Agri Business

Nafed financial re-jig package gets in-principle nod from Planning Commission

Vinson Kurian Thiruvananthapuram | Updated on February 17, 2011

The Committee on Non-Plan Expenditure (CNE) of the Planning Commission has given in-principle approval for financial restructuring of the National Agricultural Co-operative Marketing Federation of India Ltd (Nafed).

A meeting of the Nafed board of directors held on January 28 placed on record the package, a copy of which is available with Business Line.

GOVT GUARANTEE

Accordingly, the Centre will extend a guarantee to Nafed for a period of eight years for availing long-term loan of Rs 1,200 crore (repayable in as many annual instalments) to enable it repay the short-term loans of banks.

An interest-free advance of Rs 877.71 crore will be facilitated during this period to meet the resource gap required to service the loan.

Another Rs 42.50 crore will be advanced as equity so as to have 51 per cent share in the enhanced share capital.

Thus, Rs 920.21 crore would be advanced to Nafed in the following manner:

Rs 55.55 crore (including Rs 20 crore as equity) in the first year; Rs 177.43 crore (including Rs 22.50 crore as equity) in the second; Rs 158.31 crore in the third; Rs 138.89 crore in the fourth; Rs 119.17 crore in the fifth; Rs 99.15 crore in the sixth; Rs 78.50 crore in the seventh; Rs 57.43 crore in the eighth; and Rs 35.84 crore in the ninth and last year (2018-19).

EQUITY CONTRIBUTION

The Planning Commission has been requested to approve an interest-free advance/ equity contribution to finance this schedule of releases.

Meanwhile, the Department of Agriculture and Cooperation (DAC) has written to the Ministry of Finance to extend Government guarantee for borrowing Rs 1,200 crore.

The DAC has in turn been requested to find resources for equity contribution.

ESCROW ACCOUNT

The package also envisages that an escrow account be opened in a bank, to be operated jointly by the head of the Finance Department of Nafed and an officer authorised by the DAC.

The escrow account will be credited with service charges of price support scheme (PSS) operations; 10 per cent of gross profit of commercial operations; and recoveries of the Nafed ‘tie-up' parties, estimated at Rs 475 crore over the next 10 years.

Accruals in this account will be utilised only for payment of interest and repayment of the principal of the Government-guaranteed loan of Rs 1,200 crore and, thereafter, repayment of the assistance of Rs 920.21 crore.

The package also demands to mobilise additional resources of Rs 128 crore by sale of non-essential properties at the earliest.

Published on February 17, 2011

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