The Union Cabinet
chaired by the Prime Minister Shri Narendra Modi has given its ex-post
facto approval for settlement of Legacy Food Cash Credit Accounts (upto
crop season 2014-15) of Punjab Government for food procurement
operations. This proposal of Department of Expenditure was approved by
Prime Minister under Rule 12 of (Transaction of Business) Rules, 1961 on
Early settlement of legacy issues will help the banks in disbursement of
food credit in the larger interest of numerous farmers of the State and
uninterrupted continuity in food procurement operations to ensure food
security for the nation. Settlement of outstanding Cash Credit Limits (CCL)
account by availing term loan by the Punjab Government would entail
savings in terms of interest payment. This will create additional
resource enabling Punjab Government to undertake capital expenditure.
The Legacy Cash Credit Accounts (upto crop season 2014-15) for food
procurement operations by the Punjab Government shall be settled as
a) The outstanding amount in Cash Credit Accounts of Government of
Punjab pertaining to season upto Kharif Marketing Season 2014-15
amounting to approx. Rs. 31,000 crore shall be converted into a term
loan. It will be repayable in half yearly instalments over a period of
20 years with the option for pre-payment. The terms and conditions of
the loan shall be as prescribed by the RBI and the lending banks.
b) The exact amount of the loan shall be the outstanding amount as on
31.03.2015, which is not secured by stocks of food grains. The
consortium of banks led by SBI has to finalise the amount in
consultation with all stakeholders including Department of Food & Public
Distributions, Punjab Government and RBI.
c) The 14th Finance Commission has prescribed the Fiscal Roadmap for
each State for its award period 2015-20 and anchored Fiscal Deficit of
all States to an annual limit of 3% of States' Gross State Domestic
Product (GSDP). The above term loan proposed to be extended to Punjab
Government in current financial year 2016-17 will not be counted in the
fiscal deficit limit of Punjab Government in 2016-17.
d) After the conversion of legacy accounts in long term loan, the State
Govt. of Punjab may issue bonds for the purpose of paying back the long
term loan only. This will be subject to the approval of consortium of
Banks and RBI. The Gol consent will be issued for swapping of loan in
the same year of issue of bonds.
e) Punjab Government shall enter into a tripartite agreement with Gol
and RBI irrevocably authorizing the Gol to deduct, in case Punjab
Government fails to make any payment towards principal or interest of
the Term Loan on due dates, such defaulted amount from the State’s share
in central taxes and pay the same to SBI consortium.
f) This will be one-time measure to settle the outstanding amount in
legacy accounts upto 2014-15. Punjab Government shall provide adequate
annual budget provision to close CCL gaps on a regular basis to avoid
future accumulation of CCL gaps over the years. It will also make
efforts to reduce its subsidy bill to service the repayment of term loan
from its own resources.