Transportation of temperature-sensitive items along the supply chain through thermal and refrigerated packaging methods demands an infallible cold chain infrastructure. As cold chains are being globalized in India, maintaining the longevity and freshness of the perishables, pharmaceuticals and agricultural produce is indispensable and requires an innovative revamping to overcome capacity and infrastructure constraints in order to mitigate disruption risks associated with the quality of the deliverables.
The cold chain industry is emerging at a fast pace in India owing to the shift in focus from the increasing demand to better cold storage and transportation facilities for the commodities that require a certain temperature throughout the supply chain network. Due to the fledgling state of the cold chain in India, a huge amount of agricultural produce remains exposed to dissipation. Further, the market is highly fragmented and includes more than 3500 big and small players. But from the past few years, India’s cold chain industry has witnessed some positive changes. Now companies are keen to look for better-refrigerated storage and temperature-controlled transportation provisions in order to keep the integrity of the shipment intact.
Cold Chain Market Potential
According to the research entitled ‘Indian Cold Chain Industry Outlook 2022’ by Research and Markets, the cold chain industry in India is prophesied to grow at a CAGR of 17-18 percent during the period 2017 – 2022 owing to the rising need of the infrastructure to reduce wastage. The demand for cold chain logistics from organized retail, the pharmaceutical industry has been growing day-by-day. As per CRISIL research three major segments- meat, seafood, and bio-pharmaceuticals can give the buoyant force to the growth of the cold chain industry in the next five years. These segments cater mainly to the export markets where organised players are preferred due to stringent quality requirements and regulations.
Indian Cold Chain Market: Drivers
Growth in Organised Food Retail: With the growth of the organised food retail, consumers get access to a very large variety of fresh fruits and vegetables, dairy products, meat, and poultry products and a number of other temperature-sensitive commodities that require cold chain storage and transportation. Most of the organized retail players have already acknowledged that setting up of a strong cold chain infrastructure is a key step in efficiently managing their supply chains.
Growth in the Processed Food Sector: There has been a marked improvement in the consumer demand for processed foods. The Indian government has also announced the intent of establishing several mega food parks. This augurs well for the development of the cold chain industry in the country.
Shift towards Fruits and Vegetables: Due to increased risks and investments in grain crops, farmers are moving towards the cultivation of fruits and vegetables. Most of these crops require refrigeration and hence are expected to encourage the development of cold storage facilities.
Increasing demand from the Healthcare sector: A number of healthcare products such as vaccines, biopharmaceuticals as well as clinical trial materials are heat sensitive and must be stored at temperatures ranging from 2° – 8°C.
Above said, private sector participation has increased in the cold chain industry to cater to the increasing demand for cold chain logistics. The majority of the cold storages built in the last few years are meant for multipurpose storage and this trend is expected to continue in the coming years as well. The shift towards horticulture and processed food is also expected to increase the demand for cold chain solutions in India.
Despite the industrial shift towards a more integrated cold chain network and adequate cold storage facilities, the industry is reeling under a deficient cold chain infrastructure. Without the preconditioning centers, the produce cannot be readied for the cold chain, and without transport, there are breaches in integrating the movement across the cold chain. Thus, large investments need to flow into rural India and the focus should be to develop and create new packhouses with associated transport capacity at the village level.
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 move via non–reefer mode and only 4 million metric tons are transported by reefer. Higher operating costs, lack of small size reefer vehicles for shipments from distributors to retailers result in higher ambient temperature.
Talking about the crucial challenges in delivering cold chain products to the end-user in the right temperature Gopi G, Regional Business Manager- South, Snowman Logistics explains, “Considering the variable temperature range, the cold chain market is divided into chilled and frozen. And the cold chain logistics companies that cater to the two aspects of the sector are everywhere across the country – the west, south, east, north and central regions. However, lack of technology has led to the depreciation of meat and other such produce within the cold chain. Consumers need meat while it is fresh so that it can be consumed on the same or a day after it has been bought. The absence of efficient tech worsens the quality and eventually leads to wastage and even health concerns. Technologies like GPS and sensors can monitor the trucks centrally to track the temperature and other key statistics so as to ensure better control of product quality.”
Apart from this, the other concern is low awareness among labours about handling temperature-sensitive products. In India, the supply chain of most products is long and fragmented; a product goes through many hands from source to delivery point. Most workers involved in the field are not properly trained in handling temperature-sensitive products resulting in deterioration of product quality before reaching the consumer. Besides, there are various other challenges which Indian exporters are bound to deal with, such as:
- Lack of reefer vans during transport from manufacturing plant/cold storage.
- Lack of reefer plugs for uninterrupted power supply.
- Contamination during customs verification at the port before shipment.
- Product loss because of quality deterioration during shipment.
