Punjab Govt Files Suit Against Union Govt In Supreme Court Seeking Payment Of RDF & Market Fees

The Punjab Government has moved the Supreme Court alleging Union of India's refusal of the reimbursement of the statutory charges (Market Fees and the Rural Development Fees (“RDF”)).

As per the original suit filed before the Apex Court, the charges levied by the State of Punjab are for the acquisition and procurement of food grains carried out by the Punjab on behalf of the Union, for ensuring food security in India.

It is stated that RDF to the tune of Rs 3637 crores is due from 2021 and market fees to the tune of Rs 2400 crores is due from 2022.

Stating that the State of Punjab has "constitutionally validly imposed" the fee on Union under Article 246(3) of the Constitution of India read with matters enumerated under List III (State List) of the Seventh Schedule, the suit filed by Advocate Ajay Pal on behalf of the State of Punjab submits that the actions of the Union Government constitute an outright transgression of Punjab Government's exclusive legislative powers under the Constitution.

Calling itself the "food bowl of India", the State of Punjab has highlighted that it has developed a robust and dynamic agricultural infrastructure which is unlike any other Indian state. It argues that the State has made various arrangements to 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 Union for ensuring food security. 

It is stated that the Procurement Policy of the Ministry of Consumer Affairs, Food and Public Distribution, Department of Food and Public Department, Government of India provides that the acquisition or procurement costs are to be reimbursed by the FCI as per the cost-sheets prepared by the Union Government. Further, the said cost-sheets are to be prepared as per the principles for fixation of Acquisition/Economic Cost of Foodgrains (Fixation Principles) which gets updated time to time. 

Additionally, to enable effective functioning of the process, certain statutory charges are levied by the State on the Union. These include an RDF at 3% of the Minimum Support Price (MSP) in respect of the agricultural produce and Market Fee at 3% of the MSP also in respect of the agricultural produce. 

The suit argues that the State of Punjab has prerogative in determination of rates for levying the Market Fees and the RDF for the purposes of procurement/acquisition of foodgrains. However, it adds–

"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."

It further adds that after correspondence with the State, the Union decided to grant on a one-time basis RDF at 3% of MSP for KMS 2020-21 and RDF at 3% of MSP for RMS 2020-21. In addition, the State of Punjab was requested to amend the Punjab Rural Act in accordance with the Modified Fixation Principles. As a measure of goodwill, the State amended the Punjab Rural Act to limit the scope of utilization of the funds only for procurement centers and not for other works pertaining to agriculture and rural infrastructure, including debt-servicing. Despite the same, as per the petition, the Union did not provide statutory charges for KMS 2021-22, KMS 2022-23, RMS 2022- 23 and RMS 2023-24.

Stating that the Union is bound by the Constitution as well as the Fixation principles to reimburse the State, the petition submits–

"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."