THE FU­TURE OF COLD CHAIN IN IN­DIA

‘We Want to make lo­gis­tics sim­ple’ DB Schenker

Cargo Talk - - Front Page - CT BUREAU

The im­por­tance of a cold-chain for any re­gion, in con­tem­po­rary times, can­not be stressed enough. Whether it is daily needs like fresh fruit and veg­eta­bles, med­i­cal sup­plies like vac­cines and other tem­per­a­ture-sen­si­tive items, or stor­ing a par­tic­u­larly rich crop yield in a good year, the avail­abil­ity of a cold-stor­age fa­cil­ity can have im­pact from the macro as­pects to the very prices of our daily needs.

“The cold-chain in­fra­struc­ture can be di­vided into ‘static’ and ‘mo­bile’ in­fra­struc­ture. The static in­fra­struc­ture in­cludes the cold chain fa­cil­i­ties for stor­age of tem­per­a­ture-sen­si­tive prod­ucts. The mo­bile in­fra­struc­ture in­cludes tran­sit fa­cil­i­ties which are re­quired to main­tain the tem­per­a­ture-sen­si­tiv­ity of prod­ucts dur­ing their trans­porta­tion such as reefer trucks, vans etc. A proper cool-chain in­fra­struc­ture should be a per­fect blend be­tween the two,” says Ra­jesh Goel, CEO, Çelebi.

In­dia’s com­plex cold chain mar­ket is still ma­tur­ing, feels Goel. With mul­ti­ple play­ers, in­ad­e­quate road sys­tems, and re­mote cus­tomers - the mar­ket is highly frag­mented. There is also a se­vere short­age of

tem­per­a­ture­con­trolled ve­hi­cles, cold stor­age fa­cil­i­ties; with the few which are lo­cated in a hand­ful of states, mak­ing them in­ac­ces­si­ble to some users. How­ever, this dis­par­ity in­di­cates a huge op­por­tu­nity for those in­volved in the cold-chain

process.

A large num­ber of cold-stor­age projects, lo­cated in dif­fer­ent parts of the coun­try, are based on old and ma­jorly in­ef­fi­cient tech­nol­ogy. The user in­dus­try would ex­pect mod­ern plants with more au­to­ma­tion, mech­a­nized op­er­a­tions and more hy­gienic op­er­at­ing con­di­tions at the cold chain units. There is a greater need for multi-com­mod­ity cold stor­ages in ev­ery district in the coun­try.

“There has been an in­creased fo­cus on cold chain in­fra­struc­ture in In­dia which is ev­i­dent from the rise of ded­i­cated cold stor­age fa­cil­i­ties on- and off-air­port. How­ever, the tran­sit in­fra­struc­ture is still a point of con­cern and there has been a lack of ad­e­quacy both city-side and air-side. Reefer trucks are typ­i­cally not sold off-the-shelf as in case of other ve­hi­cles. Very limited OEM man­u­fac­tur­ers sup­ply fully-built re­frig­er­ated ve­hi­cles. More­over, there is def­i­nitely an additional cost at­tached to it and ship­pers need to be more re­spon­si­ble to­wards us­age of the same. Sim­i­larly, ex­ten­sion of cool chain till air­craft trans­fer is an­other area which needs to be looked into,” Goel says.

Ac­cord­ing to Raaja Kan­war, Founder, Apollo Logi So­lu­tions Limited, the struc­tural changes in food & agri­cul­ture in­dus­try, emer­gence of Quick Ser­vice Restaurants (QSRs) and growth in phar­ma­ceu­ti­cal in­dus­try demon­strate the de­pen­dency on cold chain

A large num­ber of cold-stor­age projects, lo­cated in dif­fer­ent parts of the coun­try, are based on old and ma­jorly in­ef­fi­cient tech­nol­ogy. There is a greater need for mul­ticom­mod­ity cold stor­ages in ev­ery district in the coun­try.” Ra­jesh Goel CEO, Çelebi

in­fra­struc­ture. “The fo­cus of cold chain in­fra­struc­ture de­vel­op­ment has been more to­wards the ad­vanced seg­ments (Cold chain ve­hi­cles, Ex­port-im­port lo­gis­tics and spe­cialised stor­age). The ba­sic in­fra­struc­ture for post-har­vest man­age­ment of crops, fish­eries, and meat and dairy prod­ucts still pos­sess huge de­vel­op­ment scope. The wastage of above pro­duc­tion in In­dia is con­sid­er­ably huge and can be avoided with firm in­fra­struc­ture, in terms of cold stor­age cov­er­age across key pro­duc­tion re­gions, ad­e­quate hub-and-spoke con­nec­tiv­ity mech­a­nism,” he adds.

