Himachal Pradesh Introduces Land Revenue Cess on Hydropower Projects Amid Financial Strain
Himachal Pradesh has announced a land revenue cess on hydropower projects starting January 1, 2026, following amendments to the Land Revenue Act. This decision aims to address the state's financial challenges, which have intensified due to a significant loss in revenue grants. The new cess has faced opposition from Punjab, which claims it imposes a financial burden of approximately Rs 500 crore. The state is also considering a separate electricity cess to generate additional funds. The meeting of the Himachal cabinet will further discuss the implications of these financial measures.
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Himachal Pradesh will implement a land revenue cess on hydropower projects effective January 1, 2026, as per amendments to the Land Revenue Act. This move aims to generate funds amid heightened financial pressures due to a reduction in revenue deficit grants (RDG).
The state government's notification, issued on December 12, 2025, has faced backlash, particularly from Punjab, citing a potential annual financial burden of Rs 200 crore. Punjab's water resources minister criticized the cess as illegal.
Additionally, a new Rs 2 per unit electricity cess on commercial banks and insurance firms is expected to further support state revenue. Himachal's financial status has been strained, with a debt-to-GSDP ratio of 43.98% and projected fiscal deficits. The cabinet plans to discuss the implications of the cess and RDG abolition in upcoming meetings.
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