Chandigarh: Punjab, already grappling with mounting debt, is set to face a renewed financial challenge after the Himachal Pradesh government imposed a 2 per cent cess on hydroelectric projects. The decision is expected to saddle Punjab with an additional annual burden of nearly ₹200 crore, intensifying fiscal pressures on the state.
The move will have wider implications under the Bhakra Beas Management Board (BBMB), as three major hydroelectric projects under its control will collectively attract an annual cess of ₹433.13 crore. The cost will be borne jointly by Punjab, Haryana and Rajasthan.
The BBMB has formally registered its objection to the decision. Earlier, on December 24, 2025, the Punjab government had also conveyed its written objections to the board, expressing strong reservations over the levy.
During a meeting held on January 3 with senior officials from Punjab, Haryana and Rajasthan, the Himachal Pradesh Chief Minister clarified that the cess would be imposed as a land revenue levy on hydroelectric projects. The Himachal government has argued that the charge is applicable under provisions related to non-agricultural land use.
This is not the first time Himachal Pradesh has attempted to impose an additional levy on hydropower projects. On March 16, 2023, the state introduced a water cess, which would have resulted in an estimated ₹400 crore annual burden on Punjab alone. The move, however, was declared illegal by the Central Government, and in March 2024, the High Court struck it down as unconstitutional. At the time, Himachal Pradesh had planned to generate nearly ₹2,000 crore annually from 188 hydroelectric projects across the state.
Following the court’s ruling, the Himachal government revised its approach and issued a gazette notification on December 12, 2025, announcing a 2 per cent land revenue cess on hydroelectric projects. Objections were sought from the stakeholder states as part of the process.
Punjab, in its response, has maintained that hydroelectric projects are public utility initiatives, not commercial enterprises. It has pointed out that full compensation for land acquisition was already paid at the time the land was acquired. The state has also argued that any land revenue cess should apply only to the value of the land, not the entire cost of the project, and warned that the decision undermines the federal structure and rights of states.
Adding to Punjab’s concerns, the Shanan Hydel Project operated by Punjab Power Corporation has also come under the purview of the new levy, resulting in an additional annual financial burden of ₹16.32 crore.
The BBMB and the affected states are currently exploring legal and constitutional remedies. The issue is expected to be raised again before the Central Government and the judiciary in the near future.
