Every year due to post-harvest losses, US$19.4 million worth of crops are wasted in India daily due to rejection at the farmgate and delays in the distribution process with significant impacts on the environment. Effective Cold Chain Infrastructure (CCI) is one intervention that could mitigate many of these challenges.

India is the world’s highest milk producer and the second-largest food producer. Agriculture, alongside its associated sectors, is India’s largest source of livelihood.

Almost 70% of rural households depend primarily on agriculture, and 86% of farmers are smallholders. Despite this production level, India is still home to over 190 million malnourished people, a quarter of the world’s total. The Global Hunger Index 2020 report ranks India 94th out of 107, lagging behind neighbouring countries like Bangladesh, Pakistan and Nepal. Farmers and food producers, especially smallholder farmers, still struggle with low-income levels, and 4.6-15.9% of fruits and vegetables (FFV) are lost annually throughout the supply chain. The country loses approximately INR 926 billion (US$14.33 billion) every year due to post-harvest losses, and US$19.4 million worth of crops are wasted in India daily due to rejection at the farmgate and delays in the distribution process with significant impacts on the environment in terms of toxic waste, water pollution, long-term damage to ecosystems, hazardous air emissions, greenhouse gas emissions and excessive energy use. Effective Cold Chain Infrastructure (CCI) is one intervention that could mitigate many of these challenges.

As the world’s second largest food producer, India should be able to feed its population; instead, 190 million Indians are malnourished. Proper food preservation techniques could help change this by ensuring that a higher proportion of domestically produced food reaches the Indian population. Reducing food losses would also boost the incomes of smallholder farmers and others who earn their livelihoods at the first mile segment of the value chain, creating jobs and improving food security for rural populations.

What is a cold chain?

A cold chain is an environmentally controlled chain of logistics activities that cools and preserves produce or products within stipulated parameters, including temperature, humidity, atmosphere, and packaging. A well-designed and developed cold chain can prevent food losses and reduce carbon emissions related to food waste. Cold chains also ensure food security by reducing food price inflation, buffering the food supply, and overcoming seasonal shortfalls. This buffering mechanism dampens the price fluctuations that typically put vulnerable communities at risk of poverty and hunger and better supports the growth of farmers’ incomes.

Barriers to Scaling-up CCI Business Models:

Different stakeholders in the cold chain sector face economic barriers that need to be addressed through a sustainable business model. These barriers include:

• High investment cost:

Large-capacity CCI requires a sizable investment. For example, a 5,000 MT cold storage facility costs around INR 5-6 crore (US$670,000-800,000), including the cost of the land. A reefer truck with a 7.2T capacity costs around INR 18-19 lakh (US$24,000). Although the government provides subsidies of 35-75%, the remaining cost is still too high for most farmers.xxiii

• High cost of land and its availability to the operator or service provider:

The cold chain business is capital intensive, and installing high capacity (~5,000 MT) cold chain infrastructure (like packhouses and cold storage facilities) becomes even more expensive due to the high cost of land. To access government subsidies the land where the cold storage unit will be installed must be owned by the individual or company, and a 5,000 MT-capacity cold storage unit requires 1-2 acres of land. Securing land near a farmgate can also be challenging for OEMs and operators.

• High operating costs:

Most rural areas have access to grid electricity, but it is highly unreliable. This is a major issue for CCI near a farmgate, because it requires a constant power supply. Operators are forced to rely on diesel generators for about 30% of total expenses for the cold storage industry in India.

• Access to financing:

Access to financing is a challenge for smallholder farmers. Low-income earners, many of whom are unbanked and have little financial literacy, find it extremely difficult to secure loans to purchase a cold storage facility since they are considered a credit risk. Loans and subsidies are generally only available to government institutions and FPOs, not to individual farmers.

• Demand aggregation:

Due to a lack of awareness of the benefits of cooling, demand aggregation is often a challenge for CCI operators, resulting in low utilisation rates.

