Excise sops to help expand cold chain network

There is good news for the development of cold chain infrastructure in the country.

To encourage setting up of these facilities, the FM has exempted refrigeration equipment (consisting of compressor, condenser units, evaporator) above 2 tonne refrigeration (TR) utilising power of 50 kw and above from excise duties.

Earlier, the import of such equipment attracted excise duty of 16%.

It is a good sign that the government is getting aware of the need to develop cold chain infrastructure in the country, says Ingersoll Rand chairman Daljit Mirchandaney. Ingersoll Rand is one of the largest cold chain equipment manufacturing companies in the country.

For companies that import cold chain equipment, there will be a significant reduction in the capital cost, said Gateway Distriparks (GDL) deputy CEO R Kumar.

GDL entered the cold chain logistics business in 2007 through its subsidiary Snowman Frozen Foods, a JV with Mitsubishi Group.

The key beneficiaries of this move will be third-party logistics companies that are in the process of setting up cold chain infrastructure.

Says Transport Corporation of India (TCI) managing director Vineet Agarwal, "The exemption from excise duty will have a direct saving on our costs of importing equipment, setting up of cold chain infrastructure and transportation. However, the actual quantum of the benefit can be arrived at only after reading the fineprints of the decision."

Today, cold chain infrastructure is non-existent in the country. Mr Mirchandaney adds, "Transportation of fruit and vegetables through cold chain is almost negligible in India compared with 80-85% in the US or 30-40% in Thailand."

Retailers believe the same. According to Vishal Retail CMD C Agarwal: "The current inefficiencies in the supply chain lead to wastage of fruits and vegetables worth Rs 1 lakh crore annually. Fruits and vegetables are an integral part of organised retail and the recent decision can go a long way in reducing the wastage of fruits and vegetables and thus loss of national resources. The government's move will encourage more players to set up cold chains, which will induce more efficiency in the retail business.

Experts believe that this is a good step to begin with, but then a lot needs to be done for the overall development of cold chain infrastructure.

Reliance Retail president & CEO (operations & strategy) Raghu Pillai says, Indian food habits would take a long time to change and the Indian consumers would still demand fresh fruits and vegetables, but this measure is certainly a step into ensuring that more value addition takes place at the farm level and a move away from consuming commodities.

Mr Mirchandaney though believes that this move covers only one part, that of the cost of capital of setting up a cold chain facility.

Source: Economic Times Ashish K Mishra & Irshad Daftari, TNN Mar 3,