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Karnataka cold storage units freeze under crisis
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Sunday, 01 May, 2005, 08 : 00 AM [IST]
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Nandita Vijay, Bangalore
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products, high power bills and interest rates, the cold storage industry in Karnataka has gone into deep freeze. Of the 114 cold storage units in the state, a mere 30 are up and running. As a result, a majority of units are up for sale since they have become unviable.
One of the main reasons for the slump in business is the glut in horticulture products with yield available throughout the year, even off-season. Ten potato cold storage units had to shut because of the availability of potatoes at a cheaper cost from north during the state's harvest season.
The crisis has become more acute with rising power costs and the hike in interest rates on loans. With a 500-tonne capacity cold storage unit having to pay power charge of up to Rs 40,000 a month and hike in interest rates to 18 per cent, most cold storages sold their establishments to buyers who have converted them into garment production units, IT business outlets, restaurants or even marriage halls which are proving to be more lucrative.
Most of the cold storage units that went up for sale were the single commodity units. But if entrepreneurs have to establish a multi-channel cold storage, maintenance costs will be higher and they will become unaffordable, informed sources from the University of Agricultural Sciences.
Entrepreneurs are thus caught in this viscous circle of investment and diversification. Cold storage units require huge investment ranging from Rs 10,000 to Rs 12,00 a tonne for a traditional model. For hi-tech units with imported lower end pre-cooling devices, the cost could go up to Rs 1 crore. However, the returns from investments are a mere 30 per cent of which 50 per cent goes for power costs and the remaining is used up to repay loans, informed Ms. Shailaja Somanath, president, Karnataka Cold Storage Association and managing director, Sourabh Cold Storage (Karnataka) Limited and Proprietor Sneha Cold Storage.
Currently, there are only 28 single commodity cold storage units in the state. They are Bangalore (12 ), Hassan (3), Belgaum (4) and Kolar (9). While the multi-channel units are still operational and optimally utilised for meat and fish products, storage of fruits and vegetables has come down sharply.
In Belgaum, cold chain was viable for export marketing and not on the domestic front going by the regular availability of fruits and vegetables. Grape growers had capitalised on the high yield of quality grapes in the region and had begun to export to UK and Netherlands. Customers here were stringent when it came to size, taste and colour of grapes. They demanded firm and sour varieties of grape bunches. If the supply was rejected because they failed to comply with quality standards, exporters could not sell them in the domestic market where the demand was for sweet grapes, informed Ms. Somanath. Hence unit owners decided to store meat products with demand from the export market.
High airfreight charges and stringent rules by the National Horticulture Board while offering loans have also hit the sector.
Though there have been proposals to help the sector like interest subsidy scheme for setting up new units under which loans will be provided to the projects at a concessional rate of 6 per cent, abolishing of excise duty on refrigeration plant and machinery and import duty on raw material and adoption of advanced technology, most of them have not been implemented and are unaffordable, said a cold storage owner on condition of anonymity.
In the absence of proper storage facilities and an organised cold-chain, Karnataka which is the fourth largest producer of fruits , continues to suffer from heavy wastages and perishables, fruits and vegetables, averred Ms. Somanath. Even the subsidy of Re 1 per unit of power that the Karnataka government under chief minister S M Krishna had introduced to boost cold storage facilities for farm and horticulture produce and to open up marketing opportunities has been scrapped, informed Ms. Somanath.
Faced with these problems, the Karnataka Cold Storage Association has been lobbying with the government to recognise the cold storage industry as an agriculture sector as it is an extension and critical arm of the farm operations. But the government has classified the cold storage under industry sector and hence the power charges are fixed at Rs 900 an HP a year. This despite the Centre's advice to state governments to consider cold storage as basic agricultural infrastructure and hence provide power at concessional tariff for at least 10 years and provide subsidy for purchase of generating sets.
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