Here, Pawanexh Kohli, CEO, National Centre for Cold-chain Development (NCCD) informs, “India has 30-35 million tonne (MT) storage space. However, on the transport side, it has 12,700 reefer trucks. Over 90 per cent of the bulk cold storage available in the country is used for potatoes and chillies.”
Touching upon the issue of poor infrastructure and inappropriate use of resources, Kalidas Bhangare, Managing Director, Testo India says, “It is true that the demands are increasing and even the production of perishables is increasing but still the cold supply chain potential is not at par mostly due to inadequate and basic infrastructure. Power supply, transportation, water availability, waste recovery and many other resources are still not enough to support a well-structured cold supply chain.”
There are manual errors such as improper handling of perishables and food products, while lack of awareness and ownership amongst the service providers lead to wastage or poor-quality products at the end. “Concern has been there towards the handling of drugs due to stringent pharma norms but unfortunately produce such as vegetables and dairy products are handled very casually,” adds Bhangare.
Steps to create an efficient cold chain infrastructure
The effectiveness of cold chain is defeated without the use of temperature-controlled distribution connectivity between sources to market place. Most common fact that goes with cold storage systems is that all the consumables are meant to be stored in a temperature-controlled environment. Be it milk & dairy, fruits, vegetables, meat or drugs, everything is temperature-sensitive and requires specific temperature range to be stored and transported.
With above, a new generation of reefers is coming which will be equipped with an array of sensors monitoring the temperature effectively and shutting the cooling plant when not needed and is unnecessary to use. This may improve the reliability of temperature control as well as can extend the autonomy of the reefer.
It requires a great deal of integration and optmisation to maintain seamless delivery of shipment. Rakesh Pachauri, Business Head, Cold Storage, GP Global Group also agrees to it.Pachaurisays, “We cannot take off vertically until we have sound infrastructure supported with skilled resources, especially in cold chain there is acute shortage of skilled drivers who can operate a refrigerated van. Team work and ownership are the key words which can bring a drastic change in operating a cold chain organisation. Every employee of the organisation should understand his or her role and execute it with full ownership in order to use the resources in hand to the fullest.”
About 61 per cent of the cold storage capacity is concentrated in the states of West Bengal, Uttar Pradesh and Bihar, wherein storage of potatoes accounts for 85-90 per cent of the capacity. Storage units in Maharashtra, parts of Gujarat and the country’s southern states are designed for storing commodities such as dairy products, fruits, processed fish and meat products and seasonal vegetables. However, the market is gradually getting better and organised and focus has shifted towards multi-purpose cold storages, which can help reduce the cost incurred in establishing separate cold storage for various kinds of perishables.
Pointing towards the predicament of commodities stored in cold storage Gopi marks, “Apart from labour knowledge and training in handling temperature-delicate products, there is a requirement of uninterrupted power supply in cold storages. This is an age-old problem in India. Companies have to invest distinctly in power back-ups which escalate the capital investment.”
The success of any cold chain depends upon its efficiency to cater to products that are sensitive to the environment, yet stays fresh due to the various controls and practices when transported from their place of origin to their destination. Cold Chain serves as a linkage between the producer and end user. Several components need to be developed for designing an effective cold chain infrastructure, namely:
- Static Infrastructure- cold stores, pack-houses, pre-coolers, etc.
- Mobile Infrastructure- reefer vans/trucks, carriers, merchandising carts, etc. (basically transport units for connecting the static infrastructure)
- Handling protocols and design standards
- Skilled resources
While we have laws but implementation is ineffective which allow manufactures, traders, retailers to take shortcutsbelieves Akshay Sharma, Founder, LogFresh. “If one is to visit the offices of Food Safety and Standards Authority of India (FSSAI) across the country, one will realise the peculiarities associated with the process of obtaining a license. For example each stakeholder including service providers are supposed to get license from FSSAI, but qualitative aspects need to be checked in infrastructure especially among service providers,” informs Sharma.
Role of technology and innovation
Incorporation of advanced technology and innovation in the cold chain network can revolutionise it beyond measures as temperature-sensitive goods are transported through multiple modes of transportation, it is apparent to keep track of shipment at every stage of delivery to ensure the right quality and time of the delivered consignment. The major cold chain technologies in providing a temperature controlled environment during transportation involve:
Dry ice: It is solid carbon dioxide at -80°C temperature and is capable of keeping a shipment frozen for an extended period of time. It is particularly used for the shipping of pharmaceuticals, dangerous goods and foodstuffs and in refrigerated unit load devices for air cargo. Dry ice does not melt, instead it sublimates when it comes in contact with air.
Many air freighters have launched dry ice replenishment service to temperature-controlled products such as perishable and pharmaceuticals which require specific temperature requirements while being transported and stored. This service can be provided to clients 48 hours in advance prior to service delivery.
Packaging: There has been a considerable focus on the development of packaging equipment with improved properties over conventional insulated packages. Significant efforts have been made on improved vacuum insulated panels, on-demand systems that do not require pre-conditioning, as well as flexible, actively temperature-managed solutions that are now emerging.
