Govt support to drive TCL market growth in India
Temperature Controlled Logistics (TCL) involves maintaining a defined temperature range during the transportation and storage of goods across part or full length of an industry’s supply chain. Since, in most cases, it involves maintaining cold/chilled temperatures, it is also known as cold chain. The TCL market in India is still in its nascent stage as the services offered by most of service providers in this category are very basic.
The TCL sector in India comprises few organized service providers with national coverage that can offer both temperature controlled transportation and temperature controlled warehousing services and a large segment of unorganized service providers. With the current cold chain infrastructure in India being only a fraction of the actual need, the overall TCL sector presents itself as a large and growing business opportunity.
The total TCL market in India was estimated to be around $3.83 billion in FY2013. During the year, transportation service accounted for 61 percent of the total market, estimated to be around $2.34 billion. The remaining share was contributed by warehousing service.
The announcement of enhancing investment-linked deduction of capital expenditure incurred in building and operating cold chain facilities and warehouses for food grains from 100 percent to 150 percent in the Indian Budget 2012-13 is likely to make investments in these segments more attractive, thereby driving development. In addition, announcement of efforts to create nearly 15 million tons food grain storage capacity in the country under the Private Entrepreneurs Guarantee Scheme is another major driver for growth of agriculture commodity-related warehousing infrastructure in the country. Government had targeted creation of a total 10 million tons of storage capacity in the form of modern silos by the end of FY2014.This is likely to reduce the massive shortage of storage space for agriproduce in the country.
The encouraging incentives of exempting excise duty on air conditioning and material handling equipment announced in Budget 2011-12, has been augmented with extension of the excise duty exemption to installation of Mechanized Handling Systems and Pallet Racking Systems in mandis or warehouses for horticultural produce. These measures would encourage existing food warehouse and cold storage operators to modernize their facilities while attracting new entrants to this segment.
The provision of 3 percent subvention (within 7 percent interest per annum) on post-harvest loans up to six months against negotiable warehouse receipt to farmers is likely to significantly encourage the farmers to keep their produce in agri produce warehouses and cold storages. This would enhance sustainability of the agri produce warehousing and cold storage facilities already existing and those likely to be built in the country.
