From one-stop clearance to building the right infrastructure, the Indian cold chain industry needs a big push, feels Aditya G Bafna, Executive Director, Shree Shubham Logistics Limited.
How would you describe the present scenario of the cold chain industry in the country?
The cold chain industry is even now in a nascent stage with fragmented and unorganised links in the entire value chain for most of the perishable agricultural or animal husbandry products. Milk is perhaps the only example which integrates all the links right from the highly dispersed tiny production levels of every Indian farmer producer to individual consumers who are equally dispersed with very small volumes of daily consumption. This cycle encompasses huge aggregation and value addition at different levels. The miracle created by dairy cooperatives has been successfully copied by a number of players in the private dairy sector with varying business sizes, organisational structures, and aggregation & service models.
For most other products ranging from fruits and vegetables (like apples or potato) to fish and other animal husbandry products, standalone cold storages of various types linked with ´non-cold´ chain links on either side of the cold storages has been the usual practice in our country. This trend is now changing and more and more links in the post storage stage are transforming into ´cold´ links, primarily in the space of processed precooked or even fully cooked and ready-to-eat segments catering to entities who directly deal with retail customers or for large exports. Some ´organisation´ in these post-storage activities can be seen, although most of the producer-to-storage links still remain largely unorganised.
Do you think the new government is going in the right direction?
As the new government is emphasising on up-scaling the economy, this would also impact the cold chain industry. We expect the new government to provide us new liberal policies such as subsidies/ cash assistance, and releasing of earlier subsidies/cash assistance for setting up of the cold storage and cold chain industry and also at the same time, (we) need power incentives and tax incentives like VAT and excise duty waiver for procuring for the construction of the cold storage industry. Apart from policies, the only way is to develop our food processing industry, strengthen post-harvest infrastructure, and fill the gaps in the supply chain, thus we can reduce wastage, improve food supply, step up our exports and enhance employment opportunities.
What is the market potential?
The current size of the cold chain industry in India is estimated at about Rs 25,000 crore, growing at a CAGR of around 18 per cent in the last three years. This growth may well be in the range of 25û30 per cent with a market size of close to Rs one lakh crore in the next five years. Investments in cold chain in the next five to ten years may well be in the range of Rs 50,000 to Rs 75,000 crore. The Central government has initiated a lot of steps to promote cold chains, but a similar enthusiasm from the State governments is certainly lacking.
As the industry is capital intensive with long payback periods, the governments will have to think beyond just capital subsidies and tax incentives. Promoting related infrastructure in power, and rail and road links with ports will be crucial for the growth of the cold chain sector.
What are the growth drivers for the cold chain industry in the country?
The growth driver for the industry, as for many other industries and services in the country, is the changing composition of the Indian population, not only in terms of the young brigade taking over, but also the changing composition of the fast-growing middle income group with increasing participation of the women power of households in income generation of such households. The information revolution has only added to the demand pattern for easy to carry, cook and eat food. It is this driver which is changing the very pattern of retailing in metros as well as large and mid-sized cities and towns.
What are the possible solutions that need to be taken to aid the growth of the industry in the country?
The difficulties faced right from formalities in the land acquisition process and getting change in land use to getting over a dozen other permits and licences are enough to demoralise any entrepreneur. The foremost thing required is a one-stop clearance and accreditation facility. The second is development of infrastructure already mentioned earlier. As the cold chain industry depends heavily on dispersed small producer farmers at the lowest end and is based on a suitable aggregation model which most likely is contractual in nature, an efficient dispute resolution mechanism for the unorganised farmer-producers is also necessary.
What are the business opportunities you see for yourself in the industry in coming times?
Shree Shubham Logistics Limited (SSL) is the largest warehousing service provider in the agri-space with its own infrastructure across the States of Rajasthan, Gujarat, Madhya Pradesh and Maharashtra. Currently, we are managing and operating warehouses at 159 locations with total storage capacity of around 17.70 lakh metric tonnes, i.e., 9.75 million square feet area in the States of Rajasthan, Gujarat, Madhya Pradesh and Maharashtra.
We are setting up a cold chain project in Rajasthan with state-of-the-art cold storages and sufficient number of reefer vans and facilities for primary processing which will cater to the farmers produce in the Kota- Jhalawar region and will handle about 10,000 mt of commodities from February 2015 onwards. We further plans to expand our footprints in the States of Andhra Pradesh, Chhattisgarh, Telangana and Uttar Pradesh.