This is the first time that Nabard has sanctioned funds directly to a state-owned corporation under RIDF-XVIII tranche. The project sanctioning committee of Nabard, at its meeting held on March 22, 2013, approved the loan outside the purview of Article 293 (3) of Indian Constitution.
According to Article 293 (3), Nabard can sanction funds only to state governments and in this case, the bank has directly sanctioned the loan to a state government undertaking. However, the loan is subject to a guarantee from the state government, a Nabard official said.
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This is also the first time that such a transaction is being carried out in Karnataka. Nabard had earlier sanctioned a similar loan to a corporation in Andhra Pradesh.
The Karnataka Food and Civil Supplies Corporation is engaged in the procurement and distribution of essential commodities.
The total cost of the project is Rs 37.02 crore and 25 per cent of the cost will be borne by the corporation and 75 per cent in the form of loan from Nabard. The loan carries an interest rate of 7 per cent with a repayment period of 7 years and two years moratorium.
With this financial assistance, the corporation is expected to create scientific storage capacity of 45,420 tonnes with the latest technology. This additional storage capacity creation will help in smooth procurement operations and benefit farmers, Nabard said.
The corporation will use the funds for creation of storage facilities in the districts of Belgaum, Bagalkot, Chikmagalur, Chitradurga, Gulbarga, Haveri, Koppal, Mangalore, Mysore, Raichur, Tumkur and Yadgir.
In order to give a fillip to food security, the government of Karnataka through the Food & Civil Supplies Corporation, has preferred to avail a loan under Nabard's Rural Infrastructure Development Fund, which is a cheap source of funds, Nabard official said.
Two other state undertakings such as Agriculture Cooperative Marketing Federation and Agriculture Marketing Board have shown interest to avail similar loan from Nabard. For 2013-14, Nabard is seeking fresh proposals from various other state government organisations for loan, the official added.
The government of India had allocated Rs 5,000 crore to Nabard in 2012-13 for providing assistance for the creation of warehousing capacity.
Earlier, Nabard had sanctioned Rs 62 crore to the Karnataka State Warehousing Corporation in 2011-12 and Rs 28.50 crore in 2012-13.