“All India Cold-chain Infrastructure Capacity” (AICIC)[1] (Assessment of Status & Gap)
Q1 - The NCCD-NABCONS Study (AICIC) has covered cold storage needs for horticulture produce only and not for processed food products. Therefore, the findings are grossly underestimated?
Table 2.2 of the report provides a list of food items which were selected for primary study in the AICIC. In this selection, meat products (livestock, poultry, fish), processed products (including frozen peas, ice-cream, butter) are listed besides fresh produce. The topic is also expanded upon in other parts of the report.In addition, to offset any lack of relevant data and information (consumption or production) of specific products, the holding periods in cold stores in the chain of various temperature categories, especially frozen products, was used to buffer the assessment of capacity required on the on a higher side. In relation, it is prudent to note that various reports suggest only 2%-4% of processing occurs in India. As such, even if none of the processed foods had been studied, the resulting underestimation would have been minimal.
By applying extending holding times at distribution hubs, the
report has adjusted for additional space in the overall cold store capacity
needs. This holding space will get vacated more frequently as operations will
advance so as to streamline the supply with demand, to optimise and achieve
better space utilisation.
Any underestimation will first show up in transport connectivity which should be a focus area for processed frozen foods. Importantly, the report puts forth the key missing links in integrated cold-chain development, the least of which is the cold storage capacity. The debate today is about how cold stores can be better used as platforms in the integrated food supply chain. Reviewers should ruminate why there is little trade of domestic harvest through the existing cold-chain despite a large footprint in cold storage space.
Any underestimation will first show up in transport connectivity which should be a focus area for processed frozen foods. Importantly, the report puts forth the key missing links in integrated cold-chain development, the least of which is the cold storage capacity. The debate today is about how cold stores can be better used as platforms in the integrated food supply chain. Reviewers should ruminate why there is little trade of domestic harvest through the existing cold-chain despite a large footprint in cold storage space.
This matter of fact is clearly explained in the report. The
milk collection and distribution phase is designed around handling a fluid
cargo. Refrigeration as a technology is applied when chilling or processing the
milk at the collection and processing units. The bulk milk distribution chain
uses insulated tankers (non-refrigerated units). In case of processed packaged
milk, if aseptically packaged, refrigeration is no longer required. Tetra
packaged milk can last without recourse to cooling for up to 5 to 6 months. Once
opened at consumer end, it is stored in domestic refrigerators for consumption.
In case of non-aseptic packaging (poly-packed milk), reefer movement is used,
with very little time spent to cross dock at cold stores, as the foremost aim is
to hold at cold cabinets or shelves for access to consumers. The AICIC report
contains evaluations for milk by-products such as Ice cream, butter, ghee, etc.
though here too retail cabinets play important role to hold inventory at last
mile.
Despite the high perishability of the fluid, the success of the
milk supply chain is well reported and is India is known for having established
a highly dynamic delivery system with daily or twice a day turnover. Keeping
aside the use of refrigeration for chillers and plate freezers at processing
units, the milk chain is uniquely designed for fast movement and derives
logistical benefits from insulated transport, reefer transport, retail end cold
cabinets and domestic fridges. With the advancement of packaging technologies,
the milk in packaged form has reduced the need for cold-chain. Even if all of
the 140 million tons of milk produced per annum, was to use the cold-chain to
market, the daily throughput would require about 380 thousand tons in
distribution capacity, most of it in form of transport, and dispensing units or
shelf capacity. Milk supply is currently focused on increasing production and in
the optimising of the manufacturing and distribution costs. Horticulture
distribution chain could adapt a lot from milk operations for expanding their
reach to more markets instead of storing to bide time.
