Evolving scenario: Cold Chain Industry in India

BITZER Multipac unit

(Pic: BITZER Multipac unit.)
Rob de Bruyn states that the Indian Cold Chain industry is expected to grow at a CAGR of 28 per cent over the next three years and reach a market size of $13 billion in 2017.

Rob de Bruyn

Rob de Bruyn

India ranks first in the world in production of fruits and second in vegetables accounting 10 and 15 per cent, respectively, of total global production. Despite this, the per capita fruit and vegetable availability of fruit is low due to post harvest losses and those losses can account for almost one-third (25-30 per cent) of the total production. The quality of products also diminishes by the time they reach the end consumers. The prime reason for this huge wastage and inferior produce is the lack of infrastructure – cold chain arrangement, from the source of produce to the end point of sale where the perishable goods can be stored after harvest.

With the Indian production and consumption of food products seeing a sharp rise, expect a greater demand and acceptability for cold chain services in near future. In an industry that is seeing close to about 20 per cent growth each year and is expected to double itself to Rs. 520 billion by the year 2017.

One of the main reasons for galloping rate of food inflation in India is the lack of supply chain for food, in which cold chain plays an integral part. Robust cold chain is the need of the day to benefit from larger production capacity and passing it on to consumers in the form of reduced prices as well as producers in terms of reduced wastage.

Cold storage does not only ensure quality of the produce and keep it fresh but also extends life of the produce. The absence of cold storage facilities also forces farmers to sell goods at lower prices while consumers are forced to pay more for low quality produce. Thus it is critical to build a strong infrastructure network and support the growth of cold storage facilities which in turn leads to the overall development of the commodity market ecosystem.

Rotting of perishable products can be attributed to lack of proper cold storage facilities. This problem is also compounded by the fact that cold storage facilities are usually available only for single commodity items like potato, orange, apples, grapes or flowers. This leads to poor utilisation and many perishable items which also needs cold storage facilities perish and die even before they enter the market. This shows the huge potential that is still waiting to be tapped.

The need of the hour is to create economically viable cold chain solutions linking production centres to consumption centres, thereby reducing physical wastage of perishable commodities and in turn leading to the development of processed food industry.

The major concerns that the cold storage sector faces are power supply, lack of trained personnel, outdated technology and infrastructure. However, erratic power supply and shortage of electricity is the biggest impediment in the development of cold storage industry.

Different products need to be stored at a specific temperature range such as frozen food, ice cream, chocolates and each product requires its own controlled temperature environment. Any fluctuating temperature can result in compromised quality and shortened product life.

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.

More than 50 per cent 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 field, we could see a momentum growth in the cold chain industry in India.

With a large number of global food and retail chains targeting the India markets, FDI in retail is just around the corner and is likely to be implemented soon. Then 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. With the expected future development in road and rail infrastructure, along with the changing lifestyle of the Indian consumer – Indian Cold Chain industry is expected to grow at a CAGR of 28 per cent over the next three years and reach a market size of $13 billion in 2017, although it is largely unorganised in nature. Thereby, presenting a great opportunity for foreign players. But for this to happen, the Government will have to play a very important catalyst role.

(The author is Managing Director – BITZER Refrigeration Asia Pvt Limited.)

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