contract farming and food parks in india

A

BRIEF REPORT

ON

CONTRACT FARMING AND FOOD PARKS

August 2013

REPORT ON CONTRACT FARMING AND FOOD PARKS IN INDIA

Private & Confidential of 18

1. CONTRACT FARMING

1.1 An Overview

Contract farming: an arrangement whereby farmers enter into agreements, both short term and long term, with industries to cultivate/produce the industries requirements for agriculture, horticulture, floriculture, poultry and dairy products. Punjab government has decided to promote durum wheat via contract farming to give a second push to the green revolution. Similarly, while Karnataka has announced the concept in its industrial policy for the agro-processing sector, Tamil Nadu has already prepared contract farming legislation to be implemented in the state. Apart from elaborating on the concept and application of contract farming, the workshop will cover issues such as new opportunities under the WTO regime, legal areas involved, government support and incentives and latest research and development in related areas. Industries involved in contract farming will also share their experience. In the last decade, food processors in the country witnessed considerable growth in terms of production capacities. This has brought along many problems and one of them was related to procurement of quality raw materials for processing. A substantial number of farmers in India belong to the small and marginal category and this has added to the problem. Processing firms face several challenges pertaining to supply chain such as high cost, lack of adequate availability, poor quality, and timeliness, among others. However, with the rise in exports and the entry of many domestic and multinational food processors, after the opening up of the Indian economy, contract farming, which was not so popular earlier, has become one of the preferred modes for raw material production and procurement, thus strengthening the food supply chain.

1.2 Strategizing The Concept

Contract farming is essentially defined as an agreement between a farmer and company for production and supply of agricultural/horticultural produce at a predetermined price. The basis of the relationship between the parties is a commitment on the part of the farmer to provide a specific commodity in quantity and quality standards determined by the purchaser and an undertaking by the sponsor to support the farmer’s production activities as well as purchase the commodity. Many companies in India have adopted the contract farming strategy to ensure effective supply chain management. The companies often meet with farmers to introduce them to the best agronomy practices. So be it modern planting techniques, water-efficient irrigation systems, objective methods of fertiliser and pesticide applications, the companies’ spelling agronomists would work closely with farmers, which translated into tangible improvements both in terms of crop quality and yield. The results were quite apparent.



Further, it is seen that companies in India are mainly embracing contract farming to support their export demands where they have to ensure products with certain specifications. Further, the other concern is the quantity of fertiliser used. This is because, often, even after washing the vegetables and fruits, some residue are left behind, which is not acceptable in several countries. So, in order to meet export quality requirements and standards, the contract farming for okra and other leafy vegetables initiated.

1.3 Overcoming The Challenges

Contract farming is not free from certain limitations and challenges. The biggest challenge is pertaining to providing quality seeds to farmers and ensuring that the seeds are used for the production and not sold by the farmers as it happens in many cases. Moreover, it is necessary to enlighten the farmers about proper cultivation, sowing methods, etc. On the farmer’s side also, there are certain problems. Farmers are highly skeptical about the processors, i.e. whether the companies will buy their product or not and will they have to bear losses when the price shoots up. In order to deal with such challenges, companies are taking several measures. Firstly, they select the land, taking into account the climate and soil. They also monitor the various processes at the farm level. Further, if the prices are increasing beyond certain limits, then they too increase the price offered to farmers. In order to be fair to the farmers and maintain transparency, most of the companies discusses price aspects of the produce every year before planting. It is a mutually agreed decision between the farmers and the companies, and is also dependent on prevailing market prices. This sustained investment, both in monetary terms as well as the time spent, resulted in a winwin partnership for farmers and the company.

1.4 State and Contract Farming matrix

State/ Institution Nomenclature of the Scheme

Short Details ofthe Scheme

Benefit to Farmers/Benefit to Private House

States/Districts where it is being implemented

1. Assam

Hindustan Paper Mill

Area Development Scheme

The Scheme envisages cultivation of Bamboo on wastelands.