Information on large number of crop types and their current
demand was assessed. It would have been unrealistic to evaluate the
infrastructure needs for horticulture produce or processed items that do not
require cold-chain, or with localised or negligible consumption. Annexe XV lists
additional horticulture crops factored to evaluate the infrastructure
requirements. In case of long term holding crops, a total of 6 crops types,
those that can safely be stored for longer than 4 months at farm-gate, were
studied. In case of processed foods, consumption of confections, ice cream,
butter, ghee, peas, various meats, etc. were considered. The infrastructure
requirements factors the demand by further categorising it into temperature
segments, applying a basis of holding life and final throughput to consumer,
into the overall need assessment. Information on large number of crop types and their current
demand was assessed.It would have been unrealistic to evaluate the infrastructure needs for horticulture produce or processed items that do not require cold-chain, or with localised or negligible consumption. Annexe XV lists additional horticulture crops factored to evaluate the infrastructure requirements. In case of long term holding crops, a total of 6 crops types, those that can safely be stored for longer than 4 months at farm-gate, were studied. In case of processed foods, consumption of confections, ice cream, butter, ghee, peas, various meats, etc. were considered. The infrastructure requirements factors the demand by further categorising it into temperature segments, applying a basis of holding life and final throughput to consumer, into the overall need assessment.
It is also relevant to mention that most of the processed
foods, when dispatched within the cold-chain, are already on basis of
established market demand and availability of last mile merchandising space. The
aim of the product owner is to be on the shelf, far in advance of its expiry or
use-by date and lack of retail space is critical to such throughput. After all
ice cream or frozen peas in a cold store is wasted unless retail freezer
cabinets at last mile are available. Time spent in a cold storage is anathema to
such movement. The production (by food processor) is closely linked to market
demand (on sales forecasts) as far as practicable. Where not possible, the
product is stored in captive cold stores under direct control of processor, or
on factory premises until a market pull generates directed dispatch through
cold-chain. This is typical of all branded food products, where the chain of
custody en-route to market is predetermined. Items like dried flakes, jams,
pickled, salted, canned, etc. do not use cold-chain.
This is unlike in case of fresh produce, wherein the farmer
harvests and pushes the produce to nearby available markets (mandis) – the
perishable produce arrives at the wholesale end and is pushed to retailers. Most
fresh produce can tolerate last mile merchandising in non-refrigerated retail
units. Horticulture produce like bers, cardamom, turmeric, etc. can do without
cold-chain.
Typically, a short buffer in the flow-to-market of either
produce or product is maintained in front end cold stores - either at
distribution hubs or retail-end cold rooms. The common infrastructure is mainly
in form of reefer transport and cooled distribution hubs. The logistics
infrastructure needs are synergistic for both fresh & processed supply chain
systems and accordingly assessed.
The primary aim of the AICIC study was to report a realistic
picture of the current state of affairs on the basis of existing volumetric
consumption of food items – on the existing status & gaps. The gap
assessment clearly shows the immediate potential arising from the need to
develop the reported missing links. The AICIC study did undertake a simplistic
projection on the basis of population growth and trends in production, so as to
forecast the futuristic requirement for cold-chain infrastructure in the coming
5 years. However, opinion is expressed, that cold-chain itself can impact the
consumption habits and lead to drastic changes in farm level productivity.
Official release of AICIC Report by Minister of State, Secretary, Jt Secretaries - Ministry of Agriculture and CEO-NCCD (2015)
The AICIC report states that the Cold-chain itself is known to
have a multiplier effect, affecting consumption demographics, changing demand
patterns and upsetting all forecasts. Counterintuitively, certain advancements
in food processing technologies, may altogether do away with any need for
cold-chain. Refrigeration could then be seen to from the agri-logistics space.
However, that may be wishful thinking for the while. Today there is no other
recourse, other than cold-chain, to safely serve the agri-logistics needs of
perishable foods, especially the fresh food segment. India is the largest
concentration of vegetarians, has no option but cold-chain, if its citizens want
regular and constant supply of fresh fruits and vegetables in the future.
