The cold chain industry plays an important role in preserving the quality and safety of temperature-sensitive products. It provides a suitable environment for controlled chain of logistics activities, and the cooling and preservation of products within stipulated parameters, including temperature, humidity, atmosphere and packaging. Innovations in tracking and temperature control technologies are also playing a pivotal role in evolving the cold chain industry. To add to this, increasing urbanisation and the growth of the organised retail, food servicing and food processing sectors are boosting the growth of the cold chain industry in India. The trend is shifting towards the establishment of multi purpose cold storages and the provision of end-to-end services to control parameters throughout the value chain. Further, in the pursuit of robust cold chain infrastructure, the adoption of cutting-edge technology is emerging as a paramount priority for businesses.
Size and growth
According to the Ministry of Agriculture and Farmers’ Welfare, as of January 31, 2024, there are 8,653 cold storages across the country with a cumulative capacity of 39.42 million tonnes (mt). State-wise, Uttar Pradesh, Gujarat and Punjab account for a 54.8 per cent share in total cold storage capacity, and a 49.1 per cent share in the total number of cold storages. The number of cold storages in India increased at a compound annual growth rate (CAGR) of 1.28 per cent between 2018-19 and 2022-23 (as of March 3, 2023). The cold storage landscape in India is characterised by owner-occupied facilities, which comprise about 10-15 per cent of an occupier’s total logistics space. Currently, most facilities are located near production points and require a minimum of 100,000 square feet of land.
Government initiatives
The government has taken a number of initiatives to push the growth of the cold chain industry. The Ministry of Food Processing Industries (MoFPI) launched the Scheme for Integrated Cold Chain and Value Addition Infrastructure in 2008. The guidelines for the scheme were modified in June 2022. The key components of the scheme encompass the creation of farm-level infrastructure, processing centres, distribution hubs and refrigerated vans/refrigerated trucks. Under the scheme, the MoFPI provides grant-in-aid at 35 per cent of the eligible project cost for projects in general areas, and 50 per cent of the eligible project cost for projects in difficult areas and projects involving Scheduled Castes/Scheduled Tribes, farmers-producers’ organisations and self-help groups, up to a maximum of Rs 100 million per project. As of February 6, 2024, the MoFPI has approved 372 projects for the creation of 3.88 mt of preservation capacity and 14.81 mt of processing capacity per annum. Another initiative, the Mission for Integrated Development of Horticulture, implemented by the Department of Agriculture Cooperation and Farmers’ Welfare, provides financial assistance for horticulture activities, including cold storage installation. Furthermore, the National Logistics Policy, launched in September 2022, seeks to limit losses incurred while transporting perishable commodities by improving warehousing and cold chain efficiency.
Demand drivers
Processed food
Over the past few years, there has been a shift towards the consumption of processed food items due to rising income levels, changing lifestyles and increasing urbanisation. In March 2021, the union cabinet approved the production-linked incentive scheme for the food processing industry, with an outlay of Rs 109 billion to be implemented between 2021-22 and 2026-27. During the April to September period of 2023-24, the food processing industry invested Rs 71.26 billion under this scheme. Due to the perishable nature of food, food processing requires effective cold chain storage facilities. Thus, demand for cold chain storage facilities will increase further. Refrigerated transport is used for select perishables, most of which are exported. The demand for reefer containers has been steadily increasing across industries. Recently, BLR Logistiks announced the incorporation of state-of-the-art reefer containers to its fleet.
Pharmaceuticals
It is crucial to maintain proper temperatures to store and transport life-saving products. The Indian pharmaceuticals industry plays a prominent role in the cold chain sector. Currently, it is ranked third worldwide in the production of pharma products by volume, and 14th by value. According to the Economic Survey of India 2022-23, India’s domestic pharmaceuticals market is estimated to increase to $65 billion by 2024 from an estimated $41 billion in 2021, and further to $130 billion by 2030. With the significant increase in production and consumption of pharmaceuticals, the demand for cold chain storage and packaging will increase.
Others
Meanwhile, Container Corporation of India Limited is exploring the cold chain market in India for temperature-sensitive cargo, analysing the market fitness of ice battery systems and planning market penetration strategies by testing road and rail transportation of perishables and pharma products from production sites to the market.
Emerging technologies
With cutting-edge technologies such as automation, robotics, packaging innovation, internet of things, artificial intelligence and machine learning, the cold chain industry is set to witness technological transformation. Smart sensors are being used to send out real-time alerts regarding temperature, humidity and other ambient conditions to relevant stakeholders. Radio frequency identification tags, when equipped with the requisite sensors and battery power, can store electronic product code data for logistics management and a limited set of temperature readings. Further, advanced analytics can be used to determine the optimal temperature for a product and monitor temperature fluctuations.
Moreover, the adoption of digital technologies can add value across the entire farm-to-fork (F2F) supply chain, covering the journey from planting to harvesting (of fruits, vegetables, grains, etc). all the way till the food arrives on one’s plate. The F2F method significantly reduces transport length by operating on a delivery model, with the food brought straight from the producer. The key attributes of this model are freshness and assured quality.
Industry outlook
The cold chain market in India is still at a developmental stage, making it one of the most promising fields in the logistics industry. Cold storage capacity is expected to grow at a CAGR of 2 per cent and reach 43 mt by 2027-28. Further, as per industry estimates and India Infrastructure Research, the cost per mt of cold storage capacity addition is about Rs 8 billion. Based on this, the annual investment requirement between 2024-25 and 2027-28 is expected to range from
Rs 6 billion to Rs 8 billion. The total investment requirement during the period is expected to be at least Rs 26 billion. Further, a push from the industrial sector is likely to drive investor demand for cold chain facilities, and the segment is expected to become more organised. Besides, for efficient management of the cold chain industry, there is a need for experts and well-trained professionals who possess in-depth knowledge of the intricate processes and protocols, complemented by hands-on experience in operating cold storage and transportation equipment.
Sidra Siddiquie