Farmers would be benefited in terms of production and income

8 Districts of Assam – Cachar, Hailakandi, Karimganj, Nagaon, Kamrup, Morigaon, Udalguri and Darrang

2. Bihar

1. Sarvodaya Krishak Sewa Swablambi Sahkari Samiti

Seed production Minimum Rs. 100 per quintal

Rs. 100 per quintal to Samiti

Ara district



2. Doon Valley through Aditya Kumar, entrepreneur

Basmati rice Assured procurement

Crop grown through organic farming methods prescribed by it.

Munger district

3. Chhatisgarh

MSSL Mahindra Krishi Vihars

Supply of quality inputs, technical guidance, buy back of produce at pre decided price.

Assured availability of quality produce in required quantities at pre decided rates

Chhatisgarh

4. Himachal Pradesh

Himalayan International Limited

3 herbs being cultivated

Assured purchase of crop by the company at a prefixed price

Assured supply Paona block of Solan district

5. Karnataka

1. M/s Bharati Associates

Gherkin Processing Assured market, good price, 1000 farmers benefited.

Assured supply of quality produce

Hassan, Karnataka

2. M/s Sai Agro Tech

Kolar, Karnataka

6. Madhya Pradesh

1. ITC Ltd. e- Choupal for Soybean & Wheat

Information on best agricultural practices Supply of farm inputs Supply of information on weather forecasting Price discovery of commodities

Availability of quality Soybean & Wheat at reasonable prices to ITC Ltd. for captive consumption

MP

2. Hindustan Lever Ltd.

Wheat (Durum & Sharbati wheat)

Supply of farm inputs

Availability of quality wheat at reasonable prices for captive consumption

MP

3. Cargil India Pvt. Ltd.




MP

4. Rallies India Pvt. Ltd.




MP

5. Reliance

Bio-Sciences Ltd.

Aromatic oils (Lemon grass, Palmarosa, Citronella, Tulsi)

Purchase is affected through traders. No direct benefit to farmers.

Availability of aromatic oils for export purposes

MP

7. Punjab and Haryana

1. TATA Chemicals

TATA Kisan Sansar (TKS) through TATA Krishi Vikas Kendra (TKVK)

Enhanced farm productivity & income

i) achievement of leadership by delivering value to agriculture

ii) Social engineering through community service

iii) Serving as a complete solution provider to farmers and building lasting

TKVK set up in Sunam in Sangrur district of Punjab and proposed to cover 2700 villages in Punjab & Haryana



relationship

iv) establishment of new identity and enhanced brand image

v) Increased sale of company’s products (fertilizers, chemicals etc.) leading to enhanced revenue

2. Vardhaman led consortium of spinning mills of North India & State Bank of Patiala

Village cluster adoption programme

i) Productivity of cotton increased from 4.6 quintals in 2002-03 to 9.6 quintals per acre.

ii) Expenditure reduced from Rs.7995 per acre in 2002-03 to Rs. 7112 in 2003-04.

Increased production & hence better capacity utilization of plants & machinery.

Bathinda & Muktsar districts of Punjab

8. West Bengal

M/s Fritoley India

Cultivation of Processable Grade potato (with low sugar contents)

Farmers get all critical inputs through the company at right time in right quantity. Further, they also get technical know-how from the company.

Company get assured supply of the raw material, as the key input supply is under their regulation, the quality of the raw materials are more or less as per their specification

Hooghly, Bardhaman and Medinipur (West) of West Bengal State.

8. Maharashtra

Tata Chemicals Ltd.

Grapes - Nashik district

i Assured quality of grapes for export and improving brand name 'Tata Grapes"

i Easy availability of crop loan (Rs.55000 /acre).

ii Availability of technical know-how and supply of required inputs

iii. No marketing problem for farmers.

Farmers are also resorting to direst sale whenever local processes are attractive.

i. Scheme implemented through SBI.

2. S. H. Kelkar Group of companies

Patchouli (Aromatic oil plant)

i) Availability of tissue culture planting material

ii) Marketing facility by the company

Availability of assured quality raw material

Ratnagiri & Sindhudurg districts



3. Champagne India Limited

Production of grape wine - Pune distrit

i Easy availability of planting material (@Rs.65-70 /.

