Answers - Capt Pawanexh Kohli, former CEO of NCCD & Chief Advisor to DAC&FW. He was knowledge partner & member of the Committee on Doubling Farmers Income and is conferred the title of Professor (Post-harvest Logistics) by the University of Birmingham.
Questions - Ramesh Kumar, veteran business journalist and author of Naked Banana, 10000 Km on Indian Highways and more. His penmanship is also held at the US Library of Congress and he is a well-known evangelist of India’s logistics & supply chain operators.
Excerpts from an extended dialogue between Ramesh Kumar and Pawanexh Kohli – about recent developments in cool logistics, his exit from NCCD and more...
Kumar -Q: First things first, there is a lot of buzz including a newspaper article that you left NCCD because you could not work with the government?
Kohli -A: Buzzing sounds will sometimes confuse the truth. The term government generally means the elected leadership, and the service officers who include technocrats & bureaucrats. I do not remember, even once, if the political leadership intruded in our work. In fact, they appreciate sincere inputs from domain experts. I can remember, when Mr. Shekhawat (now Minister, WaterResources) pulled me forth from the backdrop, to applaud the individual contributions in developing strategies for farm income. Similar good-will was expressed by Mrs. Badal, Mr. Radha Mohan Singh, and many others. I actually admire the gutsy and risk taking mind-set of our elected leaders, reflecting the nature of our democracy, which wants a streamlined system to support our progress on the road ahead. Challenges are taken head-on, knowing that the risk remains in how the implementation is managed.
The government that comprises of civil servants was also most support-ive. I had the chance to evidence some who believed in wholehearted collaboration with domain professionals. To name a few - Ashish Bahuguna, Anup Thakur, Satish Agnihotri, Siraj Hussain, Raghav Chandra, S.K. Pattanayak, D.K. Jain, and Raghvendra Singh. Each made the participation of an outsider like myself as their own, aiming for betterment. They did not have to, but did so, clear-headed in perception and in their desire to have real domain expertise by their side. Alongside those days was also Sanjeev Chopra, now mentoring the next generation of officers, continually bolstering our works, clearing any doubts and helping us connect with more minds. Deep mutual trust was generated in the initial years, when uncertainties abound most. NCCD was a start-up, an experiment, and this support by the establishment was crucial and formative.
More lately, I got to work closely with Ashok Dalwai on the doubling farmers income project, yet another invigorating experience with an inspiring mind. There are many such dedicated officers in the system. A few others I worked with recently are Vasudha Mishra and Rajesh Verma in Agriculture and N. Sivasailam in Commerce Ministry - admirable individuals indeed, each a purposeful facilitator. I am sure there are several more, equally go-to types, objective in their purpose. The same goes for the technocrats in the system. In fact, I maintain that a hefty majority of our government officers put in phenomenal effort, working silently behind the scenes and trying to put their best foot forward.
I originally came into NCCD for a short period, only to help incubate a roadmap. It was never expected I would continue to lead it for a record 8 years. Of these, the last 7 years were most productive. NCCD could help pioneer and reshape various interventions, under-take innovative works to initiate new paths, all without any adverse hearsay. The prestige of NCCD was born out of its dependability and scrupulous credibility that backed its varied contributions, and our government always held NCCD in good esteem.
Nonetheless, the government is huge, and within can also exist other dispositions. They were not necessarily personal in aspect, but such personalities can entitle a setting where decisions were set aside for months and months. Truth be told, indecision and inertia are not traits that are normal in this government, but ironically, our system can allow them to surface unwanted. This can stunt continued professional purpose, and my individual course was not to pursue another term and to demit at the close of this tenure, in Jan-2020.
Q: About cold-chain now, what were the key improvements made in India's cold chain logistics industry in the last 2-3 years, in terms of infrastructure, transportation, technology, investments etc.? How fast is the cold chain industry growing?
A: India added about one million tons of capacity each year, over the last 3 years. In 2016 the total capacity was 34.06 mill tons and by start of 2019 this added up to 36.77 mill tons. New figures should be out in March 2020. New capacity is spread across various components, such as reefer transport, pack-houses, ripening units and, of course, mostly in cold storages. However, in my opinion, there remains the need to drive a far larger shift for the first two, which are the critical weak links today.
