Jammu & Kashmir High Court Strikes Down 2010 Water Resources Act and Power Project Levies

The High Court of Jammu & Kashmir and Ladakh ruled on Thursday to strike down the 2010 Water Resources Act, determining that water usage charges imposed on hydropower projects constituted a tax on electricity generation, which exceeded the legislative powers of the erstwhile state.

According to the reported court decision delivered by a division bench of Justices Sanjay Dhar and Rajnesh Oswal, demand notices issued to 13 independent power producers were quashed. The bench further restrained the Jammu & Kashmir government from levying any tax on electricity generation under the guise of water usage charges or similar levies.

Background and Legal Arguments

Independent power producers had challenged the legislation, asserting that the charges determined by the Water Resources Regulatory Authority on April 2, 2019, were calculated based on the height from which water drove turbines rather than the actual volume of water consumed. They argued this structure effectively amounted to a tax on power generation.

In its defense, the government cited its authority to regulate water storage and use, referenced the National Water Policy, and emphasized the necessity of conserving water resources in Jammu & Kashmir.

Court Observations and Rulings

• Legislative Competence: The High Court concluded that the legislation exceeded the legislative competence of the erstwhile state at the time of its enactment.
• Post-Enactment Adoption: The court dismissed the government's argument that the subsequent adoption of the law under the Jammu and Kashmir Reorganisation Act, 2019, had validated the statute.
• Constitutional Principle: The bench observed that a law unconstitutional at its inception cannot be validated merely through subsequent adoption by Parliament.

Practical Implications and Verification

This legal ruling impacts the fiscal framework governing independent power producers operating within the region by halting specific water usage charges. Observers and stakeholders can verify the official judgment through the formal records and case repositories of the High Court of Jammu & Kashmir and Ladakh.