Assured supply of quality raw material

2500 acres of Wine grapes under contract

4. Venkate shwara Hatcheries Private Ltd.

Contract Broiler Farming in Maval Block of Pune district

i. Technical inputs and marketing of product is assured.

ii. All recurring expenditures are borne by the company

Assured availability of marketable product.

The Company is saving on the investment cost as well as management cost

i) Being implemented through Pune DCCB. ii) 120 units of 5000 birds each are envisaged

1.5 A win-win situation Contract farming is extremely beneficial for companies involved in it, as they stand to gain by way of stable and steady supplies, doing away with price risk fluctuations, noninvestment in big resources like land, product risk-sharing, etc. Indeed with effective management, contract farming can be a means to develop markets and bring about the transfer of technical skills in a way that is profitable for both the companies and the farmers. In terms of benefits for the farmers, the contractual agreements can provide them with access to production services and credit as well as knowledge of new skills and technology. Some contract farming ventures give farmers the opportunity to diversify into new crops and new markets. Further, contract farming increases the yield of the particular farm. Due to the agreement, the farmers are assured that the company will buy the produce and they will get timely supply of quality seeds. Thus, contract farming as a strategy adopted by food processors is gaining prominence in India due to steady progress in the economy, rising food demand, organised retail boom and an increasing shift towards branded food consumption.

1.6 Contract Farming Structures

STRUCTURE-

MODEL SPONSORS GENERAL CHARACTERISTICS

Centralized Private corporate sector State development agencies

Directed contract farming. Popular in many developing countries for high-value crops. Commitment to provide material and management inputs to farmers.

Nucleus estate State development agencies Private/public plantations Private corporate sector

Directed contract farming. Recommended for tree crops, e.g. oil palm, where technical transfer through demonstration is required. Popular for resettlement schemes. Commitment to provide material and management inputs to farmers.

Multipartite Sponsorship by various organizations, e.g. -State development agencies -State marketing authorities -Private corporate sector - Landowners - Farmer cooperatives

Common joint-venture approach. Unless excellent coordination between sponsors,internal management difficulties likely. Usually, contract commitment to provide material and management inputs to farmers.

Informal developer Entrepreneurs Small companies

Not usually directed farming. Common for short-term crops; i.e. fresh vegetables to wholesalers or supermarkets.



Farmer cooperatives Normally minimal processing and few inputs to farmers. Contracts on an informal registration or verbal basis. Transitory in nature.

Intermediary (tripartite)

Private corporate sector State development agencies

Sponsors are usually from the private sector. Sponsor control of material and technical inputs varies widely. At time sponsors are unaware of the practice when illegally carried out by large-scale farmers. Can have negative consequences.



2. MEGA FOOD PARK

2.1 Salient Features of the Scheme

Holistic & cluster based approach - centralized facilities for key activities which are technology and capital intensive Specific focus on setting up backward linkages for establishing viable supply chains - Provision for farm proximate aggregation & minimal processing infrastructure in the form of collection centers and primary processing centers. The primary processing centers shall be linked to central processing center and shall also have its own forward linkages to cater to fresh retail market Infrastructure needs of a viable Food park /Zone estimated to be about Rs 1200million (US $ 30 million) including farm proximate primary processing facilities

2.1.1 Emphasis on Economic Viability

Enabling Infrastructure Creation along the supply chain Creation of Central Processing Center, Primary Processing Centers and Farm Collection

Centers Components of basic enabling infrastructure and common technical facilities to be assisted

under the scheme

Project to be implemented with private led initiative - through a Special Purpose Vehicle (SPV) - SPV to be a Body Corporate registered under the Companies Act

2.1.2 Composition of SPV

at least three entrepreneurs / business units independent of each other with no common directors

at least one should be from the food processing sector with at least 26%equity in the Special Purpose Vehicle (SPVs) to bring in at least 20% of the project cost, including the

cost of land, as their contribution- 10% in case of hilly & Institute for Transportation and Development Policy (ITDP) notified areas

