Danfoss sees big opportunity in cold chain infrastructure

M Ramesh Chennai | Updated on July 05, 2020 Published on July 05, 2020

Ravichandran Purushohaman, Danfoss India President

Stock holding limits are gone and farmers can sell their produce to whomsoever they wish to — as such companies can buy farm produce and store it for the whole year.

The upshot of it — a big spurt in the setting up of cold chains across the country, says Ravichandran Purushothaman, President Danfoss India.

Danfoss India, the Indian arm of the Danish multinational of the same name, makes electronic control devices that go into cold chains, and indeed, in any contrivance that needs temperature control. As such, the company has its skin in the game when it comes to cold storage infrastructure.

The unfolding scenario post the recent pivotal agricultural reforms came to Danfoss as a pleasant surprise. The company expanded its capacity to make drives, controls and other products anticipating a demand arising from Prime Minister Modi’s efforts to double farmers’ income in five years. But now, with the agricultural reforms, “Danfoss has a great opportunity,” says Purushothaman, because more organised players will come into agriculture.

Assurance from govt

In a recent webinar on agriculture, Balram Singh Yadav, Managing Director, Godrej Agrovet, said that his company, being a processor, would like to buy for the full year — he said in the context of seeking assurance from the government that stock holding limits would not be brought back.

Danfoss expects companies (like Godrej Agrovet) and farmer producer organisations (FPOs) to get serious about building cold rooms, warehouses and packhouses, and refrigerated trucks. The $14-billion Agri Infra Fund announced by the government would be a big help is creating these assets.

At the end of December 2019, India had 8,064 cold storage units, with capacity to hold 36.95 million ton. Uttar Pradesh has the most (2,380 units and 14.57 mt) followed by West Bengal (510 units, 5.9 mt) and Gujarat (964 units and 3.8 mt) Purushothaman expects another 12 million tonnes of capacity to come up. “It will take about three years, but it will happen,” he told Business Line.

Arvind Agarwal, President, UP Cold Storage Association, too believes there would be a “boom” in cold chains and packhouses, in about three years. He said the country would see a “sea change” in the fruits and vegetables trade.

The sea change, he said, would come about mainly on account of digital buying from customers’ side and the enablement of e-trading platforms on the supply side. The e-trading platforms would bring in a transparency in pricing that was absent earlier.

Online buy

Online purchasers are typically very quality-conscious; you can’t deliver quality products unless you have packhouses and refrigerated transportation, Agarwal, who is also the National Co-ordinator of the Federation of Cold Storage Associations of India, said.

In a 2018 report on cold chains in India, YES Bank said: “it is a highly fragmented industry and the unorganised sector accounts for 80-85 per cent of the total capacity”. The report also underlined the challenges — erratic power supplies, deficit of skilled manpower, inefficiencies in handling and uncertain financing options. Some of these challenges could be overcome when bigger players enter the field.

Purushothaman sees the industry consolidating. India’s 37 million tonne of capacity is held by some 3,500 entities; in contrast, in the US, 20 companies operate the country’s 125 mt of capacity, he observed. He also sees technology infusion happening alongside investments.

If the reforms are properly implemented by the States more and more people will go back to farms, he said.

More importantly, he felt that the reforms would lead to de-hypenisation of agriculture and rural development. “Now agriculture will be industry, rural development will be development,” he said, noting that separate focus on each would be good for both.

Author: Silence of the Cicadas

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Published on July 05, 2020
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