India’s is the second largest fruit producer in the world. India’s horticulture output, comprising fruits, vegetables and spices, in the year 2014-15 reached a record high of 283.5 million tons (MT)(Source: Assocham, Media Reports, Reed Analysis). It ranks third in farm and agriculture outputs. Such surplus production in agriculture apart from rapid development and growth of Food & Beverage industry in India requires a robust, effective, and efficient cold chain for the sustainable and long term growth. Javin Bhinde and Anurag Jain, SynCore Consulting Group, write about the scope for Cold Chains in India.
Cold Chain Logistics involves control of temperature, humidity, air composition, packaging and more. Success of any cold chain system relies on the ways it can efficiently transport products that are sensitive to their holding environment from the place of origin to their destination with full integrity. Key growth drivers include growth in organized retail and food sectors and
rising export demand for processed and frozen food, as well as growth in domestic pharmaceutical market. The Cold Chain ecosystem offers a wide array of opportunities - two key
applications are mentioned below:
Preserving a product’s quality: The main purpose of Cold Chain technology is to primarily protect goods from inclement natural conditions. In such cases, the production unit or factory is the origin of the cold chain and the new value that is created at the point of origin is preserved for market realization by cold chain services.
Enhancing the product’s life: Cold chain solutions, when applied, effectively extend the produce’s life and safeguard nutrient quality. Though the produce trends on a perpetual, downward biological lifecycle, the ageing process gets retarded and the buying time to reach customers gets increased.
The concepts A and B are two ends of a spectrum – one is a preservative function, the other serves to delay senescence and enhance sale-able life. The use of either function depends on the product and product types. A combination thereof of these underlying principles is also
seen in use in case of potatoes, species, pulses, apples etc. Cold chain has become the prime link
between a long existing production base and the consumption centers. An optimal cold chain solution is a right combination of harvesting, routing, packaging, cooling, staging, transport, storage, distribution and retail. The following components are required for developing an end- to- end cold chain solution for its applications in industrial sector, agriculture sector and in the food and beverage industry:
Static Infrastructure: as initiators of the cold chain, for term based storage, and as cross dock distribution hubs.
Mobile Infrastructure: as links for post-production and pre-market stages. These are designed to cater to logistical load factors. Additionally, cold chain extends to last mile retail or point of sale involving merchandising infrastructure.
Standards & Protocols: as to define and for procedural processes for safety, designing,handling and for the operations of a wide array of finished products and raw produce, largely food or health related items.
Skilled Resources: human resources to implement all above aspects in a cold chain.
The Indian Cold Chain Industry which was a USD 4.7 Billion industry in 2013 is expected to grow at a CAGR of 28% over the next 4 years and will reach a market size of USD 13 Billion by 2017. Currently, with more than 3,500 companies operating, it is highly fragmented and unorganized in nature. Organized players contribute 8%-10% of the cold chain supply base. There are 5,381 cold chain storages in India with 95% of total storage capacity under private players. 36% these cold storages in India have capacity below 1,000 MT.
With the current capacity only less than 11% of what is produced can be stored, cold storage capacity is expected to grow at 13% per annum on a sustained basis over the next 4 years, with the organized market growing at a faster pace of 20%.
11% of the world’s total vegetables production is accounted by India alone but India’s share in global vegetabletrade is only 1.7%
127 Million Tonnes of milk was produced in 2011-12, but cold storage capacity is only available for 70,000-80,000 Tonnes of milk
20%-30% of fish production is annually wasted in India
25,000 unregistered slaughter houses are present in India, which generally lack chilling facilities
According to industry estimates, approximately 104 million metric tons of perishable produce is transported between cities each year
Of this figure, about 100 million metric tons moves via non–reefer mode and only four million metric ons is transported by reefer
Even though India has about 250 reefer transport operators (mostly small & non-integrated firms) thattransport perishable products and more than 30,000 refrigerated vehicles currently ply in India
The high cost of transportation is a major challenge for refrigerated vehicles market
Source: Assocham, Media Reports,Reed Analysis
Because of the wide array of applications offered by the Cold Chain industry, Cold Chain solutions are a catalyst for accelerating the growth of other industries. Apart from its applications in other industries, it finds a most crucial and sensitive application in the pharmaceutical industry, where even a few hours of failure of cold chain equipment can have serious repercussions on drug efficacy.