Cyrus Kat­gara, Part­ner, Jeena & Com­pany, says, “Var­i­ous stud­ies in­di­cate that in 2012, 18% to 40% of 240 mil­lion met­ric tonnes of hor­ti­cul­tural pro­duce was lost due to sup­ply chain in­ef­fi­cien­cies. It was con­cluded that a fo­cussed ef­fort was re­quired to pro­mote the de­vel­op­ment of the cold-chain in the coun­try. It’s a Catch-22 sit­u­a­tion.”

He says, “The crit­i­cal min­i­mum vol­umes re­quired to at­tract the in­vest­ments in coldchain in­fra­struc­ture are not there, and in the ab­sence of such in­fra­struc­ture, the costs and risks of trans­port­ing such per­ish­ables is pro­hib­i­tive to pre­vent any growth in such vol­umes. The pol­icy ini­tia­tives to pro­vide se­lec­tive fi­nan­cial re­lief to in­vestors in this area can kick-start the in­fras­truc­tural de­vel­op­ment and req­ui­site growth of vol­umes to sus­tain that.”

EX­IST­ING COLD STOR­AGE IN­FRA­STRUC­TURE

• There are about 6,300 cold stor­age fa­cil­i­ties in In­dia, with an in­stalled ca­pac­ity of 30.11 mil­lion met­ric tonnes.

• It is es­ti­mated that cold stor­age ca­pac­ity in In­dia needs to dou­ble, to a to­tal of 61.13 mil­lion met­ric tonnes of cold stor­age to min­i­mize food wastage.

• An in­vest­ment of ` 550.74 bil­lion in new cold stor­age ca­pac­ity by 2015–16 is re­quired to keep up with the fruit and veg­etable pro­duc­tion in­crease.

As of 2012, In­dia had ap­prox­i­mately

6,300 cold stor­age fa­cil­i­ties, with a ca­pac­ity of 30.11 mil­lion met­ric tonnes. Around 12 of the to­tal num­ber of fa­cil­i­ties, about 60 per cent, are lo­cated in just four states: Ut­tar Pradesh, Gu­jarat, West Ben­gal and Pun­jab. Ut­tar Pradesh has the high­est present ca­pac­ity of 10.187 mil­lion met­ric tonnes with a gap of 20 per cent pegged at 2.041 mil­lion met­ric tonnes. The re­main­ing 24 states and the bulk of the coun­try re­main un­der­served. In 2010, Tamil Nadu had only 0.0239 mil­lion met­ric tonnes of ac­tual cold stor­age ca­pac­ity, but had a need for 7.906 mil­lion met­ric tonnes of ca­pac­ity, leav­ing a 97 per cent short­fall.

Ac­cord­ing to AS­SOCHAM, dur­ing the pe­riod of 2009-2017, the cold chain in­dus­try in In­dia is ex­pected to grow at a CAGR of around 25.8 per cent to reach ` 64 bil­lion. The Na­tional Hor­ti­cul­ture Board ( NHB) rec­om­mends that in­vest­ments worth

` 550.74 bil­lion in new cold stor­age ca­pac­ity are needed by 2015–16 to keep up with the in­creas­ing pro­duc­tion of fruits and veg­eta­bles.

NCCD

“The set­ting up of the Na­tional Cen­tre for Cold Chain De­vel­op­ment ( NCCD) has been an im­pres­sive ini­tia­tive by the Govern­ment, but its core ob­jec­tive is to work as nodal agency, defin­ing guide­lines for in­fra­struc­ture de­vel­op­ment and en­su­ing that there is stan­dard­i­s­a­tion of the sec­tor. The US$ 3 bil­lion cold-chain in­dus­try in In­dia has been grow­ing at a pace of around 20%25%. The move­ment of per­ish­ables and tem­per­a­ture-con­trolled cargo has to be first sup­ported by ba­sic in­fra­struc­ture of stor­age and trans­porta­tion. The pol­icy ini­tia­tives in terms of pro­mot­ing pri­vate sec­tor par­tic­i­pa­tion can re­ally help in or­ga­niz­ing this sec­tor, cur­rently around 90% of cold chain in­dus­try is gov­erned by un­or­ga­nized play­ers,” says Kan­war.

