Cold Chain Development for Fruits & Vegetables in India

Kinnow Supply Chain Study

 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.

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

1 A kinnow supply chain study | 2016

 TABLE OF CONTENTS
EXECUTIVE SUMMARY 4

1. INTRODUCTION 5

2. A KINNOW SUPPLY CHAIN STUDY 6

2.1 WHY KINNOW? 6
2.2 RESEARCH METHODOLOGY 7

3. THE SUPPLY CHAIN 10

3.1 PICKING 11
3.2 PROCESSING IN PACK-HOUSE 12
3.3. PRE-COOLING AND COLD STORAGE 13
3.4 TRANSPORTATION FROM ABOHAR TO BANGALORE 14
3.5 DISTRIBUTION AND RETAIL IN BANGALORE 14

4. FINDINGS 17
4.1 REVENUES AND COSTS IN THE SUPPLY CHAIN 17
4.2 PROFITABILITY AND PAYBACK FOR AGGREGATOR 20
4.3 PROFITABILITY FOR TRANSPORTER 22
4.4 PROFITABILITY FOR DISTRIBUTOR 23
4.5 PROFITABILITY FOR RETAILER 24
4.6 ENVIRONMENTAL IMPACT 24

5. IMPLICATIONS 28

FURTHER READING 30

APPENDIX: A GENERIC FRAMEWORK FOR COLD CHAIN INVESTMENT 31

Glossary of Cold-Chain 35

A kinnow supply chain study | 2016 2

 INDEX OF TABLES
Table 1: Overview of research methodology by supply-chain actor 9

Table 2: Parameters for revenues and costs and the source for this 18
information

Table 3: Revenues for the retailer in Bangalore for 1 metric tonne (MT) 19
of Kinnow under each of the four scenarios, the first two in
‘base’ mode, and the next two as cold-chain interventions,
as well as various costs incurred at different stages in the supply
chain: retailer, distribution, transportation and aggregation

Table 4: Profitability for Balaji Aggregator 20

Table 5: Payback period calculations for pre-cooling equipment at Balaji 21

Table 6: Payback period calculations for cold storage equipment at Balaji 22

Table 7: Profitability calculations per year from a transporter owning a 23

reefer truck

Table 8: Profitability for Distributor 24

Table 9: Profitability for retailer 24

Table 10: Carbon emission in supply chain 26

Table A1: Generic model for evaluating supply chain surplus on fruits and 31
vegetables
Table A2-1: Investment-related costs for pre-cooler 32

Table A2-2: Fixed costs for cold storage 32

Table A2-3: Payback for pre cooler 32

Table A2-4: Payback for cold storage 33

Table A2-5: Payback period calculation for Transporter 34

3 A kinnow supply chain study | 2016

 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.

A kinnow supply chain study | 2016 4

 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

1. INTRODUCTION
across India, cold chain connectivity is the solution
needed to enable farmers and aggregators to
distribute produce over a wider area and in off-
season 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.

5 A kinnow supply chain study | 2016

 2. A KINNOW 2.1 Why Kinnow?

SUPPLY CHAIN We selected kinnow as the fruit for this study for
following reasons:
STUDY
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 only 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
This study deals with the business viability of cold in Punjab: Abohar, Hoshiarpur, Mansa, Muktsar and
chain applied to kinnow supplied from Abohar in Bathinda (Exhibit “District Map”). In 2014-15 farmers
Punjab in north India to Bangalore in south India. in Punjab produced 1.1 million tonnes of kinnow,
Doing so enables us to assess any benefits of the cold with about 48,000 hectares or two-thirds of the
chain pertaining to distributing over long distances total acreage devoted to fruit production in Punjab.
as Bangalore is 2,530 km away from Abohar and Local markets cannot consume all the production.
it takes approximately four-five days to get from Growing yield over time has only exacerbated the
Abohar to Bangalore by truck. It also allows us to price pressure on farmers. Kinnow farmers earned
look into the value generated during off-season Rs. 12-13 per kg in Dec. 2013, but only Rs. 6-7 per
sales because, as we found, there is high demand kg in Dec. 2014 and Rs. 7-8 per kg in Dec. 2015
for kinnow as well as freshly-squeezed kinnow juice in wholesale markets in Punjab. In January 2016,
in Bangalore in the months of March and April, well Punjab Agro (of the State Government) had to
after harvesting ends in January or February. intervene to stabilize the price by buying 5,000
tonnes of kinnow.

