Punjab seeks nod to float Rs 31k-cr bonds to fix grain loan mismatch

People of Punjab may have to bear a burden of repaying Rs 31,000 crore over the next 20 years as the Parkash Singh Badal-led government has again sought the Centre’s nod to float bonds to fix the mess of mismatch in foodgrain stocks, which was flagged by the Reserve Bank of India (RBI).

People of Punjab may have to bear a burden of repaying Rs 31,000 crore over the next 20 years as the Parkash Singh Badal-led government has again sought the Centre’s nod to float bonds to fix the mess of mismatch in foodgrain stocks, which was flagged by the Reserve Bank of India (RBI).

The dispute had erupted after the RBI pointed out a gap between the existing stocks of grains and the money shown to have been spent on procurement.(HT File Photo)

The objective is to help the state in returning the money to banks in easier instalments, and also to give the option to pay just the interest amount by deferring the principal repayment. But, the very decision to repay this massive amount points towards misuse of central foodgrain procurement loan mainly during the 10 years of the Shiromani Akali Dal (SAD)-Bharatiya Janata Party (BJP) government. Adaish Partap Singh Kairon, son-in-law of chief minister Badal, has been the food minister ever since the alliance came to power in March 2007.

The dispute had erupted after the RBI pointed out a gap between the existing stocks of grains and the money shown to have been spent on procurement. The value of physical food stocks in the godowns should match the money that the Centre sanctions through banks for procurement of foodgrains under the Cash Credit Limit (CCL). Punjab was unable to account for payments in previous years, and this muddle has been the worst-kept secrets of the Badal regime.

The alleged misuse of central loan made headlines in April last year as the RBI asked banks to classify Rs 12,000 crore as ‘bad loan’ given to Punjab. The Centre, then, refused to sanction CCL for paddy procurement, forcing Punjab to convert the Rs 31,000 crore into a clean term loan . As part of the agreement with the Centre, the state in October had agreed to repay the banks Rs 3,250 crore every year in two parts.

Sources said the government was prompted to float the bonds fast after it struggled to pay an instalment amount of Rs 800 crore in January. “We had to squeeze our resources. The banks didn’t agree to wait till Marchend. By floating bonds the government can breathe easy as it will first pay only the interest and defer the payment of principal amount,” a government source said. A new government will be formed in Punjab after results of the February 4 assembly elections come out on March 11. The Badal government, however, has been claiming that returning this amount is part of settling the 20-year-long CCL dispute. Already, the state has deposited over Rs 3,000 crore in the CCL account to come clean on the funds.

Now, panicked by the delay in nod to float bonds, the state government on Monday again approached the Union government to fast-track its proposal that was first put forth four months ago. The state government has to complete the exercise by March 31, but the bonds cannot be floated without the Union cabinet’s approval. State government sources said additional chief secretary (finance) Satish Chandra, along with a battery of officials, held meetings with top functionaries of the Union finance ministry.

The state’s outstanding debt, meanwhile, is set to go beyond Rs 1.7 lakh crore.