study with respect to Indian scenario

1. Coldchain industryin India – Presentstatus and future prospects
Thursday,10 March, 2016, 08 : 00 AM[IST]
SateeshKulkarni
Overview
Coldchaininvolvesthe transportationof temperature-sensitive productsalongasupplychain
throughthermal and refrigeratedpackagingmethodstoprotectthe integrityof these shipments.
There are several meansinwhichcoldchainproductscan be transported:Refrigeratedtrucksand
railcars;Refrigeratedcargoships;andAircargo.
India'sintegratedcold chain industry
India’scoldchainsectoris a combinationof surface storage andrefrigeratedtransport.The industry
has beengrowingata Compound Annual Growth Rate (CAGR) of 20% for the lastthree years.The
coldchain marketinIndiaisanticipatedtoreach Rs 624 billion(US$13billion) by2017, according to
2014 estimates.Coldstoresare the majorrevenue contributorsof the Indiancoldchainindustry.
Currently,Indiahas6,300 coldstorage facilitiesunevenlyspreadacrossthe country,withaninstalled
capacityof 30.11 millionmetrictonne.These are mostlyusedforstoringpotatoes.However,the
marketisgraduallygettingorganisedandfocustowardsmulti-purpose coldstoragesisrising.More
than 50% of the coldstorage facilitiesinIndiaare currentlyconcentratedinUttarPradeshandWest
Bengal,while otherstatesstill face achallenge withinvestmentsfromthe governmentandprivate
operators.
Facts
 Organisedplayerscontributeonly~8%–10% of the coldchain industrymarket
 36% of these coldstoragesinIndiahave capacitybelow 1,000 MT
 65% of India’scoldchainstorage capacity iscontributedbythe statesof Uttar Pradeshand
WestBengal
 At the currentcapacity onlylessthan11% of whatis producedcan be stored
Governmentinitiatives
Indiaisone of the largestproducers of agricultural productsandone of the global leadersinthe
pharmaceutical sector.Yet,itisknownto have a fledglingcoldchain,whichresultsinsupplychain
lossesof foodandotherresources.These losseshave been statedtobe ashighas US$8 to 15 billion
perannum fromthe agriculture sectoralone.Toaddressthisconcern,the governmenthadearlier
constitutedaNational TaskForce on ColdChainin2008.
The agriculture andfoodprocessingsectorsinIndiahave beendevelopingandtodayIndiaisa net
exporterof foodgrains.Thisisa dramatic transformationfromthe 70s and 80s whenIndiausedto
importfoodgrainsto feeditspopulation.Thishaslargelybeenaresultof the higheryieldsachieved

2. as a resultof the GreenRevolution.Alongside this,there have beensignificantstridesinthe
productionof fruitsandvegetables.
Segment-wise size & productsin FoodProcessingIndustry
Segment Size
(MillionTonne)
Key Products ExpectedGrowth
(%)
DairyProducts 121 Value-addedMilk,
Butter, Cheese
8
Fruits& Vegetables 233 Raw Fruits& Vegetables, Pulp,
Canned Food
7
Meat & Poultry 11 Poultry, Beef 18
Seafood 8.4 Seafood Products 7
PackagedProducts Rs 8,000 crore Ready-to-eat&
Ready-to-cook
8
However,lackof properand adequate foodstorage,processingandcoldchainlogisticsremainsa
seriouschallenge.The Governmentof Indiaisone of the drivingforcesindevelopingthe coldchain
industryandsupportsprivate participationthroughvarioussubsidyschemesandgrants.Investment
incold chaininIndiawas alsoopenedunderthe automaticroute for100% FDI participation.The
existingcoldchaininIndialargelycomprisedcomparativelysmallprivate companieswitharegional
or local footprint.
In the previoustwodecades,Indiahasbeendevelopingata quickpace and an increasingdemand
for highvalue foodswithashifttowards horticultural cropshasbeendocumented.This,coupled
withrapid urbanisation resultedinmulti-foldchangestothe spendingandconsumptionpatternof
India'spopulation.The existingfood supplychain systemswereunable tocope withthese fast
changingdemographictrendsandthe lackof efficientandeffectivesupplychainsisunderstoodto
leadto a varietyof lossesinthe perishablefoodsegment.
In 2012, Indianfarmersproduced240 millionmetrictonne of horticultural produce,almostequalto
itsgrain and cerealsproduction.Variousstudiesindicate that18% to 40% of thisproduce waslost
due to supplychaininefficiencies,concludingthata focussedeffortwasrequiredtopromote the
developmentof the coldchainin the country.The Indiangovernmentandits Planning
Commission speltoutclearintention,thatcoldchainhasto be supported.Amongstthe core
identifieddevelopmentareasare the base infrastructure,environmentally-friendlytechnologies,
standardsand protocols,enablingpoliciesandspecialisedskills.
The Indiangovernmentistakingstepstoimprove the coldchaininfrastructure,byrecognisingthe
coldchain industryasa sub-sectorof infrastructure inthe previousUnionBudgetandcreatingan

