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Strengthening India’s cold chain infrastructure can accelerate growth of food processing
Friday, 30 September, 2022, 12 : 00 PM [IST]
K S. Narayanan
The cold chain industry is one of the most critical components of the food processing value chain, where perishables form one of the largest segments. Even now, some sub-segments of perishables see wastage as high as 40%, where a lack of cold vhain infrastructure is a major aspect.

The Indian cold chain industry is at a nascent stage and remains largely untapped due to several factors, such as the requirement of high capital investment, lack of requisite supporting transport infrastructure (roads, bridges).

There is a significant opportunity to improve the cold chain industry in India. In order to further bolster the attractiveness of the industry, the Ministry of Food Processing Industry,  under the Pradhan Mantri Kisan Sampada Yojana (PMKSY) initiative, provides financial incentives for setting up cold chain infrastructure.

Over the next decade, as India’s perishables market is expected to grow at the back of an expected 15% CAGR growth of the food processing sector, the need for cold chain facilities is expected to increase exponentially. As per available information from the Ministry of Agriculture and Farmers Welfare, there are 8,186 cold storages with a capacity of 374.25 Lakh MT which is available in the country for storing perishables.

Currently, the cold storage industry in India is severely unorganised. A significant portion of these cold storage facilities are privately owned (95% of cold storage facilities are owned and operated by the private sector, whereas 3% are owned by cooperatives, and the remaining 2% fall under PSUs). Within the country, the distribution of cold storage is disproportionate, with the majority of cold storage facilities being located in Maharashtra, Uttar Pradesh, Gujarat, Punjab, and West Bengal. These facilities are being used to store primary produce and are located close to farming areas, mainly for crops such as potatoes, chilies, onions.

As per the 2020 global cold chain capacity report by the Global Cold Chain Alliance (GCCA), the global cold chain capacity as of 2020 was estimated to be 719 million cubic meters, 16.7% greater than the capacity reported in 2018. India was among the top 5 countries in terms of total capacity, along with US, China, Japan, and Great Britain.

However, in terms of average warehouse size, countries such as US, Canada, and Brazil have warehouse sizes of over 100,000 cubic meters. In contrast, India’s average capacity per cold chain warehouse is 20,000 cubic meters highlighting the fragmentation of warehouses in the country. Such fragmentation results in higher handling requirements, resultant losses, scalability challenges, and more issues.

Furthermore, India (being a tropical country), experiences an average temperature that is higher compared to other nations, amplifying the requirement of cold chain infrastructure.

The Indian market needs to provide higher capacity warehouses and densely set up warehouses that can hold a large volume of fruits and vegetables (F&V), dairy, similar to the set ups in US, China, and other developed nations. Bridging this gap will allow India to reduce wastage and build a robust ecosystem to accommodate future growth in production while simultaneously boosting export volumes.

Comparing the production volumes of fresh produce (F&V and dairy) with the capacity of the Cold Chain in the country, the results clearly showcase the need for developing the cold chain infrastructure with larger investments.

Furthermore, throughout the year, the Indian subcontinent experiences tropical weather. India has one of the most humid and highest average temperatures during the major crop seasons, which shortens the life of fresh perishable produce.

In comparison to US, UK, Germany, and China, India is 25% warmer and does not get as cold during the second half of the year. Hence, during the second half of the year, these countries are colder in comparison to India, which naturally lengthens the life of fresh produce.

Fresh produce and perishables being transported in such weather conditions deteriorate in quality quicker than in colder nations, which is aggravated due to the underdeveloped cold chain infrastructure.

Growth Drivers

Growing organised retail and the rapid growth of national as well as international chains of QSRs/cafés in the country. Increased food quality, safety, and product sensitivity. Growth of the food processing and pharmaceutical industry.

Key government impetus and initiatives
Increased investment in the farm-to-folk supply chain space and innovative start-ups integrating technology to map demand and produce for optimized supply chain models.

Challenges
  • High capital and overhead costs
  • Uneven distribution of capacity
  • Growing cost of operations, real estate, and availability of electricity throughout the year
  • Supply chain and capacity utilization gaps
Way Forward
Developing cold chain facilities in Tier II and Tier III cities. A few developments here could lead to a massive reduction in wastage, thus ensuring the availability of more food for sale and further processing. Planned set-up of cold chain infrastructure near production centres, close to markets for sale would be important to ensure minimal wastage. Operators must work in conjunction with real estate developers to optimise the costs of cold chain facilities.

Financial institutions should provide easy credit to investors and bolster investment in Cold Chain infrastructure with easier loan sanctioning, lower interest rates, and easier disbursement. Government should treat temperature-controlled warehousing for non-agricultural commodities at par with infrastructure projects to encourage investments in the cold storage industry.

More frameworks must be developed to provide tax benefits and tariff subsidies for cold chain facilities.

New technology, improved storage and handling processes, should be adopted which aim at reducing transmission losses, improving the duration of storage, and achieving better prices in the market.

(The author is principal consultant, food processing sector – Nexdigm)
 
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