MoP Warns States Against Levying Charges On Power Generation

By Saur News Bureau/ Updated On Thu, Oct 26th, 2023

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The Ministry of Power (MoP) has now issued an order asking states to not levy any additional charges on the generation of electricity from any source ranging from hydropower, thermal to renewable. The ministry even termed the events as “unconstitutional and illegal”.

“It has come to the notice of the Government of India that some State Governments have imposed additional charges on the generation of electricity from various sources under the guise of development fee/ charges/ fund. Such additional charges/ fees in the form of any tax/ duty on the generation of electricity, which encompasses all types of generation viz. Thermal, Hydro, Wind, Solar, Nuclear, etc. is illegal and unconstitutional,” the Ministry of Power order said.

The ministry, earlier on April 25, 2023, had also issued another order in this regard where it had clarified that the imposition of water tax/cess on the generation of hydropower by some states was not legal. The new order has asked the states to refrain from imposing any tax, duties or other charges on the power generation.

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“ln light of the above-mentioned constitutional provisions, no taxes/ duties can be levied by any State on generation or inter-State supply of electricity under the guise of additional charges/ fee on generation of electricity from any source – Thermal/ Hydro/ Renewables etc,” the Ministry of Power order said.

It also asked all states to promptly remove any kind of tax, duty or cess in the guise of a development fee, charge, or fund on the generation of electricity from any source of energy.

In its earlier order from the Ministry of Power, issued in April, the ministry had said that the powers to levy taxes/ duties are specifically stated in the Vll Schedule. List II of the Vll Schedule lists the powers of levying of taxes/ duties by the States in entries 45 to 63. No taxes/ duties that have not been specifically mentioned in this list can be levied by the State Governments under any guise whatsoever – as Residuary powers are with the Central Government.