Kat­gara dis­misses the NCCD set-up, “It is too pre­ma­ture to com­ment on the rel­e­vance and con­tri­bu­tions of a 3-year-old baby. How­ever, if you visit the web­site of NCCD, there is hardly any ac­tiv­ity or plan re­ported that can be termed as a trig­ger to boost the in­fra­struc­ture. It’s more of a tech­ni­cal con­sul­ta­tive body and not a driver for change.”

Goel says that, “NCCD has been es­tab­lished with the main ob­jec­tive of the cen­tre to rec­om­mend stan­dards and pro­to­cols for cold-chain in­fra­struc­ture, sug­gest guide­lines for hu­man re­source de­vel­op­ment and to rec­om­mend ap­pro­pri­ate pol­icy frame-work for de­vel­op­ment of cold chain. Def­i­nitely, this ini­tia­tive is an in­di­ca­tor of our Govern­ment’s fo­cus to­wards pro­mo­tion of tem­per­a­ture-sen­si­tive prod­ucts and its ef­forts to in­crease the shelf-life of per­ish­ables, so that farm­ers get higher in­comes. The body has been cre­ated to en­gage all the stake­hold­ers to achieve the

The US$ 3 bil­lion coldchain in­dus­try in In­dia has been grow­ing at a pace of around 20%25%. The move­ment

of per­ish­ables and tem­per­a­ture-con­trolled cargo has to be first sup­ported by ba­sic in­fra­struc­ture of stor­age

and trans­porta­tion.”

Raaja Kan­war

Founder, Apollo LogiSo­lu­tions Limited

com­mon mis­sion of pro­mot­ing cold chain prod­ucts. The ini­tia­tive is def­i­nitely op­ti­mistic how­ever, it will take some time to ac­tu­ally re­al­ize the ben­e­fits of the same. But, the move is def­i­nitely an in­di­ca­tor to­wards the govern­ment’s fo­cus to­wards pro­mot­ing cold chain in­fra­struc­ture and stream­lin­ing the poli­cies gov­ern­ing the same.”

In fact, one of the main aims of the cre­ation of NCCD is to es­tab­lish ef­fec­tive co­or­di­na­tion among all stake­hold­ers rang­ing

from grow­ers’ as­so­ci­a­tions, farm­ers, pro­ducer or­gan­i­sa­tions and co-op­er­a­tives, as­so­ci­a­tions of re­tail­ers to com­pa­nies en­gaged in man­u­fac­ture and in­stal­la­tion of re­frig­er­a­tion equip­ment, as­so­ci­a­tions of cold chain own­ers, in­di­vid­ual com­pa­nies own­ing in­te­grated cold chains, trade cham­bers, in­dus­try and com­merce, reg­u­la­tory and de­vel­op­ment agencies (WDRA, FSSAI,BIS), PSUs, aca­demic and re­source in­sti­tu­tions and in­di­vid­u­als who have distin­guished them­selves in cold chain, or any of the as­so­ci­ated fields, ad­vo­cates Goel.

Chal­lenges faced by the Cold Stor­age In­dus­try in In­dia

The cost of real es­tate in In­dia is

in­creas­ing.

High en­ergy costs in In­dia, along with fre­quent power cuts, leads to a higher cost of in­vest­ment and op­er­at­ing ex­penses in the cold chain.

Cold stor­age fa­cil­i­ties are un­evenly dis­trib­uted across the coun­try While additional fi­nan­cial in­vest­ment is vi­tal, the three big­gest chal­lenges In­dia’s cold stor­age in­dus­try faces are high life­cy­cle costs, un­even dis­tri­bu­tion and low aware­ness.

Pharma Mar­ket

In­dia’s phar­ma­ceu­ti­cal sec­tor is grad­u­ally gain­ing its po­si­tion as a global leader. The phar­ma­ceu­ti­cal mar­ket in In­dia is ex­pected to touch US$ 74 bil­lion in sales by 2020, ac­cord­ing to a Price­wa­ter­house Coop­ers (PwC) re­port.

