Cold Chain And Food Inflation!
The Confederation of Indian Industry (CII) organised the fourth Cold Chain Summit on August 29/30 in New Delhi with support from the Ministries of Agriculture and Food Processing Industries on the theme of Accelerated Cold Chain development to Mitigate Food Inflation. This writer was present through most of the sessions, and also delivered the valedictory address.
In the inaugural session itself, Secretary, DAC, Mr Ashish Bahuguna sounded a note of caution on the optimistic projections of the industry which felt that with the exemption of perishables from the purview of the APMC Act, there would be a flurry of investments in the cold chain sector, thereby leading to the transformation of the sector on account of several new players moving in with investments and technology. He felt that unless state governments actually saw the benefit of taking out perishables from the ambit of the Act, there was every likelihood of states backtracking on reform. He felt that one had to take into account several other factors, including technology, power supply, ease of transactions and the existing trade practices as well.
In his inaugural address Planning Commission Member Dr Saumitra Chaudhri shared the highlights of the report on Cold Chain Infrastructure for Perishables and High Value Agriculture. He said that the problems faced by the sector were indeed complex, and were not amenable to a silver bullet as the panacea to all the ills in the sector. The report had acknowledged the fact that intermediaries could not be wished away by legislative intent or administrative fiat. They had to be regarded as ‘economic agents’, and efforts made to convert them from being rent seekers to entrepreneurs. State governments had an important role to play in ensuring a transparent regulatory framework, and institutions like NHB, NHM and MoFPI had to play a promotional role.
This writer also chaired a session on the road map for NCCD, which had been established in the Horticulture Division of the DAC. Participants were quite vocal in the problems faced by the sector: erratic power supply, high interest rates, delays in release of subsidy by NHB, arbitrary rent control orders by state governments, and sometimes by district administrations, harassment of cold storage owners by all and sundry (cops, labour inspectors, health authorities, and revenue and panchayat officials). The latest in the series was the introduction of service tax on produce stored in the cold storages, which they felt was the last straw on the camel’s back. Cold storage owners felt that this would make it extremely difficult for the ‘rental-model’ cold storages to survive, as farmers were not willing to pay the service tax over and above the rentals, and there was no way in which the burden could be borne by the cold storage owner.
However, the conference was not just a tale of unending woes! There was much to cheer about. After all, of the total 30 million MT of capacity, nearly half had been created in the last decade itself, and even within these ten years, the last three years had shown a marked increase in the demand for cold stores. More important than the increase in demand was the fact that the new cold chains were looking at ‘price arbitrage’ rather than stand alone rentals. Integrated value chains especially in apples in Himachal Pradesh had made a positive impact on the ground, and farmers’ realisation had gone up substantially. There was now increasing interest from several state governments to replicate the Himachal model. Interestingly in Himachal interventions had been made by the corporate sector (Adanis) and the public sector (FEHL, a hundred per cent subsidiary of CONCOR).
The second reason to cheer was willingness of the financial institutions to finance new projects in the sector, and the opening of the RIDF and ECB route for cold chain projects. The third reason was the willingness of the state governments in working with the corporate under the umbrella of the PPP IAD with liberal financial support under the RKVY. Maharashtra and Gujarat had taken the lead in this direction, and the J&K government was seeking collaboration with CONCOR to establish the value chain for apples.
What does one conclude from all this. Yes, there is much that needs to be done, but what has been achieved from the time of the first summit cannot be underestimated. The spread of cold chain is moving beyond the three states of Punjab, UP and West Bengal and the new players include Gujarat, Bihar, AP, Tamil Nadu and Odhisha. Most of the new cold stores have controlled atmosphere, and are multi-chamber: thereby making it possible to store multiple commodities. There was a marked interest in technology upgrades for the existing cold stores, and there was a willingness to invest in HRD at all levels. Logistics providers were beginning to understand the potential of this sector and put their money into the business of perishables. PSUs like the CWC, CONCOR and FEHL were second to none in leading from the front, and last but not least, growers associations were eager to get into long-term contracts with aggregators to take this forward.
All this augurs well for the cold chain, and though its ability to combat food inflation still seems to be very ambitious, the first steps have been taken in the right direction, and one does hope that over the next few months, many of the thoughts and ideas shared in the Summit will see the light of the day.
By Sanjeev Chopra
(An IAS Officer, the author is Joint Secretary & Mission Director, National Horticulture Mission, Government of India. The views expressed are personal.)