A vast improvement in cold chain logistics is the need of the hour for furthering growth in export of perishables – items whose quality runs the risk of going bad during transit – from India. Key perishables exports from India include seafood and pharmaceuticals, which are exported primarily through the sea route, besides fruits and vegetables. Given the stringent quality standards of major importing nations, these items require the right temperature to be maintained in each leg of the supply chain.

However, Indian exporters falter on multiple points:

  • Lack of reefer vans during transport from manufacturing plant/cold storage.
  • Lack of reefer plugs for uninterrupted power supply.
  • Contamination during customs verification at the port before shipment.
  • Product loss because of quality deterioration during shipment.

Besides, unavailability of reefer containers at the desired time, long waiting period due to congestion at ports, unavailability of trolleys, heavy traffic at ports – all add to the exporters’ pain. Further, trucks are stuck in the queue for 2-3 days at times, pushing back delivery and shoring up the logistics cost as the containers are powered using generators.

Challenges galore across the value chain

Lack of reefer vans a key challenge in the primary leg

On the ground, the key challenge is to maintain the required temperature at all points from production to shipment. To address this and to minimise product loss during transportation, logistics companies have started employing advanced tracking and monitoring devices on reefer vehicles to keep a track of temperature, humidity, and other conditions. However, there is a conspicuous lack of reefer vans. As of fiscal 2018, India had 10,500 reefer vehicles and 36 million tonne cold storage capacity.

CRISIL Research expects the Indian cold storage chain market to log a compound annual growth rate of 13-15 per cent over the five years through fiscal 2023, from around Rs 279 billion in fiscal 2018. But shortage of reefer vans could pose a challenge here.

Unavailability of reefer plugs at certain ports

CRISIL Research’s interactions with market participants indicate there is a shortage of reefer plugs. Reefer container traffic accounted for almost 6 per cent of the overall container traffic at major ports in India and grew 16 per cent in fiscal 2017. However, the number of reefer plugs has not grown apace across ports. As of fiscal 2017, the total installed reefer plug capacity at India’s container ports was 8,918, with the top five ports accounting for half of that.

Contamination during customs verification

Until recently, contamination or spoilage during customs verification was a major challenge. Factory-stuffed containers are e-sealed by exporters, but reefer containers are picked up for examination by the customs at ports and inland container depots (ICDs). Since all ports and ICDs do not have sterile, temperature-controlled examination facilities, exporters have to incur transportation costs to take them to the nearest cold-storage facility for examination. This adds to the transaction cost, and also affects timely export of the perishables. Besides, the selection of reefer containers for examination leads to contamination or spoilage if not handled appropriately.

To address this issue, in May 2018, the Central Board of Indirect Taxes (CBDT) and customs allowed factory stuffing and sealing of reefer containers with perishable/temperature-sensitive export goods in the presence of customs officials. According to the new norms, an exporter needs to apply to the jurisdictional customs commissioner for availing of supervised stuffing, along with the list of goods for export. The commissioner will permit supervised stuffing and sealing of such export goods upon being satisfied that the goods are sensitive to temperature and there are no sterile, temperature-controlled examination facilities at the destination port.

Quality deterioration after shipment

During sea travel, a major challenge the exporters face is quality deterioration because of improper handling of required temperature by shipping companies. To minimise this damage, it is necessary for shipping companies to continuously monitor temperature conditions inside the reefer container.

Shipping companies have been increasingly employing remote container management systems, wherein reefer containers turn into digitally connected devices capable of transmitting their locations, power status, temperatures and humidity. This enables the shipping company to monitor temperature, humidity and ventilation settings throughout the journey.

For seafood exports, shortage of reefer containers in peak season a key challenge

Seafood is largely exported from India to South-east Asia, the US, and the European Union, among others, primarily through sea route. APM Terminals Pipavav is the major seafood exporter port by volume and value in India.

Shrimps dominate India’s seafood export basket with a 38 per cent contribution by volume and 65 per cent contribution in value terms in fiscal 2017. About 80 per cent of shrimps produced are exported from India, both in raw and processed forms.

While some large players export shrimp directly to clients, other producers sell their produce at a pre-determined quality to traders. These traders store the shrimp in third-party cold storage warehouses, from where it is transported to the ports based on client requirement in the exporting countries. The producer’s proximity to ports is a key parameter considered before opting for a third-party cold storage.

Challenges across the supply chain for a player exporting seafood

When preserved and stored in a cold storage, shrimp has a shelf life of around two years. As of fiscal 2018, India had 575 cold storage capacities with a combined capacity of ~287,000 tonne for seafood storage.

The key challenges faced by shrimp exporters is preservation of quality. A slight variation in temperature can lead to deterioration in the product quality, rendering the produce useless for export. The shrimp brought by farmers to receiving centres is usually without ice, and also contains mud and debris – such exposure to ambient temperature affects the quality of the produce. Further, during the peak season, exporters face a dearth of reefer containers at the exporting ports, leading to a longer wait-time and higher logistics expenditure.

For pharmaceutical exports, product loss a major challenge

Though pharmaceutical exporters deploy both air and sea mode for shipments, sea routes are a preferred mode for transport. Typically, active pharmaceutical ingredients (API), also called bulk drugs, are transported through the sea route, because of higher shelf life and huge volumes. By contrast, formulation drugs are transported through air routes, as they have shorter shelf life compared with APIs.

Challenges across the supply chain for a pharmaceutical exporter

With the ever-increasing regulations at importer nations for pharmaceuticals products, it becomes imperative to maintain the appropriate temperatures across the value chain. A case in point is the EU, where 80 per cent of pharmaceutical products require temperature-controlled transportation, due to increased regulations on imports. Ditto for the US.

Pharmaceuticals from India are largely exported to North America, Africa, and the EU. The mode of transport for pharmaceuticals is determined on the basis of volume and shelf life of the product.

Typically, a pharmaceutical product is either directly transported from the factory or distribution hub to the port for shipping to the export country. Largely, pharmaceutical companies own a cold storage facility at their production plants to store the temperature-sensitive raw material/ finished goods. A few players, however, outsource the cold storage services to a third-party logistics player that operates cold storages near consumption centres or ports.

Key challenges faced by the pharmaceuticals companies while exporting via sea route are product loss and theft. Product loss typically occurs due to the movement of package/drum inside the container, in case the container is not fully loaded.

Over 50 per cent of temperature excursion of pharmaceutical products occurs when the product is shipped via air, as the number of handling points during air transport is higher compared with sea transport.

Many a time, drugs are left at the airport terminal or corridor for a prolonged time, resulting in damage and rejection of the order. Sometimes glass bottles get damaged during the transit, due to improper handling by untrained personnel, despite all the packaging protection taken by pharmaceutical companies. Unavailability of slots at airports is another challenge.

Products that can be normally stored in ambient temperatures are also transported in temperature-controlled containers to avoid any damage because of changes in ambient temperature.

For other perishables, lack of ventilation in stowage an issue

During shipping, frozen fruits and vegetables are stacked as a solid block, with virtually no ventilation between the stack and little or no separation between the cargo and walls, front part, or the back portion of the container. For stowage patterns of chilled products, the refrigerated air must be circulated through the cargo, or their quality is affected.