Judgment : The short question for consideration in this group of writ petitions is whether subsidy of 25% payable under Gramin Bhandaran Yojana (Rural Godown Scheme) (hereafter referred to as the scheme) of the Central Government should be paid on the entire capital cost of construction of godown including allied facilities/amenities like internal roads, consumer shop, agri clinics, weighing, grading, packaging and quality certification, warehousing etc., or whether such subsidy is payable on the actual cost of the godown used for storage of food-grains. The answer to this question requires interpretation and understanding of the operational guidelines of the scheme dated 27-03-2002 issued by the Directorate of Marketing and Inspection (DMI), New Delhi, Department of Agriculture and Corporation in the Ministry of Agriculture, Government of India. At the outset background of the cases may be noticed in nutshell. 2. All the petitioners are owners of agricultural land in various places – East Godavari, Hyderabad, Nalgonda, Prakasam, Warangal, West Godavari Districts. They constructed godowns of different storage capacity after availing financial assistance/ loans from public sector banks. Godowns were constructed under the scheme at an estimated outlay of 60 lakhs each. They were completed and commissioned in May/ June 2002. As per the scheme, National Bank for Agriculture and Rural Development (NABARD) released subsidy component of the capital cost of construction of godown as apprised by the lending bank. The lending bank is required to adjust subsidy amount in the last loan installments payable by the borrower. 2. 3. The Assistant Agriculture Marketing Adviser, DMI, Sub Office, Hyderabad, addressed a letter dated 26-03-2004 to Agricultural Marketing Adviser (AMA) to Government of India, Faridabad, seeking clarification as to whether the total eligible subsidy is to be calculated on the cost of godown portion only as per total financial outlay of the project sanctioned by the bank or entire cost of godown including amenities should be taken into consideration for calculating the subsidy. In response thereto AMA issued Office Memorandum No.U-1 1 020/1 /2002-CS dated 01-04-2004 informing DMI, Sub Office, Hyderabad, clarifying that for calculating final subsidy, original total financial outlay (TFO) sanctioned by the bank (excluding allied facilities/amenities) is to be taken into consideration. 3. 4. In response thereto AMA issued Office Memorandum No.U-1 1 020/1 /2002-CS dated 01-04-2004 informing DMI, Sub Office, Hyderabad, clarifying that for calculating final subsidy, original total financial outlay (TFO) sanctioned by the bank (excluding allied facilities/amenities) is to be taken into consideration. 3. 4. After receiving AMA's clarification, NABARD sent a circular informing Chairpersons/Managing Directors of all scheduled Commercial Banks and other financial institutions that as per the advice of DMI subsidy is restricted to construction of godown only and not for any allied activities. It was also informed that the cost towards allied facilities like boundary wall, internal roads, drainage system, weighbridge, office building etc., will not form part of outlay for calculating subsidy. NABARD also issued inter office memorandum (IOM) dated 19-01-2004 to all Regional Offices requesting to reexamine all the proposals and work out eligible subsidy after deducting the cost towards allied facilities from the total project cost if included earlier. IOM also contemplates to call back excess subsidy disbursed, in case there is change in the amount of eligible subsidy, and in case final subsidy has been sanctioned but not released, revised sanction for such claims may be forwarded. NABARD also sent separate letters to all concerned General Managers/Managers of public sector banks requesting to refund the excess subsidy to NABARD head office. 4. 5. In pursuance of NABARD advice, lending banks concerned addressed letters to all borrowers/petitioners informing that refund of excess subsidy amount will attract interest and change of the instalment details will be informed later after receiving instructions from higher authorities. Subsidy under the scheme was released to all the petitioners and godowns were commissioned in May/June, 2002. Their loan repayment schedule also commenced. When there was intimation that they were paid excess subsidy on the capital cost of the construction to godown including allied facilities/amenities and that excess subsidy will have to be refunded with interest, they filed these writ petitions seeking invalidation of the communications sent by NABARD to the respective public sector banks requesting for refund of the excess subsidy. 5. 