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India in dire need to upgrade and expand its cold-chain capacity in food processing sector

The cold chain is an important enabler in minimizing post-harvest losses in the Indian food processing sector as it helps increase shelf life and prevent spoilage across the entire gamut of transportation and storage (warehousing) of temperature-sensitive products from the production hub to the point of consumption. India is one of the largest producers of fruits and vegetables globally; however, the country witnessed a significant wastage through post-harvest losses of around USD 13.16 Bn on an annual basis. One of the major reasons for this wastage is the lack of adequate and efficient cold chain infrastructure from the farm to the fork, which includes refrigerated transport, pack houses, collection centers, and cold storage in Pune.

The wastage in the supply chain (post-harvest) not only has a financial impact that affects producers but also tends to have a multiplier effect in wastage of inputs like water, fertilizers among others which exacerbates greenhouse emissions, contributing to climate change. Given this, there had been sustained efforts on part of the Central Government in facilitating setting up cold storage infrastructure through financial assistance under two schemes namely Pradhan Mantri Krishi Sampada Yojana ( PMKSY) run by the Ministry of Food Processing and the Mission of Integrated Development for Horticulture (MIDH) by the Ministry of Agriculture.

Issues affecting cold chain infrastructure

India currently has over 7600 cold storage facilities with a combined capacity of around 37-39 million tons which is far below the requirement. Around 60% of the capacity of cold storage is concentrated in the states of Uttar Pradesh, West Bengal and Bihar and potatoes account for close to ~ 70% of the overall cold storage capacity. The installed capacities in some other states are way below the requirement, especially in some of the Southern States that are affected due to humid conditions. Another issue is that most of these facilities are meant for single-purpose storage, resulting in these facilities remaining idle for prolonged periods due to the seasonality of the produce. Currently, around 30% of these are multi-commodity storage that mostly caters to dairy products, seafood, meat and poultry, fruits and vegetables, pharmaceuticals, apart from potatoes. There are considerable supply-side gaps in terms of pack houses, ripening chambers, and refer freights.

The cold chain landscape in India is primarily dominated by private players (~95%), the majority of whom belong to the unorganized segment. Also, there is a lack of focus on the need for cold storage facilities for non-horticulture crops and the need for building multi-storage facilities. Lack of enabling infrastructure in remote areas with inadequate transport infrastructure and lack of uninterrupted power supply is another constraint for this sector. Other issues which have affected the sector include low awareness and insufficient training on handling temperature-sensitive products, funding constraints, and low adoption of modern technology.

Opportunity and Suggestions

Growth in organized retail has been largely driven by favorable demographic factors. The onset of the pandemic has led to a rapid increase in the adoption of e-commerce and the need for home deliveries of perishable food items is another driver for this segment. Changing consumption patterns with an increasing preference towards proteins such as fresh fruits and vegetables, meat and poultry, dairy products have led to the increased need for cold storage facilities closer to the consumption belts, creating an opportunity for the cold chain segment in the metros along with the Tier 1 and 2 cities. Convenience and lesser time for cooking have led to the emergence of foodservice players including cloud kitchens that has accentuated the need for cold storage infrastructure to preserve temperature-sensitive commodities. Along with the food processing sector, the rapid increase in demand for cold chains would be complemented by the pharmaceuticals sector as well which is an opportunity for multi-storage cold storage facilities with better utilization.

Given the opportunities in the end-user segments and growing interest of the private sector which is testified by the spurt in recent investments in this space, it is important for the government to address the structural issues in the existing setup and also relook at the schemes which have been designed to facilitate the development of such infrastructure. The existing schemes can be made attractive to investors through relaxation of investment norms, simplification of compliances, and facilitation through single-window clearances. Incentives can be designed for product-specific cold storage facilities which can help in cluster-led agriculture growth and exports from India. Incentives can be given to the private players for training / imparting technology-related skills. Thrust on developing infrastructure such as connectivity, ensuring power supply through alternate cost-effective sources would help in developing a robust cold storage infrastructure in the country. Lastly, the focus should be to improve the efficiency of these facilities – through the adoption of modern technology, promoting R&D to develop low-cost indigenous machineries, reduction in import duties for machines/ components which need to be upgraded and technologies that have the potential to bring down the cost of operations significantly.

(The author of the article are Anand Ramanathan, Partner at Deloitte India, and Soumyak Biswas, Director at Deloitte India.)

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