Cold Chain Management

Cold Chain Management

Indian Agricultural Industry

As per FICCI report, India is • Second highest fruit and vegetable producer in the world

(134.5 million tons) with cold storage facilities available only for 10% of the produce.

• Second highest producer of milk with a cold storage capacity of 70,000 tons.

• Fifth largest producer of eggs. Investments in cold chain required to store 20% of surplus of meat and poultry products during 10th plan requires Rs. 500 Crore

• Sixth largest producer of fish with harvesting volumes of 5.2 million tones. Investment required is estimated to be Rs. 350 Crore

Reality Check• India is second largest producer of fruits & vegetables in the

world• Per capita availability of fruits and vegetables is low

– post harvest losses– about 25% to 30% of production

• Quality of a sizable quantity of produce deteriorates by the time it reaches the consumer

• Perishable nature of produce requires cold chain arrangement – to maintain the quality– extend the shelf life if consumption is not meant immediately after

harvest• In the absence of a cold storage and related cold chain

facilities farmers are forced to sell their produce immediately after harvest– glut situations– low price realisation

Refrigeration Market Size

Of the 3443 cold storage units, 2975 are in private sector, 303 are in cooperative sector & the rest are in public sector

Cold chain• Cold chain is a logistic system that provides

series of facilities for maintaining ideal storage conditions for perishables from the point of origin to the point of consumption

• The chain needs to start at the farm level (e.g. harvest methods, pre-cooling) and cover up to the consumer level or at least to the retail level

• A well organized cold chain – reduces spoilage– retains the quality of the harvested products– guarantees a cost efficient delivery to the consumer

given adequate attention for customer service.

Cold Chain Logistics Infrastructure

• The Cold chain logistics infrastructure generally consists of– Pre-cooling facilities : several temperature levels to

suit different types of products - frozen, cold chilled, medium chilled, and exotic chilled

– Surface Storage : It consists of refrigerated warehouses for storage

– Refrigerated Transport : Involves usage of refrigerated transport vehicles/ refrigerated carriers for transportation

– Packaging– Warehouse and Information Management systems– Traceability & Tracking

Economic Size of Unit & Land Requirement

• Cold storage units can be used to store either a single commodity or multiple commodities

• Entrepreneur's financial health– store the produce entirely owned by him– on rental basis – combination of the two

• NABARD encourages cold storages where 70% of the capacity is available to farmers for storage on rentals

• Financial viability of a unit depends upon the intended pattern of use and rental rate prevalent in an area

• Considering 70:30 utilisation of the capacity for rentals and own use, a 5000 MT capacity unit is considered ideal

Technology• Cold storage unit incorporates a refrigeration system to maintain the

desired room environment for the commodities to be stored• Refrigeration system works on two principles:

– Vapour absorption system (VAS) – Vapour compression system (VCS)

• VAS– comparatively costlier than VCS– quite economical in operation – adequately compensates the higher initial investment.

• VCS– comparatively cheaper than VAS.– Three types of VCS systems depending on cooling arrangements in

storage rooms • diffuser type• bunker type• fin coil type.

– Diffuser type is comparatively costlier and is selected only when the storage room heights are low

Heat load factors

• Heat load factors normally considered in a cold storage design are: – Wall, floor and ceiling heat gains due to conduction – Wall and ceiling heat gains from solar radiation – Load due to ingression of air by frequent door openings and

during fresh air charge. – Product load from incoming goods – Heat of respiration from stored product – Heat from workers working in the room – Cooler fan load – Light load – Aging of equipment – Miscellaneous loads, if any

Structural requirement

• Storage space provision will vary according to the room height and technology being selected

• Normally, a provision of 3.4 m3 per MT of potato is considered for finalizing the room size

• For other commodities, space adjustment should be made with relation to their bulk density as compared to potato

• Proper soil testing and rack design need to be ensured• The rack system and its foundation should be strong

enough to support weight of commodities. • Normally, raft foundation is preferred for racks.

Insulation

• All the sides of the cold storage room need to be insulated in order to maintain the required temperature inside.

• Insulation of side walls, partition walls, floor and roof• The most commonly used insulation material is

thermocoal and sometimes Poly Urethane Fibre (PUF) panels are also used

• Thickness : – two layers of insulating material are used for insulation.– Minimum 100 mm thickness of low density thermocoal need to

be used for sun facing walls and roof– 80 mm thickness of low density thermocoal may be used for

other two walls.– Partition walls need to be insulated with 40 mm low density

thermocoal – 80 mm high density thermocoal is necessary for floors.

Utilities

• Availability of soft water and dependable power supply

• In case power available is not dependable, provision of a Diesel Generator set

• If water at site is not soft & its hardness is within limit for treatment, a softening plant has to be installed of matching capacity

PHYSICAL OUTLAY 1) Land 2) Site development including leveling, fencing, road, drainage, etc. 3) Civil structures including main cold storage building, rack provisions, drying shed, machinery room, store for consumables, generator room, office, security cabin, etc.