Minimum Combined net worth of the shareholders in the SPV should be Rs. 500 million - Food Processor should have at least Rs 100 million of net worth

Government agencies may participate in SPV holding less than 26% equity

2.1.3 Financial Assistance from Ministry Limited to non-land component of the project 50% of project cost limited to Rs 500 million in general areas 75% of project cost limited to Rs 500 million in difficult & hilly areas and ITDP notified

areas

Program Management Agency (PMA) to assist the Ministry in implementation



Project Management Consultant (PMC) to assist SPV - in project development and implementation

PMC to be appointed by SPV from empanelled list of MoFPI

2.1.4 Project Components

Core Processing Facilities Collection Centre, Primary Processing Centers: Sorting and grading, packaging facilities ,

dry warehouses, specialized cold stores including pre-cooling chambers, ripening chambers, reefer vans, mobile pre-coolers and collection vans

Central Processing Centers: Sorting and grading, Packaging unit, Dry warehouses, Specialized storage facilities including Controlled Atmosphere (CA) Chambers, Variable humidity stores, Pre-cooling chambers, Ripening chambers etc, Cold chain infrastructure, Irradiation facilities, Steam generation & sterilization units, Food incubation-cum-development centers etc.

At least 50% of the project cost (excluding land cost) shall be towards creation of above mentioned facilities

2.1.5 Factory Buildings

Provision For MSEs – Maximum 10% of total allotable area for setting up units

Enabling Basic Infrastructure Roads, drainage, water supply, electricity supply ETP, logistics facilities, weighbridges etc

Non-core Infrastructure Administrative buildings, training centers, canteen, workers’ hostel, trade/display center etc: Cost of non-core infrastructure facilities, not exceeding 10% of the project cost, would be eligible for grant purpose

Project Implementation Expense Cost of hiring project management consultants (PMC) by SPV ± limited to 2% of eligible grant amount.

2.2 Current Status of Mega Food Parks Scheme

Of 30 planned during 11th Five Year Plan, 10 Mega Food Parks have been taken in first phase

Of 10 Parks, six have been approved by the Ministry and are currently under implementation

Combined project cost of approved six parks are about Rs 6300Million Includes Govt. assistance of Rs 3000 Million Final Approval to three more Projects under Process In addition, five new Projects have been announced



2.3 Budget Allocation for 2013-14

Rs. In Million S. No Scheme/Sub Head Implementing

Agency 1 Infrastructure Development

Mega Food Park 1160.00 Cold Chain , Value Addition & Preservation Infrastructure 1000.00 Abattoir 310.00

2470.00

2 Technology Upgradation/ Establishment/ Modernisation of Food ProcessingIndustries (spillover)

1600.00

3 Quality Assurance, Codex Standards, R&D and other promotional activities 350.00 4 Human Resource Development (spillover) 40.00 5 (NMFP)�Nation Mission on Food Processing 1870.00 6 (i) Strengthening of Institutions�Grants�in�Aid (Revenue) 220.00 7 (ii) Grants�in�Aid for creation of Capital Assests (Revenue Section) 460.00 8 (iii) Economic Services (Revenue Section) 70.00 Total 7080.00



3. COLD STORAGE IN INDIA

3.1 Overview

India, at present does not have a comprehensive cold chain network, and is estimated to grow to Rs 320 million by 2015. There has been a phenomenal growth in production of horticulture produce, dairy products, and meat products over the last decade. Owing to the tremendous pressure on improving supply chain and reducing losses during produce handling and movement, the need for creation of a cold chain network is crucial for perishable food commodities. Cold storage in India has been largely adopted for long-term storage of potatoes, onions and high value crops like apples, grapes and flowers. Potato cold storages used to contribute 88 per cent storage capacity till 2000. However most of the new cold storages in the last decade have been constructed as multipurpose facilities focusing on all fruits and vegetables, poultry, dairy and FMCG product categories. The Indian cold chain market is highly fragmented with more than 3,500 companies in the whole value system.

