India, the world’s second largest producer of fruits and vegetables, throws away fresh produce worth Rs. 13,300 crore every year because of the country’s lack of adequate cold storage facilities and refrigerated transport. Though India is agriculture-based country, according to Rupesh Khiste, Head – Quality and R&D, Sahyadri Farmers Producer Co Ltd, we have devastated agriculture economy due to following reasons:

  • Small land holding, 80 per cent area non-irrigated.
  • Low productivity, negligence towards quality.
  • Disturbed agriculture finance system.
  • Unpreparedness to natural calamities and losses.
  • Poor post-harvest management, lack of basic infrastructure.

The overall perishable food production in India is over 400 million metric tonnes (MMT). However, 15-50 per cent of this perishable food is lost due to lack of proper cold chain. Hence development of healthy, energy efficient cold chain is essential for all food perishables.

Currently, India has 6,300 cold storage facilities unevenly spread across the country, with an installed capacity of 30.11 million metric tonnes. Studies have shown this is half the amount of cold storage facilities that India actually needs. Cold storage capacity for all food products in the country should be more than 61 million metric tonnes. In order to reach that target, the report says an investment of more than Rs 55,000 crore is needed just to keep up with growing fruit and vegetable production levels.

The study estimated that cold chain market in India valued at $167.24 bn in 2016 is projected to reach $234.49 bn by 2020. The cold chain market has grown steadily in the last few years and this trend is projected to continue until 2020.

Aditi Surange, Head – Consultancy Development, ACR Project Consultants Pvt Ltd, said, “The overall trend and future of the market of Indian cold chain industry is very positive. Food cold chain has been the major driving force in the entire sector. This is due to the fact that India is a major producer of perishable foods. India ranks No. 1 in milk production, No. 2 in fruits and vegetables production and is again one of top-ranking countries for meat, poultry and fisheries products.”

Cold chain refers to storage and transportation of temperature sensitive products. The product range is quite wide and covers vegetables, fruits, milk products and other biological products including human organs, pharmaceutical and diagnostic products (healthcare) which are temperature sensitive. Their preservation and effectiveness on use, is dependent on proper storage at right temperature at all stages of supply chain, right from the point of origin to the end consumer. The required storage conditions vary from (-) 180 to (+) 25-degree C or so, as per product requirement with different low- and high-temperature limits.

For healthcare products, it is critical that storage temperatures are within the required preset limits as per their stability studies, lest, they become ineffective or pose health risks on usage as in the case of vaccines and other protein-based products.

Explaining the overall market status for cold chain, Nipun Goyal, Director – Business Development, Geetee Carriers Pvt Ltd, said, “In India the business of cold chain is growing. Customers are now more educated and health conscious and thus demanding best quality at lowest cost. Therefore, in addition to the compliance requirements, companies or agencies are focusing on providing better quality products at minimum cost, to the consumers. This has become a necessity in competitive business environment.”

However, he observed: “Only 5 per cent of India’s Rs. 35,000 crore cold storage industry is organised. So many top logistics players and transporters are attempting to become integrated cold chain service providers. Hence CAPEX plans are expected to increase in near future throwing the doors open for HVAC&R technology players.”

Growth Drivers

Indian cold chain market was worth about Rs 1,12,000 crore in 2018. It is projected to reach about Rs. 2,61,800 crore by 2024 growing at a CAGR of 15 per cent during 2019-24. According to Goyal, “The main growth drivers are increasing demand for organised food retail, processed food sector, greater shift towards consumption of fruits and vegetables and increasing demand from healthcare sector. Demand is also driven by the increased thrust for compliance to label storage condition by industries as well as regulatory agencies.”

As per recent draft guidelines, released by Central Drugs Standard Control Organization (CDSCO), on distribution practices for pharmaceutical products, transportation of pharmaceutical products need be in accordance with the storage conditions indicated on the label, among other stringent requirements. This will result in increased requirement for cold chain logistics from pharmaceutical companies. All these suggest surge in demand for multi-purpose cold storage, third-party temperature-controlled distribution and regional growth and expansion, observes Goyal.

Highlighting the growth drivers for Indian cold chain industry, Ms Surange said, “The drivers for growth of the industry include changing demographics, lifestyle and food consumption patterns, increasing buying power, increasing demand for ready-to-eats, and increasing government initiatives and financial support. There is increasing interest in Indian food market and investments from international players like food chains and logistic players.”