We must remember, like all logistics, cold-chain works between an OD pair. The point of origin (O) is where focus was missing. These points of origin are like the factory load gates - in case of cold-chain, it means pack-houses. The farm is humankind’s first solar powered factory, and the first-mile pack-house is its organised loading point. The modern cold storage is a distribution platform, mid-point in the logistics chain, to consolidate, cross dock or buffer the supply. The processor, retail and kitchen shelf is the destination (D). Barring a few produce types, like potatoes, nuts, apples, the bulk of fruits and vegetables cannot be held in situ for long, and perishable inventory must be kept dynamic.
Even in case of frozen ice cream or meat products, the right idea is to manufacture or harvest per demand, and quickly move to market. This model requires operators to adopt a mind-set change, to deliver goods for quicker exchange, rather than to hoard value in storage. As a strategy, cold-chain should be developed and used to connect with where the price is right, today, rather than to wait for demand to pick up. The latter, should be done only after all options to evacuate to market are exhausted. This shift in business priorities is slowly coming about, as more are seeing sense in faster cash flows, lower inventory costs, and using cold-chain to expand their marketing radius. Done properly, it has a cascade effect on the agrarian economy, especially for small-holding farmers.
On the technology side, like every-where else, there is increasing use of systems to improve traceability of the product and track-ability of the movement. Use of block-chain, remote monitoring, automation, etc. is picking up. Robotic systems to put away and pick at cold warehouses is increasingly coming into play. A lot of off-grid powered utilities in cold storages are also seen. These deploy solar thermal or biomass heat source for vapour absorption cooling, solar PV and hybrids for vapour compression cooling, etc. Hopefully, we should see an increase in developers taking advantage of geo-thermal cooling options to ease energy loads. On the transportation side, a lot of innovation is tried, including around designs that allow the same vehicle to carry varied temperature loads, especially for last mile distribution. Transport systems hold the key to growth. There is now growing focus on multi-modal domestic cold-chain, given the large sub-continental distances that India’s cold-chain must negotiate.
The government adopted suggestions to ease FDI (foreign direct investment) in cold-chain, and over the last few years, more than half a billion dollars were committed. In India, FDI in cold-chain is permitted up to 100 per cent and through the automatic route. The world’s largest operator, Total Produce is now invested in India, as well as companies from the Arabia.
To the last part of your question, cold-chain is not an industry! The cold-chain essentially belongs to the logistics sector. The industry tag relates more to the industrial equipment manufacturers or the agro-processors (food and non-food). Cold-chain itself involves an interplay with multiple industries; it is a functional domain and cold-chain owners must have a cross-disciplinary approach. It spreads across economic sectors, and cuts across technologies. On the whole, cold-chain is a logistics service and the sector is growing since the market opportunity is also growing leaps and bounds.
The very fact that there are very few places in India’s 3.3 million square kilo-metres which are not reached by cold-chain is an indicator of this story. The story is embodied by the fact that India has the world’s largest vaccination program, is among the top exporters of beef (albeit carabeef) and fish products, has a humongous dairy and ice-cream network, and suffers the least loss in its milk distribution chain… all enabled by cold-chain. However, like-wise development for fruits and vegetables was ignored. Frozen goods are easy to handle, it is the living breathing perishable fruits & vegetables chain where renewed efforts are needed and where the growth story remains.
Q: What improvements and investments still need to be made to reduce spoilage? Is the spoilage rate still as high as 30% for fruits and veggies?
A: Spoilage is more apt a term for when discarded food decomposes. Discards can happen due to mismanagement in the logistics chain and is then called “loss”, or due to the wasteful habits of consumers and is called "waste”. “Food loss” can be countered through good practices in logistics. Food loss is the fault of the delivery chain and mitigation is the responsibility of supply chain managers. They require the necessary infrastructure as basic tools, good understanding of systemic limitations, good SOPs and monitoring of processes followed, and all of this is driven by an operator’s desire for growth. The government eases the pro-vision of the tools, can provide capacity building and trainings, and open opportunities for cross-regional trade. On the other hand, countering “food waste”, primarily requires a behavioural change in consumers, to avoid inefficient food habits, become more careful with their purchase, etc. To explain, a good analogy is that of electricity distribution. The transmission loss is an aspect of its logistics technology, and the misuse of electricity by consumers is the waste. “Food loss is the fault of the delivery chain and mitigation is the responsibility of supply chain managers.”
As humans, we cherish our individuality and always wish to stand apart from others. However, we never extend the same courtesy to our food. There is this blindly motivated agenda to convince buyers that all tomatoes must look the same, or that all bananas should taste the same and be of same length & girth. This kind of thinking is driven by marketing spiel, and if we start enjoying the uniqueness of each, as nature intended, a lot of food waste can end. This choice dictates what is discarded as unsaleable even at the point of production and a lot of the produce never even enters the logistics chain.
