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Modi govt rescues Punjab govt from a financial crisis that would prevent it from procuring foodgrains from farmers: Details

The Govt to Punjab was on the verge of becoming Non-Bankable, as the Entire Loan amount of Rs 90000 crore towards Food credit was about to become Non-Performing Asset (NPA) by the end of the financial year.

Even as the Punjab government continues to fight the centre opposing reforms in the agriculture sector, the state government was rescued by the central govt just before the end of the financial year 2020-21 from a crisis situation in the sector. Had the central govt not intervened, the state govt in Punjab would not have been able to procure produces from farmers, as the entire portfolio of loans for this purpose was on the verge of becoming NPA by 31st March.

The Govt to Punjab was on the verge of becoming Non-Bankable, as the Entire Loan amount of Rs 90000 crore towards Food credit was about to become Non-Performing Asset (NPA) by the end of the financial year. This is because, State Procuring Agencies (SPA) had not repaid the loans they have taken from banks to procure farm products.

It may be noted that the farmers sell their food grains to FCI and other agencies through such SPAs. SPA makes payments to the farmers, and they are later reimbursed by the FCI against the stock.

To facilitate this payment to the farmers, the SPAs take loans from a consortium of banks led by State Bank of India (SBI), which is known as Food Credit Consortium. For every session (Kharif and Rabi), the amount of loans taken by the SPAs from the FCC is determined, which is known as Cash Credit Limit (CCL). The CCL is fixed depending upon the funds required for estimated procurement quantity in a procurement session. GoI gives consent under Article-293 of the Constitution for such loan to the State Govt. As per rules, this loan has to be repaid withing 3 years, else it becomes NPA.

As the SPAs had not repaid loans amounting to ₹ 89,200 crore, this entire amount was on the verge of becoming NPA, as the RBI had refused to extend the 3-year deadline to repay. Had this happened, the SPAs in Punjab would have been able to take fresh loans to procure crops in the next harvest session. The wheat procurement session is scheduled to start on 10th April, that means it was really an emergency situation. This would have led to a disastrous situation for the farmers of Punjab, as the Punjab Government and especially the farmers of state would have plunged into a deep financial crisis.

To tide over the situation, the state government had written to the Union Consumer Affairs, Food & Public Distribution ministry to lift the stock lying with the SPAs, and release the payment against them. Responding to the request, minister Piyush Goyal assured that FCI will lift the entire stock of 22.42 million tonnes of the food grain available with the state agencies since 2018-19.

According to ministry sources, the Government of India accorded an overriding priority for evacuation of almost entire stock of 2018-19 crop, as requested by the Punjab govt, and the proceeds released to Punjab. Keeping in view the seriousness of the matter, the issue was reviewed at the highest level in consultation with the state government, FCI and Railway Board and entire stock of 2018-19 was liquidated by the end of March, and funds released by FCI to Punjab Government.

Thus, the timely action by GoI saved the loan account of state government from becoming NPA.

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