Cabinet gives ex-post facto approval for food cash credit to Punjab

The Union Cabinet, chaired by Prime Minister Narendra Modi, on Monday gave its ex-post facto approval to the proposal to settle "Legacy Food Cash Credit Accounts (up to crop season 2014-15)" of the Punjab government for food procurement, a cabinet communique said.

It said that the proposal of Department of Expenditure was approved by the Prime Minister on January 2 this year under the relevant provision of Transaction of Business Rules, 1961, and is a "one-time measure to settle the outstanding amount in legacy accounts up to 2014-15".

The communique said that early settlement of legacy issues will help banks in disbursing food credit and also help maintain continuity in food procurement operations.

The outstanding amount in cash credit accounts of Punjab government up to kharif marketing season 2014-15, amounting to about Rs 31,000 crore, will be converted into a term loan, repayable in half yearly instalments over a period of 20 years with the option for pre-payment, it said, adding that the loan's terms and conditions will be as prescribed by the RBI and the lending banks.

The exact amount of the loan will be the outstanding amount as on March 31, 2015, which is not secured by stocks of food grains, it said, adding that the consortium of banks led by State Bank of India has to finalise the amount in consultation with all stakeholders including Punjab's Food and Public Distribution Department and the Reserve Bank of India.

Noting that the 14th Finance Commission has prescribed fiscal road map for each state for its award period 2015-20 and anchored fiscal deficit of all states to an annual limit of three percent of their Gross State Domestic Product (GSDP), it said that this term loan will not be counted in the fiscal deficit limit of the state government.

The release said that Punjab government may issue bonds to pay back the loan and will enter into a tripartite agreement authorising the central government deduct any defaulted amount from the state's share in central taxes and pay the same to SBI consortium in case the state fails to make payment towards principal or interest of the term loan on due dates.

--IANS

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