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Cold chain sector to nearly double in five years; Meat to drive growth
Wednesday, 14 February, 2018, 08 : 00 AM [IST]
Our Bureau, Mumbai
Crisil Research expects two key segments – meat and seafood – to buoy growth of the cold chain industry by 200 basis points (bps) in the next five years (i e until fiscal 2022). These segments cater mainly to the export markets, where organised players are preferred due to stringent quality requirements and regulations.

It expects the cold chain industry to log a compound annual growth rate (CAGR) of 13-15 per cent in the five fiscals through 2022, compared with 11-13 per cent in the previous five. This will swell the industry to Rs 47,200 crore in fiscal 2022 from Rs 24,800 crore in fiscal 2017.

In the meat segment, growth would be led by carabeef, or buffalo meat, which also has the largest share of exports at about 45 per cent. The bulk of this is routed through either the Jawaharlal Nehru Port (JNP) in Maharashtra or via inland container depots in Uttar Pradesh, as these states are the largest meat production centres in the country. Also, frozen meat is moved via railways from Uttar Pradesh to Maharashtra for export via JNP.

In the seafood segment, growth would be led by shrimp, which contributed 38 per cent in volume and 65 per cent in value terms to total seafood exports in 2016-17. About 70 per cent of the seafood exports are routed from four major production centres - Gujarat (via Pipavav port), Andhra Pradesh (via Vishakhapatnam port), Kerala (via Kochi port), and Maharashtra (via JNP). Consequently, the demand for multi-purpose cold storage units, too, is expected to emanate from these states.

Significant demand is also seen coming from fruits and vegetables, particularly the exotic varieties, which fetch higher margins.

As per the Agricultural and Processed Food Products Export Development Authority (APEDA), the share of fruits and vegetables in exports, among principal commodities, increased to 22 per cent in fiscal 2017 from 14 per cent in fiscal 2016. Also, between fiscal 2013 and 2017, exports of fruits and vegetables increased at a CAGR of 11-12 per cent in volume terms.

Still, the wastage in fruits and vegetables is high - at 15-16 per cent as per the Central Institute of Post-Harvest Engineering and Technology (CIPHET). That is mainly because cold storage units are located near consumption centres rather than farm gates.

Prasad Koparkar, senior director, Crisil Research, said, “This calls for investment in cold storages 50-150km from the farm gate, as well as meat production centres, so that an efficient cold chain grid is built across India. Investments in temperature-controlled vehicles, or reefers, would also be necessary.”

Crisil Research’s interactions with market participants indicated that there was intense pressure on reefer rentals, especially in seafood, meat, and ice cream, as a large number of unorganised players catered to the segment.

The fragmented nature of the industry also contributes to lower rentals, while the unavailability of a return load leads to inefficient utilisation of reefer vehicles.

Binaifer Jehani, director, Crisil Research, said, “Investment in cold chains and reefers suffers due to the lack of first- and last-mile connectivity. Besides, stiff competition and low preference of end-user industries to transport via reefers (as it increases costs) restrict private players from investing in the segment. We, therefore, believe greater adoption of the integrated cold chain model will help improve utilisation, and thereby draw investments.”
 
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