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Cold Chain Development for Fruits & Vegetables in India
Kinnow Cold Chain Study

FOREWORD
The cold chain, and the solutions it represents, is frequently misunderstood. Some view the cold chain as a caretaking activity under refrigerated environs, as a method to safely store food or as a method of preservation. Many others refer to the cold chain as an option to buy time to defer transactions. However, all of these are tactical advantages that the cold chain brings to the food supply chain and, as a norm, the tactics of the day tend to overshadow the strategic aims. The strategy behind applying the cold chain is, primarily, to connect food with consumers across geographies and make food production more sustainable and more profitable.
The cold chain is a logistics bridge, built on systemic pillars of preconditioning, transporting, warehousing and merchandising. Like all bridges, it improves upon connectivity; and thereby in turn, empowers gainful productivity. The cold chain is the sole enabler that allows us to deliver high nutrition and high value farm produce to those who need it. The cold chain is logistics for perishable foods and the answer to the increasing constraints in the delivery of foods around the world.
It is telling that 30% of global food production is lost, as it points to a large supply chain failure, or the inability to handle more than two-thirds of the food being produced. Food produced in surplus to what the global supply chain can safely deliver, is in fact, a 100% loss. Effective delivery systems to improve market access is the answer to reducing global food loss, across all kinds of agricultural produce. It is to beware that all food, even under safe storage, will eventually perish - a wasted resource, unless it is delivered to consumers for gainful end-use as food.
This pilot study is not a simplistic paper exercise but was designed and executed as a front line demonstration of the costs and benefits from deploying a cold chain bridge. This bridge was between Punjab and Karnataka and served not only to increase the selling season, but also the selling range of the farmer. This brings forth scope to spur legitimate growth in the producing areas. This pilot study ably demonstrates the socio-economic gains that are fostered through cold chain implementation. It lifts the veil on some misconceptions and educates in real terms.
Importantly, the study has also demonstrated the immediate environmental benefits that accrue from this cold chain connectivity exercise. The future environmental gains through follow-up productivity are beyond the scope of this pilot, but I envisage those to be yet in larger multiples.
Kinnow cold chain study | 2016

This pilot study has clearly shown how the cold chain is used intelligently to counter the inherent limitations of perishability to connect farms-to-consumers, both over large distances or over extended periods of time. In using the cold chain intelligently, food comes to gainful end-use and food losses are no longer due to the failure of bridging demand with supply.
I commend the team at Carrier Transicold for taking up the challenge and implementing this important pilot project, for truly demonstrating that they are responsible global citizens, committed to reducing food loss, hunger and climate change through implementation of the cold chain, and for wholeheartedly being part of the knowledge dissemination network in this important sector.

December 2016

Pawanexh Kohli Chief Advisor & Chief Executive Officer National Centre for Cold-chain Development, India
Kinnow cold chain study | 2016

ACKNOWLEDGEMENTS
The pilot for this project was conceptualised by Pawanexh Kohli, Chief Advisor & CEO of the National Centre for Cold-chain Development (NCCD), and we thank Pawanexh Kohli for his guidance and many helpful comments that have greatly improved this report. We would like to thank Carrier Transicold for planning and funding this study and by introducing us to some of the key informants. The keen interest of the Horticulture Mission in Punjab as well as that of the Ministry of Agriculture & Farmers Welfare, India provided motivation.
In particular, we thank Eric Prieur at Carrier for his detailed and helpful comments across many versions of this report as well as Pankaj Mehta and Tarun Malhotra, also at Carrier, for helping the team understand issues pertaining to the cold chain. We are particularly grateful to Sh. Surinder Charaya, Managing Director of Balaji Cold Store who made this study possible by hosting us at Balaji for this case study and also thank Kamal Arora at IG International and Mohan Das at KTM Traders.

Kinnow cold chain study | 2016

ISB Team Professor Man Mohan S. Sodhi, Principal Investigator
Cass Business School, City, University of London Sukhmeet Singh, Project Manager Indian School of Business Chetna Agnihotri, Analyst Indian School of Business
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TABLE OF CONTENTS

EXECUTIVE SUMMARY

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1. INTRODUCTION

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2. A KINNOW SUPPLY CHAIN STUDY

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2.1 WHY KINNOW?