Temperature Control Foil Pallet Covers: Temperature contol thermal foil pallet covers protect temperature sensitive goods during transportation. This product is predominantly used within the Aviation Industry for air cargo and also for land based pallet transportation. These waterproof foil covers has high heat and solar resistant qualities which virtually eliminates the transfer of heat to the goods within.
Reefers: This is the generic name for a temperature controlled transport unit, which can be a van, smalltruck, a semi-trailer or a standard ISO container. These units, which are insulated, are specially designed to allow temperature-controlled air circulation maintained by an attached and independent refrigeration plant. A reefer is able to keep the cargo temperature cool and even warm.
Data Loggers: Data loggers monitor temperatures in refrigerators and freezers for clinics participating in the CDC Vaccines for Children program as well as hospitals, clinics, and WHO sites. The loggers communicate wirelessly via Bluetooth low energy to mobile devices.
Talking about Testo India’s offerings to the sector, Bhangare informs, “Data loggers and temperature thermometers monitor and ensure the longevity of perishables. Testo 184 transport data loggers that record the temperature while in transit and for the purpose of traceability, this also helps the freight forwarders to prove that the cold chain was not interrupted during transport. Testo also has Wi-Fi data loggers testo Saveris 2 that monitors the cold room/storage temperature. All the measurement can be accessed online from anywhere.”
The role of the Ministry of Food Processing Industries cannot be overlooked in the development of cold chain infrastructure in India; the entity is implementing scheme for its promotion. Other departments such as National Centre for Cold-chain Development (NCCD), National Bank for Agriculture and Rural Development (NABARD), National Horticulture Board (NHB) and state governments are also taking initiatives for the development of cold chain industry in India.
According to Kohli, “NCCD engages with various private and government stakeholders to translate industry needs into policy recommendation, facilitate private investment, improve storage, specialised transport and operations, develop and promote new and energy-efficient technologies, run awareness programs and many more.”
Cold chain infrastructure in the agricultural sector suffers the most on account of shoddy cold chain infrastructure. NABARD has been instrumental in providing loans to warehouses, cold storages. The body manages the advancement of fund for creating adequate infrastructure for the storage of agricultural commodities. The funds envisage extension of loans to public and private sectors for construction of warehouses, silos, cold storages and other cold chain infrastructure.
In February 2019, The Cabinet Committee on Economic Affairs (CCEA) approved a corpus of Rs 2,000 crore for Agri Market Infrastructure Fund (AMIF) to be created with Nabard for development and upgrade of agricultural marketing infrastructure in rural and regulated wholesale markets. The fund will provide subsidised loans to states and Union Territories for 585 agricultural produce market committee (APMC) mandis and 10,000 gramin agricultural markets (GrAMs).
The cabinet committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, in its meeting held on October 2018 approved the proposal for creation of a special Fisheries and Aquaculture Development Fund (FIDF), proposed by the Department of Animal Husbandry, Dairying and Fisheries (DADF), Ministry of Agriculture and Farmers Welfare (MoA&FW). The FIDF would help in creation of Fisheries infrastructure facilities both in Marine and inland fisheries sector, which would boost fish production and help achieve target of 15 million tonne by 2020 set under the Blue Revolution.
Madhusudhana Rao, Principal Scientist at ICAR-Central Institute of Fisheries Technology says, “Cold chain infrastructure needs to be established throughout the fish value chain from harvest to consumption, and cold storage facilities at -18°C should be set up for keeping frozen products to maintain the freshness. Besides, traditional fishing boats shouild be equippd with ice store facility.”
For want of processing and storage facilities, the fish are being cut in unhygienic and unscientific ways by traditional fishermen and picked up for exports by agents from Kerala by paying a low price.
Akshay says that if the government wants to bring in gobal standards in cold chain, instead of incentivising only large corporates or individuals, they need to offer subsidies and incentives on Operating expense (OPEX) instead of Capital expenditure (CAPEX) and closely monitor the usage. “While the government has been incentivising and offering subsidy on cold chain, there is still the need to for a integrated policy resulting in cold storages being set up by large players for their own consumption, or being setup by individuals with no knowledge to avail subsidies who further rent it out to large traders,” notes Akshay.
“The Government needs to proactively strategise to ease the import rules for cold chain equipment and develop improved business models by promoting producer owned supply chains,” feels Akshay.
It is conjectured that many large domestic and foreign companies will be joining the league in coming years to cater to the growing demand of cold chain logistics. This will also inject required investment and latest technologies in the Indian cold chain industry in near future. Cold chain industry in India is also expected to witness some major mergers and acquisitions by the big companies to establish their base and to expand their reach. Besides this, the staggering growth in pharma sector will further drive the demand of robust cold supply chain infrastructure.