Centre ‘ignores’ state’s plea to cut CCL interest rate by 1%

Ruchika M Khanna

Tribune News Service

Chandigarh, February 18

The state’s plea to the Union Government for parity in payments with the Food Corporation of India (FCI) for foodgrain procurement has failed to cut ice with the Centre.

A high-level delegation of Punjab Government, which met with top officials of the Union Ministry of Food and Secretary, Expenditure last week, did not get any assurance from the Centre. The state government wants that the Centre should charge from Punjab the same rate of interest that is being charged from FCI on the cash credit limit (CCL) for procurement. At a time when Punjab is finding it difficult to meet its committed liabilities, this relief from the Centre could help the state, which is in deep fiscal crisis.

While the FCI pays 9.05 per cent interest on CCL, the Punjab Government is forced to pay 10.05 per cent, but historically too there has been 1 per cent difference in the interest rate. If allowed, the lower rate of interest could bring down the state’s interest payments by almost Rs 1,000 crore per annum. Along with this, if Punjab’’s demand for a retrospective release of 1 per cent higher interest paid by it vis-à-vis FCI (since 1993) were to be accepted, Punjab could get a relief of Rs 2,500 crore on its loan of Rs 31,000 crore taken for settling the legacy food credit account. However, the Centre has failed to come to the state’s rescue.

Official sources say though “the Union Government agreed that Punjab needs relief, there is reluctance to commit to the state’s demand.” Officials told The Tribune that just as the Centre gave a sovereign guarantee on the CCL for the FCI, the state too gave a sovereign guarantee on its CCL. “Thus, our contention is that the same rate of interest be charged by banks to both loanees giving gaurantees,” explained an official, adding that Punjab was paying Rs 5,100 crore annually from its own pocket, while procuring foodgrains for the Central pool.

This includes Rs 3,200 crore interest on the Rs 31,000-crore loan the state has to bear to settle the legacy food credit account (from 2002-03 to 2014-15); and shelling out Rs 1,900 crore each year for settling the current cash credit limit (CCL).

Other than refunding the cost borne by the state for higher interest, Punjab is also demanding parity in the transportation cost with the FCI. “Punjab gets just 13 per cent of the transportation cost (for transporting foodgrain from Mandis to warehouses/plinth storages) paid to the FCI. We have demanded parity in these charges too. The new transport policy for foodgrain cleared by the Cabinet this week is a step in getting the transport rates on a par with the FCI,” said a top official in the Food and Civil Supplies Department.