CrossTree Blog

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Focus development in Rural India

Rural India as the source, not just as a destination market

India’s Cold-chain sector was traditionally driven by the industrial infrastructure and equipment providers and various documents output by industry bodies like CII and FICCI and large consulting firms drove across the need for greater storage infrastructure required in this sector. The country followed through, and over years developed an enviable capacity in cold storage, amongst the largest in the world. Yet, our cold-chain is still considered nascent and troubled. As a follow-up, the government of India constituted the NCCD; sanctioned by the cabinet in February 2012, envisaged as a think tank to policy makers, involving participation from cold storage providers, technology & equipment providers, consultants and grower associations.

Ever since its incubation, the National Centre for Cold-chain Development (NCCD) has moved the understanding that mere storage of produce is not the final solution to food distribution. Cold-chain means market linkage and it involves a series of inter-weaved activities and has an expanded horizon beyond temperature controlled storage. NCCD thereby opened its participation base to include educational institutions, farmers and producers, traders and sellers, self-help groups, consumer groups, student groups, agri-entrepreneurs and enterprises involved in air, sea, rail & road logistics, finance, retail, research, packaging, marketing, etc.

Today, besides the equipment providers & store owners, the entire cold-chain user base, including who are impacted by it and those who add value in form of knowledge or R&D, now have opportunity to contribute directly to future developments. Through such collective participation from a wider stakeholder base, more conjoined inputs for holistic development is resulted and made this unique brain trust (NCCD) even more inclusive across all cold-chain segments.

Efforts were then undertaken to identify what were the major missing links in India's cold-chain, specifically in relation to fresh agricultural produce. Various options were put forth…

Perishable Business concepts

Enabling Horticulture Trade

I am frequently asked to assess studies and the strategies that will help develop a revenue multiplier for farmers-producers, to save food wastage and safe guard national resources; truly a laudable Vision. This vision is typically presented alongside tactical options that will enable farmers to store their weekly or periodic produce, so as to avoid peak season price drops and distress sales that stem from low shelf life of perishable produce. Ergo the cold stores, conceivably offering safe storage and extending the sale opportunity onto a more favourable future date.

Sadly, the glorious vision cannot be served merely by storing produce, abiding to ‘time the market’ for the ‘right price’. This tactic lends itself to the core premise that the local buyer will pay a higher value at a later date, when supply patterns are low - the market remains the local buyer/mandis, specific to the growing region. This concept is true to an extent but does not leverage cold chain technology to the fullest. This is not an in-depth solution by far, and is a business notion that will perish!

Viability Gap Funding (Cold chain)

This commentary is intended to present queries on the concept and the need for Viability Gap Funding (VGF) for the cold-chain industry in India. It is hoped that views; both for and against, shall be generated to allow a more cohesive debate on the matter and to allow policy makers to understand the need if any, the policy constraints if any and possible solutions to the agenda of faster cold-chain development in the country.

There is only one preliminary premise in this discussion, that we need more of the cold-chain and that this should happen with private sector participation.

First, a quick review of what are the five measures within the underlying principles of Viability Gap Funding (VGF)-
  1. The task should be clearly understood as a Public Service. This also implies that a captive need exists; in business terms a steady long term “revenue stream”.
  2. The project is undertaken under PPP mode and state government participates through provision of necessary land.
  3. The Project has pre-determined user tariff indices, basis which revenue returns are assessed.