With a large number of global retail chains targeting India, the need for retaining quality of both fresh and frozen food has increased, and there is a need for adoption of superior technology by the storage facilities. FDI in retail is just around the corner and is likely to be implemented soon. The government is also promoting the food safety and security bill which would further demand storage and cold chain facilities in order to reduce the amount of food wastage.

1. FDI in retail and the food security bill to boost India’s cold chain industry;
but role of government will be critical
Even after 50 years of independence, India still displays a unique portrait of overflowing godowns and
decaying food on the one hand, while a significant part of the country's population goes hungry. India
currently ranks a low 66 among 105 countries in the 2012 Global Hunger Index. It’s absolutely criminal that
India still has the biggest populace of hungry people in the world when there is really no scarcity of food
within the nation. The biggest problem here is not the non-availability but the wastage of food every year.
It’s unimaginable that nearly USD 7bn worth of food is wasted in India annually, mostly due to poor or nonexistent storage facilities. Out of this, nearly USD 2.5bn is fresh fruits and vegetables which get wasted due
to non-availability of cold storage facilities.
The existing lacuna
Two key reasons for these losses are the lack of quality cold storage facilities at the food manufacturer’s end
and the lack of refrigerated transport to get the produce to the point of sales. Unless there is a vast
improvement in the cold chain infrastructure - from farm harvest to consumption - food problems in India,
which is the second largest producer of fruits and vegetables in the world, will continue to grow.
In the US, the movement of nearly 80-85% of fruits and vegetables happens through refrigerated transport,
in Thailand it’s about 30-40%, while in India it is literally negligible! In India, out of the nearly 100mn tn of
fresh produce, less than 5mn tn is currently transported through refrigerated freight or reefer trucks, out of
which 2mn tn is being exported.
Even if you consider surface storage, currently India has very limited integrated cold-chain infrastructure,
with only ~5,400 stand-alone cold storages having a total capacity of ~23.6mn MT, according to
ValueNotes’s latest industry report - Integrated Cold Chain Industry in India. This is less than half the amount
of cold storage facilities that the country actually needs. In order to reach that target, an investment of more
than USD 10bn is required by the year 2016 to stay abreast with India’s growing fruit and vegetable
production levels.

2. Role of the Centre
The Indian government is taking steps to improve the cold chain infrastructure, by recognizing the cold chain
industry as a sub-sector of infrastructure in the previous union budget, and creating an additional budget to
construct new cold storage facilities. In addition, the private sector is being encouraged to develop the cold
chain industry further, by implementing the latest and most effective refrigeration technology solutions
available today.
The Centre has planned to construct two cold storage units in the state of West Bengal for which work has
already started. These greenfield projects at Jangipur and Jalpaiguri are expected to cost USD 22mn and USD
19mn respectively. These units will be under the PPP model (public private partnership) where the centre is
expected to provide USD 8mn for each project, while the balance funds would be brought in by private
players. More than 50% of the cold storage facilities in India are currently concentrated in Uttar Pradesh and
West Bengal, while other states struggle with investments from the Centre and private operators.
For private players the high level of initial capital required to construct a cold chain unit continues to be the
biggest challenge. But if the government pitches in with a clear plan and promotes more PPP initiatives in
this filed, we could see a momentum growth in the cold chain industry in India.
The Future
With a large number of global food and retail chains targeting the India markets, I feel that the need for
retaining the quality of both fresh and frozen food has increased, and there is a crying need for adoption of
superior technology by the storage facilities. FDI in retail is just around the corner and is likely to be
implemented soon. The government is also promoting the food safety and security bill which would further
demand storage and cold chain facilities in order to reduce the amount of food wastage.
I know that the cold chain industry in India is still in a very nascent stage, but with the expected future
development in road and rail infrastructure, along with the changing lifestyle of the Indian consumer, I think
there is a huge potential for the cold chain industry in the country. According to ValueNotes, the cold chain
industry in India is expected to see a growth of more than 20% CAGR over the next five years. But for this to
happen, the government will have to play a very important catalyst role.
Aniket Pargaonkar | Project Manager at ValueNotes
My 10-year work experience includes working on mergers & acquisitions, private
placements, restructuring of companies, turnaround strategies, industry and sector
studies, opportunity assessment studies, and competitive intelligence.
You can connect with me on aniket@valuenotes.co.in or through my LinkedIn profile.
ValueNotes is a full-service market and business research firm, headquartered in Pune,
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