National Agricultural Cooperative Federation of India Ltd. (NAFED) signed the Debt Settlement Agreement with its eight lender banks. The One Time Settlement with the lender banks has been made at Rs. 478 Crore with the cash payment of Rs. 220 Crore and assignment of sale rights of one of its prime properties located at Lawrence Road, New Delhi. In addition, the lenders are entitled to the assignment of auction right of the property of one of the defaulters of its tie-up business conducted in the years 2003-05. The Deputy General Manager, Central Bank of India signed the agreement on behalf of lender banks with Addl. Managing Director AMD, NAFED.
It may be recalled that the Federation had mired itself with a number of controversial businesses conducted with private parties when the borrowings made from banks were diverted to the private associates without proper collateral/securities. This has led to the default by NAFED to its bankers as the monies were not returned by the business associates. Such defaults had reached a level, when NAFED had no money to pay in the years 2011-12, forcing banks to declare NAFED’s account as NPA.
The organization serves the farmers throughout the country by implementing the Price Support Scheme of Govt. of India for Oilseeds, Pulses, Copra & Cotton. Though the fund requirement of the PSS was separately provided to the Organization through sovereign guarantee, its problems with banks many times created hurdles in smooth withdrawals even against government guarantee, affecting the payment to the farmers.
It is hoped that with this settlement, the Price Support Scheme operations will be more smooth and effective. During the last three years, the Federation has made record procurement of Oilseeds & Pulses at MSP under PSS. Further, it has been the major agency having procured around 90% of the buffer target of Pulses.
The Govt. of India had constituted a Committee headed by Additional Secretary & Financial Advisor, Department of Agriculture, Cooperation & Farmers’ Welfare comprising of senior officials from the Departments of Expenditure, Financial Services, Cooperation and Managing Director, NAFED, to work out the scheme for the financial revival including the One Time Settlement with the banks. The Committee had held various meetings with the lender banks and decided the OTS in January 2016.
Initially, the Govt. of India was to provide the financial assistance through the interest-free loan against NAFED’s properties, but later on, it was revised with the contribution by NAFED through cash payment and transfer of one of its prime properties. Govt. of India has undertaken to provide for the shortfall in the OTS amount if any.
This settlement has brought much relief to the Organization and its employees in particular and Cooperative Sector in general.