Punjab food department to invite bids to raise funds for grain procurement

For the first time, food and civil supplies department, Punjab, has started a process to invite tenders to raise funds from banks and financial institutions for procurement of wheat scheduled to start from April 1

For the first time, the food and civil supplies department, Punjab, has started a process to invite tenders to raise funds from banks and financial institutions for the procurement of wheat scheduled to start from April 1.

The food and civil supplies department, Punjab, has sought approval to raise a CCL limit of ₹29,500 crore to procure from the minister of food and public distribution for the procurement of estimated 135 lakh tonnes of paddy in the upcoming rabi marketing season. (HT File Photo)

The funds raised by inviting bids will be at competitive interest rates and as an estimate by the state department, if the new experiment turns successful, it may save ₹500-600 crore.

The state food department has sought approval to raise a CCL limit of ₹29,500 crore to procure from the minister of food and public distribution for the procurement of estimated 135 lakh tonnes of paddy in the upcoming rabi marketing season.

“In a pre-bid meeting held on Wednesday, five banks – State bank of India, HDFC, Axis Bank, Canara Bank and Punjab National Bank, have shown keen interest to our proposal,” said a food department officer, who is part of the new proposal, adding that they have accepted the offer and will participate in the tendering process. More banks are expected to join the league, hoped the officer.

“The banks have faith in our system that funds they are investing are safe with the state government and there is a guarantee of return. In the worst-case scenario, we have owned up liabilities of ₹31,000 crore and are paying back in time,” the official added.

A senior official of the food department said that the Centre is also keen on negotiating the rate of interest paid to the banks on food procurement so as to cut costs.

As per the current scenario, the Punjab government pays an interest rate of 7.28% per annum for the time they use CCL for procurement, and hope to bring the rate less than 6% in case the proposal and tendering process is finalised. The interest is paid from the time funds are taken out from the banks for purchase of foodgrain and funds are deposited back after delivery to the Food Corporation of India (FCI) and the cost is paid back to the state’s four procurement agencies.

“At least ₹1,400 to 1,500 crore goes into paying the interest and with the tendering process, we are trying to bring it down,” adds the officer.