The Chief Minister's Office of Himachal Pradesh, in a post on X on Wednesday, June 17, 2026, stated that the state has formally requested an increase in free power royalty from Central Public Sector Undertakings (CPSUs) operating hydropower projects within the state — specifically for projects that have completed their initial 12-year commercial operation period. The post, shared by the official CMO Himachal Pradesh account, listed this as a key point from a meeting: 'केंद्रीय सार्वजनिक क्षेत्र उपक्रमों में प्रारंभिक 12 वर्षों की अवधि पूर्ण कर चुकी परियोजनाओं में सामान्य 12 प्रतिशत निःशुल्क बिजली रॉयल्टी के अतिरिक्त निःशुल्क बिजली रॉयल्टी की हिस्सेदारी बढ़ाने का अनुरोध किया' — translated: 'A request was made to increase the share of free power royalty, over and above the standard 12 percent free power royalty, for projects operated by Central Public Sector Undertakings that have completed their initial 12-year period.'

Context

Himachal Pradesh is among India's most hydropower-rich states, with major rivers including the Sutlej, Beas, and Chenab hosting a large number of centrally operated projects. Under the current framework, the state receives 12 percent of generated electricity free of cost from CPSU-run hydropower stations. This arrangement has been in place since India's hydro-power policy of 1998, which codified the free power royalty mechanism for host states. The royalty entitlement under this policy becomes applicable after the first 12 years of commercial operation of a project. Once a project crosses this threshold, the state has historically sought to renegotiate terms to reflect the matured revenue profile of the asset.

Policy Backdrop

Central entities such as NHPC and SJVN operate several large hydropower stations across Himachal Pradesh. The 12 percent free power royalty forms a significant portion of the state's non-tax revenue from its natural water resources. However, hill states have long argued that once projects complete their initial tariff blocks — during which capital costs are being recovered — the host state's share should be revised upward to reflect the lower financial burden on the project operator and the ongoing environmental and social costs borne by local communities. This demand is not new to Himachal Pradesh. The state has periodically raised the issue in central forums, framing it as a matter of equitable sharing of revenue from riverine resources that lie within its geographic jurisdiction.

Stakeholders and Impact

For Himachal Pradesh, an upward revision in free power royalty from mature CPSU projects would translate directly into greater electricity availability for redistribution — either for subsidised domestic supply or for sale in power markets, generating additional fiscal resources. The state government has consistently positioned this demand within the broader framework of fiscal federalism and the rights of resource-rich states. For CPSUs, any increase in free power obligation would reduce the quantum of power available for sale, affecting their revenue calculations. The Ministry of Power at the Centre would be the key decision-making authority on any revision to the existing royalty framework.

What's Next

The formal request now awaits a response from the Union Ministry of Power. Any revision to the free power royalty structure would likely require policy-level deliberations, potentially at forums such as the Power Ministers' Conference or the Northern Zonal Council. The outcome of this engagement will be closely watched by other hydropower-hosting hill states, including Uttarakhand and Arunachal Pradesh, which face similar dynamics with centrally operated projects on their territory. A favourable ruling could set a precedent for wider royalty renegotiation across India's hydro-rich states.