It?s not that only farmers are worried about low rains this summer. State-run National Agricultural Cooperative Marketing Federation of India (Nafed) has also indicated that its turnover in the current financial year could be hit due to a possible decline in production of various agricultural commodities.
Nafed, which provides critical support to farmers through market intervention, has already been reeling under the impact of mounting losses due to its failed new business-ventures launched a few years back.
?Low rains could impact agricultural production because of which Nafed?s annual purchases would also take a hit even though demand would continue to be there,? Bijender Singh, chairman, Nafed on Wednesday said.
He said there is every possibility that the Nafed?s volume in market intervention would reduce because of low farm output, which would also hit commercial purchases made by the federation.
The federation has asked for an interest-free loan of around Rs 1,200 crore from the Centre to erase its earlier bad debts. Despite making an operating profit of Rs 120 crore on a turnover of Rs 4,800 crore during 2008-09, Nafed incurred losses to the tune of Rs 95 crore because of interest liability towards its failed business ventures. The federation also had reported a loss of Rs 56.69 crore during 2007-08 on a turnover of Rs 4,706 crore.
Although the federation has been making profit since last ten year, yet it is finding it difficult to sustain its operation due to huge losses to the tune of Rs 1,400 crore incurred due to failed ?tie-up business? two years ago.
The interest liability to the tune of Rs 130 crore annually is wiping out profit made by the federation. Since September 2008, Nafed has been able to recover only Rs 50 crore from the defaulting parties.
As reported by FE earlier, under the business tie-up arrangement during 2004-06, Nafed had provided bank counter guarantee to 29 private companies to the tune of more than Rs 3,900 crore for undertaking exports in agricultural and non-agricultural items like iron ore, dry fruits etc.
But several companies defaulted on repayment. Nafed made even amendments to its charter and decided to invest and give loans to non-agricultural trade and business.
In its proposal for an interest free loan to the centre, Nafed has said that it would repay the loans in 10 years in equal trance every year, while the government waives the interest.