6. Learned senior counsel for the petitioners Sri D. Prakash Reddy, submits that though the financial assistance by the banks was restricted to the capital cost of construction of godown, banks were free to lend for amenities also. Therefore para 3(f) of the scheme cannot be read in isolation. 5. 6. Learned senior counsel for the petitioners Sri D. Prakash Reddy, submits that though the financial assistance by the banks was restricted to the capital cost of construction of godown, banks were free to lend for amenities also. Therefore para 3(f) of the scheme cannot be read in isolation. Learned counsel would urge that para 4(A) of the scheme provides for the method and manner of calculating 25% capital cost of the project and therefore, subsidy ought to be calculated and paid on the entire project cost which includes construction of godowns, consumer shops, weighbridges, internal roads etc. He submits that a person so as to avail the benefit of the scheme has to necessarily construct godowns for scientific storage in accordance with the specifications laid down by the State Public Works Department (SPWD) as per para 3(c) of the scheme. Andhra Pradesh State Warehousing Corporation (APSWC) provided specifications. All the petitioners constructed godowns as per these specifications. Therefore, amenities/allied facilities cannot be excluded for the purpose of calculating 25% subsidy. Alternatively, learned counsel would submit that the respondents did not issue notice before lending bank sent communications directing for refund. The petitioners were never put on notice that their godowns will not attract subsidy. Thirdly, the submission is that the amount of alleged excess subsidy payable by the petitioners calculated by the banks is incorrect. 6. 7. Learned Assistant Solicitor General for Government of India, Sri A. Raja Shekar Reddy, learned standing counsel for NABARD and learned standing counsel for various banks made the following submissions. The operational guidelines do not permit payment of subsidy on the construction cost of amenities/allied facilities like internal roads, weighbridge, warehouses etc. The subsidy is payable only on actual cost of godown or per tonne storage capacity whichever is lower. Para 4 of the scheme enables the owners to claim subsidy only on the actual cost of godown. They also submit that so as to come under the scheme, all persons have to necessarily construct godowns of different storage capacities in accordance with the specifications and can also avail loans for meeting specifications which include providing amenities/allied facilities. However, they can claim subsidy at 25% only on the actual cost of construction. They also submit that so as to come under the scheme, all persons have to necessarily construct godowns of different storage capacities in accordance with the specifications and can also avail loans for meeting specifications which include providing amenities/allied facilities. However, they can claim subsidy at 25% only on the actual cost of construction. As the amounts of subsidy were disbursed taking into consideration entire cost of the godown including cost of amenities/allied facilities, respondents initiated action for recovering excess subsidy, which is not arbitrary and illegal. 7. 8. The question for consideration as indicated hereinabove requires a reference to para 3(e)(f) and para 4(A) of the scheme, which read as under. 3. Salient features Credit Linked Assistance 3(e) Subsidy under the scheme is linked to institutional credit and will be available to only such projects as are financed by commercial banks, cooperative banks, regional rural banks, ADFCs, Scheduled PCBs, NEDFI and other institutions eligible for refinance from NABARD. Loan to the entrepreneurs from banks for the construction/renovation/expansion of godowns etc. would carry an adequate long-term repayment period. (f) Assistance under the scheme shall be available on capital cost of construction of godown only. Banks will, however, be free to finance, in addition to storage, allied facilities like consumer shop, agri-clinics, weighing, grading, packaging and quality certification, warehousing etc. to meet various requirements of the farmers. 4. Subsidy .(A) Subsidy under the scheme shall be provided on the capital cost of the project as follows: .(i) Rate of subsidy shall be 25% of the capital cost of the project. In case of North-Eastern States, hilly areas and in cases where the entrepreneur belongs to SC/ST, the rate of subsidy shall be 33.33% of the capital cost of the project. .(ii) Minimum size of the godown eligible for subsidy would be 100 MTs. (iii) Capital cost of the project for the purpose of release of subsidy under the scheme shall be calculated as follows: .(a) for godowns up to 1000 tonnes capacity — actual cost or Rs.2000/- per tonne of storage capacity, whichever is lower; .