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Govt spots logistics, a lucrative investment for entrepreneurs in dairy
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Tuesday, 28 July, 2020, 08 : 00 AM [IST]
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Nandita Vijay, Bengaluru
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The Union government has spotted logistics as a lucrative investment opportunity as it is driven by a rapidly growing market in the Indian dairy sector. There is a huge shortfall for ambient, reefer and insulated trucks as well as cold warehouses.
“Here the total investment required is Rs 9 crore to Rs 11 crore. The potential returns expected are 7 to 11 per cent IRR (internal rate of return) with a payback of 6 to 12 years. We see that there are attractive returns and proactive government support,” said Atul Chaturvedi, Secretary, Ministry of Animal Husbandry.
Further there is potential to set-up additional transportation capacity across reefer, insulated and ambient vehicles and cold warehousing to match enhanced milk processing requirement. “Some of the potential business models would be establishment of independent warehouse operations and transportation services including third-party contract logistics services,” he added.
Identifying five investment opportunities in dairy between Rs 125 and Rs 140 crore, at the recently-held FICCI webinar on Development of Indian Dairy Sector, Chaturvedi pointed out that these span across production and supply of production and cattle feed.
“Infrastructure for chilling and processing, widens processed milk opportunity. This along with supply of D2C milk across top consumption hubs like the metros would take the dairy industry in the country to the next level of growth. There is also a huge demand for A2 milk tipped to be far more nutritious,” he said.
While the infrastructure gap for production of cattle feed is 10-18 MMT, in the area of chilling units too the shortfall was 120-130 MMT. The investment potential was tipped to be Rs 3,000-5,000 for cattle feed. The highest investment came forth for production of milk at Rs 19,000 to Rs 20,000.
The overall production capacity envisaged for 2025 is 285-295 MMT (million metric tonne) as against the current 188 MMT. Here states of UP, Rajasthan and AP account for 40% of total investment potential.
Specifically in logistics, reefer vehicles are a profitable investment opportunity with potential of 20% returns and payback of 6-7 yrs, with proper route and load planning.
Investment for reefer vehicles varies significantly across capacities. It can vary from Rs 18 to Rs 30 lakh depending on reefer capacity from 6 tonne to 18 tonne. The key returns for the project are based on distance travelled, percentage travel with load, diesel prices and product mix. Even insulated vehicle is a profitable investment opportunity with potential of 18% returns and payback of seven years with proper route/ load planning, according to Chaturvedi.
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