Detailed Project Report Swastik Agro Products

Chapter 1
Introduction

India’s annual food production stands at 550 million metric tons and is valued at around
US$158 billion. The annual production of fruits is 58.74 million tons, while that of vegetables
is around 109 million tons. These large volumes of fruits and vegetables production together
with consistent high year-on-year growth indicate the huge market opportunity for the food
and grocery retailers particularly in urban markets. Milk and dairy products are another
large consumption category in the food and beverages basket reinforcing India’s position as
the leader in milk production.

An important issue in the supply chain is the inefficient post-harvest management. The
proper integration of post-harvest technology into marketing supply-chain is crucial.
Cultivable waste of about 24-40 per cent is reported because of the inefficiency. Postharvest
management does not only mean reducing waste but also maintaining the quality. The
extent of losses of fruits and vegetables in India is estimated at about Rs. 30,000 crore to
40,000 crore per annum, and the loss of quantity ranges between 10 per cent and 80 per
cent in the most of the perishable fruits and vegetables.

The high wastages occur due to a multi-layered marketing channel, lack of infrastructure,
absence of suitable cold stores and associated logistics as well as the lack of an organized
distribution system. More than twenty five per cent of India's fruit and vegetable produce
goes waste because of the lack of cold chain. The short shelf life of fruits and vegetables and
poor post-harvest handling practices negate the gains achieved in production. These are
aggravated by the poor road connectivity and lack of proper storage, handling and
transportation between production areas and consumption centres located far-off from each
other. The World Bank Report highlights the fragmented cold chain in the country as one of
the major factors contributing to high marketing cost and high wastages of fruits and
vegetables in India.

The absence of integrated cold and supply chain for perishable agri-produce in India has
only encouraged the large numbers of intermediation of horticultural produce till the
produce reaches the retail point resulting in jacking up of intermediation costs and at the
same time exerting a negative pressure on the farmer’s margin and deterioration of quality
due to multiple handling. The World Bank and other studies have pointed to the
development and strengthening of the integrated cold chain as the most essential

IWIN-SL/10-11/D/DPR/R0/043
1.1 I C I C I Winfra
Detailed Project Report Swastik Agro Products

intervention in infrastructure, if India has to reap the advantages gained through low cost
production of perishables, especially horticultural crops.

Cold Chain network in India is practically non-existent with stand alone cold storage facilities
passing of as cold chain network. Most of the cold stores are single chambered, single
product facilities which mainly stock up potato and potato seed for about 6 months a year
and lie idle during the rest of the year. The Government of India estimates that as of
December 31, 2006, there were 5,101 cold stores in India with a total capacity of 21.7
million MT. More than 80% of the capacities were utilized for potatoes and only 17% was for
storage of multi-commodities. The all India capacity utilization of cold storage currently is
around 48 percent. The capacity utilization levels in Uttar Pradesh, West Bengal, Bihar and
Punjab are lower than the national average, being designed primarily for single commodity
i.e. potatoes. The high capital need of this sector with a fluctuating revenue cycle coupled
with relatively low subsidy has not encouraged use of energy efficient but capital intensive
modern technologies. The fragmented cold chain has also not encouraged the growth of cold
logistics for perishable horticulture produce. This has led to a vicious cycle, making the cold
chain uneconomical for horticulture sector. However, the recent development of Direct
Retailing in domestic segment has demonstrated the success and utility of captive end-to-
end cold chain in India including that of reefer transportation. Similarly, successful use of the
integrated cold chain by major fruits and vegetable exporters has demonstrated the need to
provide an entrepreneur driven economical but integrated cold chain model to leverage the
produce of majority of small and marginal producers.