Demand for Processed Food (In Rs Billion)

Cold storage solutions form about 85 per cent of the Indian cold chain market by value and the balance 15 per cent is contributed by transportation. There are various standalone, integrated companies and 3PL service providers offering cold storage and transportation solutions to various food companies. However, these are not enough to cater to the growing food demand.

1298.4

2716.8

4694.4

0

2000

4000

6000

2004 2010 2014

Diary

34% +14%

52.8307.2

585.6

0

500

1000

2004 2010 2014

Fruit & Vegetables

+27%

25.8158.4

518.4

0

200

400

600

2004 2010 2014

Snacks & Ready to Eat Food

+34%

25.8158.4

518.4

0

200

400

600

2004 2010 2014

Marine Products

+34%



High growth prospects for the food processing sector along with attractive government incentives (including 51 per cent FDI) make cold chain business a lucrative proposition for foreign investors as well.

3.2 Current Scenario

The total market value of Indian cold chain industry is expected to reach Rs 64,000 crore by end by 2017. During the period 2009-2017, the cold chain industry of India is expected to register a magnificent CAGR of around 25.8 per cent, which will make the value of Indian cold chain industry to reach at an astonishing figure of around Rs 640 billion by 2017. India’s cold chain industry is still evolving, not well organized and operating below capacity. Most equipment in use is outdated and single commodity based. According to government estimates, India has 5,400 cold storage facilities, with a combined capacity of 23.66 million metric tons that can store less than 11% of what is produced. The majority of cold storage facilities are utilized for a single commodity, such as potatoes. Most of these facilities are located in the states of Uttar Pradesh, Uttaranchal, Punjab, Maharashtra, and West Bengal. The following table shows distribution of facilities by commodity. In addition, India has about 250 reefer transport operators (this includes independent firms) that transport perishable products. Of the estimated 25,000 vehicles in use, 80% transport dairy products (wet milk); only 5,000 refrigerated transport vehicles are available for all other commodities. India’s greatest need is for an effective and economically viable cold chain solution that will totally integrate the supply chains for all commodities from the production centers to the consumption centers, thereby reducing physical waste and loss of value of perishable commodities. For this reason, the Government of India has prioritized the development of the cold chain industry. The government has laid out elaborate plans and incentives to support large scale investments essential for developing an effective and integrated cold chain infrastructure.

3.3 Companies in the cold storage sector

Spire and Apollo aren’t the only corporations keen to exploit the potential that lies at the back end of modern retail. A host of players, big and small, are drawing up plans to set up cold chain infrastructure. Other than the cold chain, retail supply logistics, warehousing, sourcing and merchandising management—all key to the success of a front-end retail business—are areas where companies are looking to invest. The bigger groups are doing so by acquiring established players in this sector. Over the past 18 months, two majors names in the cold chain industry, Snowman and Kausar, have been bought over. Some time back, logistics player Gati acquired Kausar India, even as transportation & logistics major Gateway Distiparks



acquired a controlling stake in Snowman Frozen Foods.

Other companies betting on cold chain infrastructure include the state-owned Container Corporation of India (Concor), and the Ahmedabad-based Adani Group, once a trading house, now an infrastructure giant that also has cold chain logistics on its drawing board. The existing players that are expanding capacities in a big way include R.K. Foodland, Refcon Carriers, Indraprastha Cold Chain, Bulaki Deep Freeze, and Glacio Cold Chain. The Future Group, meantime, has integrated backward—from food retailing to storage and transportation—with the launch of Future Logistics. And like the Spire Group, there will be other multinationals too who will be keen to get a slice of the Indian pie, what with 100 per cent foreign direct investment being allowed in the cold chain sector. For instance, GE Equipment Services is looking at entering India’s cold chain logistics market, especially cold storage and transportation equipment. Malaysia’s Haisen has signed an agreement with the Beta Empire Group and Pace CFS for a possible joint venture to establish cold chain logistics in India. The Government to provide full excise duty exemption on refrigerated equipment.

