Is a state law hiking levy binding on central govt?

NEW DELHI: States will keenly watch the tussle between Punjab and Centre in Supreme Court at the core of which is a larger question - whether a state legislation increasing the fees charged for the process of foodgrains procurement for central PDS schemes would be binding on Union government.

Punjab had increased the levy to 6% of MSP of the total foodgrains procured from the state but Centre agreed to reimburse only 2% levy , uniformly applicable to all states, towards procurement process cost.

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 govt 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".