Himachal to levy 2% annual cess on surplus land held by power project developers

The Himachal Pradesh government has notified a major policy shift that will require all individuals, companies and power project developers to pay an annual land revenue on surplus land held for non-agricultural purposes. The charge, fixed at 2 per cent of the average market value of the project, will apply to excess land identified through a special assessment conducted across the state. The new levy will come into effect from January 1, 2026.

Chief Secretary Sanjay Gupta issued the formal order on Tuesday, following an extensive verification exercise undertaken by district administrations to determine how much additional land has been retained by various project-executing agencies. The annual revenue for each entity will be based on assessment reports prepared by the respective Deputy Commissioners.

The state, facing persistent financial strain, sees this step as a practical way to generate much-needed income. A previous attempt to raise revenue through a water cess on hydropower companies remains suspended after several power producers challenged it in court. The land revenue model is now being positioned as an alternative, more legally sustainable mechanism.

In the first phase of the exercise, the government focused on hydropower producers, which hold some of the largest land parcels in Himachal. Deputy Commissioners of Shimla and Kangra carried out special assessments under the Himachal Pradesh (Special Assessment) Rules, 1986, examining the extent of surplus land beyond what is required for project operations. The 2 per cent charge will be levied under Rule 14 of the same framework.

Major public sector undertakings, including Satluj Jal Vidyut Nigam Ltd (SJVNL), National Hydro Power Corporation (NHPC) and National Thermal Power Corporation (NTPC), have developed large hydel projects in the state and are expected to come under the new revenue regime. Independent producers such as the former Jaypee-run Karcham Wangtoo project in Kinnaur are also likely to face substantial liability, as companies continue to hold sizeable tracts that were never put to operational use.

Settlement Officers in Shimla and Kangra, working with the Directorate of Energy, finalised the average market value of various hydropower projects. Their reports were submitted to the government on December 1 and subsequently approved. As per Tuesday’s order, the officers have now been instructed to publish extracts of the assessment reports in the Rajpatra (e-Gazette), inviting objections from affected individuals and organisations before the levy is formally implemented.