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Poor cold chain logistics waste 40% of crops worth over $14 billion each year

15% of India's population lives in hunger, while $14 billion of crops are wasted each year. Image by Quartz India.

Image by: Quartz India

15% of India’s population lives in hunger, while $14 billion worth of crops is wasted each year due to poor cold chain facilities and disorganised logistics. 

India is among the world’s largest food producers. Yet, India’s Food Banking Network estimates that 15% of the population goes hungry every day, 1 in 4 children are malnourished and 3,000 die every day from illnesses related to poor diets. Although there is an abundance of food in the country, disorganised supply chains fail to transport, store and distribute produce effectively. Due to failed cold chain transits, poor warehouse conditions and traffic delays, India wastes 40% all harvested agricultural produce – that is more fruits and vegetables than the entire United Kingdom consumes and more grain than Australia produces each year. Besides contributing to poor health conditions and threatening the well-being of hundreds of millions of Indians, food wastage commits grave economic damage, costing the nation over $14 billion or INR 92,000 crores in lost crops alone and disseminating environmental damage by squandering water, fuel and deforested land.

Challenges faced by India’s $360 billion food market

India produces 250 million tonnes of food each year. The agrarian industry employs 65% of India’s population or 780 million people and contributes to 14% of its total GDP, which is just over $67 billion. The government allocates 1% of total GDP or $4.84 billion on food production. Yet, three crucial inefficiencies render India unable to feed all her people.

  • Shortage and misallocation of cold chain storage facilities

According to the Director of the National Horticulture Board, there is a 90% deficit of cold storage facilities in India. This shortage is compounded by misallocation. A recent government issued press release confirms that cold storages are concentrated in a few states while vast expanses of the nation are left underserved. A 2013 report by Emerson illustrates that 60% of India’s cold storages are located in just 4 states –  Uttar Pradesh, Gujarat, West Bengal and Punjab. Out of the 30.11 million metric tonnes of cold storage facility provided by the 6,300 cold chain warehouses in the country, Tamil Nadu has access to only 0.0239. Furthermore, the Indian government estimates that 80-90% of cold storage in the country is used to house potatoes leaving disproportionate hoards of other perishable foods like fresh fruits unguarded.  Between 2015-2016, India exported nearly $600 million in fresh fruits – a category that is most severely affected by poor cold chain logistics, losing 18% of all produce after harvest.

Some of the existing cold storage facilities are only warehouses with air conditioners. Their untrained staff and handlers compound this lack of awareness and contribute to food inventory losses.

The National Horticulture Board estimates that $8.5 billion of investments are required to expand storage facilities that can keep pace with increased fruit and vegetable production.

The cost of establishing and maintaining cold storage units contribute to their scarce presence in India. Real estate prices in India have risen 280% in the last decade. Excluding the price of land, a cold storage facility that can house 6000 metric tonnes of food would require an initial investment of INR 50 million or $773,000 – an astronomical value for small and medium cold chain solution providers in India’s fragmented logistics market.

  • Poor quality and misused cold chain transport

In 2010, 250 cold chain transporters operating 25,000 trucks utilised 80% of their collective fleets to transport milk. Leaving only 5,000 trucks to transport India’s annual harvest of fruits and vegetables, valued at nearly $11.5 billion.

According to the Director of the National Horticulture Board, milk, meat and poultry are prioritised for cold chain transport because they are highly perishable, meaning a lack of temperature controlled transit would cause a near absence of these products in the market. When other produce is shipped, it is often sent in unrefrigerated, overstocked trucks that either rot the food in transit or damage it severely due to poor packaging.

Hence the supply chain disproportionately allocates transport budgets to highly perishable goods with an inelastic demand to secure returns on costly cold chain freight movement. The market collectively ignores the jarring social and economic costs of wasting fruits and vegetables in a country that is globally their second largest producer.

  • Poor infrastructure

In addition to a lack of cold storage and a shortage of refrigerated or reefer trucks, perishable goods must endure long transit times on bad roads, through dense traffic bottlenecks and ruinous delays. The movement of goods between Indian cities could be more complex in terms of regulations and tax than moving goods across international borders. Besides the risk of breakdowns and accidents, India grapples with bureaucratic policies that ensure delays. Delhi has an infamous 122 checkpoints at which queues of freight trucks, sometimes 3 kilometres long, wait hours to pay entry fees. India’s previous web of multilayered taxes exacted steep, duplicate levies and imposed high interstate barriers that further increased both risks and costs across the supply chain, scaling up losses and shrinking margins. Indian suppliers also struggle to secure two-way cargo movement due to several reasons including a shortage of drivers. This leaves cold chain fleets under utilised, limiting revenues to transporters and increasing freight costs to consignors.

