Is a state law hiking levy binding on central govt?

States will closely monitor the conflict between Punjab and the Centre in the Supreme Court, which raises a broader issue: whether state legislation that raises fees for foodgrain procurement under central PDS schemes is binding on the Union government.

Punjab raised the levy to 6% of the minimum support price (MSP) for all foodgrains procured from the state, while the Centre agreed to reimburse only 2% of this levy, a standard rate applied across all states, to cover procurement costs.

This state levy, reimbursed by Centre to states, is over and above the cost of foodgrains it pays to states. These foodgrains are distributed free or at subsidised prices to weaker and vulnerable sections of society under the Pradhan Mantri Garib Kalyan Anna Yojana, Antyodaya and Targeted Public Distribution System.

Raising a Centre-state dispute under Article 131 of the Constitution on the Centre's refusal to reimburse 6% levy mandated under state laws, Punjab has taken a stand that "the state holds exclusive power to determine the statutory charges to be levied on procurement of foodgrains on Centre's behalf".

Centre refuted the assertion and said, "There is no legal right under any parliamentary law which requires Centre to consider, or act upon such determination of levy by a state... As per the MoU entered by the states and Centre, Union govt is entitled to determine the rates concerning procurement of foodgrains for distribution under central schemes."

Punjab government said it was utilising the two levies of 3% each - market fee and rural development fee - solely for the purpose of rural infrastructure such as improving approach roads, clean drinking water and maintenance of storage facilities, and for promotion of agricultural produce and post-harvest handling.

Centre said the uniform 2% levy reimbursed to states over and above the cost of the foodgrains was meant to be used for developing facilities at procurement centres to benefit poor and marginal farmers, and this levy should not be "used as a tool to generate funds for other activities or enrichment of state revenue".

Centre accused Punjab of wrongly diverting funds, created from the reimbursed levy, for "establishment of govt educational institutes, repair of roads, construction of panchayat ghars and dharamshalas, and waiving farmers' debt".


(With TOI inputs)