Strengthening the links in cold chain
Despite being an emerging and fast-growing business sector in India, the cold chain logistics industry still faces a huge amount of wastage of perishables. digs deeper to understand how this pains the industry and what can be done to improve the present situation.
The cold chain industry depends on thermal and refrigerated packaging methods to protect the integrity of products being shipped. It is a combination of surface storage and refrigerated transport, but despite being an emerging and fast-growing business sector in India, the inadequate cold chain infrastructure is hampering its growth. To further develop the cold chain industry, it is important to focus on these hurdles and invest in technology, manpower, and infrastructure solutions that are seamlessly integrated with initiatives by stakeholders.
THE SCENARIO TODAY
Commenting on the present status of cold chain logistics and its potential in India, Ramesh
Mamidala, CEO, Çelebi Delhi Cargo Terminal Management India, says, “The Indian cold chain market is expected to grow at about 30 per cent y-o-y, while its current size is about $15 billion. The cold chain industry is quite fragmented, with about 3500 companies in the value chain and organised players accounting for only about 10 per cent of the market. The industry is still evolving and there lies huge potential for organised players to modernise the infrastructure, improve IT systems and processes, and reduce operation costs with the help of technology.”
Anand Sen, Business Head Temperature Controlled Logistics, Future Supply Chain Solutions, explains, “The demand for cold chain logistics services in India is primarily driven by bulk agricultural commodities (predominantly potato storage); consumer segments such as frozen food, dairy, confectionery, high-value fruits and vegetables; and pharmaceuticals.
`25,000 Estimated at crore in 2017, the cold chain industry is expected to grow at a rate of 13-15 per cent in the next five
`50,000 years, thus taking it to crore by 2022.” He says that three key segments - export of meat, seafood and bio-pharma products - is expected to buoy up growth in the cold chain industry. “There has always been a shortage of cold chain capacity, but with a sustained interest and increase in demand from new sectors such as fruits and vegetables, meat, seafood and bio-pharmaceuticals (which are mainly export-oriented), there has been an addition of 4.5-5 million tonnes of cold chain capacity in India. Stringent US FDA norms, for example, have necessitated critical monitoring of temperature and hence a preference for organised players rather than the unorganised ones,” he adds. According to Sen, there has been an increased focus by the government on developing farm-to-fork cold chain infrastructure as seen in the recently-announced SAMPADA scheme. “Setting up pack-houses is thus being seen as an emerging business opportunity with multiproduct cold stores as collection centres, within 50-100 kms from farm gates and increased investment in refrigerated vehicles for pan India distribution,” he states. Sharing his point of view on the potential of the sector, Amitabh
Singh, MD & CEO of Innovative Logistics (A Stellar Group Company), explains, “India is a country that produces more than 400 million MT of perishable products every year, which includes horticulture, dairy, meat, poultry, and seafood. It is a country with the highest refrigerated storage space in the world - a capacity to store 30 million MT - behind only China and the USA. About 90 per cent of the storage is used for potatoes alone. Hence, it is estimated that the country needs an additional capacity of 31 million MT storage space.” He adds that in cold chain transportation, about 104 million MT of perishable goods is transported every year out of which only five million MT is through temperaturecontrolled vehicles. “The wastage in perishable products is staggering. It is estimated that about
The industry has about 3500 companies in the value chain and organised players account for only 10%
Export of meat, seafood, and biopharma products is expected to buoy up growth in the cold chain industry
About `90,000 cr worth of agricultural produce and `50,000 cr worth of other perishable products are lost because of wastage
Retail chains and online grocers have received federal approval to set up cold chains that will bring in good investment
`90,000 crore worth of agricultural