In­dia has been able to make its name as a qual­ity sup­plier of af­ford­able medicines across the globe, says Goel. “Tra­di­tion­ally, Rus­sia, Ger­many, Nigeria and In­dia’s neigh­bour­ing coun­tries like Sri Lanka, Nepal, and the Mid­dle East were the ma­jor mar­kets for In­dian phar­ma­ceu­ti­cal ex­ports.” Over the years, In­dia has shown bet­ter reg­u­la­tory aware­ness and su­pe­rior tech­ni­cal skills, which has en­abled In­dian com­pa­nies to

The crit­i­cal min­i­mum vol­umes re­quired to at­tract in­vest­ments in cold-chain in­fra­struc­ture aren’t there, and in ab­sence of such in­fra­struc­ture, costs and risks of trans­port­ing such per­ish­ables is pro­hib­i­tive for any growth in vol­umes.” Cyrus Kat­gara Part­ner, Jeena & Com­pany

pen­e­trate the high-value mar­kets like the US and the EU. US is the top des­ti­na­tion for In­dian pharma ex­ports, fol­lowed by the UK. Amer­ica ac­counts for about 25 per cent of In­dia’s pharma ex­ports. De­mand from the ex­ports mar­ket has been grow­ing rapidly due to the ca­pa­bil­ity of In­dian play­ers to pro­duce cost-ef­fec­tive drugs with world class man­u­fac­tur­ing fa­cil­i­ties. In spite of some of the re­cent neg­a­tive de­vel­op­ments in In­dian phar­ma­ceu­ti­cal in­dus­try due to qual­ity con­cerns and IPR is­sues, In­dia still re­mains one of the prom­i­nent pharma ex­porters to var­i­ous coun­tries across the globe, he says.

Bio­phar­ma­ceu­ti­cals is an­other po­ten­tial high-growth seg­ment for In­dian phar­ma­ceu­ti­cal mar­ket, Goel re­veals. It is grow­ing at dou­bledigit strength, driven by the vac­cines mar­ket. A sound cold-chain in­fra­struc­ture is in­creas­ingly be­com­ing a key de­ter­mi­nant in the global generic drugs mar­ket. With in­creased pres­sure from in­ter­na­tional reg­u­la­tors, phar­ma­ceu­ti­cal man­u­fac­tur­ers are un­der even more scru­tiny to en­sure the in­tegrity and bioe­quiv­a­lence of their prod­ucts.

A world-class cold chain in­fra­struc­ture and its ef­fi­cient man­age­ment within the coun­try will help im­mensely to In­dian phar­ma­ceu­ti­cal com­pa­nies. The most crit­i­cal fac­tor for han­dling phar­ma­ceu­ti­cal prod­ucts from air­ports is the avail­abil­ity of tem­per­a­ture-con­trolled zones for stor­age and pro­cess­ing of phar­ma­ceu­ti­cal prod­ucts which re­mains a chal­lenge. Fur­ther, phar­ma­ceu­ti­cal prod­ucts be­ing time-sen­si­tive cargo, the avail­abil­ity of a proper sup­ply-chain ar­range­ment is of ut­most im­por­tance.

“We have also fo­cussed to­wards de­vel­op­ment of world-class in­fra­struc­ture for phar­ma­ceu­ti­cal ship­ments,” Goel says, adding, “We would like to in­form that, to fa­cil­i­tate the phar­ma­ceu­ti­cal ship­ments, we have re­cently launched our newly-de­vel­oped state-of-the-art Pharma Lo­gis­tics Cen­tre of 1200 sqm area. With tem­per­a­ture-con­trolled cham­bers, it has stor­age ca­pac­ity of 27 ULDs and loose cargo for phar­ma­ceu­ti­cal ship­ments. The cen­tre has a pre-cool fa­cil­ity and 4 cham­bers from +15ºC to +25ºC, +2ºC to +80ºC, +4ºC to -20ºC and -4ºC to -20ºC. The Phar­ma­ceu­ti­cal Lo­gis­tics Cen­tre is equipped with all mod­ern ameni­ties for ef­fi­cient han­dling of phar­ma­ceu­ti­cal ship­ments. This is in ad­di­tion to our al­ready ex­ist­ing state-of-the-art Cen­tre for Per­ish­able Cargo (CPC) with tem­per­a­ture-con­trolled cham­bers for tem­per­a­ture-sen­si­tive ex­port ship­ments, like flow­ers, fruits, veg­etable, meat prod­ucts etc.”

