Himachal Pradesh Water Cess Revived? High Court Stays Coercive Action On ₹16.32 Crore Demand Against Punjab Power Corporation

The Punjab State Power Corporation Limited (PSPCL) has approached the Himachal Pradesh High Court, challenging the constitutional validity of the Himachal Pradesh Land Revenue (Amendment) Ordinance, 2025, the Himachal Pradesh Land Revenue (Special Assessment) Amendment Rules, 2025, and consequential actions including a demand of ₹16.324 crore raised on the Corporation.

Justice Vivek Singh Thakur and Justice Ranjan Sharma while issuing notice to the State and other respondents directed that no coercive steps shall be taken against the petitioner-Corporation pursuant to the impugned proceedings till the next date of hearing.

The petition also assails the implementation of notification dated December 10, 2025, the Final Land Revenue Special Assessment Report dated February 2, 2026, and the demand notice dated March 6, 2026 issued by the Sub-Divisional Collector, Padhar, District Mandi.

PSPCL, the successor of the erstwhile Punjab State Electricity Board, contends that the State of Himachal Pradesh has illegally imposed “Specially Assessed Land Revenue” along with an Environmental Cess at 2% and a penalty of 1% per month in respect of the Shanan Hydro Electric Project located at Joginder Nagar.

The Corporation argues that the impugned enactments are a colourable exercise of legislative power. It submits that the amendments are, in substance, a re-introduction of the Himachal Pradesh Water Cess on Hydropower Generation Act, 2023, which was struck down by the High Court in NHPC Ltd. v. State of H.P. (2024) as being ultra vires Articles 246 and 265 of the Constitution.

According to PSPCL, the State has merely changed the nomenclature of the levy to “Specially Assessed Land Revenue” and “Environmental Cess”, while retaining the same target—hydropower projects—and the same basis of assessment linked to the “Average Market Value of the Project”.

It is argued that such a levy, in pith and substance, amounts to a tax on generation of electricity, which falls exclusively within Parliament's domain under Entry 97 of List I read with Article 248 of the Constitution.

No Nexus With Land, Excessive Delegation Alleged

The petition contends that the assessment mechanism under amended Rule 10, based on the “Average Market Value of Project”, has no nexus with land and is instead tied to infrastructure such as dams, turbines, and generators.

It is further argued that the amendments suffer from excessive delegation and lack an ascertainable measure of tax, failing the settled four-fold test laid down in Govind Saran Ganga Saran v. CST. The 2% cap, it is submitted, does not provide adequate guidance.

PSPCL also alleges that subordinate legislation has travelled beyond the parent statute by introducing a new charging mechanism not contemplated under the Himachal Pradesh Land Revenue Act, 1954.

Background Of Shanan Project

The Shanan Hydro Electric Project traces its origin to a pre-Independence agreement dated March 3, 1925. It was commissioned around 1932 and was later allocated to Punjab under the Punjab Reorganisation Act, 1966. The Central Government reaffirmed this allocation in 1972.

PSPCL argues that the impugned levy interferes with this allocation and is repugnant to central enactments, including the Inter-State River Water Disputes Act, 1956.

Violation Of Fundamental Rights Alleged

The petition asserts violation of Articles 14, 19(1)(g), 265, and 300-A of the Constitution. It is contended that the levy is arbitrary, discriminatory, and imposes a disproportionate financial burden, affecting the viability of the petitioner's operations.

The demand of ₹16.324 crore is stated to be recurring and unrelated to revenue generation, thereby amounting to a confiscatory exaction.

PSPCL has sought quashing of the impugned Ordinance, Rules, notifications, assessment report, and demand notice, along with a direction for refund of any amounts recovered with interest.

The matter is now listed for further hearing on 23.07.2026.

AG Punjab Maninderjit Singh Bedi with Ad AG Maninder Singh Garcha appeared for PSPCL

Title: PSPCL v. State of Himachal Pradesh & Ors. (CWP No. 10539 of 2026)