District map of Punjab as well as the map

Kinnow fruit, grown primarily in
of India showing the state of Punjab and
Punjab-India
the city of Bangalore

A kinnow supply chain study | 2016 6

Post-harvest losses and compatibility with cold business case for cold-chain investment for these is
chain: Like many other fruits, kinnow deteriorates obvious due to their high perishability as well as the
rapidly after harvest and needs to be kept cool at high prices they command in the market. In contrast,
4-5 degrees and a relative humidity of 85-90% to kinnow is a popular low-cost fruit. Therefore, if
keep spoilage at a minimum. Post-harvest losses in a business case could be made for cold-chain
kinnow from Abohar to Bangalore are estimated at investment using kinnow, then the results could be
28% in the supply chain from the orchard to the generalized to many other types of fruits.
retailer. Such losses reduce the potential revenues
for farmers, aggregators, transporters, distributors Possibility for export: Kinnow has potential for
and retailers. Storage life is about five to seven days
export, but organized export from Punjab has yet
at ambient conditions in winter months of December to develop as of this writing, even from designated
and January but can be extended to about 20 days Agro-Export Zones. Kinnow from Punjab currently
if the fruit is waxed or wrapped. The cold chain does reach Bangladesh via markets in Kolkata
makes a significant increase to life in storage for up
in eastern India. And in 2016, aggregators from
to two months, which enables sale of kinnow off-
Punjab exported directly to Russia, Ukraine and the
season from March and April and even as late as UAE but these sales were opportunistic. Cold chain
May well after harvest ends in January or February. could help in exporting kinnow on a regular and
predictable basis by preserving quality of the fruit
Popular and low value: Other fruits that could across long distances.
have been used are, say, kiwi or strawberry, but the

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. Furthermore, our study entailed two interventions: (1) 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, (2) 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 (Exhibit “Scenarios”)

BASE MODE:
(1) January
and
(2) February
CULTIVATION AGGREGATION OPEN TRUCK MANDI/ RETAIL
TRANSPORTATION DISTRIBUTION

IN-SEASON
INTERVENTION
MODE 1: (3)
February
CULTIVATION AGGREGATION PRE-COOLIING REEFER MANDI/ RETAIL
TRANSPORTATION DISTRIBUTION

POST-SEASON
INTERVENTION
MODE 2: (4)
March
CULTIVATION AGGREGATION PRE-COOLIING COLD REEFER MANDI/ RETAIL
STORAGE TRANSPOR- DISTRIBUTION
TATION

7 A kinnow supply chain study | 2016

 Four scenarios with the first two using the traditional supply chain with open-
truck transportation in season (Jan’16 and Feb’16), and the next two with
intervention: one using reefer trucks in-season (Feb’16) and the other using
both cold storage and reefer-truck transportation out of season (March’16).

Data collection was based on interviews of different managers at different nodes in the supply chain and
on some third party data. We interviewed the following for this study:

Farmers at festival Aggregator in Distributors in

organized by Punjab Abohar - Balaji Bangalore - IG
Agriculture University Cold Store International, KTM
(PAU) Fruit Traders

Retailers in Bangalore Distributor of trucks Distributors of

- D-Mart, METRO and - PASCO Motors, reefer equipment -
Namdhari Fruits & Chandigarh Coolways Automate
Vegetables Pvt. Ltd, Chandigarh

A kinnow supply chain study | 2016 8

We also visited the sites of Balaji Cold Store in Abohar and those of the distributors and retailers in
Bangalore to understand the operations and the overall context.

We calculated the costs and revenues in the supply chain at different points from Abohar orchard to
retailers in Bangalore for the two base scenarios (January and February) using open trucks as well as the
two intervention scenarios (February and March) using the cold chain. We included costs of aggregation;
pack-house processing like waxing and grading; pre-cooling and cold-storage; transport to Bangalore in
open and reefer trucks, food loss and carbon footprint in the four scenarios. Then we analyzed the profits
for the aggregator, distributor, transporter and retailer and also estimated the payback period for cold-
chain investment. Finally, we estimated CO2 emissions to quantify the environmental impact (Table 1).