Present Cold Chain facilities in India

Presently, total number of cold storages in India as on December 2006 is 5,101 with total
installed capacity of 21.7 million metric tons. Uttar Pradesh has the highest number of cold
storages with a total capacity of around 9 million metric tons followed by West Bengal.
The cold storages in India can be segregated in three categories:
• Private Sector
• Co-operative Sector and
• Public Sector
The table below provides a summary of the state-wise total cold storage capacity in India.
Uttar Pradesh and West Bengal account for more than 60 per cent of the cold storage
capacity followed by Bihar, Gujarat, Madhya Pradesh and Andhra Pradesh.
Summary of number of Cold Storage in India – State wise (2006)

IWIN-SL/10-11/D/DPR/R0/043
1.2 I C I C I Winfra
Detailed Project Report Swastik Agro Products

Private sector is the largest segment accounting for over 90 per cent of total number of cold
storages and around 95 per cent of the total cold storage capacity in India. There are 4,609
private cold storages with a total capacity of 20 million tons. The private sector cold
storages have an average capacity of 4,129 tons. There are an estimated 358 cold storage
units in the co-operative sector accounting for 7 per cent of total cold storage capacity in
India. Cold storages in the cooperative sector have an average capacity of about 2,422 MT,
lower than the average capacity of private sector cold storages. There are only 134 public
sector cold storages in India, which account for about 2 per cent of total cold storage
capacity. Public sector cold storages have average capacity of 652 MT, which is quite low.

Exhibit - State wise distribution of cold storages in India (2006), DMI

Uttar Pradesh is the single largest state accounting for more than 30 percent of the total
cold storages units in the country followed by Maharashtra and West Bengal with about 9
per cent each. In terms of average capacity West Bengal ranks first followed by Uttar
Pradesh and Madhya Pradesh.

IWIN-SL/10-11/D/DPR/R0/043
1.3 I C I C I Winfra
Detailed Project Report Swastik Agro Products

Commodities Stored in Cold Stores

In India, more than 80 per cent of the capacities are utilized only for potatoes and about 17
percent fall under multi commodity category. Uttar Pradesh has the highest number of cold
stores and cold storage capacity primarily occupied by potatoes. West Bengal ranks second.
Other important potato stocking states are Punjab, Bihar, Gujarat and Madhya Pradesh. Most
of the multi-purpose cold stores are also used for potato storage besides providing storage
for chilies, dry fruits, fruits, spices, vegetables etc. Multi- purpose cold stores account for
around 26% of the total number of cold stores.

Cold stores for meat, fish, milk and milk products and for other commodities such as chilies
and other spices account for about one percent of the total cold storage capacity. These cold
storages are usually smaller in capacity. Maharashtra followed by Andhra Pradesh are the
top two states in milk and milk product cold storages.

Jharkhand Potential and Agri business Prospective

Jharkhand in the present scenario is a front-running state in India in the field of agricultural
production. Here, agriculture leads the state’s economy and contributes about 30% of the
State Domestic Product. Yield rate for Cauliflower, Onion, Ladies Finger in the state is higher
than the national average. Despite being a leader in the area of agricultural production in
the nation and having the right environment for the agro based industry, the food
processing industry has not really developed in the State to the extent desired or required.
Only of late, there have been some positive developments. The district of Ranchi has
availability & hence enormous base of Horticulture. To add to the glory, the neighbouring
districts of Hazaribag, Gumla are rich not only in vegetables but with different valuable
forest produces.

Infrastructure and Connectivity

Connectivity with other parts of the country by road and rail is well established in Jharkhand.
The railway network is well-developed and road connectivity in the state is fairly well-built.
The network of national highway spans 1006 km and that of the state highway covers 4662
km. There are extensive goods handling facilities available at major cities like Ranchi,
Bokaro, Dhanbad and Jamshedpur and these are well connected by rail to other parts of the
country. Ranchi is connected with major cities like Delhi, Patna, Mumbai, Kolkata and
Bhubaneswar by regular air services. Major towns in the State, such as, Jamshedpur,
Dhanbad and Bokaro have airstrips.

IWIN-SL/10-11/D/DPR/R0/043
1.4 I C I C I Winfra
Detailed Project Report Swastik Agro Products

Agriculture

Diverse agro-climatic conditions have helped the state of Jharkhand to develop a

horticulture-based economy with huge opportunity for growth. The state carries surplus of
vegetable production and the major crops are Cauliflower, Cabbage, Beans, Potato, Tomato,
Peas and Cole crops. Backed by mostly rain fed agriculture, irrigation is available to
approximately 15 percent of cultivated area in kharif season, 6-8 percent during rabi and 1-2
percent during summer. Other than corn major cereal crop is Paddy.