4) Insulation of main cold store building 5) Machinery for cooling, air movement, loading, grading and weighing 6) Electric supply arrangement including installation of transformer and deposits for requisite connection 7) Standby electric supply arrangement / DG set 8) Water supply arrangement and treatment plant, if required 9) An ice manufacturing plant to utilize the recycled water 10) Pollution control and waste disposal equipment

BROAD TECHNICAL PARAMETERS FOR A 5000 MT COLD STORAGE  

• Land requirement 2 acres• Storage space requirement 17000

cubic metre • Technology preferred Gravity circulation/

Bunker type/ Fin-coil • Cold storage room height 12.2 to 18.5

m

Cold Chain in India• Cold chains market in India is at a nascent stage

– only 2% of products that should be temperature controlled are handled this way today

• Private players dominate the market though state owned players are also present

• Current state of cold chains market is dismal:– Fragmented and unorganized

• lack of awareness about proper handling & storage, poor infrastructure, insufficient cold storage capacity, unavailability of cold storages in close proximity to farms, poor transportation infrastructure

– Inefficient capacity utilization• cold storage facilities are mostly for a single commodity like potato,

orange, apple, grapes, pomegranates, flowers, etc.

– Lack of logistical support– High operating and capital costs

Market Opportunities• The total cold chain market in India is worth Rs. 21,375 million, which is

equivalent to US $ 475 million. (taking 1US$= Rs 45)• Chiller Segment, which includes F & V packhouses, Potato, apple contributes Rs

16050 Million (US$ 357 Million) to the cold chain market.• The remaining market is segregated into:

Segment Value (US$

Million)Imported Fresh Fruits & Vegetables 1.67Exports By sea (Seafood, Meat, Poultry, Fruits & Vegetables) 46.00Chocolate Industry 2.00Dairy Industry 2.67Meat & Poultry (domestic) 1.33Ice-cream Industry 4.90Processed potato 4.45Frozen F & V 1.67Emerging segments (RTE, RTS, RTC, flavored milk/yoghurt) 13.33Cool Chain Transportation 40.00

• It is at a threshold of exponential increase due to developments taking place in food and retail industry of India.

Product Mix

• Characteristics of Indian CCM market for important product segments are summarized

.

Product CharacteristicsPotato Accounts for almost 90% of existing cold storage capacityChocolate Highest outsourcing demand among various product segments.

Large variation in peak and non-peak demand. No dominant player among service providers

Poultry Almost 100% demand captured by Snowman and RK Foodland

both pan India playersFruits & Vegetables Stable and High demand throughout the year.

No dominant player yet.More than 60% demand met by small/ local/regional

playersDairy products Substantial demand throughout the year(Butter & Cheese) Major players not very active

Significant share of small playersIce Cream Highly seasonal High demand in peak season

High growth 35% demand shared by small players

Government Initiatives

• Foreign equity participation of 51% is permitted for cold chain projects.

• There is no restriction on import of cold storage equipment or establishing cold storages in India.

• National Horticulture Board (NHB) operates a capital investment subsidy scheme (CISS) which provides 25% (maximum Rs.50 lakhs) subsidies to the promoter.

• Recommended the creation of additional cold chain facilities at an investment cost of Rs. 2500 crore of which Rs. 625 crore are to be provided as subsidy and the rest has to come as private investment.

• Suggested modernization of existing facilities with an investment cost of Rs. 2100 crore of which Rs. 525 crore are to be subsidy and the balance to come as private investment.

Risks in owning a cold chain

• infrastructure capital outlays are high

• returns are long term

• country risk

• monsoon risk

• crop or raw material supply failures due to pests, diseases,etc.

• partner risk

Opportunities

• Cold chain infrastructure. – Investments in real estate and cold chain infrastructure are

capital intensive and will yield slow returns.– 100% foreign direct investment (FDI) is allowed in this sector. – The Infrastructure consists of Coolers, Warehouses,

Refrigerated Trucks, Carriers, Shopping malls, etc. – One needs to study of the potential risks and the ROI for this

activity

• Third Party Logistics– The food supply chain is temperature sensitive and manual

handling reduces the product quality and life. – Logistics providers with air conditioned trucks, automatic

handling equipment and trained manpower will provide end to end support.

Opportunities• Retail

– Globally more than 72% of food sales occur through super stores

– In India there are 12 million outlets selling food & related items including push carts, wet markets & neighborhood kirana stores.

– The kirana stores are generally located in small space & have no cold storage facilities

– Indian retail sector is estimated to have a market size of about $ 180 billion; but the organized sector represents only 2% share of this market

Opportunities

• Cold Storages– Requirement of cold storage in the next five years

may be in excess of 12 lakh tonnes. – New cold storage capacity for fruits, vegetables and

multi commodity as 15 lakh tonnes• 13 lakh tonnes in private sector, • 1.5 lakh tonnes in cooperative sector • rest 0.5 lakh tonnes in public sector.

Thus, there remains a vast potential to be tapped.