Rajesh Patil, Senior Manager – Business Development, Cold Chain Division, Sical Logistics Ltd illustrates the growth drivers as:

  • Indians are slowly but steadily adopting frozen and processed food. Consumption pattern has changed and more and more people are eating at the restaurants or QSRs (Quick Service Restaurants).
  • New start-ups in foods are focusing on healthy premium food sectors like fresh meat and fish products, dairy products, processed food products and frozen food products and relied heavily on temperature-controlled logistics.
  • Stringent FDA norms and consolidation of the pharmaceuticals cargo post GST also generating demand of cold chain logistics.

Along with this growth, the growth of support industries, more so, for HVAC&R too is imminent with more emphasis on cost competitiveness, compliance, reliability and agility. Other technologies for remote sensing, monitoring, controlling and recording for global positioning, temperature and humidity are also expected to be in increased demand along with review procedures, as assurance concept along with appropriate risk evaluation, prioritisation, mitigation and control plan. Goyal summarises by saying: HVAC&R and other associated technologies are in take-off stage along with cold chain supply chain expansion in India.

Aligned with the company’s mission to promote innovative solutions for a better quality of life, Embraco’s solutions maintain the food preserved through the whole chain and has a complete portfolio to supply cold room in farms; mobile cold rooms for food transportation; to refrigerate the products in the supermarkets and to keep the food fresh at home. The portfolio includes condensing units and compressors such as NJX, NT, and FMX (variable speed technology).

“Our success in growing the business in the India market relies on meeting the customer interests which include product robustness and reliability and the differentiation of a portfolio that can work with severe voltage fluctuation. All those aspects reach a high level of efficiency while delivering power consumption reduction,” informs Esequias Pereira, Sales Sr Manager for Asia-Pacific region, Embraco.

Investment opportunities

According to Aditi Surange of ACR Project Consultants, there is a huge potential for new cold chain facilities to be setup in India viz. need for almost 70,000 more pack houses in the country, more than 50,000 reefer vans to fill the gap in cold transport and around 500 to 700 more cold stores. Frozen food stores and fruit ripening units are also in demand.

The current demand estimates show that the potential for growth in the cold storage capacity is about 10 per cent. Of the existing cold stores, almost 80 per cent of cold stores run on old and outdated technology. The upgradation of these units is another area for new business and industry growth, Ms Surange adds.

Rupesh Khiste from Sahyadri Farmers Producer Co Ltd. outlines the hot investment scopes for the cold chain as:

  • To establish farmer facility centres across cluster to facilitate technical support, inputs and services to farmers associated. This will increase the knowledge and awareness at producer level and will help to increase the cold supply chain from root level.
  • To establish primary collection and packing centres across clusters for primary collection, grading, sorting, cold chain distribution mechanism with precooling and cold storage facility. This will reduce the actual field heat form the produce and will minimise the initial losses in the perishable fruits and vegetable and will increase the shelf life of the produce. For example, pre-cooling of fruits and vegetables at primary collection centre.
  • To create central processing unit for each value chain to handle farm produce in bulk quantities equipped with post harvesting infrastructure as per the need of value chain like freezing etc. It will help in handling the product in bulk as well as processing the surplus quantity to avoid the losses. For example: freezing of fruits and vegetables in different forms.
  • To create a controlled temperature frontend retail network with cold supply chain once the product is precooled, cold chain has to maintain throughout the supply chain. It will help to reduce the losses and to maintain the freshness of the product up to the end user.

“Investment in the cold chain sector really looks attractive in the absence of major logistics players and professional logistics companies can tap this empty spot and can get early bird advantage in the longer term,” Patil of Sical Logistics said.

According to Rajat Gupta, CEO, Tessol, “Cold chain is a hot investment area due to growth in allied sectors including agriculture especially horticulture, food processing and retail. With these sectors growing and the customers becoming more quality conscious, brands becoming more compliant and quality becoming a major point of differentiation, the growth of cold chain is inevitable. Due to the large gap between the requirement and current capacity, the growth is even faster than the growth in these individual sectors.”

Challenges

While there are many positive changes in Indian cold chain market, high operating cost is a major roadblock for sector’s overall growth, opines Khiste. While retail cold chain as a sector is currently struggling to be more efficient, there is a lot of headroom for improvement with the help of operational and technology level changes which can be brought into the overall system.

Government initiative

In order to promote technically sound, energy efficient and sustainable cold chain, the Indian government has established National Centre for Cold chain Development (NCCD) under Ministry of Agriculture. There are various subsidy schemes made available by the government through MoFPI, NHB, NHM, APEDA and other bodies. The government provides good financial incentives through these arms for various types of cold chain projects, informs Ms Aditi Surange. She adds, “Efforts are also being made to promote green and sustainable technology with application of renewable energy in the cold chain sector.”


Subhajit Roy, Group Editor