Tuesday, April 19, 2016

Commentary: The mystery of the missing food grain and Punjab’s credit woes

The problem of non-performing assets [NPAs] shows up in India in the oddest of places. Even as the courts have issued a non-bailable warrant against Vijay Mallya as a wilful defaulter, another monster of a problem has cropped up in Punjab, involving the state government and not a private company or individual. Just as the state of Punjab was about to launch its annual grain procurement drive, the Reserve Bank of India made the discovery that grain stocks worth Rs 12,000 crore have gone missing in the state. The state requires credit from the government banks to pay for the procurement and the credit is forwarded on the basis of the grain held in stock. With the Reserve Bank breathing over the necks of the public sector banks over their NPAs, a consortium of 30 banks decided to refuse further credit to the Punjab government. With the elections due in 2017, the state government is now writhing in anxiety and looking of all possible solution to the hitch, all of which must have come up during a recent meeting between the CM Badal and PM Narendra Modi. In a fast developing story, the picture is yet not clear. But clearly, the banks have to bend their earlier resolve and sort out the imbroglio created by what is being termed as a scam. This also raises the question whether something similar is going on in other states, although Punjab is responsible for nearly 40 per cent of the procurement eventually pumped into the public distribution system [PDS] throughout the country.

Among all the news coverage and articles, this one seems to give the most complete picture, though the fact is the real magnitude of this financial outrage will unfold only in the coming days. For both the reasons – the urgency of procurement and given that the BJP is part of the Punjab government, a solution will of course be found with due promptness. What is not clear is whether the mystery of the ‘missing food grain’ will be unravelled and whether the financial regulator, the Reserve Bank will be able to hold on to its strict policy on NPAs vis a vis the government agencies in the future.  

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