Not just potato, entrepreneurs now investing in cold storage for onion, carrot

Two decades ago, Fazlur Rahman, an entrepreneur in Rajshahi, built a 3000-tonne onion cold storage facility, but it eventually closed down due to consecutive annual losses. Recently, another entrepreneur has set up a new onion cold storage project, albeit on a smaller scale.

There are over 400 cold storage facilities in the country, mainly used for preserving potatoes, according to the Bangladesh Cold Storage Association.

The association members told TBS that many cold storage owners are now interested in establishing storage facilities for other products, similar to how potatoes are stored year-round to ensure a consistent supply. This includes storage options for import-dependent vegetables such as onions and carrots.

Giant Agro Processing Ltd has constructed a 500-tonne capacity cold storage in Bhaluka, Mymensingh, using Dutch technology. The facility is slated to be inaugurated next month.

Feroz M Hasan, managing director of Giant Agro, told TBS, "We have established the storage on a trial basis. Despite awaiting inauguration next month, onion preservation operations have already started."

Since 2020, the Trading Corporation of Bangladesh (TCB) has been attempting to establish an onion cold storage, but the project has yet to materialise.

As per data from the Ministry of Agriculture, Ministry of Commerce, and the Cold Storage Association, the country's annual onion production exceeds 34 lakh tonnes, while the demand ranges between 27 to 28 lakh tonnes.

However, post-harvest losses, ranging from 25% to 40%, reduce the usable onion supply to around 25 lakh tonnes annually. Consequently, the country needs to import an additional 5 to 7 lakh tonnes of onions each year to meet demand.

Most of these imports originate from India due to its proximity, resulting in shorter lead times. Any halt in India's onion exports significantly impacts Bangladesh. In the past, Bangladesh has experienced soaring onion prices, reaching as high as Tk270, when India suspended its onion exports temporarily.

Feroz M Hasan said, "Effective onion preservation could reduce our reliance on imports and save huge foreign currency."

Entrepreneurs are now keen on establishing cold storage not just for onions but also for various other import-dependent products, aiming to ensure year-round availability of seasonal produce.

Himadri Limited, with over 50 years of experience in potato cold storage since 1974, plans to venture into carrot preservation, setting up an experimental cold storage facility.

Company officials said construction is expected to commence between June and July, with efforts to secure low-cost capital through preferential bank loans or foreign institutional borrowing.

Annually, the country imports over 12,000 tonnes of carrots, primarily from China and India. While locally produced carrots are priced between Tk30-50 per kg during the production season, imported carrots command significantly higher prices year-round, reaching up to Tk150 per kg in Dhaka markets.

Despite producing over 1.5 lakh tonnes of carrots annually in the country, a portion of the yield is squandered due to inadequate storage facilities.

According to Bangladesh Bank data, over Tk27 crore was expended on carrot imports in the fiscal 2022-23.

Cold storage owners said by preserving a fraction of the winter carrot harvest, the need for imports could be eliminated, enabling year-round domestic supply.

Eshtiaque Ahmed, director of Himadri Limited and senior vice president of the Bangladesh Cold Storage Association, told TBS, "We want to preserve agricultural products, particularly those that need to be imported despite ample domestic production. Initially, we want to build a cold storage facility for carrots.

"Carrots are produced seasonally in our country, leading to shortages throughout the year, which are met through imports. By developing our storage infrastructure, we aim to reduce reliance on imports."

The company plans to construct a carrot storage unit initially with a capacity of 800-1,000 tonnes, utilising different technology from potato storage. While potatoes are stored at 3 degrees Celsius, carrots require storage at zero degrees.

Eshtiaque Ahmed refrained from disclosing the investment amount at this stage for business reasons. However, industry insiders estimate that constructing a chamber with a capacity similar to those used for potatoes, ranging from 2,500-3,000 tonnes, requires an investment of around Tk7 crore.

Eshtiaque said certain members of the Cold Storage Association are also dedicatedly focusing on establishing storage facilities for products like onion and garlic. The initiatives are now progressing from planning to implementation stages.

These entrepreneurs demand low-interest funding to invest in diversifying their cold storage offerings.

Mostafa Azad Chowdhury Babu, the president of the Association, emphasised the challenges posed by the current high interest rates on bank loans, which range from 13% to 14%. "With such rates, profitability becomes a concern. If the government facilitates loans at a significantly lower interest rate, around 3-4%, through the Bangladesh Bank or from foreign sources, it would encourage increased investment in this sector," he said.

Most cold storage facilities in the country have four chambers and allocating one or two specifically for storing onions or other perishable agricultural products requires additional investment. Access to low-cost funding is crucial for such investments, hence the appeal for government support, Mostafa Azad added.

Challenges faced by entrepreneurs

Cold storage owners stressed the importance of preserving a variety of products such as potatoes, onions, tomatoes, carrots, meat, and dates, to safeguard the nation's food security. 

Some items may require processing as they cannot be stored in cold storage for extended periods. Entrepreneurs are keen on integrating these processing technologies into the preservation system.

However, entrepreneurs highlight another challenge in this regard. They said while importing a compressor for cold storage incurs only a 1% additional duty, importing individual parts of the compressor subjects them to tariffs of up to 130%.

Mohammad Asaduzzaman, president of the Bangladesh Refrigeration and Air-conditioning Merchant Association and chairman of the Standing Committee on Refrigeration, Air Conditioning, and Cold Chain Policy Implementation of the FBCCI, called for reducing this tariff to a range of 3-5%.