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

The J&K High Court on Thursday (October 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 upon the petitioners, is held to be ultra vires the Constitution and is struck down to that extent. The impugned demand notices issued against the writ petitioners are quashed, and the respondent State is restrained from imposing any tax on the generation of electricity under the garb of water usage charges or any other tax,” held a Division Bench, comprising Justice Sanjay Dhar and Justice Rajnesh Oswal.

The Division Bench also observed that the impugned J&K Water Resources (Regulation and Management) Act, 2010, “to the extent it provides for levying water usage charges upon the hydro power projects, amounts to imposing a tax on the generation of electricity and, therefore, the State Legislature did not have the competence to impose such tax”.

The J&K government in 2010 passed the J&K Water Resources (Regulation and Management) Act “to generate revenue on water resources by charging for its usage from private and public units, which will include companies generating electricity in the State”. The then-government claimed that it was aimed at generating revenue of around ₹850 crores annually from the companies generating electricity in the State, which includes the National Hydro Power Corporation (NHPC).

However, 11 companies, working on independent hydro power projects in J&K, challenged the provisions of the Act of 2010. The petitioners contended that the use of water by the hydro power projects is non-consumptive in nature; therefore, water usage charges could not have been levied. They also pointed out that the Water Resources Regulatory Authority on 02.04.2019 fixed the water usage charges for generation of electricity on the basis of head height from which water in hydro power plants is deployed for propelling the turbine and not on the basis of the quantum of water used by the hydro power plants.

“Under the scheme of the Constitution, the power to impose tax on generation of electricity is beyond the competence of the State Legislature. Even as per the stand of the Union of India, the State Government cannot levy tax on generation of electricity under the garb of water usage charges etc,” the petitioners argued.

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

The petitioners also referred to 12% free electricity to the Government of UT of J&K, which is in the form of royalty being paid. “An assurance was extended that no additional charges, tax or cess beyond those expressly mentioned would be imposed upon the writ petitioners. Thus, the writ petitioners have developed a legitimate expectation that no water charges would be levied upon them for a full project period of 40 years,” the petitioners told the court.

However, the J&K government, while defending the enactment, contended that the State Government “is competent to legislate on charges for the storage and use of water for various purposes, including for generation of electricity, under the Constitution of India”.

“It has been submitted that the impugned Act is in consonance with the National Water Policy and that the State desires to conserve and harness water resources in the best possible manner for the benefit of the residents of the UT of J&K. It has been submitted that under Entry 17 of List-II of Seventh Schedule of Constitution of India, water, including water power projects, is specifically mentioned and, therefore, the State is vested with the power to legislate in respect of the regulation of water, which includes the levy of water charges for various purposes, including generation of electricity,” said the J&K administration.

It was argued that water falls within the definition of land, as it is derived from or connected with land; therefore, the imposition of water usage charges under the impugned Act is justified under Entry 49 of the State List. “It has been contended that because water falls within the definition of minerals. The State Government is competent to legislate and levy water usage charges, even under Entry 50 of List-II of the Seventh Schedule to the Constitution,” it added.

It was further argued that the Act was a piece of legislation and that promise, if any, was extended to the writ petitioners by the executive. “Therefore, the writ petitioners cannot seek to enforce such a promise against the legislative enactment. Lastly, it has been contended that even if it is assumed that water charges levied in terms of the impugned enactment are like tax on generation of electricity, still then, because the impugned Act has been adopted by the Parliament of India at the time of enactment of J&K Reorganisation Act, 2019, as such, it can be presumed that the impugned enactment has the assent of the Parliament of India, which is vested with power to legislate on the subject of taxation on generation of electricity,” it added.