How the Indian Government is securing the future of the Agricultural Cold Storage Market in India? : Ken Research

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The agriculture sector in India has had consistent growth in production levels over time. This production level hasn't been matched appropriately in terms of food storage, which highlights the Indian Agricultural Cold Storage Industry's existing whitespace. Despite being an agricultural nation, India experiences significant food losses per year that range from INR 90,000 to INR 100,000 as a result of inadequate post-harvest management and a lack of adequate cold storage infrastructure.

The government has been developing numerous programs and giving grants to help, along with special preference to the states that are behind in terms of infrastructure, in an effort to foster development in the agricultural cold storage industry. Here is an overview of all those crucial steps taken by the government to level up the agricultural cold storage market in India.

1. Indian agricultural sector is growing due to favourable climatic and demographic conditions which is creating demand for cold storage facilities in the country

2. Setting up cold storage facilities could aid in development of food processing, packaging industries, coupled with increase in farmer’s income

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3. Indian Government is actively taking initiatives to establish a robust cold chain infrastructure to enhance the farmers’ income by preventing supply chain losses

4. Multiple schemes are implemented on ground to accelerate investment in the cold storage sector

5. Government is also offering support to Cold Storage Industry via Capital Investment Subsidy Scheme, Agricultural Marketing Infrastructure Scheme and Role of NCDC

6. The establishment of Mega Parks is expected to provide a boost to processing & cold storage services.

7. With support from the government and investors, the Indian Agricultural Cold Storage sector looks attractive in the long run

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India Agricultural Cold Storage Industry

With a project allocation of INR 9000 Cr by GOI, massive infrastructure development alongside technological push is expected to boost market growth in the next 5 years: Ken Research

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The Agri-tech market is expected to witness a growth of 32% indicating a well versed adoption rate of technology in cold storage units & modernization of existing ones, says a report by Ken Research

1. Opening up of the sector and technological push is gearing up for unleashing the potential

Recent Trends in India Agricultural Cold Chain Market

The market is currently experiencing a technological push in terms of increasing technology adoption & modernisation of existing cold storage facilities. Cold storage operators with sound capacity & sizeable operations expressed willingness to upgrade their cold storage rooms with Controlled Atmosphere technology. Given the inherent benefits of technology, cold storage operators are looking to diversify clientele to export partners; fetching higher returns than normal market prices. Moreover, trends like entry of foreign players & increase in contract farming are some of the other trends that are being currently witnessed by the industry.

2. Technological and Warehousing developments could revolutionize the way cold logistics work in India.

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The market has witnessed increased technology adoption rate with technologies such as Remote monitoring systems (RMS) wherein an all-round check and SLA fulfilment by cold storage operators could be enabled at Wi-Fi enabled smartphone & the system takes away the pain of keeping check of temperature and humidity conditions. Other features such as ‘Portable cold storage solutions’ are also becoming the new trend.

3. The opportunity for technological inclusion in agricultural cold storage sector is anticipated to witness a surge in upcoming years.

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Trends such as adoption of CA Technology solar power systems & RMS alongside push by COVID-19 has geared up momentum for next 5 years along with the creation of massive opportunity for market growth. Moreover, backward integration by incumbents & rise of agri-tech startups solving industry problems fosters support from ecosystem participants. All in all, rising technological adoption is going to be witnessed in the upcoming years which is then expected to boost industry growth.

Government initiatives such as PM-KSY are expected to result in the capacity expansion of 6.5 Mn MT in the next 5 years: Ken Research

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Total project Outlay of INR 9000 initiated by GOI towards infrastructure development is expected to boost the Indian Agricultural cold storage market growth in the next 5 years, says a report by Ken Research

1. “Favorable Policies:” Growth of agricultural sector is driven by favorable policies towards the farming population in India

Recent Trends in India Agricultural Cold Storage Industry

A massive stream of support has been given to the agricultural ecosystem in India including the cold chain industry via Capital Investment Subsidy Scheme, Agricultural Marketing Infrastructure Scheme and Role of NCDC. Government Schemes such as PM Kisan Sampada Yojana wherein integrated cold chain & value addition infrastructure have been added with the objective of reducing post-harvest losses of horticulture & non-horticulture produce & providing remunerative price to farmers for their produce. In a similar way, capital investment subsidy investment scheme has been introduced with the objective of creation of 12 lakh tonnes of new cold storages and modernization/rehabilitation of 8 lakh tonnes of existing cold storages.

