Shimla, Aug 4
The recent ruling by the Supreme Court on July 25, 2024, has provided a significant boost to the financial health of Himachal Pradesh. The Constitution Bench, in a majority decision of 8:1, affirmed that state legislatures have the authority to levy taxes on mineral-bearing land and mines, unrestrained by Parliament. This landmark decision aligns with federal governance principles and grants states greater autonomy over their resources.
Under Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957, those who obtain leases for mining activities must pay royalties to the landowner or corporation. The Supreme Court’s judgment clarified whether these royalties constitute a tax and if the states exclusively hold the right to levy such charges within their jurisdictions. Chief Justice D.Y. Chandrachud’s bench heard Solicitor General Tushar Mehta’s request to clarify the retrospective applicability of this decision, which remains reserved.
This ruling offers a vital opportunity for the Himachal Pradesh government to impose water cess on hydropower projects. By making necessary legislative amendments and preparing new bills in accordance with the Supreme Court’s decision, the state can introduce these measures in the upcoming monsoon session.
Himachal Pradesh faces significant economic challenges due to limited revenue sources and mounting debt. Historically categorized as a special state due to its economic weakness, Himachal Pradesh lost many of its concessions over time. Consequently, the state has struggled with a severe imbalance between revenue and expenditure.
The Sukhu government, seeking to enhance revenue, initially focused on leveraging the state’s abundant water resources by proposing a water cess on hydroelectric projects. However, legal obstacles and central government opposition hindered progress. The recent Supreme Court decision provides a clearer path for the state to revisit and potentially implement this measure.
The ruling also opens avenues for the state to address other financial challenges. For instance, Himachal Pradesh has been fighting legal battles to secure its share of revenues from Bhakra Beas Management Board (BBMB) power projects and other century-old hydropower projects. Despite a Supreme Court ruling in favor of the state’s share, the state has yet to see tangible benefits.
Additionally, the state has struggled to levy green taxes on tourist vehicles and to gain credit for its forest conservation efforts under central control. The Supreme Court is set to hear Himachal Pradesh’s plea regarding the Shanan power project’s possession in September 2024.
The recent decision empowers the state to increase levies on limestone mining for cement plants, quarrying, and other industries utilizing riverbed resources. By managing auctions of sand, concrete, and limestone more effectively, the state can significantly boost its revenue.
Moreover, the state can explore the potential of forest products like timber, resin, and other materials as valuable revenue sources. Developing industries based on natural products could provide employment opportunities and promote self-employment for the state’s skilled and experienced workforce.
The Supreme Court’s July 25, 2024 decision has granted Himachal Pradesh a crucial opportunity to enhance its financial stability. By leveraging the autonomy to impose taxes on mineral resources and water cess on hydropower projects, the state can generate much-needed revenue.
Experts feel that the Sukhu government must seize this opportunity to ensure sustainable economic growth and development for Himachal Pradesh.
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