Cold Chains in India Challenges and Emerging Solutions
India’s integrated cold chain industry – a combination of surface storage and refrigerated transport – has been growing at a CAGR (compound annual growth rate) of 20 percent for the last three years. The cold chain market in India is anticipated to reach
Rs 624 billion by 2017. Currently, India has 6300 cold storage facilities with installed capacity of 30.11 million metric tonnes. Refrigerated transport or cold chain distribution is still in its nascent stage in India and still to reach a milestone if compared to world standards for cargo movement outside. There are various industries where there is a requirement of cold chain facilities like agriculture, horticulture, floriculture, dairy, confectionery, pharmaceuticals, chemicals, poultry, etc.
Though, India having a high production of food, the demand for food still remains unfulfilled as most of it gets wasted due to inefficient, inadequate and weak supply chains. Cold stores are the major revenue contributors of the Indian cold chain industry and most are only suitable for storing potatoes. However, the market is gradually getting organised and the focus towards multipurpose cold storages is rising. Pharmaceutical, medical and food industries are increasingly relying on the cold chains to make sure that products do not get damaged or compromised throughout the process of transportation till they reach the consumer.
Cold chains are essential for extending the shelf life, period of marketing, avoiding over capacity, reducing transport bottlenecks during peak period of production, and maintaining of quality of produce. The development of the cold chain industry has an important role to play in reducing the wastages of perishable commodities and thus providing remunerative prices to the growers. Cold chain, now, has become an integral part of the supply chain management for storage and transportation of temperature sensitive goods. In the last few years, the Indian cold chain market has witnessed various positive changes.
India needs a higher number of storage units as it can only store less than 11 percent of the country’s total produce. At present, the estimated size of Indian cold chain industry is projected to be somewhere between `80-100 billion ($2.0-2.5 billion). It forms part of the overall logistics and the supply chain industry in India that is approximately a `600 billion ($15 billion) industry, contributing about 13 percent to India’s GDP (USTDA Report, 2007). With an installed capacity of 30.11 million metric tonnes, cold storage capacity for all food products in the country should be more than 61 million metric tonnes. In order to reach this target, an investment of more than `550 billion will be needed by 2015-16 just to keep up with growing fruit and vegetables production levels.
India is the largest producer of fruits and second largest producer of vegetables in the world. The estimated annual production of fruits and vegetables in the country is about 130 million tonnes. This accounts for 18 percent of our agricultural output. But, by the time it reaches the consumer, quality of produce deteriorates because of its perishable nature which requires cold chain arrangement to maintain the quality and extend the shelf life. In the absence of a cold storage and related cold chain facilities, the farmers are being forced to sell their produce immediately after harvest which results in glut situations and low price realisation.
As the global food web is undergoing rapid changes, significant opportunities and challenges are being seen. Consumer tastes are changing fast and there is a growing consumer consciousness towards nutrition. Food companies, the world over, are continuously looking for low cost sourcing options. There is a huge opportunity for India, with its easy availability of raw materials and low cost of production, to capitalise on this market. With global food prices on the rise, India with its low cost structure is well poised to exploit the world’s demand for cheaper sourcing.
India can become a leading global food supplier if only it has the right marketing strategies and of course an agile, adaptive, adequate and efficient supply chain. But there are a few challenges which need to be taken into considerations:
• Rising real estate cost;
• Location for cold storage;
• Lack of proper infrastructure;
• High energy cost;
• Uneven distribution of capacity;
• Most of the cold storages present in India only cater to single commodities.
The huge wastage of perishable food occurs due to following factors like:
• Lack of pre-cooling and storage facilities;
• Dearth of refrigerated carriers;
• Fragmented supply chains;
• Scarcity of applications of latest tools and technologies;
• Poor product knowledge;
• Lack of professionals.
There is also a need to bring in efficiency in existing cold chain networks. It can be made efficient by development of basic infrastructure. These initiatives will also lead to the improvement of roads, railways, ports, airports and power. Developing countries acutely require institutions, infrastructure and human capital in place to improve efficiency in cold chains and also to exploit the competitive advantage.
By 2015, the Indian food industry is estimated to grow by around 40 percent over 2007. The following are key factors which are expected to drive this growth:
• The country’s wealth of native knowledge and growing domestic demand of processed food has contributed to the growth of the food industry which will bring immense benefits to the economy in the form of enhanced agricultural yields, improved productivity, employment generation, and high standard of living of large number of people throughout the country;
• Socio-economic changes across India, in terms of increase in the households in the high-income category, rising youth population and migration of people from rural to urban areas has led the industry to be focussed on providing them with products and services to suit their changing lifestyles;
• Changing attitudes of women towards the cooking tasks: There is increased usage of electronic appliances; preference towards non-traditional foods; easy to prepare snack/mixes entering the menu; increasing health consciousness; etc.
• Consumers today want more for their money, and now actively seek quality; the attitude of compromise is a thing of the past. While disposable income is on the rise, the consumption pattern has undergone a rapid change due to urbanisation and changing lifestyles.
Role of Government
Though the Government of India is one of the driving forces in developing the cold chain industry and supports private participation through various subsidy schemes and grants but still needs motivation and participation from people. Investment in cold chain in India was also opened under the automatic route for 100 percent FDI participation. The National Centre for Cold-chain Development (NCCD) – an autonomous body of the Government of India – was established with an agenda to positively impact and promote the development of the cold chain sector in the country. NCCD is tasked with objectives:
• To serve as a think tank to the government on the subject of cold chain;
• To provide an enabling environment for the cold chain sector and facilitate private investment for cold chain infrastructure;
• Direction setting to narrow the gap in the supply and value chain including storage, specialised transport and operational or business processes;
• To address the concerns on standards and protocols related to cold chain testing, verification, certification and accreditation and creating demand for training establishments;
• To assist in developing and promoting new and energy efficient technologies and their adoption in India;
• Capacity building and training activities to reduce the gap in skilled human resources required for cold chain sector;
• Recommend guidelines to minimise environment impact and promote sustainability in the cold chain;
• Awareness programmes on best practices for perishable product handling, indigenised for specific requirements and conditions;
• Adopting to Indian backdrop i.e. to move from mass storage to direct access storage;
• Anticipate ahead of a developing market.
There has been a tremendous growth in the organised retail sector and so there is a need of cold storages to prevent the perishable food products from perishing. Due to change in consumption patterns, the frozen food market is one of the largest and most dynamic sectors of the food industry. In spite of considerable competition between the frozen food industry and other sectors, extensive quantities of frozen foods are being consumed all over the world. The food supply chain needs the attention of the academicians, the industry and the Government for its enhancement.
AuthorAnju Bharti is Assistant Professor at Maharaja Agrasen Institute of Management Studies, New Delhi.
Kohli Pavanexh,(2010).Future direction-cold chains in India,Slideshare,20th Dec,cross tree,techno-visors.