Sources told FE the Board of Directors has already sent a request to the agriculture ministry to sanction R25 crore to meet the cost of VRS offered to 500-odd employees.
There would be a 10% cut in salaries of employees from immediate effect to bring down annual expenses including salary bill of federation from R56 crore to R35 crore in next few months.
Sources say the move is also aimed at bringing down the surplus work after the commercial operations were stopped. Commercial operations are those where the federation used to undertake by taking bank loans.
It was a difficult and painful decision which the Board of Directors had to take, which could not be postponed any further in view of administrative expenses getting almost the double of business income of the organisation, said Sajeev Chopra, joint secretary, agriculture ministry and managing director of Nafed.
Chopra said there is strong and immediate need to restructure the organisation to PSS procurement specific.
Despite making operating profits in last five years, Nafed had been incurring losses because of mounting interest liability on outstanding loans due to its failed tie-up business. Nafed owes around R2,000 crore to banks at present.
In 2012-13, despite making a gross profit of over R64 crore, the federation incured a net loss of R149 crore due to huge interest liability on the outstanding loans in tie-up business. Similarly, in the last fiscal though the cooperative earned a gross profit of more than R45 crore, it eventually incured a net loss of R188 crore.
With our financial restructuring proposal not finding favour from agriculture ministry, the mounting debts of the lending banks have been worrying the Management of Nafed. Reportedly, some of the lending banks have moved debt recovery tribunal for recovery of their dues, an agriculture ministry official said.
The federation in 2012 had submitted two proposal for loan restructuring to the agriculture ministry. However the agriculture ministry has rejected its restructuring plans.