Highly placed sources said Chief Minister Prem Kumar Dhumal today issued instructions for follow-up action on the Prime Minister's announcement and also subsequent talks which he had with Vajpayee before his departure to Manali yesterday. The state expects an annual income of Rs. 160 crore initially, which later is expected to go up to Rs. 500 crore after commissioning of the Nathpa-Jhakri hydel project by 2001. After having got Rs. 300 crore special Central assistance including Rs. 200 crore given by the PM, the state is now looking for permanent resource base to tide over its financial crisis.

The proposal on levying generation tax on the power produced in the state, in fact had been hanging fire for the past seven years, and the previous Congress government, though had also passed a bill envisaging generation tax at the rate of 10 paise per unit but President K R Narayanan withheld the consent on the bill.``At least, I am fully convinced that Himachal has a very strong case and I will myself advocate state's cause,'' Vajpayee declared at his public rally and later in his official talks with the Chief Minister. Basic objection, which the Centre had earlier raised was that such a decision would have inter-state ramifications, and a large number of other states would also start asking for imposition of similar taxes and duties on other items.

On this, the state government argued that permission to levy the generation tax on power had been sought under recommendations of C.Ranagarajan Committee.

The committee was set up by the Centre in 1971-72 to look into the scope for raising the revenue resources of the special category states.

The job to prepare a draft for preliminary discussions with Prime Minister at Manali was entrusted to special monitoring group which Dhumal had set up in CM's secretariat. The CM had discussed the issue with Vajpayee soon after his arrival at Manali and before Vajpayee flew for his Shimla rally, he had himself studied the matter in detail.Sources said PM was informed that the state earlier had also consulted top legal experts including former CJI Y.V.Chandrachur, all legal opinions are in its favour and if HP was granted the permission, other states cannot claim on the same analogy as the Rangarajan report basically deals with rights of special category states. Since Himachal had a vast potential of hydel generation and a major source of its revenue, it had the right to impose such a duty.

The state government also informed the Prime Minister and officials accompanying him that the state had not to impose any other duty tax or royalty on the hydel power generated from the projects in its territory.