Emerging solutions to India’s food supply chain

The cold chain storage industry is growing at a CAGR of nearly 25%. Yet, growth is negated by perpetuating inefficiencies. To combat these shortcomings, The Indian government has implemented several policy changes that will directly optimise cold chain transport and attract private sector investments to indirectly bolster supply chain productivity.

  • Government mandates cold chain storage and GST spurs investments in tech-savvy warehouses

The Indian government recently sanctioned 101 cold storage projects to add 2.76 lakh MT of Cold Storage/Controlled Atmosphere/Frozen Storage, 115 MT per hour of Individual Quick Freezing (IQF) capacity, 56 lakh litres per day of Milk Processing, 210 MT per batch of Blast Freezing and 629 Refrigerated/Insulated vehicles.

These Integrated Cold Chain projects will not only provide a big boost to the growth of food processing infrastructure in the concerned states but also help in providing better prices to farmers and is a step towards doubling of farmers’ income. The infrastructure will also reduce wastage of perishables, add value to the agricultural produce and create huge employment opportunities, especially in rural areas.

  • Tech innovations optimise cold chain transport

Smart sensors or data loggers connected to GPS trackers can record real time temperature, pressure and humidity readings. These sensors are synchronised with analytical dashboards, accessible through convenient web and mobile apps, which can alert transporters of any risk, detect the nearest service station to help navigate crisis and optimise routes to shorten delivery times. Smart sensors can also record vehicle maintenance reports to predict malfunctions based on historical data thus forecasting temperature fluctuations and preventing delays due to truck breakdowns.

The cost-effective, durable and user-friendly system offers full visibility of a cold chain fleet, including utilisation, driving speed, idling and arrival times. This transparency of information connects transporters, drivers and customers in real time to freight movements, ensuring that consignments are well allocated, cargo is secure and any potential risks are detected immediately or predictively.  

  • Investments in logistics networks promote better roads and connectivity

The Goods and Services tax (GST) will overhaul regulatory barriers. Unifying India under one common tax, implementing FASTags (RFID scanned toll booth e-payments), e-way bills (electronic airway bill registrations to digitally monitor freight movements), Aadhar linked tax profiles, and other digital innovations will ease the movement of goods across India.

Simultaneously, these leniencies will boost productivity and attract private sector investments. Before the GST, companies feared cascading tax impositions and chose to establish warehouses in tax-friendly zones rather than strategic locations. Now, fulfilment centres, go-downs and yards can be positioned to suit distribution chains, lowering costs, expediting delivery times and improving cargo security. Thus, India has already witnessed an influx investments in warehousing space around the country. Increased investment in the arena will also improve awareness of cold chain storage, transport and distribution. These upcoming mega-warehouses are not only several times larger, they are better designed and automated with multi-commodity storage facilities and distributed refrigeration architecture.

The future of cold chain transport and India’s perishable food market

Despite growing at a CAGR of 25%, the cold chain market failed to curb agricultural transport, storage and distribution losses, which increased from approximately INR 440 billion or about $6.8 billion in 2013 to INR 920 billion or $14.2 billion in 2017. The cost of establishing cold storage and reefer trucks with adequate cooling systems combined with the infrastructural or regulatory barriers that crippled distribution chains, the fragmented market grew quickly but haphazardly to keep pace with demand. Along with the irreparable damage of poor health and starvation among 194 million Indians, the steep economic costs, the disorganised perishable food market is environmentally unsustainable. 300 million barrels of oil and 25% of fresh water used in food processing is ultimately wasted. 45% of India’s land is degraded due to deforestation, unsustainable agricultural practices and excessive groundwater extraction to meet food demand.

As strategic investments and regulatory overhauls build a scalable framework for India’s growing food market, tech innovations can facilitate these changes and optimise logistics to bridge communication gaps, record essential information to steer operations and improve security. Digitised supply chains will shrink risks, offering better returns on investment. Automating tax profiles, toll booth payments and border checkpoints stops, will speed up delivery times, reducing the fuel costs of cooling perishable cargo. Tech enabled distributors like Amazon, establish e-grocery stores, will further evolve operations to consolidate a fragmented market. Over time improved connectivity, ease of moving goods and transparent supply chains will take sufficient and better quality food to the far corners of the nation, reducing diet-related illness and the consequent cost of medical care. Efficient operations will also move lower costs up the supply chain, making better food accessible and affordable to all Indians.

To learn more about how you can optimise your transport or fleet operating business contact Numadic. We make smart sensors that pair with analytical dashboards to give you full visibility and control of your trucks and consignments.

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