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

Aggregator Distributor Retailer Transporter

Site visit

Primary data collection

Profitability Analysis

Payback period of investment

Besides primary data, we used third party research to identify the relevant parameters for our analysis,
especially for estimating spoilage and CO2 emissions.

9 A kinnow supply chain study | 2016

 3. THE SUPPLY
CHAIN

The ‘orchestrator’ of the supply chain of interest is a fruit aggregator, Balaji Cold Store, who is also a
wholesaler, a fruit exporter as well as fruit importer involved in nearly all stages of the supply chain from
the orchard to retail. The company is based at Abohar, Punjab, and is privately owned and managed by
Sh. Surinder Charaya. Balaji supplies kinnow and other fruits to local markets in Punjab, and in a limited
way to markets in other parts of India including Bangalore and Gujarat. Occasionally he would also supply
for export to markets in Dubai, Russia and Ukraine.

Sh. Charaya sees the benefit of the cold chain investment in being able to reach markets in southern India
selling high-quality kinnow in season as well as off-season, and reducing spoilage substantially. He hopes
to establish Bangalore as a primary centre for distributing fruits in southern India, for which he believes
proper integration of his supply chain with pre-coolers and refrigerated trucks would be required. Also he
believes he can get more value from using a complete cold chain solution as it will increase reach to new
markets and also help maintain quality.

“ extends the kinnow market for us even off-season. We use reefer trucks, along with pre-
Reefer trucks are required for supply chain to Bangalore- that makes a huge difference and

cooling and cold storage facilities to supply kinnow.

”
- Sh. Surinder Charaya, Managing Director of Balaji Cold Store Pvt. Ltd., Abohar

Sh. Surinder Charaya, Managing Director of Balaji Cold Store

A kinnow supply chain study | 2016 10

The post-harvest supply chain process for Balaji for this particular pilot study comprises:

2. Processing in
Abohar pack-house, 4. Open-truck or reefer-
including grading/ truck transportation to
sorting, waxing and Bangalore
packing

1. Picking the fruit from 3. Pre-cooling and 5. Distribution and

the orchard in Abohar cold storage in Abohar retail in Bangalore
or vicinity pack-house (optional)

The precooling and cold store is used to buffer produce intended supply beyond the peak season, while in
season market continued to be supplied in the cool winter months without needing to use the pre-cooling
system.

3.1 Picking
Balaji Aggregators get kinnow from multiple farmers and orchards in Abohar, covering an area of about
2,000 acres. Sh. Charaya himself owns 14 acres of kinnow farms. For picking, the aggregator incurs the
cost of labor and of transportation to one of four pack-houses that Balaji have in Abohar or in the vicinity.
Traditionally, fruit is harvested with pruning shears, letting the fruit drop to the ground. In orchards owned
by Balaji, the fruit is harvested with clipper and is collected the fruit in crates/ bags without letting the
fruit drop to the ground to keep spoilage to a minimum. However, most of the kinnow that Balaji sells is
obtained from other orchards so the fruit in this supply chain is primarily picked from the ground after
using shears.

Kinnow trees in orchards in Abohar Kinnow fruit being handpicked

The harvested fruit is then transported to the aggregator’s pack house.

11 A kinnow supply chain study | 2016

3.2 Processing in pack-house
Upon arrival at the pack-house, the fruit is processed. There are about 200 employees per pack-house, in
charge of processing and packaging facilities. Processing of the fruit includes waxing, grading, sorting, and
packing. Balaji have installed a mechanical waxing and grading machine for supply intended for far-away
markets including exports.

Processing (grading, waxing and sorting) Packing operations at Balaji pack-house in

equipment at Balaji Abohar

Workers pack the fruit manually in corrugated fiberboard (CFB) boxes, each carrying approximately 10 kg
of fruit. Balaji had started looking into smaller plastic containers that allow for improved circulation of air
and hence more effective cooling; these containers also have the benefit of not requiring unpacking for
retail sales.

