Cold storages face the heat as potato prices crash

Owners of cold storages in major potato-producing States including Uttar Pradesh, West Bengal, Bihar and Gujarat are a worried lot these days. A sizeable amount of loans they had taken from banks to lend to potato farmers and traders have not been repaid and have turned into non-performing asset (NPA).

With the price of the tuber crashing, a majority of the farmers and traders have been unable to repay the loans they had taken from cold store owners against warehouse receipts. Unable to repay their loans, cold storages are shutting down operations.

According to Mahendra Swarup, President, Federation of Cold Storage Association, 200-300 cold storages in UP, which is the largest potato-growing State, are likely to close down as they have become unviable.

“A majority of the store owners have only been able to repay 50-60 per cent of the loans taken at the beginning of the loading season in February. While it is difficult to say the total amount of credit taken, as per our estimate, ₹400-500 crore are yet to be repaid,” Swarup said.

UP has close to 1,700 cold storages with a capacity of around 120 lakh tonnes. The State produces 140-150 lakh tonnes of potatoes a year. Agra and Farukkhabad, which are the key producing districts, have been the worst hit, said Swarup.

Grim situation

The situation is equally grim in West Bengal, the second largest potato-growing State with an average annual production of 100-110 lakh tonnes. The State has close to 470 potato cold storages with a capacity to load about 70 lakh tonnes of the tuber.

Ashok Kumar Pradhan, MD and CEO, United Bank of India, said the West Bengal Cold Storage Association (WBCSA) has urged the State Level Bankers’ Committee (SLBC) to restructure the loans to salvage the situation. United Bank is the SLBC convenor in the State.

“In the last SLBC meeting, in December 2018, they had asked for a restructuring of loans. But we did not feel there is much stress, so we did not think restructuring would be essential. But we have asked individual banks to look at it on a case-by-case basis,” Pradhan said. The WBCSA estimates the total loss incurred by the potato industry in the State, including growers, traders and store owners, at ₹2,000 crores.

 

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