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2.2 RESEARCH METHODOLOGY

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3. THE SUPPLY CHAIN

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3.1 PICKING

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3.2 PROCESSING IN PACK-HOUSE

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3.3. PRE-COOLING AND COLD STORAGE

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3.4 TRANSPORTATION FROM ABOHAR TO BANGALORE

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3.5 DISTRIBUTION AND RETAIL IN BANGALORE

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4. FINDINGS

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4.1 REVENUES AND COSTS IN THE SUPPLY CHAIN

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4.2 PROFITABILITY AND PAYBACK FOR AGGREGATOR

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4.3 PROFITABILITY FOR TRANSPORTER

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4.4 PROFITABILITY FOR DISTRIBUTOR

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4.5 PROFITABILITY FOR RETAILER

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4.6 ENVIRONMENTAL IMPACT

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5. IMPLICATIONS

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FURTHER READING

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APPENDIX: A GENERIC FRAMEWORK FOR COLD CHAIN INVESTMENT

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Glossary of Cold-Chain

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Kinnow cold chain study | 2016

INDEX OF TABLES

Table 1: Overview of research methodology by supply-chain actor

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Table 2: Parameters for revenues and costs and the source for this

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information

Table 3: Revenues at costs at different levels

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Table 4: Profitability for Balaji Aggregator

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Table 5: Payback period calculations for pre-cooling equipment at Balaji

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Table 6: Payback period calculations for cold storage equipment at Balaji

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Table 7: Profitability calculations from a transporter owning a reefer truck

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Table 8: Profitability for Distributor

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Table 9: Profitability for retailer

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Table 10: Carbon emission in supply chain

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Table A1: Generic model for evaluating cold chain viability for fruits

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and vegetables

Table A2-1: Investment-related costs for pre-cooler

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Table A2-2: Fixed costs for cold storage

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Table A2-3: Payback for pre cooler

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Table A2-4: Payback for cold storage

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Table A2-5: Payback period calculation for Transporter

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Kinnow cold chain study | 2016

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EXECUTIVE SUMMARY
Fruit-and-vegetable distribution in India suffers significant post-harvest losses in the supply chain primarily due to the perishable nature of fresh produce and its sensitivity to handling damages. Cold chain is one possible solution for reducing post-harvest losses. Moreover, cold chain can help increase value of the produce by enabling sales out of season and in far-away markets. However, the stakeholders in the value chain may be deterred by setup complexity, dependence on other stakeholders investing along the supply chain, and high cost of investment, despite government incentives. This report assesses investment in cold chain by analyzing profitability in a particular supply chain to encourage stakeholders along the entire supply chain to make similar assessments.
Our study focuses on a particular supply chain for kinnow, a citrus fruit. The supply chain we studied originates from Abohar in Punjab in northern India to Bangalore in southern India. This supply chain allows us to analyze the time- and distance-related aspects of cold chain investment. We conclude that with cold chain intervention:
• x10 profit by reefer truck
• -16% CO2 emissions
• ÷4 spoilage of kinnow
Cold chain has the potential for increasing volume of flows, which can result in better returns for farmers. The benefits really come through when the cold chain is a refrigerated chain all the way from the farmer to the retailer so any inducements the government wishes to give to investors by way of subsidies should consider all stakeholders along the supply chain.
Eventually, we have also provided a general decision framework for aggregators and distributors to analyze profitability for any crop when using the cold chain.

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Kinnow cold chain study | 2016

1. INTRODUCTION
Kinnow cold chain study | 2016

India is the second largest producer of fruits and vegetables amongst all countries in the world after China. Fruits and vegetables are traditionally consumed close to where they are grown, but with urbanization and changing consumer preferences across India, cold chain connectivity is the solution needed to enable farmers and aggregators to distribute produce over a wider area and in offseason months. Moreover, besides expanding the domestic market in the country, cold chain can help with exports, considering that India currently exports merely 1% of the production.
Despite potential benefits, there is a noticeable lack of investment in the cold chain infrastructure. According to the National Centre for Cold-chain Development’s (NCCD) 2015 study of the status of the nation’s cold chain infrastructure, India has a shortage of reefer transportation vehicles- having fewer than 10,000 vehicles against an estimated 62,000 needed vehicles. There are at least two possible reasons for this reluctance for investment. One reason is that cold chain investment may be perceived as being too high with benefits that are questionable. The second reason may be the complexity of the investment: A complete cold chain solution requires investing in pre-cooling and cold storage, in refrigerated vehicles for transporting food and in the refrigerated distribution centres. To get benefits pertaining to reaching distant markets, the entire supply chain needs to be refrigerated – hence the phrase ‘cold chain’ – requiring investment by all the stakeholders along the supply chain from aggregator to distributors to retailers as well as the transporters linking them.
To shed light on cold chain investment, we investigated a particular supply chain for kinnow, a particular citrus fruit grown primarily in Punjab, India. This supply chain begins with aggregation in Abohar, Punjab and ends with retail in Bangalore in southern India under four scenarios. Two scenarios are base or status quo scenarios of no cold chain for the months of January and February respectively with no cold chain. The two other scenarios, for February and March respectively, entail intervention by way of the introduction of cold chain to shed light on cold chain economics and environmental impact across this particular supply chain. Under these scenarios, we analyzed the profitability of investing in and/or using the cold chain for all the stakeholders in this particular supply chain.
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2. A KINNOW
COLD CHAIN STUDY
This study deals with the business viability of cold chain applied to kinnow supplied from Abohar in Punjab in north India to Bangalore in south India. Doing so enables us to assess any benefits of the cold chain pertaining to distributing over long distances as Bangalore is 2,530 km away from Abohar and it takes approximately four-five days to get from Abohar to Bangalore by truck. It also allows us to look into the value generated during off-season sales because, as we found, there is high demand for kinnow as well as freshly-squeezed kinnow juice in Bangalore in the months of March and April, well after harvesting ends in January or February.