“Fur­ther we have brought in cool dol­lies to ex­tend the cool chain till air­side which is a re­frig­er­ated dolly on wheels. It can carry one com­plete air­craft pal­let/container up till the air­craft ar­rival at a pre-de­fined tem­per­a­ture, ad­justable to the re­quire­ments of the per­ish­able prod­ucts,” he added.

“The US$ 12 bil­lion In­dian pharma mar­ket, grow­ing at around 10-15% over last few years is pro­jected to be among top 10 global mar­kets in terms of value by 2020. The govern­ment must as­sess the de­pen­dency of this sec­tor on ad­e­quate

lo­gis­tics in­fra­struc­ture and should fo­cus on in­te­grat­ing dif­fer­ent legs of lo­gis­tics. Cold chain, be­ing one of the most im­por­tant for pharma sec­tor, has to be de­vel­oped at global stan­dards, en­sur­ing qual­ity and re­li­a­bil­ity of In­dian pharma man­u­fac­tur­ers in global mar­kets,” says Kan­war.

On the is­sue of pharma sec­tor’s growth, Kat­gara says, “Im­port­ing coun­tries of these prod­ucts, such as US and Europe, are highly sen­si­tive to qual­ity as­sur­ance for food and pharma prod­ucts. Con­sid­er­ing that we have had many set­backs for this in­dus­try on ac­count of ab­sence of good man­u­fac­tur­ing prac­tices, we can­not rule out an­other trig­ger for au­dit of the sup­ply chain and its im­pact on pre­serv­ing the qual­ity of prod­ucts in tran­sit.”

High life­cy­cle costs

Typ­i­cally, a cold stor­age fa­cil­ity with a ca­pac­ity of 6,000 met­ric tonnes re­quires an ini­tial in­vest­ment of around ` 50 mil­lion, ex­clud­ing land. The high real es­tate cost also con­trib­utes sig­nif­i­cantly to the high life­cy­cle cost. In a coun­try like the USA, a sim­i­lar cold stor­age fa­cil­ity re­quires half the in­vest­ment.

The pri­mary chal­lenge fac­ing the cold chain in­dus­try is ris­ing property prices; with in­creases of more than 280 per cent over the last decade. To build a cold stor­age fa­cil­ity with 1 mil­lion cu­bic feet of space re­quires an acre of land.

Elec­tric power is an equally ex­pen­sive chal­lenge. In­dia faces a 9 per cent peak power deficit. This forces the ma­jor­ity of cold stor­age oper­a­tors to run on backup power which leads to a marked in­crease in op­er­at­ing costs. Sum­ming up the sit­u­a­tion, he says, “Key per­ish­able pro­duc­tion re­gions should have cold chain con­nec­tiv­ity to the end mar­ket, en­sur­ing min­i­mum wastage of goods. Tem­per­a­ture con­trolled long haulage rail con­nec­tiv­ity shall be de­vel­oped to con­nect the mar­kets and sup­pli­ers.”

Role of In­dus­try Stake Hold­ers

Kan­war adds, “The role of in­dus­try stake­hold­ers in de­vel­op­ing cold chain is of para­mount sig­nif­i­cance. Be­ing a sup­port in­fra­struc­ture of num­ber of in­dus­trial seg­ments ( Re­tail, Health­care, Agri­cul­ture, Flori­cul­ture, and Fish­eries etc.) cold chain should be given its due im­por­tance as key leg of lo­gis­tics in­fra­struc­ture in In­dia.”

On the role of the in­dus­try stake­hold­ers in de­vel­op­ing cold chain fa­cil­i­ties, Kat­gara says, “So far, all the risks and losses, aris­ing out of in­ad­e­quacy, have been born by the stake­hold­ers as pas­sive sufferers. In­di­vid­u­ally, they may not be strong enough to fill the gaps, but joint ef­forts both in terms of cre­at­ing aware­ness as well as a com­mon plat­form not only for shar­ing ideas, but in­vest­ing jointly in cre­ation of such fa­cil­i­ties and if re­quired lobby with govern­ment to cre­ate the req­ui­site pol­icy and in­cen­tive en­vi­ron­ment.”

