Sops for cold chains insufficient

The target of 10 MT storage capacity by 2012 may not be achieved.

Despite various incentives announced in the Budget, the government’s plan to create a capacity of 10 million tonnes of cold chains, pack houses and ripening chambers by 2012 is unlikely to be achieved because of the lack of enthusiasm among commodity retailers and farmers.

The finance minister has announced investment-oriented tax incentives to encourage investment in cold storages. These incentives, according to industry players, are insufficient to “catch-the-eye” of investors.

Overseas, retailers normally create cold chains for preserving agricultural commodities, both for their back-end retail business support and for common farmers. In India, however, individual investors have been serving farmers’ needs for cold chains, while retailers have largely been unenthusiastic about creating such facilities.

Although, retailers such as Reliance Retail have started creating cold chains for their back-end business, the industry has a long way to go in this regard. For farmers, preserving their produce in cold chains is an additional burden, which may raise prices for end users, fear analysts.

Viability of cold chains is an important issue for most Indian retailers. High capital needs, fluctuating revenue cycle coupled with relatively low subsidy have worked as impediments for the sector.

Also, a fragmented cold chain industry has not encouraged the growth of cold logistics for perishable horticulture produce. This has led to a vicious cycle, making cold chains uneconomical for the horticulture sector, according to the report of a task force on “Development of cold chains in India”, submitted to the government in 2008.

Lack of awareness about post-harvest management among farmers is another constraint faced by the industry today. Lack of logistical support was another constraint faced by the , said B Thiagarajan, president, channel business group of Blue Star, a pioneer in cold chain business in the country.

According to government estimates, there were 5,101 cold stores in India as on December 31, 2006, with a total storage capacity of 21.7 million tonnes. More than 80 per cent of this capacity is being utilised for potato storage, while only 17 per cent of the capacity is used for preserving other commodities. Most importantly, the all-India capacity utilisation of cold storage currently stands around 48 per cent. Capacity utilisation is lower in Uttar Pradesh, West Bengal, Bihar and Punjab than the national average due to their focus on a single commodity (potato).

The task force, set up by the government last year, was to facilitate the creation of 2.5 million tonnes of additional capacity each year during the 11th Five Year Plan.