Himachal Pradesh Introduces Land Revenue Cess on Hydropower Projects to Boost State Finances
In a significant move to bolster its financial resources, the Himachal Pradesh government has imposed a graded annual land revenue cess of up to 2% on hydropower projects operating within the state. This decision comes in the wake of the Centre discontinuing the revenue deficit grant (RDG), which previously provided Rs 40,000 crore to the state. The new levy is projected to generate approximately Rs 1,800 crore annually, marking a crucial step in augmenting non-tax revenue from the hydropower sector, a cornerstone of Himachal Pradesh's economy.
Detailed Notification and Graded Slab Structure
The state government issued a detailed notification on Thursday, outlining the structure and rates of the land revenue to be levied. The annual charge has been fixed in a graded slab ranging from 1% to 2% of the project's average market value. This assessment framework encompasses over 180 hydro power projects across districts including Shimla, Kinnaur, Bilaspur, Una, Lahaul & Spiti, Chamba, Kangra, and Mandi.
According to the notification, the revised land revenue will be payable effective from February 2, 2026. Project authorities are required to pay the levy in two equal annual instalments: from April 1 to April 30 and from October 1 to October 31. This special assessment will remain in force for 10 years or until a fresh revision is undertaken.
Key Projects and Their Financial Contributions
The hydro projects subject to this land revenue cess include major installations such as the Bhakra Dam, managed by the Bhakra Beas Management Board (BBMB). The BBMB is expected to pay approximately Rs 227 crore annually for land used for non-agricultural purposes related to the hydropower project. Other significant contributors include:
- Nathpa Jhakri, managed by SJVN, to pay Rs 144.45 crore annually.
- Kol Dam-1 in Bilaspur district to pay Rs 63 crore annually.
- Kol Dam-2 in Solan district to pay Rs 38 crore annually.
- Beas-Sutlej Link to pay Rs 146.92 crore annually.
- Pong Dam to pay Rs 58.77 crore annually.
- Satluj Jal Vidyut Nigam could pay around Rs 283 crore yearly.
These figures are based on a preliminary assessment report that included land classification and assessment blocks, sanctioned by the Financial Commissioner (Revenue) on December 1, 2025.
Legal Framework and Implementation Process
The exercise was undertaken in compliance with the Revenue Department notification issued in October 2025, under Sections 49, 52, and 63 of the Himachal Pradesh Land Revenue Act, 1954. Records of rights for land used in operational hydro power projects were requisitioned from all concerned District Collectors. Subsequently, under Section 50(b)(iii) and relevant Special Assessment Rules, the market value of projects was obtained from the Director of the Energy Department for assessment purposes.
Controversy and Objections from BBMB
Despite the state's efforts, the move has faced criticism from the Bhakra Beas Management Board. BBMB chairman Manoj Tripathi termed the land revenue tax on the Bhakra Dam as arbitrary, levied despite strong objections from the board. Tripathi emphasized that the Bhakra Dam is a multipurpose project, not solely a hydropower venture, as it also serves irrigation and drinking water needs. He stated, "BBMB is not a profit-making entity; we are working in the field of nation-building." The board had submitted valid objections to the Himachal government's proposal, highlighting its non-profit nature and broader societal contributions.
This new policy reflects Himachal Pradesh's strategic shift to secure financial stability through internal revenue generation, leveraging its abundant hydropower resources while navigating the challenges posed by the discontinuation of central grants.