The billion-dollar investments announced by the likes of Reliance, Bharti, ITC, the Godrejs, the Tatas, the Aditya Birla Group and the Future Group offer a ready market for third-party cold chain logistics players. The cold chain industry itself is estimated to be as large as Rs 100-150 billion, growing at 20-25 per cent and is expected to touch Rs 400 billion by 2015.

India has a total 5316 cold storages with a capacity of 23333694 MTs . India requires an additional 9-10 million tonne of cold storage capacity to address annual post-harvest losses of around Rs 1 trillion (US$18.6billion). Post-harvest losses of farm produce of fruits, vegetables and other perishables, have been estimated to be over Rs 1 trillion per annum, 57 per cent of which is due to avoidable wastage and the rest due to avoidable costs of storage and commissions.

The Spire Group’s joint venture with Apollo, called Apollo Everest Kool Solutions (Spire has a North American subsidiary called Everest Cold Storage), has plans to set up at least 15 temperature-controlled warehouses in India starting 2008. The Spire Group will attempt to bring into the country international quality standards in storing food items. Private equity players, Indian as well as foreign, have shown keen interest to invest in cold chain companies— more so after witnessing the boom in the retail sector. Global and local financial services firms like Edelweiss, IDFC, Goldman Sachs, Macquarie and Blackstone are on the look-out for the right investment candidate.



3.4 Key Suppliers

The following is a partial list of companies currently supplying cold chain technology/equipment/services in India: Ingersoll Rand (USA); Rinac; Walco Engineering; Frick India; Carrier; Bluestar; Lamilux; Dupont; Emerson Climate Technologies; Parker Hannifin; Snowman; R.K. Foodlands; Schaefer Systems International Pvt. Ltd.; Metaflex Doors India Pvt. Ltd.; Alfa Laval (India) Limited; Tolsma Storage Technology, Snowman Frozen Foods; Fresh and Healthy Enterprises, and Apollo-Everest Cool Solutions

3.5 Cold chain industry in India on a hot growth trail

3.5.1 The Integrated Cold Chain Scheme

India since medieval era, has lured the world to its rich horticulture delights, the aroma of myriad spices, and the palate of delectable flavours. In fact, its traditional Indian cuisines have been attributed to fruits, vegetable and condiments of the fertile Indian soil. While India has such a rich tradition in terms of spices, flavours and cuisines, the food & beverage sector in the country is mired by inherent problems such as lack of adequate storage infrastructure and other facilities to meet the gigantic needs of its vast populace. In fact, if one takes a look at the lack of adequate storage infrastructure for fruits and vegetables in the country, it pinpoints at wastage and value loss of approximately Rs 330 billion every year. Investment in cold storage projects is now gaining momentum. During this year, 24 cold storage projects with a capacity of 1.4 lakh metric tonnes have been sanctioned under National Horticulture Mission. In addition, 107 cold storage projects with a capacity of over 5 lakh metric tonnes have been approved by the National Horticulture Board. It is for the faster growth of the cold chain industry that the Ministry of Food Processing Industry (MoFPI) has announced an Integrated Cold Chain Scheme. The integrated cold chain will enable excellent infrastructure facilities for cold chain, value addition and the preservation industry along the supply chain from ‘the farm to market’ by employing a cluster-based approach. To do this, the government has offered a 50% subsidy of up to Rs 100 million for project development. Individuals or groups of entrepreneurs with business interests in cold chain, supply chain, warehousing and logistics can benefit from this.

3.5.2 Eligible project components The scheme will consist of any two of the following components ‘A’ or ‘B’: Minimal processing centre at the farm level with facilities for weighing, sorting, grading

waxing, packing, pre-cooling, CA/ Modified Atmosphere (MA) cold storage, normal )storage and Individual Quick Freezing (IQF)

Mobile pre-cooling vans and reefer trucks Distribution hubs with CA / MA chambers / cold storage / variable humidity chambers,

packing facility, Cleaning in Place (CIP) fog treatment, IQF and blast freezing Or



Irradiation facility (Considering the functional nature of the facility, irradiation facility can

be treated as a stand-alone component for the purpose of availing the grant)

3.5.3 Pattern of Assistance The subsidy on offer is 50% of the total cost of plant, machinery and technical civil works in general areas and 75% in the northeastern region including Sikkim, J&K, Himachal Pradesh and Uttarakhand and difficult areas. However, it is subject to a maximum of Rs 100 million. The grant will be released in 3 installments in the ratio of 25:50:25.