(b) for godowns exceeding 1000 tonnes capacity — actual cost or Rs.1500/- per tonne of storage capacity, whichever is lower; .(c) for renovation/expansion of godowns constructed by cooperatives with the assistance from NCDC — actual cost or Rs.500/- per tonne of storage capacity whichever is lower. .(iv) Amount of subsidy calculated as above shall be further restricted to a maximum storage capacity of 10,000 MT and further to a maximum amount of Rs.37.50 lakhs for each project. In the case of, NE States and hilly areas and for entrepreneurs belonging to SC/ST, maximum amount of subsidy shall be Rs.50 lakhs for each project. There will, however, be no such ceiling in respect of renovation/ expansion of godowns already constructed by the Cooperatives with assistance from NCDC. (v) Subsidy for the projects under the scheme shall be released through NABARD for projects financed by the commercial, cooperative and Regional Rural Banks, ADFCs, Scheduled PCBs, NEDFI and other institutions eligible for refinance from NABARD and through NCDC projects financed by the NCDC. .(vi) The capacity of godown shall be calculated @ of 1.8 MT per sq.mt of floor area with an average height of not less than 4.50 metres. 1. 9. Before analyzing the purport of above paragraphs on which both sides laid emphasis, it is appropriate to notice the objectives of the scheme. The Government of India having realized that small farmers do not have economic strength to retain the produce with themselves till the market price is favourable, thought it fit that network of rural godowns will enable small farmers to enhance their holding capacity in order to sell their produce at remunerative prices to avoid distress sales. Accordingly the scheme for construction/renovation/expansion of rural godowns was introduced. It is capital investment subsidy scheme with the objectives of creation of scientific storage capacity with allied facilities in rural areas to meet requirements of farmers for storing farm produce, agricultural inputs and to provide facilities for grading, standardization, package and quality certification. 2. 10. As per para 3 of scheme, the salient features of the scheme are: (i) construction of godown can be taken up by individuals, farmers, self-help groups, companies etc., (ii) the entrepreneur is free to construct godown at any place and of any size outside the limits of Municipal Corporation area and be of a minimum capacity of 100 MT. The scheme mandates that godowns built thereunder shall be structurally sound on account of engineering consideration and functionally suitable to store agricultural produce. The scheme mandates that godowns built thereunder shall be structurally sound on account of engineering consideration and functionally suitable to store agricultural produce. The general conditions for scientific storage contemplated by the scheme are – godowns shall be constructed as per CPWD/SPWD specifications or any other specifications laid down in that behalf, godowns shall be properly ventilated, shall have well fitted doors, windows and ventilators and shall be waterproof godowns shall have protection from rodents, (iv) godowns shall have protection from birds, (v) godowns shall have doors and windows that can be sealed for effective fumigation, (vi) godown complex shall have easy approach road, pucca internal roads, proper drainage, arrangements for effective control against fire and theft and (vii) shall have arrangements for easy loading and unloading of stocks. If necessary the licence under State Ware Housing Act has to be obtained by entrepreneurs. 3. 11. The scheme is a matter of policy and operational guidelines are referable to executive power of Union Government under Article 73 of the Constitution of India. Therefore, scope of judicial review of subsidy scheme, (which is a matter of policy) is rather very limited. A reference may be made to Assn. of Industrial Electricity Users v. State of A.P. 2002 (3) ALT 41 (SC) = (2002) 3 SCC 711 = AIR 2002 SC 1361 , wherein it was held as under: We also agree with the High Court that the judicial review in a matter with regard to fixation of tariff has not to be as that of an Appellate Authority in exercise of its jurisdiction under Article 226 of the Constitution. All that the High Court has to be satisfied with is that the Commission has followed the proper procedure and unless it can be demonstrated that its decision is on the face of it arbitrary or illegal or contrary to the Act, the court will not interfere. Fixing a tariff and providing for cross-subsidy is essentially a matter of policy and normally a court would refrain from interfering with a policy decision unless the power exercised is arbitrary or ex facie bad in law. 12. A further reference may also be made to State of U.P. v. S.K. Theatre Productions 2007 (3) SCJ 848 = (2007) 10 SCC 198 . 