Simply put, food loss is due to poor delivery systems, food waste is due to poor consumer habits. Globally, food loss is much higher than food waste, in each region. Stopping food loss should be the utmost priority and this means delivering food more efficiently. However, both loss and waste result in spoilage and that has a poor impact on the environment since spoilage translates into greenhouse gases.
Meanwhile, the biggest challenge is to have people take a break outside their comfort zones. For too long, people have thought of the cold as synonymous to preservation. Mere preservation tactics in cold-chain does not stop losses. Only gainful consumption can stop food loss. To achieve consumption, you require to connect with consumers. Cooling is not an end, but only defers the inevitable expiry of food, before which you must opt to supply to demand. Therefore, cold-chain must not be perceived as a preservation option, but as a method that buys you time, so as to run longer distances and connect with unsated demand. Food loss remains high, and in some seasons, can even be higher than 35 per cent.
The first step to stop food loss, is to capture its occurrence at first mile, near farms where the discards can be reused. For this there is need to organise the supply chain, at first instance, at village level. The Government has a program to develop nearly 22,000 GrAMs which will serve this purpose. The term GrAM, is an acronym for village level aggregation and dispatch facilities. These will essentially have pack-houses or pooling points, where small farm lots will be aggregated, precooled and dispatched over road or rail to destinations. The process of pre-conditioning the produce (preparing for market), also sorts out the non-saleable pieces to utilise, such as for bio-dyes, energy, fodder or compost. Edible rejects can also be diverted to support local cottage scale food pro-cessing to make jams, pickles, so forth. So, discards need not be wasted spoil, but can be used, turning would-be-waste into wealth.
All output of agriculture is biological in nature. There is no need to have any spoilage. We need to make sure there is no loss when communicating goods to markets, and also ask consumers to waste nothing.
Q: What other trends or developments are impacting the cold chain logistics market in India? Are there any new regulations or policies that are impacting the industry for example?
A: India is the world’s largest consumer of perishables, predominated by a largely vegetarian population. There is a growing preference for fresh fruits and vegetables, contrary to earlier projections that with greater affluence the population will shift towards processed products. Processed foods are now mostly relegated to convenience foods, as growing health awareness is bringing people back to whole fresh foods. In fact, the more affluent a household, the more likely they go for fresh foods. This is going to help grow the cold-chain as the fresh whole food segment has scope to grow multi-fold.
Indicated earlier, the cold-chain for pharmaceuticals is well established, and this has been driven through regulations as well as pharmaceutical industry wanting to protect their brands. The frozen or processed food segment is also regulated to an extent, but that was also driven by compliance with what the market demanded and mostly focused on exports. The fresh segment will be driven first by the rapidly growing domestic demand, which in turn will feed higher productivity, and then by using the cold-chain to expand marketing range, even beyond domestic borders.
Barring for strict regulations for safety of people and environment, other regulations must aim to ease how we do business. India has taken tack towards having a unified one-nation one-market. Multi-modal movement will be key. We must understand that while agriculture will be naturally bound to the location of individual farms, the market should have no boundaries. As a federation of states, we had too many rules that hampered inter-state trade. These are now being actively eased at various levels.
Besides a direction towards a one-India market, the government also provides strategic support to those wishing to invest in cold-chain. Besides the incentives in the form of capital subsidy, there also exists a capital linked tax deduction. Hence if you invest a hundred in capital, you can deduct that from your profits over the next 5 years. As mentioned, 100 per cent FDI is also allowed through automatic route. All services like preconditioning (ie. sorting, grading, packaging, precooling), loading, unloading, trans-port and warehousing of fresh produce are now exempt from goods & service tax (GST). There is more being done to aid and abet the growth of cold-chain.
However, there still remains some lethargy against change, slowing the full scope of growth possible. It exists in promoters, the economists and policy makers who all give development a direction. They are yet to think beyond cold stores and to translate the opportunity that is cold-chain. This can be broken by more domain experts getting involved to guide the planners. That means more logistics professionals must become pro-active in sharing their knowledge & experience, bringing sense to ambiguity and shattering a few myths along the way. They must take a bigger part in nation building efforts.
