon the petitioners, is held to be ultra vires the Constitution and is struck down to the said extent,” the high court ruled, restraining the administration from levying future taxes on electricity generation under the guise of water usage charges.
The judgment grants major relief to independent hydropower companies, nullifying all demand notices issued over the past 14 years and setting a firm precedent against similar levies going forward.
