J&K High Court declares imposition of water usage charges under 2010 Act in UT ‘ultra vires’

The J&K High Court on Thursday (Oct 29, 2026) described the imposition of water usage charges under the J&K Water Resources (Regulation and Management) Act, 2010 as “ultra vires the Constitution” and “struck it down”.

“The impugned enactment, to the extent it imposes water usage charges on the petitioners, is held to be ultra vires the Constitution and to that extent is set aside. The impugned demand notices issued against the petitioners are set aside and the respondent State is enjoined from imposing any tax on electricity generation under the guise of water tax,” consisting of water usage charges and any other Judicial Division Rajne Sany. Oswal.

The Division Bench also observed that the impugned J&K Water Resources (Regulation and Management) Act, 2010 “to the extent that it provides for the collection of water use charges for hydropower projects, amounts to the imposition of a tax on the generation of electricity and therefore the State Legislature had no power to impose such a tax”.

In 2010, the J&K government passed the J&K Water Resources (Regulation and Management) Act “to generate revenue from water resources by charging for its use from private and public entities which will include electricity generating companies in the state”. The then government claimed that it aimed to generate revenue of around ₹850 crore annually from the state’s electricity generating companies, which include the National Hydro Power Corporation (NHPC).

However, the provisions of the 2010 Act have been challenged by 11 companies working on separate hydro projects in J&K. The proponents argued that the use of water by hydropower is non-consumptive in nature; therefore, no water usage fees could be collected. They also pointed out that on 04/02/2019, the Water Authority set charges for water consumption for electricity generation based on the head of water from which the water in the hydroelectric power plants is used to drive the turbine, and not based on the amount of water consumed by the hydroelectric power plants.

“As per the scheme of the Constitution, the power to levy tax on electricity generation is beyond the purview of the state legislature. Even according to the view of the Union of India, the state government cannot levy tax on electricity generation as part of charges for water consumption etc,” argued the petitioners.

The Division Bench restrained J&K from “imposing any tax on electricity generation under water usage charges or any other tax”.

The petitioners have also referred to 12% free electricity to the UT Government of J&K which is paid by way of license fees. “An assurance was extended that no additional charge, tax or levy would be imposed on the petitioners beyond those expressly stated. The petitioners thus developed a legitimate expectation that they would not be charged any water charges for the entire duration of the 40-year project,” the petitioners told the court.

However, the J&K government, while defending the law, argued that the state government “is competent to make laws regarding charges for storage and use of water for various purposes, including generation of electricity, under the Constitution of India”.

“It has been submitted that the impugned Act is in accordance with the National Water Policy and that the State wishes to conserve and utilize water resources in the best possible manner for the benefit of the people of UT J&K. It has been submitted that as per Item 17 of List-II of the Seventh Schedule of the Constitution of India, water, including power regulatory projects, shall be accorded maximum respect to the State’s regulatory projects. water, which includes withdrawal of water for various purposes including generation of electricity,” the J&K administration said.

It has been argued that water falls within the definition of land because it is derived from or associated with land; therefore, the imposition of water usage charges under the impugned Act is justified under Item 49 of the State List. “It was argued that since water falls within the definition of minerals. The State Government is competent to make laws and levy charges for the use of water, even under Item 50 of List II of the Seventh Schedule of the Constitution,” he added.

It was further argued that the Act is a statutory provision and that promise, if any, was extended to the petitioner by the Executive. “Therefore, the petitioners cannot claim such a promise against the legislative enactment. Finally, it was argued that even if the water charges levied under the impugned enactment are supposed to be like a tax on the generation of electricity, yet, as the impugned Act was passed by the Parliament of India at the time of the enactment of the Act, it may be, prior to such reorganization of J&K201, that the impugned Act has the consent of the Parliament of India, which has the power to legislate on the subject of taxation electricity production,” he added.

Published – 30 Oct 2026 0:55 AM IST