Tuesday, 2 May 2017

Cold Chain Industry 2017

    Global cold storage industry reached 250 USD billion having global capacity of 600 mio. Cubic meters. Global capacity was reported as 552 USD billion in 2014 and having CAGR of 4.26% since 2014. Market size of cold storage is expected to grow further at CAGR 16% and reach USD390 billion by 2019. This growth is influenced by factors such as new construction in emerging markets , household income; growth of the urban population; sales in supermarket retail outlets; consumption of meat, dairy products, and frozen foods; and quality of roadway and port infrastructure. The United States is a world leader in developing the technology and processes necessary to develop and manage cold chain systems.
    Indian cold storage industry is growing at CAGR 26.6% and has largest capacity in the world. Market size of India has reached USD 10 billion (aprox.) in 2017. India has world’s largest cold storage capacity of 134 Mio. Cubic meters (33mio.tones). Along with sustained growth in food production, increase in the construction and expansion of cold storage facility in the recent 10 years along with government support to improve designs and standards in the storage infrastructure as well as to build additional cold storage capacity through provision of fiscal and tax incentives has led to growth of this industry. Cold chain involves the transportation of temperature-sensitive products along a supply chain through thermal and refrigerated packaging methods. At the current capacity only less than 11% of what is produced can be stored. Organised players contribute only ~8%–10% of the cold chain industry market.
     Agriculture products accounts 83% share in total cold storage; potato alone contributes 75% of the agri. Products cold storage. ‘Farm gate storage.’ that is used for agri.products are predominated by potato stores and those for spices and specific crops like carrots, apples, oranges, onions, etc. 75-80 % of CS are suitable only to store potatoes, a commodity that produces only 20 % of agricultural revenue. Cold storage for poultry related products have relatively low market share as Indian consumers mostly prefer to have fresh chicken or other poultry items. Meat and fish cold storage market in India is expected to grow further at 9% per annum. 92% of CSs are owned and operated by private sector – proprietorship, partnership, private limited company or public limited company.;3% Cooperative and another 2% govt/PSU CSs.
    There are total 6156 cold storage warehouses reported in India. Out of this More than 50% of the cold storage facilities in India are currently concentrated in Uttar Pradesh and West Bengal due to high horticulture produce in Bengal and poultry industry in UP. UP alone has 43% of total cold storage facilities in India and is also on of the key sourcing destination for other countries for food products.. Despite consumer demand, states such as Maharashtra and Gujarat lags behind in number of cold storage in India leading to the food wastage.
    Average capacity utilization is 75%. Eastern part of India has highest average capacity utilization of 77% followed by south(75.6%), North(75%) and West (70.8%). West Bengal, UP and Chandigarh have high storage capacity than other Indian states. There are smaller CSs which can store less than 1,000 MT of produce and then there are mega CS’s which store 10,000 MT of capacity. West Bengal, UP & Chandigarh boasts having extremely high storage capacity viz;more than 6000 MT. Karnataka and Maharashtra, despite having higher number of cold storages, have average storage capacity of less than 2000 MT.
   There has been consistent average 74-75% capacity utilization of the CSs. Overall Capacity utilization is 75%. It is highest for horticultural produce. Even in East where the average capacity is the highest, the capacity utilization is also robust at 77%. Utilization of obsolete refrigeration system in cold stores is still prevalent as most units lack technologically sound refrigeration; directly impacts profit margins. The study claimed 30-40% of India's produce gets wasted due to lack of cold chain infrastructure. With the current capacity only less than 11% of what is produced can be stored.
   The supply side gap is large in case of pre-cooling at pack-houses, transport connectivity and ripening chambers. There is need to target additional creation of the following major infrastructure components for integrated cold-chain:69381 modern pack-houses; 3.27 million MT of new Cold storage aptly segregated into cold storage (bulk) and cold storage (hub); 52826 number of units of Refrigerated transport vehicles/containers; 8319 number of modern Ripening chambers. and there is 10% gap in cold storage (bulk and hub).
   Govt. has been providing support for infrastructure through various schemes for financial assistance and technology up gradation. Govt gives Capital Investment subsidy for construction/ expansion/ modernization of cold storage for Horticulture Products by NHB for Setting up of cold storage of capacity above 5000 MT and up to 10000 MT. Also financial assistance @ 50% of the total cost of plant & machinery and technical civil works in general areas and 75% for NE region and difficult areas (North Eastern states, Sikkim, J&K, Himachal Pradesh and Uttarakhand) subject to a maximum grant-in-aid of Rs 10 crore is provided. Viability gap funding up to 40% of the cost is given by govt.
100% FDI through government route has also been sanctioned.Long term storage and distribution hubs up to 5000 MT capacity are eligible for assistance under the open ended scheme of NHM/ HMNEH. It has established of National Centre for Cold Chain Development for promotion of cold storage industry. In addition to this it has been promoting use of refrigerated containers by reducing basic custom duty (BCD) to 5% and excise duty to 6% (budget 2016-2017). 5% concession on import duty, service tax exemption, excise duty exemption on several items. Subsidy of over 25% to 33.3% on the cold storage project cost is also granted on project basis.
   Total 3984 projects have been sanctioned at present, under various schemes of govt. to boost cold storage infrastructure. Highest number of projects around 63% are being sponsored by schemes of National Horticulture Board (NHB) followed by Mission for Integrated Development of Horticulture (MIDH) that sanctioned 31% projects. 2% of Cold storages in India have reported using government subsidy or grant for their capital investment. Only 35% of government cold storages have utilized a subsidy scheme. More than 40% of cooperatives, partnership and public limited company type of cold storages have utilized subsidy schemes.
   This industry is facing several challenges in India. Severe shortage as only 25% of the capacity is available for fruits, vegetables, processed foods and pharmaceuticals, whereas 75% of the capacity is dedicated to potatoes. 20%-30% of fish production is annually wasted in India due to Lack of quality cold warehousing infrastructure: Then there is a lack of standards and protocols in construction and operation of facilities.Technical standards followed in India are mostly unsuitable for Indian conditions, which results in lower performance of standard refrigerated systems. Addition to this Low awareness of lab our in handling temperature-sensitive products is also one of the key issue In India, the supply chain of most products is long and fragmented. Most workers involved in this are not properly trained in handling temperature-sensitive products resulting in deterioration of product quality before reaching the consumer. High fuel cost in India constitute around 30% of operating expenses of cold storage in India as compared to 10% in the West. Further, cold storages are dependent on steady supply of power. Most Indian regions face power cuts. Few Indian states like Uttar Pradesh have a power shortage of 11.6% against the all India average of 2.3% leading to the challenge of maintaining Cold Chain services Hence, these companies have to invest in power back-ups, which push up the capital investment requirement. Above all, Technology availability is also critical issue. Most modern industrial equipment and technology is imported to India rather than indigenous development. Sellers store limited quantity in territory of India to avoid tariff concerns. This lead time in sourcing equipment adds to the delays in procurement and development. Need to develop capacity of local equipment manufactures.

(See Below for detail power point presentation)



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