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Cold storage owners seek loan rescheduling for survival

The sector has a total outstanding loan of Tk 4,000 crore
Rokon Mahmud
23 Jun 2022 00:00:00 | Update: 23 Jun 2022 01:14:00
Cold storage owners seek loan rescheduling for survival
Due to excess production, farmers and cold storage owners are not getting fair prices of potatoes – Shamsul Haque Ripon

As many cold storage owners have been unable to repay bank loans, and many more are on the verge of defaulting, claiming hefty losses, they have sought long-term special loan rescheduling facilities to avoid shutting down.

They have asked for defaulted loans to be rescheduled against a 2 per cent down payment, with a 2-year moratorium facility, and a 20-year repayment period extension, and for non-defaulted loans to be rescheduled with a 20-year repayment period extension.

They also insisted on paying the loan instalments annually rather than monthly.

To this end, Bangladesh Cold Storage Association (BCSA) sent a letter to the Bangladesh Bank last week.

According to the BCSA, the country produces over 1.2 crore tonnes of potatoes against an annual demand of 80-85 lakh tonnes.

Due to excess production, farmers and cold storage owners are reportedly failing to get fair prices for potatoes.

On the other hand, due to many cold storages in the country, the owners face fierce competition and allegedly end up having to charge below-market rent to survive.

In 2021, the sector claimed to have suffered a loss of almost Tk 3,200 crore because of a drop in the market price of potatoes.

Currently, the cold storage sector owes banks around Tk 4,000 crore in loans, with 71 cold storage owners defaulting.

Earlier in 2015, when many cold storage owners defaulted, the banks rescheduled their loans, extending the repayment period by 5-6 years.

According to the BCSA’s letter sent to Bangladesh Bank, around 50 million people, including 35 million farmers and their families, are directly involved in the cold storage industry.

Potato production in the country is gradually increasing as a result of the availability of more than 400 cold storage facilities.

However, the sector is suffering from high-interest rates on projects and working capital loans; high operating costs; high labour costs; rising electricity prices; rising spare parts and lubricant prices; and other ancillary liabilities.

According to industry insiders, cold storage owners operate by providing loans to farmers to facilitate potato production and buying the produce at market prices and storing it themselves. They also rented cold storage space to farmers for potato storage.

But when the price of potatoes falls, cold storage owners, like farmers, suffer losses.

“When the letter was delivered to Bangladesh Bank last week, the governor immediately referred the matter for further consideration,” said BCSA President Mosharraf Hossain.

He also said that they would meet with the deputy governor soon to discuss the issue further.