`50,000 produce and crore worth of other perishable products are lost because of wastage,” Singh informs. Describing the nature of the market, Sunil Kohli, Managing Director, Rahat Cargo, says, “The Indian cold chain market is by and large unorganised and dominated by traditional cold storage facilities in various cities, though cold storages with state-of-the-art provisions have been in place at major airports in the country. The industry has a compelling future, albeit with challenges. The market can be facilitated by favourable government initiatives and enhancement in technology to improve the quality of storage and transportation facilities. The transition from traditional cold storage facilities to fully-integrated cold chain projects would bring about efficiency and increased productivity of cold chain companies. Furthermore, with growth in export of seafood, dairy products and other perishable items such as fruits and vegetables, major players will upgrade their facilities in order to store a broader variety of products under a wider temperature range.” Exemplifying his train of thought with numbers, Sunil Nair, CEO, Snowman Logistics, says, “According to the Economic Survey 2017-18, the Indian logistics sector provides a livelihood to over 22 million people which, in the next couple of years, is expected to grow significantly. Equipping the sector with the latest digital technologies and automation in operations would lead to a 10 per cent decrease in indirect logistics costs, placing India in good stead with countries like the US, China, and Japan when it comes to both domestic as well as international trade. In the last few years, there has been a major demand in the processed food segment. However, even today, the cost for setting up a cold storage is very high. Consequently, only a few organisations are investing and are being patient in the hope of earning long-term returns.” He also says that power, diesel, and labour are the major cost elements of cold chain and have been increasing more than the inflation rate year-on-year. This puts a lot of pressure on cold chain operators. Cold storage is a major revenue generator of the Indian cold chain industry, feels Harpreet Singh
Malhotra, Chairman & Managing Director, Tiger Logistics. He says, “The total value of the cold chain industry in India is expected to reach $20 billion by 2020 through increased investments, moderni
sation of existing facilities, and establishment of new ventures via private and government partnerships. Currently, India has more than 6,300 cold storage facilities that are unevenly spread, with an installed capacity of 30.11 million MT used mostly for storing potatoes. The market, however, is gradually getting organised and multi-purpose cold storage facilities are on the rise. More than 50 per cent of the cold storage facilities in India are currently concentrated in Uttar Pradesh and West Bengal, while other states still face a challenge with investments from the government and private operators.” Limited infrastructure at the farm gate, a fragmented agriculture base, and lack of awareness of the benefits of cold chain access to expanded segments are some of the challenges plaguing cold chain development, according to Pankaj Mehta, MD, Carrier Transicold, India & South Asia.
WHAT’S TRENDING?
Describing the evolution of the cold chain logistics sector over the years, Mehta says, “Over the next few years, increase in the organised retail sector, online grocery stores, quick service restaurant chains, as well as government initiatives will drive cold chain growth.” Echoing a similar view, Mamidala adds, “Some key strategic changes that have either taken place or are currently taking place include 100 per cent FDI, infrastructure status being provided, government funding and/or subsidy on development cost of up to 33.3 per cent, establishment of National Centre for Cold Chain Development (NCCD), and development of food parks.” “Major dairy companies, retail chains, and online grocers have received federal approval to set up 101 cold chains that will bring in
`3100 an investment of crore in the sector,” believes Kohli. Sen lists the following key trends: )NCREASED FOCUS ON MAINTAINING the temperature integrity of products across the value chain. 0REMIUMISATION IN END USER industries that has improved the willingness of companies to pay. 4EMPERATURE CONTROLLED SUPPLY chains becoming global on account of increasing food exports and entry of MNCs. #OLD CHAIN OPERATORS LOOKING for new ways to improve efficiency of energy requirements of perishable products. Nair says that IT tools have changed the spectrum of the cold chain industry by providing realtime synchronisation to deliver stable and hygienic supplies to the end-user in the least possible duration. “With the shift in focus from increasing productivity to providing better storage and transport facilities, the Indian cold chain industry has gained importance. The cold chain sector is receiving the best policy support from multiple agencies such as the MoFPI, NHB, APEDA, State governments, etc. Looking ahead, we can see a major shift from an unorganised to an organised market,” he says. Malhotra shares a similar sentiment. He says, “The private sector is being encouraged to develop the cold chain industry further by implementing the latest and most effective refrigeration technol
Equipping the sector with the latest technologies and automation would lead to a 10% decrease in indirect logistics costs
More than 50% of cold storage facilities are currently concentrated in UP and Bengal; other states face a challenge with investments
