Opening New Fair Price Shops a Policy Matter, Existing Licensees Have No Vested Right to Challenge: Rajasthan High Court - 2025-09-18

Rajasthan High Court Upholds State's Authority to Open New Fair Price Shops, Dismisses Plea by Existing Licensees

JODHPUR: In a significant ruling on the administration of the Public Distribution System (PDS), the Rajasthan High Court has held that the establishment of new fair price shops (FPS) is a policy decision of the State government and existing licensees have no legal or vested right to challenge it. Hon'ble Mr. Justice Sunil Beniwal dismissed a batch of 17 writ petitions filed by current FPS owners who sought to block the government from opening new shops in their operational areas.

Background of the Case

The petitioners, all licensed operators of fair price shops across various districts in Rajasthan, challenged a government advertisement dated June 25, 2025, which proposed the establishment of new shops. The primary grievance was that these new shops would be set up in areas already serviced by them, potentially reducing their customer base and affecting the economic viability of their businesses.

Arguments from Both Sides

Petitioners' Contentions: The counsel for the existing shop owners argued that the government's action was arbitrary and violated its own guidelines, which stipulated that a new shop should not be opened where an existing one serves 500 or fewer ration card holders. They contended that:

- The decision was taken without any survey or study to assess the actual need for new shops.

- It disregarded the recommendations of the Justice Wadhwa Committee Report, which suggested a minimum of 500 consumers per shop to ensure financial viability and prevent malpractices.

- The move was politically motivated, initiated at the behest of local MLAs and Ministers.

- It would infringe upon their fundamental right to carry on a trade or business under Article 19(1)(g) of the Constitution.

State's Defense: Conversely, the respondents, representing the State of Rajasthan, defended the move as a necessary policy decision. Their key arguments were:

- The petitioners have no vested right or monopoly over a particular area and cannot challenge a policy decision aimed at public welfare.

- Government guidelines are executive instructions, not mandatory rules, and do not confer any enforceable legal rights.

- A recent circular dated May 10, 2025, explicitly allows for the relaxation of the 500-card norm based on geographical conditions and public interest.

- The ultimate decision to open new shops rests with the State, which assesses the needs of consumers, and is not merely based on political recommendations.

Court's Analysis and Precedents

Justice Beniwal conducted a thorough review of the legal precedents on the matter, noting conflicting earlier judgments. While some initial rulings in 2012 had favored the petitioners by upholding the 500-card norm, subsequent and more definitive judgments, including a Division Bench ruling in Hari Om Meena & Anr. v. State of Rajasthan & Ors. (2015), had settled the law.

The Court relied heavily on the Hari Om Meena judgment, which established that:

- The Justice Wadhwa Committee Report is not binding on the State.

- Guidelines regarding the number of ration cards are not mandatory, and it is the "sole prerogative of the State to determine the number of fair price shops required in a given area."

The Court summarized the established legal position as follows:

"(i) The establishment/allotment of fair price shops is a policy matter therefore, the State Government has sole authority to decide as to the number of fair price shops in an area;

(ii) the guidelines or executive/administrative instructions issued from time to time, are neither mandatory in nature nor confer any right upon the existing fair price shops holders;

(iii) the report of the Justice Wadhwa Committee is merely suggestive in nature...; and

(iv) the existing fair price shop holders do not have any inherent or contractual or legal right enforceable against the decision to establish/allot new fair shops."

Addressing the petitioners' specific arguments, the court found the allegations of political motivation to be baseless and unsubstantiated. It also noted that the State's main purpose is not to protect the business interests of licensees but to ensure the effective distribution of essential commodities to beneficiaries.

Final Judgment and Implications

Dismissing all 17 writ petitions, the Court concluded that it would not interfere in the policy decision of the State government. The ruling reinforces the government's authority to expand the PDS network based on its assessment of public need, population growth, and geographical considerations, without being legally constrained by the commercial interests of existing operators. This judgment clarifies the legal landscape for the administration of the PDS in Rajasthan, prioritizing public welfare over the claims of monopoly by existing fair price shop dealers.