• Low utilisation affecting revenue:

Low utilisation rates are a major challenge to the business viability of CCI. 90-95% of CCI assets are owned by the private sector, but due to smallholder farmers’ limited ability to pay for storage and transportation, many do not use the cold storage available. CCI funded by the government also lacks modern efficient technology and transport facilities, resulting in low capacity and utilisation. To ensure better adoption of CCI, it is important to develop sustainable and affordable business models for farmers. The focus should be on decentralising CCI solutions, which would reduce investment costs. Decentralisation would also make CCI more accessible to farmers and increase utilisation of the assets, resulting in better revenues for operators and allowing farmers to sell their produce at relatively high prices. The pay-as-you-store model should be scaled up, since it lifts the burden of ownership from the farmer and therefore removes the barrier of financing.

Also read : Challenges to the Uptake Of CCI

Potential Interventions to Increase the Uptake of CCI

Various strategies could be adopted to increase the uptake of CCI solutions in India, and to ensure that these solutions scale by 2030. The following are some recommendations for the sector.

For the Government and Donors:

1. Mainstream decentralised CCI at first mile (near farmgate):

Most CCI today are centralised and high-capacity, located near urban areas which are expensive for farmers (especially smallholder farmers), and are difficult to access. Decentralising CCI can potentially solve the problem of access, benefiting farmers from cold storage through improved incomes. Decentralised CCI solutions would also significantly reduce post-harvest losses, since unsold produce could be stored rather than being discarded or spoiling. Such units could provide multi-commodity storage at affordable rates near the farmgate. The government should consider scaling them up through a programmatic intervention similar to the KUSUM scheme, which focused on solar water pumps (SWPs).

2. Promote the use of renewable and alternative energy-based CCI solutions:

The government should promote the use of off-grid solar PV for CCI technology, as well as solar thermal systems, solar-biomass hybrid systems and PCM for thermal storage. There are several different ways this could be done: providing additional incentives for renewable energy-based CCI solutions under existing subsidy schemes; integrating support for CCI into existing renewable energy schemes (such as the SWP KUSUM Scheme, since the excess power generated by SWP systems could be used to power small cold rooms near the farmgate); or promoting the Decentralised Renewable Energy livelihood scheme. Deployment of these technologies would both reduce GHG emissions and mitigate the risks associated with weak grid connectivity. It could also bring down operating costs significantly, making CCI less expensive for operators and allowing farmers to store their produce at more affordable rates.

3. Develop a standards and labelling programme for cold chain components:

Decentralized renewable CCI solutions should have defined and measured energy efficiency, quality, and performance. The Bureau of Energy Efficiency (BEE) under the Ministry of Power (MoP) can establish energy performance parameters and minimum standards (MEPS) for equipment and appliances. BEE’s Standards and Labelling (S&L) program, which has improved energy efficiency for various consumer products, could be extended to cold chain technologies. Technical specifications and cost benchmarks for renewable-based CCI solutions are currently lacking, leading to improperly sized systems. Clear standards and guidelines would promote technology innovation and help consumers choose the best options.

4. Develop demand aggregation models for deployment and utilisation of CCI:

Today, CCI is concentrated in urban areas, primarily consisting of high-capacity and capital-intensive cold storage facilities. This uneven distribution leads to operational inefficiencies, undermining the benefits of the cold chain. The high investment costs hinder CCI growth, and low demand aggregation results in underutilised assets and increased costs for farmers. To address these issues, demand aggregation is necessary to deploy appropriately sized and technologically advanced CCI across the cold chain while reducing upfront expenses. This can be achieved through data-driven optimization of overall cold chain requirements and integrated deployment of storage and transport facilities. Establishing a feedback loop from wholesalers, retailers, and consumers to producers enhances farmers’ decision-making, amplifying the holistic benefits of CCI. A demand aggregation model similar to the successful programs for LED bulbs and electric vehicles, implemented by Energy Efficiency Services Limited (EESL), can lower upfront costs. Such a model could be integrated into existing government schemes like KUSUM, utilising surplus power from solar water pumps for productive-use applications.

5. Create behavioural change for farmers:

There is a need to provide incentives for medium and smallholder farmers to start using CCI. Stakeholders report a lack of awareness around CCI among farmers, who see it as a luxury rather than a necessity. Enhanced understanding of cold chain technology should change this perception, driving CCI uptake and improving income generation opportunities for farmers. Awareness drives led by government, financing institutions like NABARD, and NGOs would demonstrate the benefits of using CCI, convincing farmers to adopt it. Such campaigns could educate farming communities on pre- and post-harvest cooling practices to better manage their produce, and on how cold chains can improve incomes. This could be done through targeted consumer campaigns such as mobile van displays, live demonstrations and goodwill ambassadors, all of which will help scale demand for CCI.