A kinnow supply chain study | 2016 12

3.3. Pre-cooling and cold storage
Balaji have been using cold storage for fruits since 2000 at their storage facility in Ludhiana in Punjab, and
have installed cold storage installed at the Abohar pack-house as well. In 2015, Balaji initiated cold storage
trials for kinnow for a period of three months and in 2016, installed pre-cooling for kinnow for staging
prior to cold storage or cold transportation. At a part of this pilot study, they had already bought pre-
cooling and had committed to using reefers for the interventions under consideration for this study. Fruit
is not pre-cooled throughout the season at Balaji. But once the temperature starts to rise around February
end, and it becomes difficult to maintain the quality of fruit for supply to a distant distributor. To supply far
away customers in proper quality and quantity, pre-cooling the fruit becomes imperative but this was not
being done in the past. Storing the produce in a cold store without precooling, resulted in moisture losses,
poor quality and shorter holding life. The pre-cooling unit at Balaji has a capacity of 30 tonnes per batch
and load of 22kWh. The kinnow at point of input is typically at 15 degrees Celsius and the temperature is
brought down to 4-5 degrees within 6 hours.

Cold storage unit at Balaji had a capacity of 1500 tonnes initially and a load of 65kWh. As part of the
intervention, part of this capacity gave way to a pre-cooling unit leaving the cold storage with a capacity
of 1000 tonnes. The unit runs for 10-12 hours a day.

Precooling at Balaji packhouse at Abohar

Cold storage at Balaji in Abohar

13 A kinnow supply chain study | 2016

3.4 Transportation from Abohar to Bangalore
After packing, Balaji sends the supply across to different distributors within and outside Punjab, and, in
for this study in particular, to distributors in Bangalore. Prior to the start of this study, Balaji used only
conventional open trucks vehicles for sending fruits by road. During this study, Balaji rented reefers for the
first time as intervention. Open trucks have a holding capacity of 15tonnes with a length of 25 feet, and
reefers have a reduced holding capacity of 13.5 tonnes and 24-feet length to accommodate the cooling
equipment. For the initial phase of the intervention, Balaji rented a truck with 28ft long container equipped
with an Oasis 350 – 10300watts refrigeration unit from Carrier Transicold. After this phase, Balaji purchased
a truck with a 30ft long container equipped with Supra 1150 – 10,500 watts refrigeration unit from Carrier.

Open truck used by Balaji getting ready to Reefer truck purchased by Balaji
be loaded for Bangalore

3.5 Distribution and retail in

Bangalore
We visited two of Balaji’s distributors in Bangalore, IG
International and KTM Fruit Traders. IG International
is a fresh produce import/export company and
working towards the object of preserving the fresh
produce with long shelf life and reducing the high
level of wastages by using cold chain. IG Group
has wholesale outlets, distribution centers and
cold storage across 21 branches all over India and
overseas. These distributors sell kinnow supplied by
Balaji to retailers and to other distributors, taking a
commission from Balaji on the sale.

IG International, a distributor, based in

Bangalore

A kinnow supply chain study | 2016 14

 IG International, a distributor, based in Bangalore

IG International have 50 reefer trucks of different sizes and capacity, which carry a total of 25,000 tonnes
of fresh produce each year. These vehicles are used for the transportation of fruits under controlled
temperature to the sales outlets to ensure safety and quality. The company currently owns three cold
storages with total capacity of 10,000 tonnes and, at the time of the study, was aiming to increase capacity
in the near future.

“We earn higher profits if kinnow market is extended after March. The quality of kinnow
received in reefer truck even in the month of Feb is much better that the quality of kinnow
received in open truck. The price difference reflects the same.
”
- Mr. Kamal Arora, IG International, Bangalore

The other distributor, KTM Fruit Traders, received kinnow only from Balaji Aggregators for supply to the local
retailers. In past years they received kinnow from Balaji Aggregators in open trucks from December only
till mid-February. Having experienced considerable spoilage with the supply coming in non-refrigerated
(open) trucks, they have felt the need to invest in reefer trucks for increasing profits. Along with Balaji, they
have tried using open trucks with thermcol, a common lightweight packing material that provides good
insulation but doing so did not reduce spoilage much in their experience.

