Cold-chain Investment requirements (India)

Total investment projected in cold chains over the next 5/10 years

As per estimates by the National Centre for Cold-chain Development (NCCD), the total investment expected in India’s cold chain in the next 5 years is approximately USD 6 to 10 billion. These estimates are based on the following, basis current costing norms (and could be higher). This investment estimate does not include cost of land and added cold-chain ancillary requirements -

• Current gap in cold storage infrastructure estimated about 36 million metric tonnes
• Estimated investment of $ 5 billion in storage infrastructure alone; at average cost of $ 127 per ton capacity for multi-product storage other ancillary infrastructure. The land and other infrastructure would require further $ 5 billion investment.
• Specialised storage systems like Controlled Atmosphere cold stores would involve a higher investment cost of $ 580 per ton capacity.
• Further investment would be needed for upgrading technology of existing cold storages, which is estimated at $ 27 per ton capacity. Such upgradation involves thermal integrity, refrigeration installation, handling systems, etc.
• These cost estimates are linked to norms for minimum design standards as established by the government.
• In refrigerated transport, the capacity is required to grow 3 fold to fully service the existing and more for growing storage capacity. Current estimate of refrigerated transport indicates an available on road capacity of only 3.6 million MT.
• An estimated $ 1 billion investment will be required for long haul refrigerated transportation. A refrigerated vehicle of 10 ton capacity currently costs $ 44,000/.

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• Each cold storage on an average employs 10 direct employees and approximately 50-100 handlers. Currently we have 6488 cold storages (30.4mill MT), and this is expected to double in capacity in next 5/10 years. This requires added investment for training approximately one million skilled and semi-skilled employees in this sector. An investment of approximately $ 300 million is projected for this.
• Similar investment will be needed to train refrigerated transport operators and technicians (road and rail). Each road transport employs two drivers, one helper and shared maintenance technical staff.
• Investment will additionally be required in developing farm-gate level packhouses with precoolers as initiators of cold-chain, specifically for horticulture produce. Infrastructure cost for such packhouses with precooling capacity of 15 MT per is about $ 50,000 per unit. Currently there is negligible capacity available in the country.
• To complete the cold-chain, there is front-end investment required at retail end, both for walk-in buffer storage and vending platforms or shelf space.
• The other investment needs are in testing and certification labs, research and protocol development centres, specialised training centres, transaction based IT network, handling and packaging equipment.

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Plans/Strategies of achieving these targets

• Easing of import rules for cold-chain equipment including refrigerated vans.
• Developing FPOs and FIGs and enabling them to develop direct market links.
• Developing improved business models by promoting producer owned supply chains.
• Amendments to APMC aimed at enabling direct market driven supply chains and opening options through alternate market channels.
• Continue extant grants and subsidy schemes for cold-chain infrastructure development and extend the schemes to include the logistics and transport sector.
• Develop multi-modal cold-chain links through rail and highways, aimed at a fast track green corridor for perishables.
• Promote use of Negotiable Warehouse Receipts for notified perishable goods stored in WDRA accredited cold storages.
• Exemption of all cold-chain activities including knowledge dissemination in cold-chain from service tax.
• Promote HRD for all levels of cold-chain; farm-gate aggregation and pre-cooling, storage, transport, handling, packaging.
• Establish produce specific protocols linked with domestic FSSAI and ATP Legislation for the export markets.
• Promote energy efficiency and low carbon imprint technologies and operational processes in the cold-chain.
• Promote development of a national virtual network or grid of cold warehousing and transport available to public lease.
• Establish National Centre for Cold-chain Development (NCCD) as centre of excellence to promote an integrated approach to cold-chain development, spanning agricultural and non-agricultural products.
• Implement recommendations of Dr Saumitra Chaudhari Committee (DSCC) Report, for strengthening supply chains, in XIIth Plan.

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The status of tax reliefs and financial incentives

• Basic Custom duty at a nominal 5% for imports specified for cold-chain projects.
• Basic Custom duty Nil for import of Reefer vans and containers.
• 100% FDI through automatic route open for cold-chain.
• ECB route open for cold-chain infrastructure.
• Investment subsidy of 40% for cold chain projects is available.
• Service tax is exempted for storage of agricultural produce in cold storages and warehouses.
• Service tax is exempted for erection, installation or commissioning of cold storage equipment; transport; technical testing and analysis service by state or central certification agencies.
• Deduction of 150% of Capital expenditure incurred for setting up and operating a cold chain facility (for computing taxable income).
• Excise duty is fully exempt for specified equipment for cold storages or transport.

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Status of PPPs in this area

• NCCD has been setup as an autonomous organisation in PPP mode with Govt and industry participation. The mandate of NCCD is to provide enabling environment through developing standards & protocols, HRD and applied research for integrated cold-chain.
• Govt participation is through credit linked subsidy schemes to strengthen the equity base of the cold chain projects. Since 2009-12, government has participated by disbursing INR 739 crore as subsidy to cold-chain projects. 

Note: assessments of 2012 are under revisions in July-2015, with changes to focus components.