Punjab: Banks reluctant to extend Mandi Board loan for its rural roads repair project
Punjab's agricultural board opts for a loan from NABARD at 8.3% interest to repair rural roads, facing a fiscal crisis and pending funds of ₹5,850 crore.
With the banks and other financial institutions seemingly reluctant to extend a loan to the Punjab state agricultural marketing board on easier terms for repairing the rural roads, the Mandi Board has decided to go with the National Bank for Agricultural and Rural Development (NABARD) offer.
The board tried to raise loans from the banks and other financial institutions, however, by August 30, the last date fixed to get offers from the banks, only three private sector banks came forward offering a heavy rate of interest (up to 10%) and were also seeking government guarantee, an official, who didn’t wish to be named, said.
NABARD, it is learnt, has offered to loan the required amount at an 8.3% annual rate of interest with a moratorium of 18-24 months.
The cash-strapped state’s agricultural board is seeking to raise a loan of ₹1,800 to ₹2,000 crore for repairs of the rural roads in the state, which have not been paved for the past 6 to 8 years. Top officials in the board are apprehensive that if the roads are not repaired now, then these would be damaged beyond repairs, and the expenditure in that case would increase manifold.
The Mandi Board is responsible for the upkeep of rural roads totalling 65,000km in length and 1,872 mandis. As per the board’s surveys, 17,500km of roads are in urgent need of repairs, at a total expenditure of ₹2,500 crore. The roads were last repaired between 2016 and 2018 and are now in shambles.
The board’s fiscal crisis started particularly after the centre in 2021 stopped releasing rural development funds (RDF), the state used to charge on food grains procurement (wheat and Paddy) from the state.
As many as ₹500 crore of 2021 rabi season are pending with the centre. Plus, the release of ₹1,000 crore of 2021 kharif season, ₹650 crore of 2022 rabi, ₹1,000 crore of 2022 kharif, ₹800 crore of 2023 rabi, ₹1,000 crore of 2023 kharif and ₹900 crore of 2024 rabi are pending, taking the total amount to ₹5,850 crore.
“If RDF is not paid in the upcoming kharif harvest, the total pending accruals will touch ₹7,000 crore, as by 3% norm more than ₹1,100 crore is expected during paddy procurement starting from October 1,” a board official said.
The centre stopped the release of funds in 2021 asking the state to amend seeking specific provisions regarding the use of accruals, and adding to its woes, the state government is also repaying loans raised during the previous Congress government led by CM Capt Amarinder Singh, which pledged future receipts of RDF to raise funds for its flagship farm debt waiver scheme.
A total of ₹3,976 crore was raised when the scheme was launched in 2018. The scheme provided 5.5 lakh farmers a relief of around ₹6,640 crore.
The Aam Aadmi Party (AAP) government has paid a sum of ₹1,130 crore, two instalments each of ₹565 crore, to the financial institutions and banks, which the previous government had raised to fund their debt waiver programme and a sum of ₹400 crore more is to be paid.
“For this fresh loan, we want the instalments to start after 2027 so that by then all the other pending loans are paid back,” said a top officer, adding that a government guarantee will be required for the loans the board is raising.