12. A further reference may also be made to State of U.P. v. S.K. Theatre Productions 2007 (3) SCJ 848 = (2007) 10 SCC 198 . In this case the question before the Supreme Court was whether 25% subsidy given by State of U.P. for cinematography films should be based on the cost of production or the cost of film processing in the lab. Dealing with the same, their lordships observed as under: We are of the opinion that if other film producers were granted subsidy of 25% of the cost of production of the film (subject to a maximum limit of Rs.10 lakhs) then the writ petitioners should also be given the same benefits. However, if that was not done then the subsidy should be 25% of the cost of film processing in the lab (subject to a maximum of Rs.10 lakhs) and not the entire cost of the film production ... It is well settled that a relevant factor for interpretation if there is some ambiguity in a circular is how the circular has been understood by the department itself which issued it. This is particularly so when there are two interpretations possible, as is in the present case. (emphasis supplied) 1. 13. Therefore, it may be taken as well settled that while interpreting a subsidy scheme introduced as a matter of policy to achieve desired objective the Court of judicial review cannot exercise its powers as appellate authority. Ordinarily subsidy scheme must be construed keeping in view Government's understanding of scheme, unless such executive interpretation is riddled with absurdities. Subject to such limitation, the questions of arbitrariness or irrationality are limited areas in which judicial review must be confined. .14. The operational guidelines can be conveniently divided into financial aspects, eligibility aspects and subsidy aspects. Para 3(j) to (m) and paras 6, 8 and 10 of the scheme deal with financial aspects. Broadly stated they provide that so as to create new 18.50 lakh tones and renovation of 1.5 lakh tones of rural storage capacity, Government of India sanctioned an outlay of Rs.334.43 crores during 2001-2002 with financial assistance of Rs.90 crores. This Rs.90 crores of financial assistance in relation to the total expenditure for godowns is nothing but subsidy component as the scheme is capital investment subsidy scheme. This Rs.90 crores of financial assistance in relation to the total expenditure for godowns is nothing but subsidy component as the scheme is capital investment subsidy scheme. As per para 8 of the scheme NABARD would provide refinance to commercial banks and other financial institutions at 90 per cent of amount financed. The farmers .keeping the produce in the godowns were also eligible for pledge loans from cooperative banks, which is again refinanced by NABARD. Whatever be nature of refinance, all the participating banks will have to adhere to their own norms for appraisal of the projects. Thus the total financial outlay to be refinanced by NABARD is Rs.334.43 crores, whereas the financial assistance by way of subsidy restricted to Rs.90 crores is by Government India. It may also be mentioned that Government of India would release subsidy amount to NABARD (as per para 4(B) of the scheme), who in turn would release subsidy to the participating banks in advance for keeping the same in Subsidy Reserve Fund (SRF) account of the borrower, which shall be adjusted against promoter's loan account of bank after completing the project. But no interest is chargeable on subsidy portion. 2. 15. Paragraphs 3(a), (c), (e) and (f) read with para 11 of the scheme contain eligibility criteria. The rural godowns can be taken up by the categories of persons/agencies mentioned in para 3(a) of the scheme at any place and of any size outside the limits of municipal area. The minimum capacity would be 100 MT. Secondly the construction of such godowns should be as per the specifications of CPWD/SPWD. The godowns must provide the facilities as enumerated in para 3(c) (i) to (v) of the scheme for the purpose of ensuring scientific construction. Only such rural godown projects, namely, those who satisfy the eligibility criteria under para 3(a), (b) and (c) of the scheme would be eligible for financial loans and only such banks which lend money would only be eligible for refinance from NABARD. Nevertheless banks will be free to finance not only for construction of godowns and also for all allied facilities/ amenities. To see that the project for construction of rural godowns satisfying all eligible criteria are only financed by commercial banks with guarantee of refinance by NABARD, para 11 of the scheme contains the procedure to be followed for sanctioning of project and release of subsidy. 3. 