Punjab files suit in SC against Centre's refusal to rural development fees on food procurement

The Punjab government has approached the Supreme Court challenging alleged refusal by the Centre on the reimbursement of the statutory charges, i.e., market fees and the rural development fees (RDF), levied by the state on the acquisition and procurement of grains for ensuring food security in the country.

In an original suit, it contended, "The actions of the defendant in its refusal of payment and insistence on capping the statutory charges to a total of 2 per cent 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 state government contended the Centre’s actions are also in violation of the Modified Fixation Principles that recognise the autonomy of the plaintiff to determine the fees to be levied and subsequently reimbursed with by the defendant.

“The reduction of the statutory charges at this stage would adversely affect the rural infrastructure and economy. Further, the Punjab State Agricultural Marketing Board/Punjab Development Board will not be able to pay the loans/liabilities created for development of rural infrastructure in respect of the outstanding payments accrued on account of the market fees and RDF,” the suit said.

The suit contended that RDF to the tune of Rs 3,637 crore is due from 2021 and market fees to the tune of over Rs 2,400 crore is due from 2022.

"The Union of India is refusing to pay the market fees and RDF even though it is validly imposed by the State under Article 246(3) as per State List of the Seventh Schedule," it stated.

The state submitted that it has been the fulcrum of India’s agrarian and food economy, thereby earning the moniker of “food bowl of India”.

It also stated that the State contributed 21 per cent of rice and 31 per cent of wheat in the central food grains of the nation during 2021-22. To be able to contribute significantly towards national food security, including the central government’s public distribution system and procurement schemes, the State has developed a robust and dynamic agricultural infrastructure, which is unlike any other Indian state.

As laid down in the procurement policy of the Ministry of Consumer Affairs, Food and Public Distribution, Department of Food and Public Department, Government of India, the acquisition/procurement costs are to be reimbursed by the FCI as per the cost-sheets prepared by the Centre under the procurement policy.

"As per Section 5 of the Punjab Rural Development Act, 1987, rural development fees at rate of 3 per cent of the Minimum Support Price is levied in respect of the agricultural produce," it said.

"As per Section 23 of the Punjab Agriculture Produce Markets Act, 1961, market fee at the rate of 3 per cent of the MSP is levied in respect of the agricultural produce," it added.

However, beginning with the provisional cost sheet of Kharif Market Season, 2020- 21, the Centre began refusing reimbursement of RDF at the rate of 3 per cent of MSP, and subsequently Market Fees at the rate of 3 per cent of MSP, as part of the acquisition or economic costs for procurement of foodgrains, the Punjab government said.