The National Agricultural Cooperative Marketing Federation of India (Nafed) is facing imminent closure and liquidation with as many as eight banks, armed with the go-ahead from the Debt Recovery Tribunal, simultaneously initiating a process to recover R1,750 crore from it. An agriculture ministry official told FE that the federation’s failure to pay the dues to the lenders might lead to attachment of its properties and freezing of its bank accounts.
Only a generous budgetary provision by the Centre could avoid a shutdown of the multi-state cooperative and this, sources said, appeared unlikely at the moment.
According to sources, Nafed has recently written to the agriculture ministry and department of financial services in the finance ministry, seeking a bailout.
What did Nafed in was its 2006 decision to become a guarantor to unsecured loans of R3,900 crore availed by 29 private companies for undertaking exports in agricultural and non-agricultural items. As several of these debtors defaulted, the onus of interest payment fell on Nafed, forcing it to take debt. The federation has managed to recover R2,900 crore from defaulting partners so far, but the delays have cost it dear.
Nafed, which procures copra, oilseeds, cotton and pulses and undertakes market intervention activities when the prices of these agricultural commodities fall below the minimum support prices, has found its activities crippled for several months now due to the interest burden from 2006 mid-adventure that more than wiped off its paltry profits.
Except the commission it gets from the government for its price support measures, Nafed has little other means of income, as its commercial presence in the farm goods market is almost non-existent now.
Sources said that Nafed has recently filed a fresh application with the Debt Recovery Appellate Authority for stay on the demand notices received from banks and consequent coercive action.
It had earlier sought from the finance ministry assistance in the nature of a R450-crore government guarantee coupled with an interest free advance or equity infusion of R590 crore. “Considering the fact that Nafed is a multi-state cooperative society registered under the Cooperative Societies Act, 2002, without any share capital or equity from the government, (it was found not) feasible to extend the financial help sought,” agriculture minister Radha Mohan Singh had said in the Lok Sabha earlier this year.
“This interest liability on the outstanding bank loan has become more than net profit generated by its operations of procuring oilseeds, pulses, copra, onion and cotton,” an agriculture ministry official said.
According to official data, due to losses incurred in the past several years, Nafed’s negative net-worth was reported at Rs 318 crore in 2013-14.
The lenders seeking to recover funds from Nafed include the Central Bank of India, PNB and Bank of Maharashtra.