The State Government has decided for a capital restructuring of the Odisha State Cooperative Marketing Federation (MARKFED) by turning its Rs 177.27 crore of debts into equity resulting in this apex cooperative organisation’s positive net worth of Rs 95.30 crore.
The State Government will scale up its equity participation in the MARKFED to a tune of Rs 206.83 crore, which is now at the level of Rs 29.56 crore, allowing it to boost its bottom-line and business to a Rs 1,000-crore level per annum.
The decision was taken at a recently-held meeting attended, among others, by Additional Chief Secretary, Finance UN Behera and Secretary, Cooperation Bishnupada Sethi. It was viewed that the MAKFED should prove to be a financially viable organisation sans any dependence on the Government in order to deliver its mandated services to farmers.
The MAKFED, which provides agricultural inputs like fertilisers and pesticides and procures produce of farmers, is facing heavy loss due to the default of Regional Cooperative Marketing Societies (RCMSs) for which it could not repay its loan dues to the Government.
The MARKFED has incurred an accumulated loss of Rs 114.82 crore as on 31 March, 2013, due to which it was not considered creditworthy by financial institutions, including commercial banks.
Management consultancy firm Deloitte has prepared the capital restructuring plan, which the high-level found to be suitable to improve the finances of the MARKFED. It was decided not to write off the loans and accrued interests amounting to Rs 177.27 crore, which, instead, would be turned equity of the State Government, resulting in the MARKFED having an impressive net worth of Rs 95.30 crore.
With an improved net worth and an improved balance sheet, the MARKFED would achieve creditworthiness to have access to adequate and low-cost borrowings from banks and other financial institutions at competitive rates.
And the MARKFED would be able to raise the required working capital of Rs 200 crore to have a business turnover of Rs 1,000 crore, which is now at the level of Rs 700 crore as envisaged in the Business Optimisation Plan, said sources.