During 2011-12, India produced about 127 million tonnes of milk, but the country has an estimated 70,000-80,000 tonnes of proper milk storage capacity.

In 2011, India’s vegetables output was about 147 million tonnes, accounting for nearly 11 per cent of the world’s vegetable production. But here also the available cold chain capacity, a key requirement to stem wastage and enhance quality, is hardly 9 million tonnes.

The result — about 30-40 per cent of the production lands up in the waste bin every year, leading to higher costs for consumers and shrinking presence of India in the global vegetables export market, which has slumped to 1.7 per cent.

The country ranks third in fish production, with an output of over 8.5 million tonnes. However, frail cold chain logistics again leads to wastage of about 20-30 per cent of the production.

These were some of the cold statistics thrown up at the national summit on ‘Cold Chain—Emerging Trends and Market Challenges’ organised by trade body Assocham in Hyderabad last week. Cold chain essentially means temperature-controlled storage and transport for perishable products from the point of origin to the consumption centre.

These hard facts continue to beam the grim message that much is needed to be done to beef up cold chain logistics. This is despite the Union Government significantly sharpening its focus on this sector in the last few years by allowing 100 per cent foreign direct investment, giving infrastructure status to the industry and other incentives.

fragmented structure

It is not that there are not enough opportunities in cold storage sector for private investors. The market value of Indian temperature-controlled warehouses is expected to grow at a 26 per cent compounded annually till 2017, enlarging the market size from Rs 98 billion in 2009 to Rs 624 billion in 2017, according to estimates by Assocham and TechSri Research.

By volume, the total capacity of cold chain warehouses is estimated to reach about 47 million tonnes by 2017, going by the current rate of capacity addition.

But still, there will be enormous room for further investment and business opportunities, with the spurt in output of horticulture products and growing export of processed foods and frozen items.

Take the coverage under horticulture crop — it increased from 16.5 million hectares in the beginning of the decade to 21 million hectares last fiscal, with India becoming the world’s second largest producer of fruits and vegetables. But various estimates show that inadequate storage is resulting in an annual wastage of about Rs 35,000-crore worth fruits and vegetables.

The biggest flaw in this chain is the obsolete technology that a bulk of the over 5,300 cold storages in India are using, with most of these facilities built in the 1960s and suitable only for potatoes. Another flaw is that most cold storages are single-product facilities, which narrows capacity utilisation.

Indeed, more than 75 per cent of the cold storage capacity in India is today suitable only for potatoes, which have low economic life. By value, potato storage contributes only 20 per cent in the total revenue of cold chain storage.

“Due to higher returns from the multi-purpose facilities, the new infrastructures coming up are mostly in this sector. In multi-purpose cold storages, various temperatures can be maintained at the same time, due to which capacity utilisation is significantly higher,” points out the Assocham-TechSci Research report.

It estimates that to set up a 100-tonne single-commodity cold storage, an investment of about Rs 50 lakh is required, including Rs 15.8 crore on plant and machinery, Rs 24 crore on land and Rs 9.12 crore for construction.

Green energy link

Says Sabyasachi Ghosh, Andhra Pradesh Principal Secretary (Food Processing): “Cold storages should not be seen as a standalone business and instead be part of the supply chain system that would make better business sense for investors.” Ghosh and his team are drafting a five-year action plan for the food processing sector in the State, with major thrust on cold chain infrastructure through private participation. “We would like to link some of the new facilities with our renewable energy policy,” he said.

Yet another weak link is lack of sufficient temperature-controlled vehicles that are vital to keep the cold chain intact. Currently, there are an estimated 30,000 temperature-controlled vehicles plying across India, with 80 per cent used for transport of milk and milk products and 11 per cent for meat products.

Huge opportunities are awaiting investors in this sector with the increasing demand for such vehicles from the retail and food services sector, especially frozen food.

In the last three years, the revenue generated by these vehicles climbed from Rs 400 crore to Rs 500 crore. Assocham-TechSci believes that the revenue could jump four times from the 2009 levels to Rs 16 billion by 2017, while the number of vehicles could reach 52,000.

Beefing up the cold chain industry will not only reduce wastage and, with it, food cost for consumers, it will also ensure steady availability of food throughout the year.

“What is needed is a holistic approach by the stakeholders, focusing on each aspect of the chain. Cold chain industry players are expected to mint a lot of money in days to come as the demand rises,” the Assocham report points out.

amitmitra@thehindu.co.in

(This article was published on February 17, 2013)
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