16. To see that the project for construction of rural godowns satisfying all eligible criteria are only financed by commercial banks with guarantee of refinance by NABARD, para 11 of the scheme contains the procedure to be followed for sanctioning of project and release of subsidy. 3. 16. There are four stages (See para 11) in sanctioning the project and releasing subsidy. As a first step interested promoter will submit proposal for term loan and subsidy to bank on prescribed application along with project report and other documents for appraisal and sanction of loan. A copy of the proposal shall also be sent to DMI (Regional/Sub-Office). Second stage involves appraisal and sanctioning of the project by the bank. Bank shall furnish a brief project profile-cum-claim form for advance subsidy in a prescribed format to regional office of NABARD with a copy to Regional/Sub-Office of DMI. In third stage after receiving the brief project profile-cumclaim from bank concerned, NABARD will sanction and release 50% advance subsidy to the participating bank for keeping the same in SRF account, forwarding a copy thereof to the head office of DMI. In fourth and last stage, after completion of the project promoter will inform bank who thereupon arrange joint inspection by a committee consisting of officials of bank/NABARD.DMI to ensure that rural godown conforms to technical and financial parameters. After such inspection bank will submit claim for final subsidy in the prescribed format. After receiving the same NABARD will release final subsidy to the banks which will be replenished by DMI or adjusted against subsidy amount provided to NABARD in advance. 4. 17. Para 4 of the scheme (subsidy aspects) cannot be read in isolation ignoring eligibility criteria, and method and manner of applying, sanctioning and releasing subsidy by banks concerned and NABARD. Only such of those promoters who take up the project for construction of rural godowns conforming to specifications provided under para 3(c) of the scheme and satisfying other criteria alone can apply for subsidy. Such application shall be processed in accordance with operational guidelines contained in para 11 of the scheme. That is the reason why para 11(d) of the scheme is clear that the inspection committee shall ensure that the rural godown conforms to technical and financial parameters. Only such of those godowns, which satisfy eligibility criteria, are entitled for release of subsidy. Such application shall be processed in accordance with operational guidelines contained in para 11 of the scheme. That is the reason why para 11(d) of the scheme is clear that the inspection committee shall ensure that the rural godown conforms to technical and financial parameters. Only such of those godowns, which satisfy eligibility criteria, are entitled for release of subsidy. Therefore, adherence to project specifications does not furnish any clue to understand the subsidy component under para 4 of the scheme. Furthermore under para 3(f) of the scheme assistance or subsidy under the scheme shall be available only on the cost of construction of godown and not construction of allied facilities/amenities. Keeping in view para 3(f) of the scheme para 4(A)(iii) provides that the subsidy under the scheme shall be calculated in two ways: it is either based on actual cost of construction of godown or storage capacity whichever is lower. In any event amount of subsidy shall be restricted to a maximum storage capacity of 10,000 MT and further to maximum amount of Rs.37.50 lakhs for each project (as per para 4(A)(vi) of the scheme). 5. 18. If the submission of the petitioners that for the purpose of subsidy the entire cost of project including the construction of allied facilities shall be included in a given case, para 4(A)(iv) of the scheme would be rendered redundant. Secondly as per para 10(iv) of the scheme, in case of doubt, Government's interpretation of various terms will be final. Such an interpretation was made by AMA to Government of India clearly stating that for calculating the final subsidy original TFO sanctioned by bank excluding the cost of construction of allied facilities/ amenities shall have to be taken into consideration. To say in other words, even though a promoter avails loan from a commercial bank or other financial institutions, for the purpose of construction of godown, internal roads and such other amenities and allied facilities, criteria for subsidy is only actual cost incurred for construction of godown. As per the ratio laid down by Supreme Court in S.K. Theatre Productions (2 supra), department's interpretation of scheme should prevail in the matter. If clauses 3(f) and 4(A) of the scheme are interpreted as suggested by the petitioners, para 3(j) of the scheme which provides that the scheme shall be implemented with approved outlay of 334.34 crores will have to be