Cold storages are large refrigerated warehouses, commonly used for storing fruits, vegetables, processed meat, frozen foods and pharmaceuticals. Cold storages serve as an important link between farm produce and final consumer. The demand for cold storage services has been rising due to a growth in food and related industries. There are over 7000 cold storages in India with a total capacity of 32 million metric tonnes, distributed across the country. A regional break up of cold storages across the country is given below.
Table 1: Cold storages in India
Source: National centre for cold chain development
Cold storages typically have two business models
- Food and Agri products storage: Cold storage stores items such as fruits, dairy, meat etc, which are required all through the year. The cold storage needs to be located close to the end customers and should preferably own some delivery infrastructure as well.
- Off season products storage: Cold storage stores products such as chillies, potatoes, seeds for meeting the demand in off season. The cold storage needs to be located close to the source /originator of products. Majority of cold storages in India fall in this category.
A thorough analysis of market, key customers and business model is essential before starting a cold storage.
Machinery and profitability
The cold storage equipment has two important components: machinery and insulation panels. The machinery comprises compressors, evaporative condenser and motors. The walls of the cold storage chambers are fabricated with insulation panels, made of polyurethane.
Many of the cold storage machinery suppliers take up turnkey contracts and offer services to do civil work, install machinery and provide insulation. The cost of cold storage depends on a number of factors such as
- Capacity of the cold storage and the number of rooms/chambers in the cold storage
- Type of goods stored, typically divided into two categories: Plus temperature storage for vegetable/fruits/seeds and minus temperature for frozen products. The cold storages that offer facilities to keep frozen product would cost higher as compared to the plus temperature cold storage.
The key operational costs include electricity charges and manpower cost. Since both these are costs are somewhat fixed in nature ( electricity bill and manpower charges do not decrease/decrease in line with increase/decrease in business volumes) the profitability of cold storage depends on its capacity utilization (ability to use its space optimally).
The cost of setting up a cold storage of around 5000 metric tonne would be close to Rs. 4 crores, excluding land cost. One would need around 1 acre of land to set up a cold storage of 5000 mt.
The subsidy for financing the cold storage is available under the scheme from Scheme for Integrated Cold Chain and Value Addition Infrastructure under Pradhan Mantri Kisan Sampada Yojana
The subsidy is calculated based on the cost norms that are provided in the scheme. For example the cost norm for single chamber cold storage are Rs. 8000 per tonne and the subsidy is capped at 35% of project cost. The project cost includes cost of machinery and technical civil work.
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