National Agricultural Cooperative Marketing Federation?s (Nafed) misadventure of ?tie-up business arrangements? with private parties has started hitting it hard with the federation incurring a net loss of Rs 56.69 crore during 2007-08 despite making operating profit of Rs 88.94 crore.
?The loss is largely on account of interest liability resulting from the funds locked up in the public-private partnership business (tie-up business arrangements were a few partners have turned out as defaulters,? Nafed managing director Jiji Thomson said.
So much so that the federation, which was set up in 1958 to foster farmers? interest, might seek government?s help to bail it out from the financial mess because by the current process it would take more than 10 years to just repay the Rs 1,000 crore loans taken for the tie-up business arrangements.
Just because of this burden the federation made a nominal profit of Rs 1.77 crore in 2006-07.
Under the business tie up arrangement, Nafed had released advances to the tune of more than Rs 3,900 crore to private companies to undertake exports in agricultural and non-agricultural items. But several companies defaulted on repayment of Nafed as advance.
Nafed had entered into MoUs with several companies for exports of materials such as iron ore, dry fruits even wheat where the federation extended credit facility to the private farms. Even Nafed made amendments to its charter and decided to invest and give loans to non-agricultural trade and business.
?We have recovered more than Rs 2,900 crore as outstanding from these companies while Rs 1,000 crore is still pending,? said Nafed chairman Bijender Singh.
The federation has initiated criminal proceedings against 29 companies who have defaulted on the repayment. The annual interest outgo of Rs 120 crore towards the Rs 1,000 loan taken from banks has been adversely impacting its financial health.
?The loss is largely on account of interest liability resulted from the funds locked in tie up businesses and the profit was not sufficient to absorb the interest burden,? Thomson said.
According to information accessed by FE, major defaulting parties include Delhi-based Earth Tech Enterprises Ltd (Rs 537.76 crore), Mumbai-based Swarup Group of Industries (Rs 239.91 crore), Zenith Mining Pvt Ltd (Rs 81.45 crore), Rital Impex (Rs 65.29 crore) and Handum Industries (Rs 71.51 crore).
According to sources, a repayment cheque worth Rs 105 crore issued by Swarup Group of Industries to Nafed had bounced. Criminal proceedings have been initiated against the company and Nafed already attached the property, which was mortgaged.
Nafed had signed an MoU with Swarup Group of Industries on March 26, 2004, for export of 40,000 metric tonne of iron ore. Nafed?s annual general body meeting was held here on Wednesday to discuss the way out of the financial mess. Apart from the loss, the turnover of the agri cooperative too declined to Rs 4,706.65 crore during 2007-08 from Rs 6,381.37 crore in previous year. The federation has decided not to undertake business under tie-up arrangements. It has already chalked out a business plan aiming at a turnover of Rs 7217.63 crore by 2009-10.
Under the diversification plan, Nafed has entered into seed business aggressively by recording a turnover of Rs 21.16 during the last fiscal. Besides Nafed has entered warehousing sector on a long-term basis for providing infrastructure support to farmers.