Government is to mortgage its paddy stocks to state-run banks to obtain the required cash to make purchases from farmers in the current season.
The move came after the state-run banks declared they were not in a position to extend loans to the state-run Paddy Marketing Board (PMB) to buy paddy as the debt on previous loans amounting to nearly Rs two billion was still outstanding.
PMB Chairman the Neil Alwis told the Sunday Times approval was granted on Friday to buy 30,000MT of paddy and to obtain a pledge loan of Rs two billion by mortgaging the stocks to the banks.
The objective was to ensure that the PMB maintained its own buffer stocks preventing the private sector from collecting most of the paddy stocks, he said.
The state banks had turned out the request for the facility in view of the non-payment of more than Rs one billion by the PMB.
The PMB had obtained Rs 6,500 million from the Bank of Ceylon for paddy purchases for the 2021/22 Maha season and of which so far only Rs 4,464 million had been paid back with more than Rs 1,000 million outstanding and due to be paid up by September 11.
The PMB also had obtained loans from the People’s Bank to buy paddy for the 2019/20 Maha season and Rs 759 million is outstanding.
Earlier the PMB’s outstanding loans to the two state banks for the 2012-2019 period of Rs 13,604 million was taken over by the Treasury which is now paying the capital and the interest. Rs 6,400 million was still outstanding.
The Sunday Times learns that following agreement reached with the state banks to release Rs two billion, Rs 250 million was released on Friday.
The PMB during talks with the banks has pointed out other possible methods of repaying of the loans.