Mechanism underway to ease cold storage debt burden

Yasir Wardad | Published: February 10, 2019 14:37:47 | Updated: February 12, 2019 21:33:38

Labourers working at a cold storage in Rajshahi - FE Photo

A mechanism is underway to ease the mounting debt burden on the country's cold storage owners, officials and industry insiders said.

According to the Bangladesh Bank, 108 cold storages are Tk 14.44 billion in debt at 22 scheduled banks as of December 31, 2017. Of the loans, Tk 7.44 billion was irregular.

The financial institutions division (FID) of finance ministry at a recent meeting suggested a bailout package for cold storage operators.

The FID proposed to make an alternative mechanism in line with existing policy of state-run Sonali Bank on loan rescheduling scheme for them.

The proposal came following hue and cry of cold storage businesses who have been incurring losses since 2017 amid falling potato prices, a ministry official said.

The Bangladesh Cold Storage Owners Association (BCSA) wrote to banking division last December about Tk 125-billion loss of potato businesses and farmers in 2017.

It said potato production was 11.3 million tonnes that year and cold storages stored an all-time high of 5.5 million tonnes. But more than 1.5 million tonnes remained unsold.

BCSA president Mosharraf Hossain said it cost an owner Tk 1,000 for per sack of potato (80 kilograms) when it was traded at Tk 250-300 a sack in peak season.

According to the BCSA letter, owners also gave Tk 500-700 as loan against per sack of potato to farmers and small traders in 2017 which they failed to realise.

A meeting was held on December 24 at finance ministry with FID secretary Md Ashadul Islam in the chair.

The FID proposed a meeting involving agriculture ministry, storage owners, Bangladesh Bank and others to find a way following Sonali Bank's rescheduling policy.

The FID additional secretary (bank administration) meeting is likely to chair the meeting that will make a recommendation to the finance minister.

However, Sonali Bank has a policy on cold storages, adopted long back in 2005.

It transferred the entire outstanding project and cash credit of storage owners into interest-free block account and fixed loan repayment period for 20 years at 8.0 per cent interest.

There are over 360 cold storage units across the country and their combined capacity is now 6.0 million tonnes of potatoes, according to the BCSA.

When asked, BCSA secretary Mozammel Hoque Chowdhury said the proposed meeting was yet to be held. He, however, said they also incurred losses in 2013 and 2014 amid political turmoil.

Mr Chowdhury said they were desperate for loan rescheduling to keep the industry vibrant. "The survival of the industry now depends on getting such facility," he told the FE.

Potato farmers, however, have been going through the same ordeal this year like that in 2017.

Potato prices fell to Tk 4.0-6.0 a kg in Rangpur, Dinajpur, Rajshahi and Bogura regions against production costs of Tk 6.0-9.0, according to the Department of Agricultural Marketing.

Potato sold at Tk 15-20 a kg in Dhaka on Saturday which is 13 per cent cheaper than that of a year ago, according to the Trading Corporation of Bangladesh.

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