The government has cracked down on the National Agricultural Cooperative Marketing Federation (NAFED), the largest such institution in the country, after unearthing a major financial scam and suspended a Rs.1,200-crore fiscal package.

he agriculture ministry also issued a show-cause notice to Additional Managing Director P.K. Sharma for convening what is being termed as an “illegal board meeting”, defying a government directive that empowers only the managing director to conduct such meetings.

“Yes, we have issued a showcause notice to additional managing director for convening an illegal board meeting,” Minister of State for Agriculture K.V. Thomas told IANS here, adding that a probe was conducted into its affairs by a retired high court judge.

“As our prime minister (Manmohan Singh) has said, we have zero tolerance on corruption. Anyone — at any level — if found guilty, strict action will be taken,” the minister added.

Officials said Agriculture Minister Sharad Pawar has ordered the crackdown.

Spelling out the background behind the latest move, senior officials in the agriculture ministry said a big scandal was suspected in 2003-04, which was eventually established by a committee headed by retired Allahabad High Court Judge R.R. Mishra.

The probe committee found out that top officials with their “notorious tie-ups” with some private businesses made NAFED extend counter guarantees on loans taken by them without any security, with the connivance of a few board members.

Nearly 30 companies were said to have turned defaulters for an amount estimated at over Rs.3,900 crore, officials said. This resulted in huge losses for the cooperative, due to which it was forced to approach both the government and other agencies for soft loans.

Questions were also raised about the conduct of present chairman Bijender Singh, who was a board member in 2003-04, even as the probe committee said the loss to the agriculture cooperative was in the region of Rs.1,600 crore.

Based on the findings of the probe committee, one top official of NAFED — the former additional managing director Homi Rajvanshi — and a Delhi-based businessman identified as O.P. Aggarwal, were also arrested by the Delhi Police two months ago.

A proposal was also mooted for a one-time settlement, wherein the defaulters paid back the money owed to the cooperative. But the government-named Managing Director Ananda Bose, tasked last September with reviving the agency, said it was against the norms.

“I am a civil servant send by the government to revive an ailing organisation. I will go purely by the government’s interest. Any amount of pressure or arm twisting will not cow me down,” Mr. Bose told IANS.

Now, as officials explained, till such time the cooperative’s books are not set in order the government has decided against any major fiscal assistance to it, even as financial institutions have been directed not to extend any loan.

NAFED was set up in 1958 with the object of promoting cooperative marketing of agricultural produce to benefit farmers. The agency now also imports some essential commodities from overseas — such as oil seeds and lentils — as part of India’s food security strategy.

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