The volume generated for handling is not one time, as meat
harvest is staggered across the year, normally on a daily basis. Of the
harvested amount, a percentage is consumed locally. A certain amount is
processed or blast frozen at food processing factories. If not being pickled,
canned, salted or undergoing other preservation through additives, this quantity
will thereafter require cold-chain intervention. The regional quantum of meat
products consumed was assessed through the per capita meat consumption data from
NSSO household surveys. The AICIC assessment is on the basis of information of
all kinds of meat consumption (not differentiated between canned, pickled of
fresh frozen). This entire demand is considered to be held at frozen cold stores
at last mile for 15 days, to consider variations or omissions in information. In
reality meats would normally be stored for lesser periods in the cold-chain.
Similar logic is applied to horticulture production, otherwise cold storage
capacity for the full basket of 281 million tons of the annual horticulture
production would have been required.
In the future, depending on demand, as more abattoirs or
poultry factories are setup, the cold-chain requirements could vary from the
current assessment. But how will this capacity manifest – firstly at production
end in food processing units in form of blast freezers with associated captive
deep frozen cold stores. This equipment at production stage, along with slicers,
cutters, grinders, effluent treatment, laboratories, etc. form captive part of
an industrial facility, and as reported in the study, categorised under aegis of
Food Processing Industries.
The onwards market connectivity is in form of logistics
capacity, which comes into use after the product is dispatched or released from
the factory. This capacity is will be in form of long haul reefer transport
(rail, road, sea, air), receiving hubs (to deconsolidate for onwards dispatch),
reefer distribution (small units for retail-end delivery), merchandising
platforms (retailing cabinets) and domestic refrigerators. These components of
the cold-chain delivery mechanism have been discussed in the AICIC report. It is
a misnomer that the evaluation is a simple mathematical calculation between
total produced quantity and space. Cold-chain is about matching throughput with
time, distance, market and demand.
The AICIC study was tasked to evaluate cold-chain
infrastructure requirements and did not extend to future potential of food
processing technologies. Cold-chain largely refers to the scientific handling of
a finished product or harvested value once entrusted for delivery to market,
whereas the production or creation of value (farming or food processing) is a
backend activity, prior to market-linked logistics. The study explains
cold-chain as a logistics intervention and evaluated requirements in regards to
the current consumption of food products, including those produced at food
processing units.
It should be understood, that all technological equipment used
at production end, neither on a farm or within a factory, was considered as part
of cold-chain even if it applies refrigeration. The IQF lines, seed stores,
dicers, cutters, trucks, tractors, planters, harvesters, irrigation pumps, etc.
which are used to create a food product are not strictly under purview of
cold-chain, which is a distribution based logistics activity. The application of
refrigeration as a technology, does not automatically include the equipment in
the cold-chain. A refrigerated cold store holding seeds is therefore not covered
under this study. Equally for IQF freezing lines, as these are captive to the
input and the process of creating a food product, one that is yet to be readied
through a transformative process, for subsequent distribution to market. Until a
product or produce is handed over for onwards logistics activity, the allied
equipment is under control of the production phase. In India, IQF Lines &
Blast freezers are categorised under food processing activity since a
transformative process is applied, where the natural characteristics of the
agricultural produce being handled is changed. The tax laws accordingly reflect
this.
On the other hand, fresh produce is ready for logistics
handling after harvest. A pack-house merely aggregates this fresh whole harvest,
segregates it for market movement, cleans & packs it for safe handling,
precools the package for better holding and to transport the produce. As these
activities do not alter the natural characteristics of the fresh food item or
transform it into a new food product, the pack-house is considered part of the
logistics chain or cold-chain. Accordingly, the service tax is exempted for such
pre-conditioning of agricultural produce.
