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Synopsis

State of Punjab has approached the Top Court challenging refusal by the Union Government of reimbursing statutory charges (market fees and rural development fee “RDF”) levied by the State on procurement of food grains, done in pursuance of the national policy to ensure food security across the country.

“Since the year 2003, the rates that have been determined by the Plaintiff in respect of the statutory charges (i.e., Market Fees @ 2% of MSP and RDF @ 2% of MSP) have been respected by the Central Governments, basis which funds have been released to the Plaintiff for carrying out the procurement operations. In the year 2017, the statutory charges were increased (i.e., Market Fees @ 3% of MSP and RDF @ 3% of MSP), and the Defendant continued to approved the cost sheets in favour of the Plaintiff as per increased rates of Market Fees and RDF, determined by the Plaintiff. However, beginning with the Provisional Cost Sheet of Kharif Market Season (“KMS”) 2020 – 21, the Defendant began refusing reimbursement of RDF @ 3% of MSP, and subsequently Market Fees @ 3% of MSP, as part of the acquisition/ economic costs for procurement of foodgrains”, the plea at the outset states.

It is submitted that though the act of the State is constitutionally valid, as per Article 246(3) of the Constitution read with List III of the Seventh Schedule, market and rural development fee in their favour is not being disbursed by the Union.

“The actions of the Defendant in its refusal of payment of statutory charges and insistence on capping the statutory charges to a total of 2% of the MSP is an outright transgression of Plaintiff’s exclusive legislative powers under the Constitution of India, which empowers it to determine the rate of fees to be levied in respect of agriculture and market/fairs. The Defendant is obligated to pay the fee which is constitutionally levied by the Plaintiff State. The mere fact that this fee is being paid in respect of acquisition, which the Plaintiff State is carrying out for the Defendant, does not in any way change this underlying constitutional/ legal position”, the plea further states.

There are certain statutory charges that the State Government levies for the purpose of meeting the demands of its robust agricultural network;

(i) As per Section 5, Punjab Rural Development Act, 1987, Rural Development Fees/ RDF @ 3% of the Minimun Support Price is levied in respect of the agricultural produce.

(ii) As per Section 23, Punjab Agriculture Produce Markets Act, 1961, Market fee @ 3% of the MSP is levied in respect of the agricultural produce.

The abovementioned levies enable effective functioning of the acquisition/procurement process, and ensure financial viability of the acquisition process, in so far as the State of Punjab is concerned.

As per the petitioner State, although it makes the said acquisitions for the Union in pursuance of the policy to ensure food security, apart from the above-mentioned fee, the State does not have any other revenue source to carry out these acquisition activities.

“An extraordinary infrastructure such as the Plaintiff State’s requires creation of comprehensive channels for logistical and operational arrangements that ensure that the agricultural produce is efficiently procured by the state agencies and delivered to the Food Corporation of India (“FCI”), which operates as an agency of the Defendant for ensuring food security and carries out procurement for the Defendant towards this end. Thereafter, as laid down in the Procurement Policy (Annexure-IV) of the Ministry of Consumer Affairs, Food and Public Distribution, Department of Food and Public Department, Government of India (“Ministry of Food and PD”) (“Procurement Policy”), the acquisition/ procurement costs are to be reimbursed by the FCI as per the cost-sheets prepared by the Defendant. These cost sheets are required to be prepared by the Defendant in accordance with the Principles for Fixation of Acquisition/ Economic Cost of Foodgrains dated 16.07.2023 (modified from time to time) laid down by the Ministry of Food and PD (“Fixation Principles”) under the Procurement Policy”, the plea adds.

Fixation principles, as revised by the letter dated 24.02.2020 are also relied upon by the petitioner to contend that rates as notified by the States, with respect to the market fee or any other fee/ levy/ cess in connection with the procurement operation, would be accepted both for the provisional cost sheet and the final cost sheet, basis which the funds would be released by the Union to the States for procurement.