September 27, 2016 12:17:01 am
The Punjab government has asked the SBI-led consortium of banks, which advances it a cash credit limit (CCL) every harvest for foodgrain procurement, to restructure an accumulated outstanding of Rs 21,000 crore.
Separately, the Reserve Bank of India Monday approved the release of Rs 26,000 crore CCL for paddy procurement in Punjab, which commences in less than a week on October 1.
A Punjab government official said that the consortium has been asked to treat the outstanding Rs 21,000 cr as a “soft loan”, with a promise to repay it in instalments. “We plan to clear the dues in instalments as we get the money from Centre,” a state food department official told The Indian Express.
During the wheat procurement season in April this year, there was a standoff between the banks and the state over the unpaid debt, and the huge mismatch between foodgrain procured on behalf of the Union government and the stock in the FCI godowns. The RBI had then directed banks to set aside 15 per cent of this missing stock as wastage, but even so the stocks available in Punjab godowns were not adequate to cover the debt.
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The banks at first refused to advance a CCL for wheat procurement, creating a crisis at the mandis. Eventually, the RBI stepped in to resolve the matter and Punjab was extended a CCL Rs 16,000 crore.
But issue of the previous debt remains, and bank sources in Mumbai said the Punjab government had sought a restructuring. Banks usually use this method to set up new repayment schedules for defaulters. The state’s proposal for this reason has made the banks nervous.
Given Punjab’s precarious financial situation, an official said it was risky for the banks to take this route. Moreover, it would set a precedent and all other states would want similar treatment.
Manjit Singh Sarang, Director, Punjab’s Finance Department said he was not aware if the state had asked for restructuring, but added it was up to the RBI to decide.
“Why should a plea for restructuring be interpreted as defaulting? This just means that the borrower wants to clear the outstanding in instalments that suit him,” said Sarang.
This paddy harvest season, Punjab asked a CCL of Rs 26,000 crore for an expected bumper kharif crop, the highest ever CCL it has sought.
“RBI has given its approval for the Rs 26,000 crore of CCL for procuring paddy from Punjab,” Punjab Mandi Board Vice Chairman Ravinder Singh Cheema said today. “Now, the state government will seek approval of the Centre by sending the RBI’s approval letter for the release of funds for the purchase of paddy,” added Cheema.
Sarang said the state had already settled the accounts pertaining to Rs 16,000 crore borrowed for the wheat season this year and Rs 22,000 crore for paddy last year.
“We were asked to reconcile the CCL advanced to us in last paddy season. The state government has contributed Rs 1,200 crore from its pocket to settle that amount.”
Foodgrain procurement is funded through Cash Credit Limit availed from RBI through a consortium of banks led by SBI. The CCL is availed on the hypothecation of foodgrain procured and the state agencies are required to maintain stock levels at least equal to the CCL outstanding.
While former state Congress chief Partap Singh Bajwa had filed a plea in SC demanding a court-monitored CBI probe into the mismatch between the stocks and the funds advanced to Punjab, Sarang claimed that there was no scam involving foodgrain stock in the state.
He said the Rs 21,000 crore gap was a legacy issue dating back to many years. “We will settle the legacy account soon,” he added.
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