Tata Chemicals, one of the world’s largest manufacturers of soda ash is dissolving its 50:50 JV with Total Produce Ireland, one of Europe’s largest suppliers of fresh produce, as uneconomic operations forced it to suspend operations at its lone distribution centre in Punjab.

“As of now the operations are suspended and we have taken a Rs 12 crore provision for impairment of our investment in Khet-Se Agriproduce India. We will be dissolving the joint venture subsequently as the business has failed to take off,” said a top Tata Chemicals official. The JV entered into in 2007 aimed to set up state-of-the art sorting, grading, packaging and distribution centres which cater to cash and carry wholesale trade, small fruit and vegetable retailers, hotels, restaurants, caterers and organised retailers.

The JV also had plans to adopt the franchisee route to grow its store network. The firm was slated to invest Rs 212 crore till financial year 2012, to set up 20 cash and carry distribution centres across India. In Ludhiana, the company had set up a state-of-the-art cold storage and ripening facility that functions as an integrated collection, primary processing and distribution centre. A franchisee, on the other hand, runs the store, which services local clientele such as businesses and small retail outlets. The company was also in talks to set up a distribution centre at Kalyan near Mumbai.

“The JV experimented with several different products, lastly narrowing its range of produce to just bananas. Now we have decided to suspend operations as the operations are not viable,” said the top Tata chemical official. The Punjab facility catered to the requirements of Ludhiana and Patiala and had facilities of sorting, grading and packing of all fresh produce; four ripening chambers of 10 metric tones (MT) capacity each and four cold storages of 25 MT each.

In its 2010-2011 annual report Tata Chemicals said, “Khet-se achieved a total distribution of 5660 MT against 4077 MT of fresh produce valued at Rs 9.46 crore against Rs 7.17 crore in the previous year. Khet-Se brand of banana is now available with all the major retail chains like Wal-Mart, Spencer’s, and Reliance as a premium brand. Volume of business for Khet-Se greens has doubled during the current year. Key customers for greens are organised retailers in Punjab and Chandigarh. This business is yet to achieve the break-even point and the desired level of turnover.” The JV had a net loss after tax of Rs 6.5 crore for the fiscal year 2010-2011,according to figures gleaned from the report.

Meanwhile Tata Chemicals also said it took an impairment charge on assets at its Nanded, biofuels facility. This is the second major business that it seems to be exiting. It had planned to develop a significant presence in the bio-fuels space and had set up a Rs 50 crore bioethanol plant with technology from Praj Industries to process sweet sorghum into fuel that can be mixed with auto fuels under the government’s fuel blending programme. “Our Nanded operations have been shut for the past few months and are not reviving as the price of sweet sorghum does not dovetail well with the sale prices of bioethanol. Sugarcane is the other alternative feedstock but that is reserved primarily for co-operative sugar factories. We are therefore looking to sell or lease the facility or shift it outside India to a location where it does not face similar issues,” said R Mukundan, MD, Tata Chemicals. The plant had a capacity of 30 kilolitres per day.

Even as these two new business diversifications in the B2B space seem to have misfired, the company which is the largest branded salt firm in India, is increasing its focus on B2C businesses. Its i-Shakti branded pulses are now being sold across 18 states and it plans to enter the nutraceuticals business too. “The site breaking for our Rs 20 crore plant near Chennai that will manufacture sugar substitutes for use by consumers has already taken place,” said PK Ghose, executive director and CFO at Tata Chemicals.