Himachal Pradesh has introduced a new levy specifically aimed at generating additional revenue for the state, which is a cess on water used for power generation. This initiative is part of the government's broader strategy to enhance its fiscal health amidst significant financial challenges, including high debt levels and a growing fiscal deficit.

The rationale behind this levy is rooted in the state's unique geographical and economic context. Himachal Pradesh is endowed with abundant water resources, which are crucial for hydroelectric power generation. By imposing a cess on the water utilized for this purpose, the state government aims to tap into a revenue source that aligns with its natural resources and economic activities. This approach not only seeks to increase the state's revenue base but also reflects a move towards more sustainable financial practices by leveraging existing resources.

The revenue generated from this cess is projected to be substantial, with estimates indicating it could yield around ?4,000 crore. This additional income is vital for the state, especially as it faces a decline in financial support from the central government and a reduction in grants. The introduction of this levy is part of a multi-faceted strategy that includes improving tax collection efficiency, broadening the tax base, and rationalizing expenditures to achieve a more balanced budget.