2.1 Why Kinnow?
We selected kinnow as the fruit for this study for following reasons:
Geographically concentrated cultivation and saturated local markets: Kinnow is a high-yield variety of mandarin orange grown primarily in Punjab region of North India. It requires five years before first harvest. Punjab is India’s leading producer of kinnow with 29% of total national production. Kinnow orchards are in five locations in Punjab: Abohar, Hoshiarpur, Mansa, Muktsar and Bathinda (Exhibit “District Map”). In 2014-15 farmers in Punjab produced 1.1 million tonnes of kinnow, with about 48,000 hectares or two-thirds of the total acreage devoted to fruit production in Punjab. Local markets cannot consume all the production. Growing yield over time has only exacerbated the price pressure on farmers. Kinnow farmers earned Rs. 12-13 per kg in Dec. 2013, but only Rs. 6-7 per kg in Dec. 2014 and Rs. 7-8 per kg in Dec. 2015 in wholesale markets in Punjab. In January 2016, Punjab Agro (of the State Government) had to intervene to stabilize the price by buying 5,000 tonnes of kinnow.

Kinnow fruit, grown primarily in Punjab India
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District map of Punjab as well as the map of India showing the state of Punjab and
the city of Bangalore
Kinnow cold chain study | 2016

Post-harvest losses and compatibility with cold chain: Like many other fruits, kinnow deteriorates rapidly after harvest and needs to be kept cool at 4-5° and a relative humidity of 85-90% to keep spoilage at a minimum. Post-harvest losses in kinnow from Abohar to Bangalore are estimated at 28% in the supply chain from the orchard to the retailer. Such losses reduce the potential revenues for farmers, aggregators, transporters, distributors and retailers. Storage life is about five to seven days at ambient conditions in winter months of December and January but can be extended to about 20 days if the fruit is waxed or wrapped. The cold chain makes a significant increase to life in storage for up to two months, which enables sale of kinnow offseason from March and April and even as late as May well after harvest ends in January or February.
Popular and low value: Other fruits that could have been used are, say, kiwi or strawberry, but the

business case for cold chain investment for these is obvious due to their high perishability as well as the high prices they command in the market. In contrast, kinnow is a popular low-cost fruit. Therefore, if a business case could be made for cold chain investment using kinnow, then the results could be generalized to many other types of fruits.
Possibility for export: Kinnow has potential for export, but organized export from Punjab has yet to develop as of this writing, even from designated Agro-Export Zones. Kinnow from Punjab currently does reach Bangladesh via markets in Kolkata in eastern India. And in 2016, aggregators from Punjab exported directly to Russia, Ukraine and the UAE but these sales were opportunistic. Cold chain could help in exporting kinnow on a regular and predictable basis by preserving quality of the fruit across long distances.

2.2 Research methodology
Distribution of kinnow in India mainly relies on open trucks. As such, a typical supply chain goes from the farmer to the aggregator, then to the mandi or to the distributor via open truck transportation, and then on to the retailer. We observed the supply chain for the months of January 2016 and February 2016 as the two base or status quo scenarios (1) & (2) Furthermore, our study entailed two interventions: (3) use of pre-cooling and then use of refrigerated or “reefer” trucks in-season to transport from a pack-house to distributors without using cold storage in February 2016, and, (4) taking kinnow from cold storage (having pre-cooled it earlier) and then transporting with reefer trucks for out-of-season transportation to distributors in March 2016. Thus, we made our observations under four scenarios.

BASE MODE: (1) January and (2) February
CULTIVATION

AGGREGATION

OPEN TRUCK TRANSPORTATION

MANDI/ DISTRIBUTION

IN-SEASON INTERVENTION MODE 1: (3) February
CULTIVATION

AGGREGATION

PRE-COOLIING

REEFER

MANDI/

TRANSPORTATION DISTRIBUTION

POST-SEASON INTERVENTION MODE 2: (4) March
CULTIVATION

AGGREGATION PRE-COOLIING

COLD STORAGE

Kinnow cold chain study | 2016

REEFER TRANSPOR-
TATION

MANDI/ DISTRIBUTION

RETAIL
RETAIL
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