3.5.4 Eligibility Criteria

Participants will have to fulfill the following criteria: The applicant should be an individual or group of entrepreneurs with interest in setting up

of an integrated cold chain The applicant should have a proven track record in food processing, value chain and cold

chain logistic management The promoter must have a net-worth of 1.5 times the grant amount The implementation schedule for the project would be about 18 months from the date of

the approval of each project

3.6 Progress of Cold Chain for Horticulture

6 companies have set up CA stores in India for apples Total capacity at present is approx.40,000 MT Some have been buying apples, storing in CA and selling in off-season for the last 4 years

and this has tremendously benefited the farmers and customers Progress in productivity and quality of produce Substantial capacity built up for ripening bananas

3.7 Some Trends Quality fruit is in demand round the year India imported more than 1,25,000 MT of apples in 2009-10 Price of imported apple is almost 3 times that of Indian apples in the season, yet the

imports are growing @30%+ every year. India is also importing large quantities of grapes, kiwis, pears, etc.

3.8 Prospects India’s food industry, which is currently estimated to be at approximately USD 100 billion will grow to USD 300 billion by 2015. Value addition of food products is expected to increase



from 8 percent to 35 percent and that of fruits and vegetable processing from the current 2 percent to 25 percent by the end of 2025”. The survey further reports that the dairy sector, which currently comprises the highest share of the processed food market, will experience marked growth

3.9 Challenges Limited expertise available in the country in orchard care and post-harvest management Protocols need to be established for every commodity and variety At all stages, manpower involved in logistics and marketing is not fully aware of produce

requirements, leading to loss in quality and value Rural infrastructure is very poor, affecting transport

One of the most critical constraints in the growth of the food processing industry in India is the lack of integrated cold chain facilities. According to the government’s estimates India has 5,400 cold storage facilities of which 4,875 are in the private sector, 400 in the cooperative sector and 125 in the public sector. Although the combined capacity of the cold storage facilities is 23.66 million metric tons, India can store less than 11% of what is produced. Most of the infrastructure used in the cold chain sector is outdated technology and is single commodity based. Many are designed for storing potatoes. Industry experts believe that controlled atmosphere storage facilities and other cold storage facilities with the technology for storing and handling different types of fruits and vegetables at variant temperatures would have a very good potential market in India. Another major constraint is the lack of refrigerated vehicles for movement of perishables produce (with the exception of milk). According to industry estimates, approximately 104 million metric tons of perishable produce is transported between cities each year. Of this figure, about 100 million metric tons moves via non– reefer mode and only four million metric tons is transported by reefer. Although there are currently more than 25,000 vehicles and 250 operators involved in refrigerated transport, 80% of this capacity is dedicated to transporting milk. When compared with world standards for cargo movement through cold chain, India is still far behind. The percentage of movement of fruits and vegetables through cold chain in U.S. is around 80 to 85 percent, Thailand is 30 to 40 percent and India is negligible. Currently, most of the refrigerated transport in India is operated by small, non integrated firms that do not make use of state–of–the–art technology or management practices. Therefore, India offers market potential for cold chain logistic solution providers, including refrigerated transport services

3.10 Winds of Change

Thanks to entry of imported good quality fruits, the sector seen as a good business opportunity

40,000 MT of CA Storage capacity established in the last 4 years Demand of reefer transport has increased manifold. This is now a major constraint



3.11 The Way Forward Organized players have started entering this sector. The organized players should make a difference in the next 1-2 years and then the sector

should see major investments Expect substantial improvement in quality, productivity and reduced losses in Fresh

Produce supply chain Perhaps a mix of co-operative and corporate model should work best for this sector Role of Subsidies may have to be studied for effective growth.

contract farming and food parks in india

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