Cold Chain:

Solution for Food Wastage Good Food is a Terrible Thing to Waste

It’s unfortunate, depressing and the facts are unsettling; but it’s essential to get them right! Approximately 1.3 billion tonnes, about a third of the food produced in the world every year, gets lost or wasted. The staggering quantity of food wasted is enough to lift the nearly one billion hungry people out of malnourishment!

There is a severity of hunger across the world. Asia and Africa – where food is wasted the most, are home to the maximum number of undernourished people in the world. Asia, alone, accounts for almost 28 percent of the total food wasted across the world. Surveys conducted across the world have shown that the industrialised countries waste almost as much food (222 million tonnes) as the entire net food production of sub-Saharan Africa (230 million tonnes).

According to data from the Central Institute of Post-Harvest Engineering and Technology (CIPHET), 18 percent of India’s fruit and vegetable production – valued at `13,300 crore – is wasted annually. The lack of high quality cold chain facilities is primarily responsible for the wastage of India’s fruits, vegetables and grains, worth `44,000 crore annually. The fact remains that without significant improvements in the cold chain infrastructure, India will continue to waste the most precious commodity of the world.

Several studies conducted across the globe suggested that the biggest contributors to food losses are the lack of refrigerated transport and the lack of high quality cold storage facilities for food manufacturers and food sellers. Home to more than 1.2 billion people, India needs proper management of food resources. There must be an effective system in place to ensure smooth flow of food from harvest to table. A more effective and vast network of cold storage infrastructure is the way forward. There must be concerted efforts to establish a network of sustainable cold chains to prevent unnecessary food loss, which will help lessen hunger and boost food security.

With the rapid growth of the food processing industry and the expansion of organised retail, the cold chain industry is emerging as a fast growing business sector in India. A well-integrated network of cold chain, spread across the length and breadth of the country, is crucial for reducing the wastage of food products, thereby leading to a cost efficient delivery to the consumer by bringing the wastage of agricultural produce down to about five percent.

According to the government estimates, India has about 5,386 cold storages with a total capacity of 23.66 million tonnes. Unfortunately, they cater to less than 15 percent of the total produce. The industry is worth `10,000 - 15,000 crore, growing at 20-25 percent and is expected to touch `40,000 crore by the end of 2015.

India’s largest state, Uttar Pradesh, leads the pack when it comes to the number of cold chains, followed by West Bengal, Maharashtra and Punjab.

Rinac, Walco, Frick India, Carrier are some of the cold chain players in India, covering various segments of food industry such as dairy, seafood, fruits and vegetables, meat, poultry and organic food industry.

A lack of proper infrastructure and technology are major obstacles in the growth of cold chain industry. Some of the latest technologies for the cold chain industry include post harvest technologies for pre-cooling, process technologies for controlled ripening, high relative humidity cold stores for fruits and vegetables, blast freezing and individual quick freezing for fruits and vegetables among others.

The use of modern warehouse management system provides organised and systematic storage of various kinds of goods. Temperature data loggers and RFID (Radio-Frequency Identification) tags monitor the temperature history of the truck, warehouse, etc, along with the temperature history of the product being shipped. The palette cold storage facility has different temperature controlled segments, enabling the customer to select the right temperature for specific product requirements. The optimum usage of cold chain facility is the key.

The Indian cold chain market is projected to register a Compound Annual Growth Rate (CAGR) of about 23.88 percent between 2014 and 2019, in revenue terms, according to a report by research-based global management consulting firm TechSci Research titled ‘India Ready-to-eat Food Market Forecast and Opportunities, 2019’.

There have been several initiatives undertaken by the Indian government to boost cold chain infrastructure in the country. India’s cold chain market has huge potential due to rising food exports, investments, high agricultural and horticultural produce and rise in share of meat and marine product exports.

The cold chain industry also caters to pharmaceutical and chemical industries in India. They offer growth opportunities to both domestic as well as international players. Potatoes dominate the total cold storage capacity in India, with multipurpose cold storage facilities being dedicated towards potato storage due to its high consumption, especially in north India.

Agriculture Minister Radha Mohan Singh recently remarked that India needs $2 billion investment to set up low-cost and energy efficient cold chains in the country.

"India is in need of low-cost/energy efficient and ecological sustainable cold chain technologies requiring an estimated investment of $2 billion,” Radha Mohan Singh said.

The government-run farm lender National Bank for Agriculture and Rural Development (NABARD) has set up a `1,000-crore corpus for lending to cold chains, which will ensure creation of the necessary infrastructure for the agriculture and allied sectors.

According to a report of the Associated Chambers of Commerce and Industry of India (ASSOCHAM), the total market value of Indian cold chain industry is expected to reach Rs 64,000 crore by the end of 2017.

The report, ‘Opportunities in Cold Chain- emerging Trends and Market Challenges’, said though India produced 147 million tonnes of vegetables in 2011, the country has cold chain capacity available for only 9 million tonnes, leading to huge wastage.

Despite being the second largest producer of vegetables and fruits after China, India’s overall contribution in world trade is quite dismal because of wastage of about 30 to 40 percent of fruits and vegetables due to the lack of proper cold storage facilities.

In 2011-12, government brought cold chain under the ambit of the infrastructure sector. As of 2012, India had about 6,300 cold storages with a capacity of 30.11 million metric tonnes. Today, India’s cold storage industry faces multiple challenges such as high lifecycle costs for a cold storage facility, uneven distribution of cold storage facilities and low awareness of best storage practices amongst industry players.

Several multinational players have now entered the market through direct subsidiaries or through partnerships with domestic companies in the cold chain sector in India. The government has spent around `5.5 billion during 2008-11 on subsidies and tax incentives to step up the cold storage capacity.

The Indian cold chain industry has a long way to go before it gets globally competitive. There still exists a yawning gap between the cold chain industry in India and the West. The operating costs for the cold storage business in India are approximately Rs 80-90 per cubic ft per year as compared to Rs 40 per cubic ft per year in the West. Energy expenses alone make up about 30 percent of the total expenses for the cold storage industry in India compared to 10 percent in the West.

A fully integrated cold storage facility with one million cubic ft of storage space will require an area of an acre to build, which could cost between `1 crore and `1.5 crore, constituting 10-12 percent of the project cost. Cooling units are not mobile units, and so location becomes a key factor, and with India’s small land holdings, getting a sufficiently large tract of land to build a cold storage unit becomes a major additional constraint. The lack of logistical support further adds to the problems of the cold chain industry. A majority of investment in setting up cold storages in India has been in Uttar Pradesh, Maharashtra, Gujarat, Punjab and West Bengal, with all of them catering to single commodities only.

The Way Forward

The government should facilitate entry of private players in a big way in the Indian cold chain industry. The revenue potential of a cold storage facility is dependent on technology and overall service standards. Railways and airports can play significant role in strengthening the cold chain infrastructure. There are certain legal and policy changes that are imperative for expansion of the cold chain industry. The government must step in and aid in acquisition of land to set up facilities for cold storage, food processing, etc and examine reducing FDI restrictions in retail.

It all boils down to the flow of investment into the cold chain sector. Retail sector is a tempting proposition for the big business houses. More and more sops are needed for the cold chain industry. Despite several government sops and the ‘infrastructure’ status it enjoys, investment in the cold chain business remains weak and leaves a lot to be desired. With the opening of FDI in retail, the need for cold chain storage facilities is going to increase. The government must get its priorities right and focus on real estate development to encourage investment in the cold chain industry.