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Cold chain sector is expected to grow at 14% CAGR by 2023

11:08 AM Sep 23, 2022 IST | GK NEWS NETWORK
cold chain sector is expected to grow at 14  cagr by 2023
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India’s cold storage capacity is likely to reach 40.7 million metric tonnes by 2023, rising 8.2% from 2020, as per Colliers’ latest report, opportunities in Indian cold chain assets.

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Colliers forecasts the Indian cold chain sector is expected to grow at 14% CAGR during next three years driven by growth of online grocery, pharmaceutical sales and the ongoing Covid-19 vaccination drive in the country.

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“Cold store facilities today are an emerging asset class in India. The lack of an organized/efficient supply chain across the country currently leads to wastage of agricultural produce, and the government has been keen on curbing the same. Increased focus on developing organized cold storage infrastructure would enable lowering this wastage by shelf-life improvement of the stored produce. There is a clear opportunity for organized development in this segment as the current infrastructure is primarily fragmented and undersupplied”, said Shyam Arumugam, Managing Director, Industrial & Logistics Services at Colliers India.

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Over the next three years, the cold storage segment is expected to become more organized, with increased interest from third-party logistics providers and institutional funds.

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The cold storage market in India is fragmented and unorganized with facilities being largely set up on an ad-hoc basis. India has about 8,200 cold storage facilities as of 2020, 75% of which are suitable only for storing single commodities, mainly potatoes, one of the major crops in India in terms of production and consumption. The surge in online grocery, processed foods and pharmaceuticals sales have opened up ample opportunities for developers and third-party logistics players to develop multi-purpose cold chain facilities in India.

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As per the report the cold storages offer an immense opportunity for developers and institutional funds to develop multi-commodity cold storage, offering storage facilities for a range of sectors including higher-value commodities. Cold storage facilities are hugely capital intensive but can fetch gross yields of about 12%, with a break-even period of nine years and a higher rental premium of about 3-4 times that of traditional warehouses.

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Siddhart Goel, Senior Director & Head, Research at Colliers India, further added, “While the government reforms have been received positively by private players, aspects such as providing uninterrupted power, recognizing the need for cold storage for non-horticulture products, with accompanying product-specific regulations, introducing single-window clearances for government approvals, and developing infrastructure interlinkages between storage and delivery will further enthuse the private sector and help develop an important real estate asset class that can provide good returns to developers and investors.”

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Currently, most facilities are located near production points. Occupiers can explore smaller cold storage facilities of about 10,000 sq feet– 50,000 sq feet, closer to distribution centers, but in peripheral locations of Tier I cities, for efficient last-mile delivery.

Over the last eleven years, the government has initiated policies such as profit-linked tax deduction, allowing FDI and other financial assistance, to support integrated cold chain management and encourage the private sector to develop facilities.

‘374.25 lakh MT capacity of cold storages available across India’

As per available information, there are 8186 cold storages with a capacity of 374.25 Lakh MT available in the country for storing perishable horticulture produce like fruits and vegetables. State/UT wise details of cold storage is at Annexure – I.

The information regarding capacity utilization, realtime data regarding availability, cost etc on cold storage facilities for farmers and traders etc. is not centrally maintained by the Ministry. There is no real-time monitoring System.

A study on All India Cold-chain Infrastructure Capacity (AICIC-2015) carried out by NABARD Consultancy Service (NABCONS) assessed the requirement of 350 lakh MT capacity of cold storage for perishable fruits and vegetables. Currently, there is 374.25 Lakh MT capacity of cold storages available in the country.

Government is implementing following schemes under which financial assistance is provided for setting up of cold storages throughout the country to bridge the gap between availability and required cold storage capacity:

Mission for Integrated Development of Horticulture (MIDH)

Department of Agriculture Cooperation & Farmers Welfare is implementing the Mission for Integrated Development of Horticulture (MIDH) under which financial assistance is provided for various horticulture activities including setting up of cold storages. The component is demand/entrepreneur driven for which Government assistance in the form of credit linked back ended subsidy is available at the rate of 35% (for general areas) and 50% (for hilly and scheduled areas) of eligible capital cost of the project for both public and private sector enterprises.

Pradhan Mantri Kisan SAMPADA Yojana (PMKSY)

Ministry of Food Processing Industries is implementing the Scheme for Integrated Cold Chain and Value Addition Infrastructure as one of the component of Pradhan Mantri Kisan Sampada Yojana (PMKSY) with the objective of reducing post-harvest losses of horticulture & non-horticulture produce and providing remunerative price to farmers for their produce. Under the scheme, Ministry provides financial assistance in the form of grant-in-aid at the rate 35% for general areas and 50% for North East States, Himalayan States, ITDP areas and Islands for storage and transport infrastructure and at the rate of 50% and 75% respectively for value addition and processing infrastructure subject to a maximum of Rs.10 crore per project for setting up Integrated Cold Chain projects including Irradiation facility. Standalone cold storages are not covered under the Scheme.

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