A post-harvest management and agri-logistics system helps reduce food loss and aids in reaching distant markets
ogy solutions available today. For private players, the high level of initial capital required to construct a cold chain unit continues to be the biggest challenge. However, if the government pitches in with a clear plan and promotes more PPP initiatives in this field, we could see a growth in momentum of the cold chain industry in India.” Mehta adds, “Indian agriculture is one of the main drivers of the country’s economic growth. An efficient post-harvest management and agri-logistics system including aggregation, pre-conditioning, precooling, and refrigerated transportation not only helps reduce food loss, but also aids in expanding the reach to distant markets.” He believes that there is huge opportunity to reduce food loss and improve food distribution by implementing existing cold chain technology. “With a focus on the agri-logistics sector, we are working closely with several stakeholders to help plug the gaps by offering carrier cold chain solutions such as availability of reefer trucks in remote areas where cultivation/harvesting takes place. These infrastructure interventions have helped our customers achieve better returns on their investments and have benefitted farmers, traders, and transporters alike,” Mehta shares.
IS THE STRATEGY APPROPRIATE?
Despite having the potential, the question remains, where is the country lagging? Is the strategy it follows to utilise this potential appropriate? Mamidala believes that India has the right strategy in place. “The current government has successfully implemented several good initiatives, however, some more stringent enforcement of regulations in packing, transportation, handling, and storage of perishables and pharma products will be needed. This will lead to more demand for quality infrastructure, operations, and services,” he explains. Kohli states, “Timely attention by the government and related trade bodies was not paid towards achieving a marked improvement in the development of cold storage across the country, which could have played a vital role in strategising a smooth passage for cold chain logistics. However, it is heartening to note that several steps are in the offing by all stakeholders to move forward positively in this regard.” According to Singh, “The consumption of CPG goods in India is just going to grow by leaps and bounds. The requirement to increase shelf life of the product and reduce loss necessitates that the cold chain industry move from traditional to modern methods of creating and operating the infrastructure. Unfortunately, in India, there are hardly any cold storage facilities that cater to multiple products. This requires huge investments in terms of infrastructure and technology. The cost of operations is also very high, driven essentially by the high cost of power and fuel required to operate the warehouse. The government, as a strategy to support the industry, has incentivised development of cold storage infrastructure. This is a positive step towards making the setting up of a storage facility viable.”
REDUCE WASTAGE, INCREASE REVENUE
Mamidala emphasises on strict implementation of regulations to ensure that perishables are handled, processed, and managed within standard temperature-controlled transportation methods and facilities to help reduce wastage. According to Singh, “Cold chain infrastructure in India is not fully modernised yet. Capacity is spread unevenly across India and given the size of our country, this is a huge challenge. Integrated facilities must be set up at the farm gate. It is important to invest in the development of skilled labour and vehicle drivers. The industry must look at using alternate sources of power to reduce the operating cost of storage facilities and create awareness in the country that wastage must be avoided at all cost.” Kohli feels that improved quality in production will lower the need for frequent quality control checks. “Lean business processes allow operators to focus on quality on the front end. This cuts the cost of the product in the long run. Furthermore, lead times, one of the greatest areas of waste within a company, can and should be controlled through process improvement,” he explains. Nair shares that one of the major reasons for food wastage is the lack of an efficient cold chain infrastructure from farm to fork, which includes refrigerated transport, pack houses, collection centres, and cold storages. “A range of commodities such as fruits, vegetables, dry fruits, spices, pulses, and milk can be stored at multi-purpose cold storage facilities throughout the year. With separate chambers operating at various temperatures that are simultaneously maintained, these facilities save cost and space and deliver efficiency. Even though multi-purpose cold storages command a minuscule percentage as compared to single commodity storages, this number is slowly improving due to growth of organised retail and the food processing business,” he concludes.