3. additional Budgettoconstructnewcoldstorage facilities.Inaddition,the private sectorisbeing
encouragedtodevelopthe coldchainindustryfurtherbyimplementingthe latestandmosteffective
refrigerationtechnologysolutionsavailable today.
For private playersthe highlevel of initial capital requiredtoconstructa coldchainunitcontinuesto
be the biggestchallenge.Butif the governmentpitchesinwithaclearplanandpromotesmore PPP
initiativesinthisfield,we couldseeamomentumgrowthinthe coldchainindustryinIndia.
Initiativesto boost the cold chain infrastructure
 100% FDI throughgovernment route
 Since 2011-12 coldchain has beengiveninfrastructure status
 Viabilitygapfundingupto40% of the cost
 5% concessiononimportduty,service tax exemption,excise dutyexemptiononseveral
items.Subsidyof over25%to 33.3% on the coldstorage projectcost
 Establishmentof National Centre forColdChainDevelopment
 Proposedfinancial outplayforcoldchaininfrastructure &foodparksof US$335 millionand
US$650 millionrespectively.Over50%-70% capital grant on projects.
Key challenges
 Lack of qualitycoldwarehousinginfrastructure:There isasevere shortage of coldchain
warehousingcapacityasonly25% of the capacityis available forfruits,vegetables,
processedfoodsandpharmaceuticals,whereas75% of the capacityis dedicatedtopotatoes.
 Lack of standardsand protocolsinconstructionandoperationof facilities:Technical
standardsfollowedinIndiaare mostlyunsuitable forIndianconditions,whichresultsin
lowerperformance of standardrefrigeratedsystems.
 Low awarenessof labourinhandlingtemperature-sensitiveproducts:InIndia,the supply
chainof mostproductsis longand fragmented.A productchangesmanyhandsfromsource
to deliverypoint.Mostworkersinvolvedinthisare notproperlytrainedinhandling
temperature-sensitive productsresultingindeteriorationof productqualitybefore reaching
the consumer.
 Highfuel cost andpowercuts: Fuel costsinIndiaconstitute around30% of operating
expensesof coldstorage inIndiaas comparedto 10% in the West.Further,cold storagesare
dependentonsteadysupplyof power.MostIndianregionsface powercuts.Hence,these
companieshave toinvestinpowerback-ups,whichpushupthe capital investment
requirement.
Future prospects
Witha large numberof global foodandretail chainstargetingthe Indiamarkets,FDIinretail isjust

4. aroundthe cornerand islikelytobe implementedsoon.Thengovernmentisalsopromotingthe
foodsafetyandsecuritybill whichwouldfurtherdemandstorage andcoldchainfacilitiesinorderto
reduce the amountof foodwastage.Withthe expectedfuturedevelopmentinroadandrail
infrastructure,alongwiththe changinglifestyleof the Indianconsumer –Indiancoldchainindustry
isexpectedtogrowat a CAGR of 28 per centoverthe nextthree yearsandreacha marketsize of
$13 billionin2017, althoughitislargelyunorganisedinnature.Thereby,presentingagreat
opportunityforforeignplayers.Butforthisto happen,the governmentwillhave toplaya very
importantcatalystrole.
Globallycoldchainshave nowbecome anintegral partof supplychainmanagementforthe storage
and transportationof temperature-sensitivegoods.The focushasnow shiftedfromincreasing
productiontobettercoldstoragesand transportationof foodproduce. The utilisationof coldchain
logisticsincludesbothcoldstoragesandrefrigeratedtransportationandisusedtoincrease the shelf
life of foodproduce.
With35-40% of agricultural produce inIndiabeingwasteddue tolackof propercoldstorage
facilities,itisimmenselyimportantthatafocussedeffortisrequiredonpartof the governmentto
encourage the use of cold chainamongmarketparticipants.Some of the likelystepsthatthe
governmentcouldtake are mentionedbelow:
 Provide requisite supportlike lowercostof fundingforsettingupcoldchaininfrastructure
facilities.
 Promote awarenesscampaignandeducate marketparticipantaboutthe importance of cold
chainfacilities.
 State governmentscanencourage settingupof coldstorage facilitiesbyprovidingsubsidised
powertariff aspowerformsa significantproportionof the operatingcost.
 Encourage betterand more efficientrefrigerationtechnologiestoimprove the shelf lifeof
perishable products.