Horticulture

Favourable agro-climatic conditions allow round the year production of varieties and "off-
season" vegetable (such as brinjal, cabbage, cauliflower, ladies-finger, onion, peas, potato,
pumpkin, mushroom, capsicum and green chilly) and fruits (such as mango, leechi, guava,
banana, papaya, lemon, jack fruit, amla and others). Presently, horticultural crops are grown
over an area of 2.5 lakh hectares with total annual production of 181094 tonnes. The main
producing regions are Ranchi, Hazaribagh, Lohardaga, Gumla, East Singbhum, Dumka,
Godda, Deoghar, and Jamtara and Saraikela.

Existing Cold Storages in Jharkhand

One of the main strategies for development of Jharkhand state is to ensure agricultural and
rural development on sustainable basis with capacity building being the focal point for the
developmental endeavor. For the purpose of agricultural development, special emphasis is
being laid on technological aspects, ensuring new, cheap and timely availability of inputs
and their storage. Some of the existing cold storage have been listed below:

M/s. Bhandari Cold Storage,

5000 M.T. Multipurpose Cold Storage for fruits ,
1 Demotan, Ranchi-Hazaribag Road,
vegetables.
Hazaribagh, Jharkhand
M/s. B. Deoghar Cold Storage, 5000 M.T. Multipurpose Storage for Potato,
2
Deoghar, Jharkhand fruits, vegetables.
5000 tonne multipurpose storage with 30
M/s. Brambhananda Himghar Ltd.,
3 tonne Controlled Atmosphere cold storage
Jamshedpur, Tatanagar, Jharkhand
chambers.

IWIN-SL/10-11/D/DPR/R0/043
1.5 I C I C I Winfra
Detailed Project Report Swastik Agro Products

Need For Cold Chain Infrastructure in Jharkhand

However, there is a need to establish multi purpose, multi chamber cold storage and cold
chain infrastructure in this region for the storage of surplus fruits and vegetables. This will
regulate the market, and enable to provide produce during off-season and subsequently
increase production. Setting up of this facility would in turn be helpful in handling of
horticultural produce for distant markets and also export of horticulture crops. Thus the
development of the cold chain network must take into account the needs of the produce
right from the farmer to the ultimate consumer. This would reduce not only wastages of
produce but also lead to greater income in the hands of the farmer.

Background of the Proposed Project

Ministry of Food Processing Industries (MoFPI), Government of India (GoI) has taken a
number of initiatives to promote infrastructure for food processing in India. Out of a number
of schemes incentivizing private players to come into the food processing sector, three
prominent and very significant schemes are Mega Food Parks, Cold Chain infrastructure
development and setting up of or modernization Abattoirs. In this regard, Swastik Agro
Products has taken interest in setting up of a cold chain facility in the Ranchi, Jharkhand.
This proposed facility has been desired out of an acute need of storing fruits and vegetables.
As mentioned above, while Jharkhand already has a few established multi-purpose, multi-
chamber cold stores having modified/ controlled atmosphere facilities, the huge production
base subsequently proves them to be insufficient. The initiative of Swastik Agro Products on
this backdrop is well grounded and it is expected that not only the region surrounding
project location, but farmers will be highly benefitted through storage of their produces
reducing wastage, generating employment and also contributing to the state’s economy as
a whole. ICICI West Bengal Infrastructure Development Corporation Ltd. (ICICI WInfra) being
an empanelled consultant of MoFPI with vast experience in food processing sector has been
entrusted with preparation of the Detailed Project Report (DPR) and for advisory services of
the project. MoFPI, GoI has sought expression of interests along with the DPR for setting up
of cold chain infrastructure development from private players whereby 50% of the cost of
technical civil works and plant & machineries of the project will be subsidized with maximum
limit of Rs. 10 crore. This report will look into feasibility, viability and all the aspects of
infrastructure requirements of the project to suggest most suitable parameters for
establishment of cold chain facility.

IWIN-SL/10-11/D/DPR/R0/043
1.6 I C I C I Winfra