Exploring issues plaguing Cold Chain Infrastructure

Union and State governments have been promoting the construction of cold chain infrastructure in India through its various schemes and providing subsidies on capital expenditure. However, industry stakeholders across India and especially in Uttar Pradesh have been demanding to provide subsidies on power tariffs to keep operational cost in control in order to increase the profitability of the business.

Agriculture sector contributes 17.1% to India’s GDP and provides a livelihood to more than 53% population of the country. Contribution of the sector to the economy is declining every year which has emerged as a cause of concern for the policymakers.

India is globally the largest producer of milk and lies second when it comes to fruits and vegetables. Large amount of meat, seafood, poultry and perishable goods demand a robust cold chain infrastructure and supply chain where India is largely lacking behind other well-developed economies.

Uttar Pradesh is demographically the biggest state in India. Apart from demographics, the state holds another tasteful speciality: the Malihabadi Dusseri mango.

Malihabadi Dusseri Mango

The special breed of mango is a delicacy and is exported across the country and to many global destinations as well. However, it is only available for a short period of time as the ripening has to be measured and only a certain level of ripe provides the better taste.

Exporters pick the fruits in a measured time and load them onto trucks for further transportation. However, the whole process claims a sizeable chunk in the transportation. Agriculture experts hold the view that if modern cold storage units are set up and are given demanded facilities, the Malihabadi mango could gain a global brand icon value.

Despite having such a high potential product in its kitty, the state lacks cold storage, fruit ripening units and packhouse for preservation of fruits and vegetables. Kaleem Khan, a 60-year-old man, from Kavalhar village in Hardoi district said: In Malihabadi fruit belt, 70% of the land is used for cultivation of the Dusseri mango.

Khan said that though the business has expanded over the years, the big players do not allow the small farmers to gain benefit. Due to monopoly of certain firms, the small farmers are forced to sell at lower prices or let the produce perish.

He said, “Mangoes are usually harvested when they have reached maximum size and have not (quite) started to ripen. The optimum time for harvesting is not easy to establish, but can be determined somewhat by the shape, peel colour, flesh colour and firmness.”

Due to the very high temperature of mangoes during harvesting, the mangoes must be cooled as soon as possible to the optimum storage temperature after harvesting using flow cooling or hydro cooling. As per global standards, mangoes are stored at a temperature between 8 and 13 degree Celsius, depending on the variety and ripeness. Indian mango varieties cannot tolerate a high relative humidity.

The Controlled Atmosphere (CA) storage of mangoes inhibits ripening by reducing the respiration rate and the ethylene production. The optimum for CA mango storage is 3% to 7% oxygen and 5% to 8% carbon dioxide presence. Depending on the variety and stage of ripeness, mangoes can be stored for 3 to 6 weeks in CA at 13 degree Celsius and for 2 to 4 weeks in ordinary cooling.

However, no such advanced centres have been set up to cater to the sector-specific needs. It is not like UP does not have a cold chain network. In fact UP, Punjab and Gujarat consist of country’s almost half of the cold storages but high power tariff charges reduce the profitability of the business.

Mahendra Swarup, President, Federation of Cold Storage Associations of India told Logistics Insider: “Bringing down temperature for storing perishable goods takes energy and the cost associated with it is the foremost hurdle for the cold storage industry.”

He said, “We have been demanding from the Central and State governments to reduce the tariff charges being laid on the cold chain sector. In UP itself highest charges are levied on the cold chain storage. Policy changes are required from the government to boost the business that has a worth of around $13 billion.”

He further said “There are many varieties of fruits which are cultivated in Uttar Pradesh. No government has hardly taken any step towards fruit preservation and storage of fruits in bigger volume. There are only 5% cold storage units for the preservation of fruits and vegetables, and it is not clear whether the particular unit is operational or closed.”

According to the central government’s data, there are total 2,299 cold storage facilities available in Uttar Pradesh. Out of the available facilities, 95% of storages are used for storing potatoes.

Distribution of Cold Chain Infrastructure

The main roadblock in the growth of cold chain logistics is the high energy consumption cost. The energy consumption alone amounts to 50% of the total operating expenses of cold storage in India compared to 10% in the developed countries. Uneven distribution of existing cold storage facilities is also a stumbling block.

Sunil Nair, CEO, Snowman Logistics said, “Around 50% of the operating costs in cold storage is power cost and is the highest operational expenditure item. There are hardly any options to cut this cost. The tariffs can’t be negotiated. Consumption can slightly be controlled by better-operating processes, but largely the consumption remains same as one would not risk the desired temperature.”

“While Government is giving subsidies for CAPEX, I believe some subsidy should be given on OPEX in the form of discounted power tariff for cold storages. This would help better utilisation of cold storages, and more affordable food for consumers,” he added.

According to CRISIL, the Indian Cold Chain Industry is growing at a 13%-15% CAGR and is set to reach INR 47,200 crore by 2022, compared to the 11%–13% CAGR in 2017, which amounted to INR 24,800 crore.

Another report said that the cold-chain industry in India is forecasted to grow at a CAGR of 19% during the period of 2017–2022 owing to the rising need of the infrastructure to reduce wastage.

India’s cold storage was developed majorly for bulk products like onions and potatoes, with major facilities concentrated in UP, West Bengal, Punjab, and Gujarat. South India, especially Tamil Nadu, with a complex hot and humid environment, reels under the lack of sufficient cold storage solutions, with access to only 174 cold chain warehouses out of 7,645 such facilities nationally.

Hence, the government should focus on creating cold chain infrastructure evenly across India. Meanwhile, the government should also provide subsidy on power tariff to private operators for keeping their overall operating cost in check. This step will certainly motivate cold chain operators to set-up more cold storages which will in-turn facilitate better transportation of agri-products.

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