6. Provide incentives for demand and supply side CCI ecosystems:

Currently, the government is providing various capital subsidies for CCI development. It is recommended that the government uses additional incentives to encourage the growth of both a demand side and a supply side CCI ecosystem. The supply can be boosted through grants, tax rebates and R&D funds, while providing fiscal incentives to CCI users would help grow demand. The supply side ecosystem could also be developed through capacity building, creating a pool of service providers and technicians. This would not only grow the CCI industry, but would establish India as a leader in CCI for both domestic use and export.

7. Build capacity and raise awareness of CCI:

Lack of awareness hampers the optimal operation of CCI, impacting commodity quality and consumer confidence. To address this, comprehensive capacity building and training are needed throughout the supply chain, including farmers, operators, and technicians. Training should cover economic impacts, business models, technical expertise (such as temperature requirements), system monitoring, installation, and maintenance. Special focus should be given to empowering rural women through skill development programs like “Pradhan Mantri Kaushal Vikas Yojana.” Collaboration among industry leaders, associations like ISHRAE, practitioners, construction professionals, academics, NGOs, and CSOs is vital for developing effective training programs at grassroots level.

8. Drive energy efficiency in new and existing CCI:

The government should promote retrofits and replacement of existing inefficient CCI technologies, and the efficiency of new installations should be driven by the S&L programme. This would significantly reduce operating costs of CCI, and these savings can be passed on to the end-user in the form of affordable storage rates. EESL ran a similar Demand Side Management (DSM) programme to replace inefficient motors and air conditioning units. India currently has the world’s largest capacity of cold storage warehouses, but these are designed almost exclusively for the long-term storage of potatoes; this existing single-commodity CCI storage needs to be converted or retrofitted to store multiple commodities through preferred lending programmes.

For OEMs /CCI Owners /Operators:

1. Strengthen product development:

OEMs should focus on product development to make their products more low cost sustainable and farmer-centric. Using clean technology (refrigerants with low GWP) would make CCI solutions more climate friendly, which would be a better fit for the market. 2. Develop financing and servicing models: TOEMs and system integrators should leverage available government subsidies to provide end-to-end financing solutions for their customers; this includes exploring pay-as-you-store and Cooling-as-a-Service models. These models can be beneficial for smallholder farmers, who do not then need to own CCI themselves. OEMs should also focus on value-added features like warehouse financing products, after-sales support from trained personnel, and integration with reefer transport to improve market linkages

For Financing Institutions (FIs):

1. Develop a long-term warehouse financing product:

There is a need for a long term (10-15 years) financing product that de-risks farmers’ production, de-risks the CCI business for operators, and benefits smallholder farmers without requiring them to own the asset. This could be developed based on the business model of the FPO, especially those using the CCI for their own consumption or to build a new business as aggregators. For FPOs in tribal communities where this business is still nascent, longer term financing is critical. In order to reach last mile FPOs, farmers and aggregators, FIs would need to create awareness of the credit linkages and subsidies available for this sort of infrastructure (through the AIF and MIDH, for example), and would have to assist with the process of applying for these schemes and financial products. This could be done through NABARD, SFAC and other FIs empanelled under schemes like AIF.

Also read : Government Support for the Growth Of CCI

Although use cases vary across value chains, overall, CCI India is underdeveloped in the agricultural sector, and significant quantities of food are lost each year due to a lack of cold chain technology. Many smallholder farmers are still unaware of proper post-harvest handling procedures, and cannot access or afford the CCI they need to prevent losses. Business models like pay-as-you-store would help drive CCI uptake at the first mile level, as would farmer education and the development of more off-grid cold chain solutions that could reduce the risk of power cuts in areas with poor grid connectivity. Solving this problem requires more than the proper technology; a system-wide approach combining education, financing and policy changes is needed for the potential of the cold chain market to be fully realised, and for Indians to finally revolutionise their agricultural sector.

Read full assessment report on cold chain markets in India here