Govt to pick up 51% in Nafed

The National Agricultural Cooperative Marketing Federation of India will soon become a central public sector undertaking.

The National Agricultural Cooperative Marketing Federation of India (Nafed) will soon become a central public sector undertaking (CPSU). The union agriculture ministry is set to pick up 51% stake in the national agency for cooperative marketing of farm goods with a capital infusion of Rs 1,200 crore. The move is expected to help it intervene in the market for agriculture produce more efficiently.

The agriculture ministry reckons that by bringing Nafed under its direct control,wrong policy decisions like the 2006 tie-ups with private exporters could be averted. The conversion of Nafed would put it in the league of firms such as MMTC and STC,which are not only CPSUs and standalone profit centres but also vehicles for the government to implement its social sector policies.

Set up in 1958 under the Multi-state Cooperative Societies Act,Nafed is saddled with bad debt that arose from the Rs 3,900-crore advances made in 2006 to 39 exporters. The money was released not only to exporters of farm goods but also iron ore exporters. Nafed suffered bad debt of Rs 1,600 crore even as it struggled to service bank loans.

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In fact,the federation’s annual interest liability is more than its operating profit during last three years. The financial problems have adversely impacted Nafed’s plans on procurement. The federation purchases pulses,cotton and copra from farmers and sells them in the open market,besides being the nodal agency for onion export.

We have received the letter from the finance ministry on the bailout and we are in talks with banks for renegotiating our debt, Nafed managing director Sanjeev Chopra told FE.

According to sources,the federation has written to the Central Registrar of Multi-state Cooperative Societies to make changes in its bye-laws and facilitate government purchase of 51% stake in the cooperative. A senior Nafed official said the process of government picking up shares in Nafed would be completed before the end of the current fiscal. Under the bailout package,the agriculture ministry would support Nafed in meeting the annual interest accrued on its debt. Chopra said that Nafed would continue to pursue legal recourse to recover debt from defaulters.

During 2009-10,although the federation made a gross profit of Rs 83.91 crore,but due to huge interest liability of Rs 135 crore,it reported a net loss of Rs 50.06 crore. Its turnover rose by 26% to Rs 6,373.31 crore during the previous fiscal against Rs 5,065.04 crore in 2008-09. As reported by FE earlier,Nafed has already initiated criminal proceedings against 29 companies which have defaulted on the repayment.

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According to information accessed by FE,major defaulting parties include Delhi-based Earth Tech Enterprises (Rs 537.76 crore),Mumbai-based Swarup Group of Industries (Rs 239.91 crore),Zenith Mining (Rs 81.45 crore),Rital Impex (Rs 65.29 crore) and Handum Industries (Rs 71.51 crore).

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