Archive : JAN-DEC 2006

NCDEX associate may tap FCI for paddy procurement

National Collateral Management Services (NCMSL), an associate of National Commodity & Derivatives Exchange (NCDEX), has made a pitch to borrow from Food Corporation of India (FCI) for supporting its foodgrain procurement programme.

NCMSL intends to procure about three lakh tonnes of paddy during the next 12 months. On aggregate, this would cost the company close to Rs 240 crore. Typically, an agency needs some Rs 80 crore for procurement of one lakh tonnes of paddy.

It plans to borrow from FCI against collateral. “We are ready to furnish bank guarantees to borrow from FCI for our food procurement programme,” NCML MD Hari Prasad told ET. He did not, however, specify the company’s total borrowings requirement.

NCMSL promoters include Bank of India, Canara Bank, Punjab National Bank and HDFC Bank. NCML is the first non-government agency that procures foodgrain from farmers on behalf of FCI.

It has successfully run a pilot project for food procurement from December, ’05 to July, ’06 and this track record, according to Mr Prasad, should support its claim for financing from FCI.

On the other hand, FCI and other government agencies that procure foodgrain from farmers get funds from RBI as food credit. However, NCML has no plans to approach RBI for credit.

So far, we have procured some 1.2 lakh tonnes of paddy till July. We intend to procure up to three lakh tonnes over the next 12 months. However, we need financial support for further expansion of this procurement programme,” Mr Prasad said.

During the first year of its operation for foodgrain procurement, NCML bought paddy from farmers in Madhya Pradesh and Orissa. It now intends to extend the scope of this operation in Maharashtra, Bihar and West Bengal as well.

NCMSL’s procurement plan is, however, no match to FCI’s. For instance, FCI procures nearly 100 lakh tonnes of wheat every year under the government's minimum support programme (MSP).

NCMSL’s foodgrain procurement has no commercial angle currently. “Our main objective is to supplement FCI in its role to support farmers,” Mr Prasad said, adding “We are working in areas where FCI has no outreach. Our aim is to support farmers residing in the most remote areas of the country,” he added.

(Source: Times News Network, Tuesday, September 19, 2006)