2. “Investment boost:” Multiple schemes are implemented on ground to accelerate investment in the sector

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A total of 325 projects (214 completed and 111 on-going) are operational in various parts of India. With a total project outlay of INR 9000 Cr, government of India has approved a cumulative grant –in aid of INR 2,478 Cr via its various schemes under MOFPI & NHB. These projects are mainly being undertaken in Fruits & Vegetables, Marine, Fisheries, Diary and Irradiation sectors in Tier II/III cities of the country. Release of this type of data as well as positive feedback from new unit operators further emboldens the confidence in govt.

3. With increasing government initiatives & rising investment scenario from private entities, the sector looks attractive in the long run

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Cold storage units provide aid in getting better prices of crop produce to farmers by providing cooling solutions. Further, storage units near export zones has allowed generated export receipts from domestic crop produce. During 2010-20, establishments of new cold storage units led to substantial reduction in post-harvest losses. Presence of cold storage units has enabled backward integration by food processing firms undertaking massive contract farming of Potato. In the upcoming years, it is expected that an increased investment from government & private entities will boost the market growth. The market is expected to register a market growth of 3.2% in the upcoming years.

Growing food processing industry, shift in cropping patterns to horticulture, and Proactive Govt. Policies and Financing Support will propel the growth of the Indian Agricultural Cold Storage Market: Ken Research

 1. Cold storage capacity has increased year on year, however, there is a lack of modern storage facilities that hold back the industry’s extreme growth.

The cold storage sector in India is driven by the increase in international trade because of liberalization in trade. Also, with the push by the government via various incentive-led schemes and recommendations of NCCD (2015), the number of cold storage units increased dynamically in August 2020. Although the highest number of units are concentrated in Uttar Pradesh, the top 5 states contribute >75% to total Indian capacity. This highlights the focus to ensure a well-distributed mechanism in India. Moreover, more than 80% of units are decades old in nature and lack modern techniques for storing more commodities, temperature control methods, etc. which inhibits the growth of the cold storage industry.

2. Inadequate capacity for multi-storage, high Opex, long gestation period & small unorganized players are some of the other pain points of this industry.

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While the cold storage capacity has increased at a CAGR of ~4.8% during 2010-20, it is still behind the capacity of New Zealand, the USA, and Great Britain in terms of availability per urban resident in cubic meters. There can be many reasons for it. One of them is the inadequate capacity for multi-storage. Around 68% of its capacity is suitable for potato storage only which makes it an economically not so-viable option in bumper years of production.

Also, only 20% of revenues of the cold chain sector are generated from Potato while the multi-purpose sector increases the capacity utilization rate and contributes 54% to total revenue. Moreover, the presence of small independent private players has restricted the growth of the industry as these players do not possess the required monetary backing for undertaking capacity expansion, technological advancements across cold chains, procuring reefer trucks, setting up mobile units, etc. Also, the low availability of skilled staff at economically viable rates increases the Opex.

3. Opening up of the sector and technological push is gearing up for unleashing the potential of the cold storage market in India.

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Despite having challenges, the industry is expected to grow in the future as multiple factors are working together to boost growth. One of them is the surge in the adoption of CA Technology. Cold storage operators with sound capacity & sizeable operations expressed willingness to upgrade their cold storage rooms with Controlled Atmosphere technology. Given the inherent benefits of technology, cold storage operators are looking to diversify clientele to export partners; fetching higher returns than normal market prices.

In addition to this, in 2020, Mumbai airport became the world’s largest airport-based temperature-controlled facility with a capacity of stock holding up to 700 tonnes at a time. Railways of India has been undertaking multiple steps via CONCOR & subsidiaries to establish/ operate cold storage units in various states. Entry of new players, increase in contract farming, and backward integration are some of the other trends and development in the industry.