Himachal Hc Halts Diversion Of Hydro Project Local Area Fund For Orphan Welfare

Shimla: The Himachal Pradesh high court has stayed two state government notifications that diverted a portion of the Local Area Development Fund (LADF)—generated from hydroelectric projects—to provide financial assistance to orphans.

A division bench, comprising chief justice GS Sandhawalia and justice Bipin C Negi, issued the interim order on Thursday during the hearing of a public interest litigation challenging the validity of notifications issued on September 23, 2025, and March 18, 2026. The directives earmarked 10% and subsequently 40% of total LADF collections for the social justice and empowerment department to assist orphans.

Janak Raj, the BJP MLA of the Pangi-Bharmaur constituency in Chamba district, moved the high court against the notifications in June. He argued that diverting the funds violated the Swaran Jayanti Energy Policy, 2021, under which the LADF was created exclusively to address the developmental needs of communities affected by hydroelectric projects and to foster local asset ownership.

Under the energy policy, hydro project developers must contribute 1.5% of the final cost for projects exceeding 5MW, and 1% for projects up to 5MW, toward the LADF. The policy strictly mandates that these funds be used for infrastructure development at the panchayat, block, and district levels within project-affected areas, including internal village roads, drinking water schemes, street lighting, sanitation, schools, and health centres.

During the hearing, the petitioner contended that the state government lacked the jurisdiction to shift money from a fund earmarked for specific local development to a separate welfare scheme unrelated to the policy’s objectives. Raj pointed out that the original fund management clause was tinkered with in September 2025 to introduce the 10% diversion, which was then aggressively increased to 40% in March 2026.

Accepting the prima facie contention, the high court observed that the notifications failed to indicate that the diverted funds would be utilised for orphans living within the hydro project-affected areas.

“Keeping in view the argument raised coupled with the fact that the notification does not show that the amount is to be utilised for orphans in the area concerned, we are constrained to stay both the notifications dated September 23, 2025 and March 18, 2026, respectively,” the bench observed while granting the interim stay.