Jammu & Kashmir HC strikes down water tax on hydropower projects

SRINAGAR: In a setback to J&K govt, the high court (HC) of Jammu & Kashmir and Ladakh Thursday struck down the 2010 Water Resources Act, ruling that water usage charges levied on hydropower projects amounted to a tax on electricity generation, a subject beyond the erstwhile state legislature’s powers.A division bench of Justices Sanjay Dhar and Rajnesh Oswal quashed demand notices issued to 13 independent power producers and restrained J&K govt from imposing any tax on electricity generation under the guise of water usage charges or any other levy. The producers had challenged the law, arguing that charges fixed by Water Resources Regulatory Authority on April 2, 2019, were linked to the height from which water drove turbines rather than the volume consumed, effectively taxing power generation.Govt defended the levy, citing its authority to regulate water storage and use, National Water Policy and the need to conserve J&K’s water resources.Rejecting its arguments, HC held that the legislation exceeded the erstwhile state’s legislative competence when enacted. It also dismissed J&K govt’s contention that the law’s subsequent adoption under Jammu & Kashmir Reorganisation Act, 2019, had legitimised it.HC observed that a law unconstitutional at the time of enactment could not be validated merely through its subsequent adoption by Parliament.