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Punjab cornered: is the proposed Rs 31,000 crore loan a scam cover up?

Rajeev Khanna | Updated on: 7 October 2016, 21:59 IST

Just as paddy procurement has begun in Punjab, the ruling Shiromani Akali Dal (SAD)-BJP combine government in the state is once again in the eye of the storm.

This time, it is the reported move of the state government to borrow Rs 31,000 from the banks. The amount is going to be paid over the next 20 years to address the mismatch of food grain stocks and payments that have happened in the last two decades.

This has led to the Opposition parties, the Congress and the Aam Aadmi Party (AAP), threatening to take the matter to court as they see it as an attempt, by both the Centre and state, to cover up the Akali 'looting'.

This borrowing of Rs 31,000 crore is being termed as a 'mega scam'. It is also being seen as the fall out of the developments in April this year when the Reserve Bank of India (RBI) had come out saying that food grain stocks worth Rs 12,000 crore had gone missing in Punjab.

Following which the consortium of nationalised banks, led by the State Bank of India (SBI), had held up funds to be released for procurement of wheat. This was followed by the state government reportedly seeking Rs 21,000 crore from the banks under the Cash Credit Limit (CCL) head for procurement.

Mismatched calculations

The stock of the grains procured must match with the amount of the money released by the Centre under the CCL, but allegedly there was a huge gap between the two for the last almost two decades.

It was in view of the hardship the farmers faced in the event of non-lifting of their produce that the Centre had agreed to direct the RBI to release the money in April.

Punjab government had at that time had brought up the plea of there being a mismatch in accounting with the Food Corporation of India on whose behalf the procurement is done.

Punjab remains the top contributor to the central pool of food grains and there have been conflicts between the Centre and the state on related issues. Now, the government ostensibly wants to settle the issue once and for all by raising a loan of Rs 31,000 crore.

Agricultural economist Dr Gian Singh of Punjabi University at Patiala pointed out that this means putting a huge economic burden on the next government.


There are a couple of interesting aspects of the issue. To begin with, the food and supplies minister Adaish Partap Singh Kairon, who is at the core of the controversy, is the son-in-law of Chief Minister Parkash Singh Badal.

Secondly, if the loan is being taken to address the mismatch over the last two decades, it needs to be pointed that the Congress also ruled the state during this period.

Senior political analyst Jagtar Singh pointed out, "Where has all this money gone? Punjab government is already under heavy debt. Rather it is the people of the state who have to bear this debt burden and now they would be made to pay for Rs 31,000 crore loot that the government has itself admitted to and is not an allegation levelled by the Opposition."

It is also being pointed out that by seeking this loan, the government has accepted that the loans taken earlier for procurement were misused.

No clean chits

It was in July this year that the state government had reportedly deposited Rs 926 crore in the CCL account to come clean on the funds. While claiming that there had been no wrong doing on its part, the government pointed to a gap between the cost of buying food grains and reimbursement by the central agencies.

The state intends to re-pay the new loan by making a payment of Rs 3,250 crore every year in two instalments.

Terming the offer of soft loan to Punjab government and latter accepting the Rs 31,000 crore in lieu of 'embezzlement' of food grains as a cover up by both the Centre and the state to hide the "loot" done Akalis, the AAP leadership has asked the Union government to come clean on the issue and clarify what action it has taken in this multi-crore scam.

AAP's state convener Gurpreet Singh Ghuggi aka Waraich said that it indicates that SAD-BJP have already smelt their humiliating defeat in the forthcoming assembly elections and are trying to 'loot' the state.

"What action did the Centre take against the Punjab government for embezzlement of food stock worth multi-crore? Under what condition the CCL was given to the Punjab government for procurement? Isn't the offering and accepting the loan request by Akalis indicative of a nexus between the centre and the state in the food grain scam," he said.

The AAP leaders have demanded that instead of putting the liability on the people, the Centre should fix the responsibility for the 'loot' on the right culprits and the 'theft' amount should be retrieved from the personal properties of these 'thieves'.

They have also pointed that the decision to convert Rs 31,000 crore into a loan flies in the face of what the Badal government had claimed earlier. They had said that it's the Centre that has to reimburse Punjab Rs 26,000 crore.

What now?

After the Centre refused to sanction the CCL for paddy procurement till Punjab settled the outstanding legacy food credit amount by converting it into a clean term loan, the state agreed to repay Rs 31,000 crore, AAP said.

The Congress has threatened to approach the court on the matter. Senior leader Sunil Jakhar stated, "You cannot convert a theft into a loan and put the liability on the people of the state for another 20 years. Why should the people bear the liability of the theft committed by few people in power?"

The party has also sought Kairon's resignation for the misappropriation of funds.

Meanwhile, Dr Gian Singh said, "This shows the 'efficiency' of the government over the years. Instead of covering up their follies with a loan, they should order a time-bound probe into the matter and the guilty should be punished no matter whether the wrong was done during the Congress or the Akali regime."

Unfazed by the criticism from the Opposition, the government has asked the farmers to approach Deputy Chief Minister Sukhbir Badal in case they face any difficulty in selling their produce during the ongoing paddy season, if the problem is not resolved at the sub-divisional and district level.

Sukhbir has strictly instructed officers to make sure that the farmers face no hassles. He has made it clear that if any farmer faces a problem the onus would be on the official concerned and strict action would be taken against him.

With the farmers in the border villages already agitated due to the evacuation from their villages following the Indo-Pak standoff, the move by the government to procure a hefty loan is certainly not going to augur well for the government.

Edited by Jhinuk Sen

Also read: Battle Field Punjab: how the state's farmers are suddenly being wooed

Also read: Agrarian crisis in Punjab: low returns lead to falling lease rents on farmland

First published: 7 October 2016, 21:59 IST