given a goby. If clauses 3(f) and 4(A) of the scheme are interpreted as suggested by the petitioners, para 3(j) of the scheme which provides that the scheme shall be implemented with approved outlay of 334.34 crores will have to be given a goby. The petitioners applied as per the operational guidelines of the scheme and so as to be eligible they have to construct godowns in conformity with technical and financial parameters. It must be, therefore, held that operational guidelines dated 27-03-2002 for the year 2001-2002 and 2002-2003 do not contemplate or provide for subsidy on construction of allied facilities/amenities Subsidy is provided only on the actual capital cost incurred for construction of the godown. .19. The Government of India, while continuing rural godown scheme, issued operational guidelines effective from 01-10-2004 to be valid upto 31-03-2007. Similarly Government of India also issued .operational guidelines effective from 26-06-2008 to be in force up to 31-03-2012. Para 3(viii) of 2004 guidelines provides that assistance under the scheme shall be available on capital cost of construction of godown including the cost of allied facilities like boundary wall, internal road, platform, internal drainage system, weighing, grading, packing, quality certification, warehousing facilities which are functionally required to operate the godown. A similar guideline is also included in operation guidelines of 2008. Thus in comparison with operational guidelines for 2001-2003, the subsequent guidelines clearly provided for subsidy for construction of the godown as well as construction of allied facilities. Such a clear guideline is very conspicuous by absence in the operational guidelines dated 27-3-2002, which are subject matter of this batch of writ petitions. This also would show that though the Government of India did not specifically provide for release of subsidy under earlier scheme, in subsequent years the Government provided such subsidy. Therefore, in the absence of any such specific clause providing for subsidy even with regard to allied facilities/amenities, the petitioners cannot claim a right for payment of subsidy except on actual cost incurred for construction of godown for storage of food grains, agricultural produce etc 6. 20. The other submission of the learned senior counsel for the petitioners with regard to issue of notice is devoid of any merit. Under the scheme the advance subsidy as well as final subsidy would be credited to the SRF account and will be adjusted against the loan account of the bank on completion of the project. 20. The other submission of the learned senior counsel for the petitioners with regard to issue of notice is devoid of any merit. Under the scheme the advance subsidy as well as final subsidy would be credited to the SRF account and will be adjusted against the loan account of the bank on completion of the project. In these cases after completion of godowns, taking into consideration the total project cost, subsidy was credited to SRF account of banks, which was factor for scheduling instalment payments. By reason of clarification issued by DMI, taking into consideration excess amount of subsidy paid, the instalments have to be rescheduled. There is no denial that all the lending banks issued such communications to the petitioners informing that there would be change of instalments and the details will be informed later. This itself is a notice and any aggrieved person can always approach the lending bank. 7. 21. It is submitted by learned senior counsel that while calculating the refundable amount, the Government has not taken into consideration the actual cost of construction of godown and subsidy paid thereon. This is a matter, which needs to be sorted out by the petitioner and banks. Therefore, it is always open to the petitioners to submit memoranda of calculations with regard to the excess subsidy paid to them and the amount to be refunded or charged to rescheduled instalments. In writ petitions these matters cannot be gone into. Therefore, all the petitioners are given liberty to submit their memoranda of calculations keeping in view the principle that under 2001 to 2003 scheme, the subsidy, at the rates specified in para 4(A)(i) and (iii) of the scheme, would be payable only on the actual capital cost of construction of godown excluding the construction cost for providing allied facilities/amenities. As and when such memoranda are submitted by the petitioners within a period of two weeks from the date of receipt of a copy of this order the commercial bank concerned shall calculate/ assess the excess subsidy, if any paid, and take action accordingly. 8. 22. For the above reasons and subject to the observations hereinabove, the writ petitions are accordingly disposed of. No costs.