In the pharmaceutical industry, it is crucial that the industry players/ regulators monitor and maintain the requirements for temperature controls till the retailer level. Otherwise there is a high possibility of the efficacy getting compromised.
Total Investment projected in Cold Chains over the next 5/10 years.
The above diagram summarizes the critical factors for the reluctance in setting up cold storage facilities and in buying of cold chain equipment in India.
Apart from the investment related issues, there are infrastructural issues leading to the problem of non-adherence to the correct Cold Chain practices during the storage and transportation of Cold Chain products.
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. Owing to the high cost of running the (outdated) back-up generators (which naturally consume more power) few pharmaceutical distributors and retailers are forced to cut the power supply to cold chain equipment especially during the night.
Maintaining Cold Chain services during drug distribution has its own set of challenges.The old condition of cold chain equipment used in transportation, high waiting and queuing time due to lack of requisite infrastructure at the seaports and airports, high ambient temperature in India, unawareness on the significance of maintaining Cold chain services etc. contributes to the problem of restricted growth of Cold chain industry in India. Besides, the 3PL service providers are of the opinion that they are not provided any incentives for maintaining cold chain services due to the long transport lead times owing to poor road condition and high number of toll nakas (which leaves very low margin for their operations).
Understanding the criticality andsignificance of maintaining coldchain services are important inorder to enhance patient value.While manufacturers must strictlyadhere to Good ManufacturingPractice (GMP) and GoodDistribution Practices (GDP), itis equally critical for the othersupply chain stakeholders to maketheir contribution in enhancingpatient value by following GDPpractices rigorously. Unfortunately,compromises are made by some3PL players and industry playerswho often use low quality reefer containers (which cost significantly less) compared to good quality reefer containers.
Drug Packaging can play a significant role in maintaining temperature controlled services in pharmaceutical industry. But, quite often due to unavailability of small size reefer vehicles for shipment from distributor to retailer, drugs are generally shipped on 2 wheeler or even bi-cycles. This leads to violation of GDP as practices like storing and shipping drugs directly with ice-cubes in a thermocol box can only lead to drug safety, quality and efficacy getting compromised.This makes a sharp dent on efforts taken by other supply chain players to enhance patient value. Moreover, lack of an industry wide IT platform implementation across the supply chain to track and trace drugs consignment has further magnified the problem.
As per estimates by the National Center for Cold Chain Development (NCCD), the total investment expected in India’s cold chain in the next 5 to 10 years is approximately USD 6 to 10. Moreover, there is front-end investment required at the retail end, for walk-in buffer storage and vending platforms or shelf space. The other investment needs are in testing and certification labs, research and protocol development centers, specialized training centers, transaction based IT network and handling and packaging equipment.
Strategies and Plans to achieve the targets
In the Union budget 2016-2017, the Government has made a good attempt in boosting Cold Chain infrastructure in India, through measures like promoting use of refrigerated containers by reducing basic custom duty (BCD) to 5% and excise duty to 6%. The Government must continue grants and subsidy schemes for cold chain infrastructure development and extend schemes to include logistic and transport sector. Attempts must be made to develop multi-modal chain links through railways and highways, aimed at fast track green corridor for perishables. All cold chain activities including knowledge dissemination in cold chain must be exempted from service tax. All supply chain stakeholders must make efforts to promote human resource development for all levels of cold chain: farm-gate aggregation, pre-cooling, storage, transportation, handling, packaging etc.