India can become the food supplier of the world
The country has a huge opportunity to become a leading global food supplier if only it has the right marketing strategies and of course efficient supply & cold chains management.
The food supply chain is complex with perishable goods and numerous small stake holders. In India, the infrastructure connecting these partners is very weak. Also, demand forecasting is totally absent and the farmers try to push what they produce into the market.
The cold chains segment can be subdivided into a number of sectors – agriculture, horticulture, fisheries & aquaculture, dairy, processed food for ready-to-eat / cook format together with the packaging companies, retailers, wholesalers and caterers are in the last stage of the cold chains.
Against a requirement of over 31 million tonnes of cold storage, India has over 5,101 cold storage units with a cumulative capacity of nearly 21.7 million tonnes, leading to a loss of about 40% of the agri-produce post-harvest.
The Indian cold chains market is largely untapped and lined by several players in the unorganised sector which clues for immense investment and development opportunities.
Further, the diversity in terms of India’s population with several religious groups with different food habits and culture can be used to the advantage to become the “Halal food hub,” the “Organic food hub,” the “Vegetarian food hub” the “Sea food hub” and so on.
Currently, the Indian cold chain market is worth $2.6 billion. This market is expected to grow to $12.4 billion by 2015. Uttar Pradesh and West Bengal have 65% of the total installed capacity of cold storage in the country. Cold chains are used primarily for fruits and vegetables, meat and marine products, floriculture, dairy products, ice creams and confectionery.
In the Vision 2015 paper, food processing minister Subodh Kant Sahai said the focus needed to be on areas of reducing post-harvest losses, building supply chain, cold chain, and developing linkages of farming to the processing industry. Particularly, the need of the hour is to adopt a strategy whereby cold storage facilities are provided collectively to production centres as ‘Cold Storage Centres’ with potential strengths for storing primary and processed agricultural products for most of the year.
“This should be supplemented with a good system of refrigerated transportation connecting farm level storage facilities, processing units and various distribution outlets as the present system of transporting by insulated trucks is not effective for long distance movement. At the retail outlet end, there is a need to develop display cabinets for marketing of frozen food products. India should also augment cold chain facilities and container handling facilities at major ports as also at air cargo complexes for targeting global markets. All this will not only need large-scale investments but also the development of appropriate technology more suitable to our requirements,” the minister said.
100% depreciation for cold chains investment
Even after announcing 100 per cent depreciation for cold chain investments in the Union Budget for 2009, the industry is yet to come forward and make investments in the sector which is considered vital for the growth of agriculture and food processing sector in the country. Currently, a large chunk of fresh produce go to waste due to inadequate storage and processing facilities.
According to industry analysts, with integrated cold chains and supply chain management the country can save Rs 75,000 crore annually by cutting 30 per cent wastage of perishable horticulture produce, besides garnering additional export revenue of Rs 25,000 crore.
At the Cold Chain Summit 2009, organised in December by the CII, the ministry of agriculture and the ministry of food processing, T Nanda Kumar, agriculture secretary, said the industry must come forward with investments as private sector involvement in warehousing and logistics had to be stepped up. A special purpose vehicle (SPV) has been mooted, which will offer multi-modal logistic solution for the movement of perishable commodities across the country and revision of subsidy norms.
Cold chains development scheme:
To accelerate and develop a roadmap for cold chains sector in the country, the Centre had set up a taskforce in association with the CII. “Based on the recommendations of the taskforce, the Central Warehousing Corporation has been designated as the nodal agency to take action for the setting up of a special purpose vehicle for cold logistics, creation of an integrated multi-product multi-purpose commodity complex as well as to develop software for commissioning of IT-based market information and management system,” the union agriculture minister Sharad Pawar said.
Under the National Horticulture Mission (NHM), a new scheme of Terminal Market Complex has been approved by the government to link farmers to markets by shortening the supply chain of perishables with the provision of state-of-the-art technology for infrastructure which includes cold chain logistics. Under the NGHM scheme, financial assistance of Rs 44.87 crore has been provided for the establishment of 156 cold storages from 2005 - 06 to 2009 -10, Pawar informed.
Till now, NHB has provided assistance for the establishment of 2,172 cold storages with eligible subsidy of Rs 604.60 crore from 1999 – 2000 to 2009 – 10. “Agricultural and Processed Food Products Export Development Authority (Apeda) also provides assistance for setting up of integrated pack houses which include pre-cooling, sorting, grading and cold storage facilities,” Pawar added.
Additionally, the Mofpi is implementing a scheme for cold chain, value addition and preservation of infrastructure whereby financial assistance is provided for strengthening cold chain infrastructure. So far the food processing ministry has accorded approval to 10 cold chain projects during 2008 – 09 in Maharashtra, Bihar, Tamil Nadu, Rajasthan, Karnataka, Uttarakhand, West Bengal, Andhra Pradesh, Gujarat and Haryana.
Haunting Issues
Technology is another problem. “The Indian cold chain industry is not mature compared to emerging destinations. Still, there is a big business opportunity here. Big retail chains may end up dominating the business. But soon, small and medium entrepreneurs could still find niches,” a Mumbai-based frozen food suppler told F&B News.
Opportunities for improving the cold chains industry:
Infrastructure: Investments in real estate and cold chain infrastructure are capital intensive and will yield slow returns. However, 100% foreign direct investment
(FDI) is allowed in this sector. The infrastructure consists of coolers, warehouses, refrigerated trucks, carriers, shopping malls and so on. One needs to study the potential risks and the return on investment (ROI) for this activity.
Third party logistics: Food supply is temperature sensitive and manual handling reduces the product quality and life. Logistics providers with air-conditioned trucks, automatic handling equipment and trained manpower will provide end-to-end support. One can also adapt state-of-the-art techniques such as cross-docking that will reduce the transit times and inventory.
Retail: One of the largest sectors in the global economy ($7 trillion), Retail is going through a transition phase in India. One of the prime factors for non-competitiveness of the food processing industry is because of the cost and quality of marketing channels.
Globally, more than 72% of food sales occur through supermarket stores. In India there are 12 million outlets, including push carts, wet markets and neighborhood kirana stores, selling food and related items. The kirana stores are generally located in a small space and have no cold storage facilities. They also have restricted capital resulting in lack of shopping variety.
The Indian retail sector is estimated to have a market size of about $180 billion but the organised sector represents only 2% share of this market. A strong retail front-end can also provide the necessary fillip to agriculture and food processing and other industries.
FP industry: The Central government allows 100% FDI in this sector. There are incentives for setting up processing plants either in agri–export zones or outside of them. Sourcing of raw materials, either fruits and vegetables or flowers or meat, is easier with an AEZ since there are already participants with knowledge about the industry standards. There are opportunities to create a Halal hub (export to Southeast Asia, Middle East), vegetarian hub (20% of Indian population + overseas), organic food hub (Europe and the US) and sea food hub in the country