The Agriculture Ministry has agreed to give financial support to Nafed in order to bail out the agri-cooperative from liquidity crunch following financial irregularities.
"The Agriculture Ministry has accepted the financial restructuring package of Nafed. The matter will be placed before the Finance Ministry and then to Cabinet," Nafed Managing Director Sanjeev Chopra said.
In August, Nafed had agreed to all the conditions of the Agriculture Ministry, including sale of 51 per cent equity to the government in lieu of a Rs 1,200 crore bailout package.
Nafed had suffered bad debt of Rs 1,600 crore because of default in unsecured loans to the tune of Rs 3,900 crore that it provided to 62 companies under tie-up businesses.
Under the proposed bailout package, the government would help Nafed in meeting the interest accrued on its debt, so that it runs into profit and conduct business efficiently, Chopra said, adding that there was no proposal to offer financial support for clearing the principal amount.
"Nafed will make efforts to recover the bad debt from defaulters," he said.
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Meanwhile, Nafed has written to the Central Registrar of Multi-state Cooperative Societies to make changes in its bye- laws, which will pave the way for the government to buy 51 per cent stake in the cooperative.
Nafed had posted a loss of Rs 50.05 crore in the 2009-10 fiscal because of huge payment of Rs 135 crore as interest on borrowings that it took from banks for tie-up business. Its turnover rose by 26 per cent to Rs 6,373.31 crore against Rs 5,065.04 crore in 2008-09.