The government today said there is no budgetary provision as of now to provide interest-free loans to bail out agri co-operative major Nafed from the financial mess following its failed tie-up businesses.
Nafed has submitted a proposal for providing an interest-free loan of Rs 2,000 crore to tide over its financial crisis, Minister of State for Agriculture Kanti Lal Bhuria said in a written reply in the Rajya Sabha.
On the action taken by the government on Nafed's proposal, Bhuria said: "Nafed has undertaken PPP/tie-up business on its own under its commercial activities, without any government support. Presently, there is no budgetary provision to provide interest-free loan to Nafed."
However, he said the Centre is providing guarantee for arranging capital and reimbursing the losses to Nafed on account of undertaking procurement operation on behalf of the government.
The minister pointed out that the reasons for financial crisis of Nafed include non-recovery of dues under PPP/tie-up business, higher debt burden, higher interest liability and financial losses.
Under the tie-up arrangement, Nafed had released advances to private companies to undertake import and export. Though such companies neither imported nor exported materials, Nafed is yet to recover its dues from as many as 27 of them.
Speaking to PTI, Nafed Chairman and Managing Director U K S Chauhan had last month said, Nafed will be doomed if it doesn't get the loans in time. The pressure of the interest liability (on loans taken for tie-up businesses) can't be sustained.
After earning profits for two years from the tie-up businesses in the public-private mode, Nafed had incurred a loss of Rs 56.69 crore in 2007-08 due to huge defaults by some of its partners in such businesses. Nafed intends to write off bad debts through the interest-free loans.