The Govern­ment’s Bit

Kat­gara says, “Spe­cial ini­tia­tives are re­quired for PPP in­vest­ment with suit­able in­cen­tives with a time-frame to make these ini­tia­tives self sus­tain­ing. Also, a mon­i­tor­ing body should be set up to main­tain the sup­ply chain stan­dards and guar­an­teed ser­vices.”

Goel says that In­dia’s great­est need for an ef­fec­tive and eco­nom­i­cally vi­able cold chain so­lu­tion can be achieved through in­creased in­vest­ments, mod­erni­sa­tion of ex­ist­ing fa­cil­i­ties, and es­tab­lish­ment of new ven­tures via pri­vate and govern­ment part­ner­ships. “Our govern­ment has al­ready iden­ti­fied the pre­req­ui­sites to pro­mote the sec­tor and the above men­tioned mea­sures are a good in­di­ca­tor of the same,” he says.

An in­te­grated process of sup­ply chain for all com­modi­ties is im­per­a­tive for In­dia. This will in­clude trans­fer of per­ish­able items from the pro­duc­tion cen­tres to the con­sump­tion cen­tres, thereby re­duc­ing phys­i­cal waste and loss of value of per­ish­able com­modi­ties by main­tain­ing the cool chain, he says.

From the past few years, the In­dian cold- chain in­dus­try has wit­nessed some

pos­i­tive changes, Goel feels. The pri­vate sec­tor par­tic­i­pa­tion has in­creased in the cold- chain in­dus­try to cater to the in­creas­ing de­mand for cold- chain lo­gis­tics. What Goel feels is nec­es­sary for the im­prove­ment of the cold chain in­fra­struc­ture is

• A cre­ation of Task Force on de­vel­op­ment

of Cold Chain and NCCD

Cold Chain achiev­ing In­fra­struc­ture

sta­tus, &

• 100 per cent FDI for health and med­i­cal

ser­vices un­der the au­to­matic route.

GROWTH OF 3PL

Third Party Lo­gis­tics (3PL) com­pa­nies, like in any other lo­gis­tics ser­vice pro­vi­sion, have an ex­tremely im­por­tant role to play, says Kat­gara. “Lo­gis­tics ser­vices are the most per­ish­able prod­ucts. So any in­vest­ment in this prod­uct, that has to fend for its sus­te­nance in the mar­ket through cut-throat com­pe­ti­tion, is nor­mally con­strained by cau­tion and more so when the ser­vice re­quire­ment for this sec­tor make the in­vest­ment more cap­i­tal in­ten­sive and riskier. How­ever, with­out the par­tic­i­pa­tion and as­sur­ance of the stake­hold­ers, they may be a lit­tle shy of putting in the req­ui­site in­vest­ments which are, by all means, huge with all the un­cer­tain­ties.”

3PL is gain­ing sig­nif­i­cance world­wide as or­ga­ni­za­tions are un­able to man­age their lo­gis­tics op­er­a­tions and are out­sourc­ing them to 3rd Party Lo­gis­tics ser­vice providers. The grow­ing global con­sumer de­mand for phar­ma­ceu­ti­cal, food, and med­i­cal goods in emerg­ing and de­vel­op­ing mar­kets has never been higher, mak­ing cold-chain man­age­ment one of ‘coolest’ growth niches for 3PL providers that are able to spe­cialise in broad-reach­ing, con­trolled-tem­per­a­ture ship­ping, Goel says.

He continues, “There is al­most no scope of er­ror for han­dling of cold chain prod­ucts due to the tem­per­a­ture sen­si­tiv­ity of the prod­ucts. It re­quires an im­pec­ca­ble stor­age and tran­sit fa­cil­ity and a ro­bust sup­ply chain ar­range­ment. Our ex­pec­ta­tion from a 3PL ser­vice provider is to re­ceive the high­est stan­dard of pro­fes­sional ser­vice so that we can take full ad­van­tage of a 3PL’s cold-ware­hous­ing

ex­per­tise.”

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