Bombay High Court Rules on Export Subsidy for Milk Powder

The Bombay High Court has directed the state government to release export subsidies worth Rs. 8.8 crores to milk powders manufacturers.

The bench of Justice G. S. Kulkarni and Justice Firdosh P. Pooniwalla has observed that once a party like Indapur, who was similarly placed like the Petitioner, was in receipt of such subsidy, which is certainly in the nature of a State largesse, all attributes of reasonableness and fairness emanating from Article 14 of the Constitution of India would stare at the Respondents in similar treatment to be meted out to a person like the Petitioner who was identically placed. A different treatment being meted to the Petitioner would result in breach of the basic rights of the Petitioner of non-discrimination guaranteed to the Petitioner under Article 14 of the Constitution. The subsidy scheme in question is a welfare scheme which was fully implemented and acted upon in the case of Indapur. Thus, no technical argument would prevent the Court from recognizing such Constitutional rights as conferred on the Petitioner as also recognized by the Scheme.

In 2018, there was a drastic fall in the prices of Milk Powder in the domestic as well as the international market and all manufacturers of Milk Powders were not able to sell Milk Powder as manufactured by them at prices which would break even their costs. The prices had reduced drastically and did not cover the basic cost of milk, production cost, manufacturing cost and other expenses etc. Due to the same the stock of Milk Powder with each and every manufacturer in Maharashtra was increasing. As a consequence, the manufacturers, including the Petitioner, reduced procurement of milk from the end milk farmers as the demand of the Milk Powder has reduced. In furtherance of the same, the fresh production of milk was also reduced. The milk farmers were accordingly unable to sell their milk which resulted in additional milk in the State of Maharashtra.

The government floated a Scheme for grant of Export Subsidy to clear existing stock within the State and restart the manufacturing/production of milk powder. The intention behind subsidy was that manufacturers of Milk Powder would sell their existing stock in the international market and start manufacturing fresh milk powder and for the same would start procuring milk from the milk farmers.
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The Petitioner submitted that, as on 30th June 2018, it had 2173 metric tonnes of Milk Powder in stock which formed part of the aforesaid 30183 metric tonnes of Milk Powder which was inspected and calculated by the department pursuant to the Government Resolution dated 31st July 2018. Further it is the case of the Petitioner that it admittedly exported 1617 metric tonnes of Milk Powder between 1st December 2018 and 5th January 2019. Therefore, according to the Petitioner, it became entitled to receive the Export Subsidy at Rs. 50/- per kg. of Milk Powder and thus was entitled to Rs. 8,08,50,000 under the said Government Resolution dated 31st July 2018.

The Petitioner, while relying upon the Government Resolution, exported 1617 metric tonnes of Milk Powder between 1st August 2018 and 19th January 2019, especially when the prices of Milk Powder in the international market were much lower. It was upon the assurances and promises by the State Government, pursuant to the Resolution dated 31st July 2018, that the Petitioner had exported a huge stock of Milk Powder at a lower price, which would not even cover the production cost. The Petitioner submitted that it had relied upon the Government Resolution dated 31st July 2018 and hence the department were now bound to abide by the assurances and promises given by them in the Government Resolution by disbursing the export subsidy.

The department contended that the Rules of Business made under Article 166(3) of the Constitution of India are mandatory. The Government Resolution had been issued without the concurrence of the Finance Department and without a resolution of the Council of Ministers. The Government Resolution, if implemented, had substantial financial implications. Rule 9 of the Maharashtra Government Rules of Business mandates that, save in exceptional circumstances, under the directions of the Chief Minister, any case in which the Finance Department is required to be consulted under Rule 11, cannot even be discussed by the Council of Ministers unless the Finance Minister has had the opportunity for its consideration. Rule 11 mandates that, without prior consultation with the Finance Department, no department shall authorise any order which will affect the finance of the State. Sub Rule (2) of Rule 11 however empowers the Council of Ministers to approve the decision even if the Finance Department is not consulted. The Government Resolution dated 31st July 2018 cannot be implemented and payment of Export Subsidy cannot be made to be Petitioner.

The court while allowing the appeal directed release of payment of export subsidy to Indapur on the basis that Indapur was legally entitled to the same.