It should be clear, that without cold-chain, the production efforts of farmers and fishers can only be monetised at markets within a short radius, dictated by the perishability of the produce. Without cold-chain, all efforts for greater production and productivity comes to naught in real terms. With cold-chain, their selling radius extends and through market expansion they can find growth. With cold-chain connectivity they can have a choice among markets, and can directly connect with markets afar. This ensures the production can translate into optimal economic gains. Plus, awareness of nutritional wellbeing means a steady demand for fresh food items.
There is no alternate to cold-chain, at least so far, until we have 3D printers for fresh food and medicines. As more populations drift away from food production, they add load on the agricultural sector. Without cold-chain, how do we safeguard our food and health in a harsh future - cold-chain is vital for civilization to develop as it will - without cold-chain, humankind’s progress will get stumped.
Q: So, going back to the first question, it seems there is a bit of truth that at a level something worked to derail this train? How does it feel, having set up NCCD and now leaving it to others?
A: I feel full, and the fulfilment comes from knowing that NCCD contributed best to various important strategies and decisions at the apex level. As you know, I entered to contribute pro-bono with no expectations, certainly not imagining an 8 year stint, as part of the establishment that I was not integral to. I have no regrets here, and it is satisfying to see NCCD being considered today as the nodal brain-trust in this domain. Yes, more and better is demanded and needed a streamlined work environment.
Your question provokes for specifics. I will respond that, we were greatly enabled to pioneer excellence in a short time span, but of late NCCD did face some forced challenges. Struggling with crippling indecisions and arbitrariness, eventually NCCD’s governing bodies were updated details, and then of my decision to demit office. The underlying principle was to keep true to system & due processes. Remember, there are numerous in the government who work resolutely and mutely in this backdrop, still trying to make a positive difference; my privilege to have met a few and shaken their hands.
Let me explain a bit. We all ask to see progress that makes a difference. Which is why we increasingly elect leaders on that basis. The good direction that our Prime Minister and other leaders put across, requires relevant context in implementation. For holistic development and speed, the need of the hour is to do more through PPP models, to induct expertise of domain professionals, and such like. These are recognised necessities today, and are fully facilitated. But sometimes, if a facilitator loses track, then this agenda can get grossly undermined. Any PPP like NCCD is at core a wilful collaboration, and we must keep score of this essentiality - it has to be guarded against misappropriation and nurtured constantly. If not, instead of the partners being equal, the PPP becomes a one-sided affair, and the working eco-system gets intolerably confused.
The confusion is equally evident in the non-governmental stakeholders, the other ‘P’ in PPP. The private sector, tends to be partial in involvement, for all its talk of nation building. Those in this sector are not ready, or strong enough, to take up cudgels to counter arbitrary red-tape; instead they try to adjust and play safe. This half-hearted participation normalises individual overbearing conduct and taken advantage of. There are limitations to people in the government, and we need more of the private sector to step up and take charge and burden where government cannot. All of us have a role to play in nation building and it should not be seen as the captive domain of government employees.
We all know that good ideas are never sufficient without good implementation, and implementation is insufficient unless guided by experienced context. Such experience is honoured, but as a people, we still tend to kow-tow more to a position. As said in my farewell letter, domain expertise is not assumed with the chance nomination to an administration position - the power that stems there, is transitory and should rightfully be used to create good value, and not nuisance value. Similarly, any strength of knowledge should be used to improve the lot of others and not merely for personal gain. The collective capabilities should be used wholesomely and not in con-fused or roughshod ways. Like how cold-chain should optimally be used to make the most of the transitory time to connect value with demand, rather than to hoard & control the supply. NCCD demonstrated such possibilities, as it got evolved into a think-tank of repute, a collaboration of the people and for the people.
So, to repeat, my heart is full and I feel gratified for being enabled to establish NCCD, and for so many who supported the path changing works we were able to accomplish.
Q: What do you say for the next CEO of NCCD? And what comes next for you?
A: The position of CEO in NCCD is designed to be held by a senior industry professional. Unfortunately, NCCD has not passed on to another, though I assume one such will be selected in the future. I hope its next leader will have ample domain experience to support its stakeholders in taking a direction that makes even better sense for the farmers, operators and consumers. NCCD was not mandated its authority, which was established only through the credible force of its works and that too should be upheld. Most importantly, he or he should ardently strive to keep NCCD’s unique PPP nature alive and as a body where knowledge collaborates and reigns supreme.
I had not really figured my “next” yet. There is enough under my sleeves and maybe there will be other places and opportunities to contribute… or maybe I am due a quiet fade out…
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