While trains, planes, ships, trucks or tractors can form part
of the cold-chain, they would at the time be involved in serving as a conduit to
market for such goods. Similarly, small insulated carriers, street vending
carts, display cabinets controlling temperature and/or humidity, front-end
wholesale or retail storage could also form part of the cold-chain distribution
network. The study was time and resource constrained and focused on the larger
infrastructure components in the cold-chain. The purpose of the study was to
provide insightful information on the major gaps which if rolled in could
readily service the current and real demand for food.
The National Spot Exchange Limited, is an organisation well
known for its expertise in spot exchange of commodities and collateral
management. Firstly, their report was not on cold-chain but on cold storage
capacity only. The NSEL study worked out the capacity requirement on basis of
peak season production and the highest arrival/ harvesting of fruits &
vegetables to markets. It did not incorporate domain inputs on the storability
of the crops, the allied infrastructure components that lead to and from a cold
store, or other concepts inherent to cold-chain. The NSEL report was modelled on
the premise that all the produce could be stored to take advantage of price
arbitrage from deferring the commodity for a transaction at a later date. The
study did not consider the holding life of fresh produce or any other food
products. The conclusions by NSEL are not substantiated by the AICIC study.
The AICIC study followed a different approach by linking the
current consumption of food products, making the cold-chain evaluation
market-linked as well as production linked. Attention is also drawn to the
differentiation between size and capacity, holding life and shelf life, and
definitions of the various infrastructure components that make the integrated
cold-chain. It is to note that the infrastructure needs assessed in the AICIC
translates into a total capacity to handle 240 million tons of perishable food
items every year. This includes fresh and processed foods, as well meats and
milk by-products.
Cold-chain is not to be viewed from the narrow prism of
refrigerated warehousing, as it includes the pickup or pre-conditioning
activities, a transport function, the inventory holding at cold storage, last
mile distribution and the retailing and the managing of the waste generated at
each stage. Refrigeration may or may not play a major role in any of these
activities or functions.
The AICIC study is essentially a review of secondary
information collated from various implementation agencies supporting cold-chain
development. The conclusions derived depend on the accuracy of the information,
the differentiation in capacities of existing assets, the disaggregation
possible of production and location, and the domain expertise of those that
interpreted the data. However, this is the first ever study to take an inverse
approach to interpreting the demand for infrastructure using long standing NSSO
household surveys of food consumed and lays a realistic direction to cold-chain
development. NSSO data is considered par excellence and the trend over a decade
were studied. Regional and cultural preferences were also factored in demand for
food items. The study reports a mathematical matrix, grounded in realistic
information and is neither underestimating the needs, nor projecting any
ambitious potential.
Importantly, the AICIC report highlights how cold-chain can
intervene in today’s flow-to-market of perishables. The results of the study
highlight major gaps in form of various missing infrastructure. Fulfilling the
gaps in pack-houses & reefer transport units will require highly ambitious
efforts of all the stakeholders. Second guessing any future potential would have
been misplaced in light of the highlighted missing links, as assessed for the
current demand.
The cold store (bulk) capacity was derived from district
level production data, for the crops that can be stored safely at farm-gate for
long durations. Yet, the actual location of such cold stores is only indicative
to a crop producing region. A facility located a few kilometres away across a
state border would still service the storage needs in the overall region. The
cachement of a cold storage is not necessarily limited. For example, produce
from Bihar may get storage space in UP or Odisha. Market restrictions of W.
Bengal can result in the potato from the state moving out in advance to storage
space elsewhere.
In addition, lack of basic infrastructure in a state, for
example electricity or road connectivity, can also cause disparity in
development of cold-chain infrastructure. A favourable electricity tariff by
some states also affects choice of development. This is evidenced in higher
ratio of pack-houses in Gujarat and Maharashtra, as also in the case of cold
stores. Yet, as these restrictions do not directly impact farming activity, the
harvest is easily shifted to the cold store capacity available in other states.
A recent baseline survey by NHB also reports 75% capacity utilisation,
year-on-year, indicating most existing cold stores are well utilised. The
incidental excess capacity existing in a particular state, therefore does not
necessarily translate into a surplus of storage space.
