In a bid to tide over the present financial crisis, mainly due to huge losses incurred by failed ?tie-up business? initiated few years ago, the National Agricultural Cooperative Marketing Federation of India (Nafed) has decided to tie up with Krishak Bharati Cooperative Ltd (Kribhco) and Indian Farmers Fertilisers Cooperatives Ltd (Iffco) for joint operation of fertiliser, seeds and pesticides businesses.

The federation has already approached the government for an interest subversion scheme, in order to, get an interest free loan payable over the next few years.

?We want to be a partner with Kribhco and Iffco in any of their business,? Bijender Singh, chairman, Nafed told FE. He also said the federation needs to expand its business outreach so that it could pay back the annual interest payment to the tune of Rs 130 crore.

Singh said as these cooperatives are into fertiliser business, and Nafed having centres across the country will provide a vital support in delivery and transportation of these fertiliser. ?If we can have small share in these cooperatives profit, we can manage our finances well,? he said.

Nafed had taken loans for these business and, currently, it has an outstanding loan amount of Rs 1,200 crore with various banks.

Despite making gross profit since last ten years, Nafed is facing difficulty in sustaining its operations due to its huge losses incurred on tie-up business. The interest liability to the tune of Rs 130 crore annually is wiping out profit made by the federation.

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, which is currently estimated to be Rs 1,200 crore, and the onus of interest payment now lies with Nafed.

The cooperative major?s turnover increased from Rs 1,412 crore during 2003-04 to Rs 4,706 crore during 2007-08, while its gross profit rose from Rs 35.43 crore to Rs 88.94 crore during same period. Due to interest payment liability, Nafed reported a net loss of Rs 56.68 crore last year.