Nafed to clean books by year-end with govt help

Mired in financial distress over the past four to five years, the National Agricultural Cooperative Marketing Federation (Nafed) is looking to clean its books by the end of this financial year, through a mix of part-payment of old loans and a one-time settlement.

Managing director Rajeev Gupta told Business Standard: “We will be able to raise fresh funds for business operations after we clean our books through repayment of loans of around Rs 1,200 crore and a one-time settlement for the remaining amount of about Rs 500 crore.” He said the federation wished to start with nil liabilities in the new year beginning April 2012.

It is learnt the agriculture ministry is in an advanced stage of providing Nafed a guarantee to help it raise Rs 1,200 crore. The money is to be repaid after the eighth year and during the interim period, the agriculture ministry would hold 51 per cent stake in the cooperative for having a better say in its operation. Nafed is the government’s procurement agency for non-cereal crops such as cotton, oilseeds and pulses.

Nafed has alliances with 62 companies since 2003 and had invested a total of Rs 3,962 crore in this tie-up business, taking loans from commercial banks. The federation had posted profits of Rs 88.4 crore from such businesses between 2003-04 and 2005-06. It had also released advances to private companies to undertake import and export. A number of companies neither imported nor exported and had defaulted in paying back, leaving the combined burden of Rs 1,700 crore from the principal sum and accumulated interest on the federation.

Although Nafed made a gross profit of Rs 48 crore in 2010-11, yet, owing to an interest liability of Rs 170 crore, it reported a net loss of Rs 108.5 crore. Its annual interest liability has exceeded its operating profit over the last three years. “If the losses of the tie-up business were not there, we would have shown profits,” said Gupta.

Gupta said Nafed has requested banks for deferment of interest payment from July onwards. This will help the federation in its operations of trading in various agricultural commodities.