Not ready to pay

The state may not be able to realize water usage charges from NHPC, which sources say is contemplating court intervention to bypass the state law. A Kashmir Life report.

On March 3, Congress minister Taj Mohi-ud-Din briefed assembly about the windfall that State Water Resources Regulatory Authority (SWRRA) has started triggering for the public kitty. His ministry, he said, had sent Rs 66 crore bills – Rs 37 crore to NHPC and Rs 27 crore to state’s PDC – for two months ending December 2010. While PDC has made the payment, the NHPC has sought two months time. On basis of the telephone call from NHPC’s Jammu based executive director, Taj assured the house that India’s hydropower giant has in principle agreed to pay.

Taj did not know that NHPC is seriously considering seeking an intervention from the Supreme Court. Two days before the assurance that Taj received, NHPC had been officially asked by most of the members and chairman of the Northern Region Power Committee (NRPC) to first seek the intervention of the union power ministry and later go to the apex court against the water usage charges that J&K has started levying. NRPC’s technical coordination committee had met for two days in Dehradun on February 28 and J&K was represented by a superintending engineer.

Taj managed passage of a law in October – in absence of opposition PDP, BJP that set up SWRRA as the ultimate godfather of state’s water resources. Apart from registering afresh, all water users (read power producers) will have to pay water usage charges to the Authority. Chief Minister Omar Abdullah is excited that some of the neighbouring states have approached him for getting an idea of the model legislation.

After six months of calculations, the NHPC says the water usage charge of 25 paisa per cubic meter has immense financial implications. It will add Rs 1.23 costs to every unit of energy at Salal, Rs 0.49 at Uri, Rs 0.58 at Dulhasti and Rs 0.20 per unit at Sewa-II. Since power producers pass the costs to the consumer, the tariffs will go up for all those states (read northern India) where NHPC supplies power produced in J&K. This led to the counselling of the NHPC by consumer states that they should manage intervention of the union power ministry and also knock at the door of the Supreme Court, a suggestion that NHPC sources said they were contemplating.

It was with the setting up of Salal that NHPC was launched in 1975. Since then a huge share of its yearly energy comes from its J&K operations. Currently its four operational power projects with 1680 MW capacity – Salal, Dul Hasti, Uri and Sewa-II – generate over 47 percent of the energy that NHPC sells in a calendar year. It will substantially increase within two years when its three other projects – one in Kashmir and two in Ladakh – will go into generations adding 320 MWs to the installed capacity. Besides, NHPC has 49 percent stakes in the JV company that it owns with PDC. It will execute three Chenab basin projects totalling 2100 MWs. This has made NHPC as the main beneficiary of a water abundant state having identified potential of 14275 MWs.

Kashmir’s economic dependence has remained a debate transcending decades. But the post-1990s narrative focused around the NHPC as the hydropower major is considered to be Delhi’s main tool of exploiting the water resource. Along with the Indus Water Treaty that guides the sharing of water between India and Pakistan, the issue of J&K’s water resources is a highly sensitive subject especially in Kashmir. All the parties regardless of their ideological divide have their own prescriptions to the crisis. Taj’s bill was actually riding the same wave.

On energy front, J&K has many skeletons in its cupboard. Scandals started soon after water resources were surrendered that helped the federal government to barter it in the Indus Water Treaty. In fact, Taj recently stunned people by revealing that NHPC’s three operational projects – Salal, Dulhasti and Uri-I – have no documents barring the MoU. Same system was adopted while allotting five other projects to the NHPC is July2000.

“There is no cabinet order, lease deed, or agreement to substantiate that any procedure was adopted for the allotment of these projects. There is no mention about who identified the site for the projects, how it was identified and who transferred the land to NHPC and (under) what terms and conditions the land was given to the Corporation,” Taj told the state legislature. “There is not even a cabinet decision that is mandatory for transferring land.” The disclosures have sharpened the shrieks to make people accountable for subverting the systems.

Approaching the court might become the only viable option for the NHPC to skip the crisis in which it is gradually landing. The power major has done it earlier as well. In 1999, the then NC government after invoking Jammu and Kashmir Electricity (Duty) Act (JKEDA) 1963 issued a notification levying electricity duty at the rate of 50 paisa per unit of electricity generated by various projects in the state. NHPC was also asked to deposit nearly Rs 70 crore for the months of April and May 1999.

NHPC challenged the notification saying though JKEDA was enacted in 1963, no rules were framed which could facilitate filing of returns, issue of notices, assessment and collection of electricity duty and therefore the provisions of the act can’t be implemented.

It also contended that state legislature in not competent to enact any law on the levy of duty on electricity and that JKEDA 1963 provided only for levy of electricity duty on sale and consumption of electricity and not on generation. It said the J&K was getting 12 percent of the generated electricity free from these projects as royalty and J&K lacks any capital investment in these projects. It listed Delhi, Haryana, Himachal Pradesh, Rajasthan, Uttar Pradesh, Punjab, Chandigarh as proforma respondents – being the states likely to get affected by such a notification by J&K state.

J&K contended that NHPC is generating electricity within the state and supplying it to different states for decades without paying any duty to the state as envisaged under the Act. It said J&K Constitution empowers the state to make law on electricity and section 3 of the JKEDA 1963 enabled it to levy duty on electricity.

After the two sides argued, the case was referred to a double bench comprising Justice S N Jha, chief justice and Justice Nisar Ahmad Kakroo, which observed that section3(1) of JKEDA 1963 provided for fixing rate of duty on the basis of factors and rules that needed to be framed and in the absence of these, the entire Act was rendered unworkable and rates so fixed vulnerable to being challenged.

Citing a judgement, the judges observed that tax on the sale of electricity can be levied by the state legislature if it is meant for consumption within the state and tax on sale of electricity outside the state would be beyond the legislative competence of the state. Quashing the state order in October 2004, the bench observed that there was no room “for doubt that state legislature is incompetent to enact any law on generation or production of electricity as it would be ultra vires (in contravention) to constitution of India. So, no duty can be levied on generation of electricity by a notification made in exercise of power under any such enactment (that is ultra vires constitution ofIndia).”

A section of the politicians and the bureaucracy were of the view that the state government should not rush the bills without taking history into account. However, the pro-SWRRA group almost booed them down. Riding the hate-NHPC wave, Taj used too much of statistics to conclude that the new system will add fortunes to the kitty. He repeated many a times, within and outside the state legislature, that the NHPC is making around Rs 7140 crore a year from its operations in J&K and SWRRA would get the state around Rs 848 crore a year.

Apart from encouraging wrong data to get into the public domain, the government has raised too much of the expectations. Now when the government is hitting a block, its massive media blitzkrieg will add to its failure list as the commoners will feel demoralized. NHPC continues to have its J&K operations as its major energy contributor. But nobody in the state is willing to accept that it is not making as much of money from J&K as certain sections in the government are trying to make us believe. So far NHPC’s highest ever sale turnover was Rs 4218.90 crore as it sold 16960 million units of energy in 2009-10. More than 47 percent of this energy – 7991million units – came from J&K. NHPC hopes to get 8334 million units from its J&K project for the current fiscal but that will never make it to the level the Irrigation Ministry thinks it has. The policy may require course corrections.

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