However, the same cannot be said of ripening chambers and
pack-houses, which have a locational restriction in the supply chain. Mobile
assets, reefer transport requirement was not listed statewise, except with
mention that they should optimally be attached to pack-houses. A direct
arithmetic inference from the statewise breakup of figures may therefore be in
disconnect from various domain specific correlations.
The study did a primary review of demand from major cities
and extrapolated the demand to other high population urban centres. As such the
conclusions are limited in regards to demand from 414 million domestic
consumers. This could change as more of India’s 1.25 billion citizens also
generate demand for goods in the cold-chain. However, this could be met from
cold-chain hubs at nearby cities initially. With the advent of GST, the general
trend presumed for all goods is expected to lead development on lines of large
centric hubs feeding cross regional retail.
The AICIC study considered no intervention in the delivery of
produce to urban centres within a 24 hour span of harvest (approx. 300 kms
range). This may change in the future due to qualitative changes in market
demand for certain food types.
The requirement of pack-houses had initially seemed too high.
An earlier assessment on this component by NCCD had evaluated that about 33,000
pack-house units were required (about 1 every 20 farming villages). However,
repeated review of the information has borne out the need for 70,000 base units.
The actual number could vary as adjoining modular capacities would be created.
Furthermore, changing cropping patterns, improved organisation of farming in the
north-eastern states, improving of the base infrastructure, and increased
intercropping practices may result in relocation or dynamic variations to the
assessments for pack-houses, as made in the AICIC.
The report did not exemplify that small cottage industry sized
food processing units would adjoin the pack-houses (as these are and added
option for gainful recovery of the energy and resources that go into
production). The culled quality from pack-houses would feed such units adding
more production at farm-gate. The products from such units may add to cold-chain
transport and distribution hubs as assessed. Similarly, more rapid development
of food processing industries can impact on such future needs.
The data on relevant fruit consumption limited the assessment
and safely ripened fruits as a health factor could show phenomenal growth in
demand in the future. The need and number of modern ripening units may well fall
short.
The assessment of refrigerated transport units was for a fixed
unit size. In actual reality, micro factors will impact the size and carrying
capacity of transport units and the numbers can drastically vary. More so, when
rail or inland waterways develop cold-chain capabilities, the format of
transport units can also be expected to change. The report did not fully assess
other last mile infrastructure components, for distribution & retail, due to
a paucity of information to deliberate on all the micro-factors.
Farming or food processing, are on the production side of
affairs, and can be a State subject. Cold-chain primarily is cross regional
intervention, bridging farmland with markets, both domestic and international.
Cold-chain has to be driven by a National agenda, preferably on the concurrent
list as it is key to a nationwide network for high value foods and for food
security. Cold-chain forms the bridge that stitches together the rural landscape
with urban consumption, leading to value all around. Its development requires
strategic direction which should be implemented under mission mode.
The impact cold-chain is not just wealth creation through
expanding reach of food to markets, but also on stemming of price fluctuations
from episodic availability of foods. Further, the ensuing organisation will
drastically reduce food loss to a large extent and help to position us more
favourably on the food security map. Cold-chain provides for regular, healthy
and safe access to food and cold-chain is key to the future well being of the
country.
A National Policy on Cold-chain will greatly aid in setting the
direction for developing integrated, end-to-end, cross regional, future ready
agri-logistics for India.
Reference: NCCD.2015 All India Cold-chain Infrastructure Capacity (Assessment of Status & Gap), Delhi
Study by – Lead author: Pawanexh Kohli, Supported by: B.R.Premi, S.Gupta, A.Dey, S.Tripathi
(Explanations by Pawanexh Kohli, CEO-NCCD cum Chief Advisor DAC&FW)
[1] NCCD.2015 All India Cold-chain Infrastructure Capacity (Assessment of Status & Gap), Delhi
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