High Court Strikes Down Jammu Kashmir Water Usage Charges

The High Court of Jammu and Kashmir and Ladakh struck down provisions of the Jammu and Kashmir Water Resources (Regulation and Management) Act, 2010, ruling that water usage charges imposed on independent hydropower projects are unconstitutional. A division bench comprising Justices Rajnesh Oswal and Sanjay Dhar determined that these charges were not regulatory fees but were, in substance, an impermissible tax on the generation of electricity, which falls outside the legislative competence of the state or union territory legislature.

The court found that the tariff mechanism linked charges to head height rather than water volume, proving the levy targeted electricity production. Consequently, the court quashed all demand notices issued to independent power producers since 2010 and restrained the government from imposing future taxes on electricity generation under the guise of water usage charges. The ruling provides relief to companies including Mass N Energy Pvt Ltd, Magpie Hydel Construction Operation Industries Pvt Ltd, and Choudhary Power Projects Pvt Ltd.

The court rejected the administration's argument that the 2019 Jammu and Kashmir Reorganisation Act legitimized the 2010 law, stating that a statute void ab initio cannot be validated by subsequent parliamentary adoption. The Government of India supported the challenge, arguing that states may only tax the consumption or sale of electricity, not its generation.