Cold Chain Industry Yet to Attract FDI.

At a time when vegetable prices are overheated, the cold chain industry, voicing its frustration at Budget 2011 promises not being met, pointed out how the sector could help curb rising food inflation.

Making a case for preventing the wastage of fruits and vegetables that ensues from a gap in cold chain infrastructure, Venkatesh Valluri, chairman, Ingersoll Rand, India region, said, “One must invest in building infrastructure with a long-term view. The argument that with a cold chain infrastructure in place, the consumers will have to pay more and players along the supply chain will be able to lower their costs, is taking a simplistic view of the matter. At present, with no cold chain, are the consumers paying less than what they would otherwise?” he told Business Line on the sidelines of a CII event on the Indian cold chain industry in New Delhi.

Against a production of 180 million tonnes a year of fruits, vegetables and perishables, India has a capacity of storing only 23.6mt in 5,386 cold storages across the country, of which, 80% is used only for potatoes, according to the latest DIPP paper on foreign direct investment (FDI) in retail. According to the industry estimates, 25-30% of fruits and vegetables, and 5-7% food grains in India get wasted.

Valluri rued that till now FDI in cold chain infrastructure in India has been nil. The DIPP paper says that though 100% FDI is permitted in cold chain through the automatic route in the absence of FDI in retail, FDI flow to the sector has been insignificant.

According to some reports, Indian farmers realize only one-third of the total price paid by the final consumer, as against two-thirds by farmers in nations with a higher share of organized retail, according to the DIPP paper. In addition to that they have to bear heavy losses due to the lack of adequate storage facilities. The post-harvest loss of perishables in India has been estimated to be close to Rs one trillion a year. As much as 57% of it is avoidable by eliminating wastage. Commissions and avoidable costs of storage make up the remaining 43% of the loss.

Valluri also expressed the industry’s frustrations at the slow implementation of the Budget promises made by the finance minister during the last Budget. They are not moving as fast as it could. The 2010-11 Union Budget had announced that external commercial borrowings would be made available for cold storage facilities. It had also promised project import status at a concessional Customs duty of 5% with full exemption from service tax for the initial setting up and expansion of cold storage, cold room (including farm pre-coolers for preservation or storage of agriculture and related sectors produce) and processing units.

In addition to that, full exemption from customs duty to refrigeration units required for the manufacture of refrigerated vans or trucks had also been promised.

“How much is organised retail in the country? Only 2% and all the noise is for that. For cold chain to attract substantial FDI it will take time and some promised returns before we see serious investment into it,” said B S Subramaniam, director, Shanders Real Assets.

Source : fnbnews.com