“Without reefer trucks, I incurred considerable spoilage in February 2016. The use of reefer
trucks for transport can reduce that. ”

- Mr. Mohan Das, Manager, KTM Fruit Traders, Bangalore

15 A kinnow supply chain study | 2016

We visited two retailers in Bangalore for the case study, D-MART and METRO. These retailers sold kinnow at
prices ranging from Rs.79-149 per kg, with higher prices in March compared to those in the cooler months
of January or February. These retailers felt that the high prices of kinnow in March indicate huge demand,
and the continued supply off-season would be beneficial. Another retailer confirmed the popularity and
price of kinnow both in- and off-season in Bangalore. While the kinnow was no longer available in April,
orange from Valencia, Spain was available at Rs.90-110 per kg. As such, the retailers felt they could achieve
that same price for kinnow if it were available in April.

Retailers D-Mart and Metro

in Bangalore

Orange from Valencia, Spain

on sale in Bangalore in April

A kinnow supply chain study | 2016 16

 4. Findings
We first estimated the revenues and costs across the supply chain for comparison of the four scenarios
taken up for this study. For the calculations, we started with the retailer selling 1 metric tonne (MT) of kinnow
and then go upstream from the retailer to the aggregator and identify the quantity sold, operational
costs, revenues and spoilage at each level- retailer, distributor and aggregator to make this one 1 MT of
retail possible in Bangalore. Next we estimated the profitability for the retailer, distributor, transporter and
aggregator and also calculated the payback period for the cold-chain investment used in the intervention
scenarios.

4.1 Revenues and costs in the supply chain

The interviews provided us with selling prices and transport costs at various levels across the supply chain.
We also use third party data for parameters such as spoilage, cross-checking these data to the extent
possible with the information from the interviews. As mentioned earlier, the capacity for cold storage
at Balaji was 1,500 tonnes but was reduced to 1000 tonnes to make room for pre-cooling. So for the
profitability analysis, we took the capacity as 1000 tonne. However, for the purpose of calculating return
on the investment, we took 1,500 tonne as the investment was made in getting a 1500 tonne cold storage,
not a 1000 tonne cold storage. So the calculations for payback will have 1500 tonne capacity (withRs.4
crore investment) and for running costs for profitability and CO2, will have 1000 tonne. For the spoilage
estimates, we started with numbers from a 2007 study that provides these at different stages of the supply
chain from orchard in Abohar to retailers in Delhi and Bangalore; we then adjusted these numbers for
the intervention scenarios. Thus we obtained parameters for profitability analysis; Table 2 indicates the
parameters and the source of our information.

17 A kinnow supply chain study | 2016

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

S.no. Parameters taken for Units Sell in cold Sell in cold Sell in cold Sell post
profitability calculations (source) season open season open season season from
truck truck reefer truck cold storage
(mid Jan16) (mid-Feb’16) (mid Feb 16) and reefer
truck
(mid Mar 16)

1. Retailer’s selling price (in Bangalore) (Rs/MT) 70,000 75,000 80,000 100,000

2. Spoilage at retailer (adapted from % 13.7% 13.7% 5% 5%

Gangwar et al. 2007)

3. Operational costs for retailer (Rs/MT) 38000 38000 42000 50000

(estimated using a 1% normal
margin for the retailer in the base
scenarios)

4. Retailer’s purchase price = (Rs/MT) 27000 30000 35000 40000

aggregator’s selling price (from
Balaji)

5. Spoilage from transportation/ % 5.7% 15% 1% 1%

distribution (adapted from
Gangwar et al. 2007)

6. Labour cost for distributor (our Rs/MT 2000 2000 2000 2000
estimates based on time and daily
cost of labour)

7. Cold storage cost for distributor - - - 42 42

(estimate based on Rs 7 per unit
electricity cost)

8. Transportation cost (Abohar- Rs/MT 5333 5333 9259 9259

Bangalore)(taken from Balaji with
Rs 80,000 for an open truck of 15
tonne capacity and a reefer at Rs
1.25 lakhs with13.5tonne capacity)

9. Spoilage at orchard and packhouse % 2.5% 3% 3% 3%

10. Procurement cost for aggregator (Rs/MT) 12000 12000 12000 12000
(our choice – actual prices vary)

11. Operational cost(harvesting till (Rs/MT) 4900 4900 4900 4900

shipment) (our estimate)

12. Pre-cooling cost (25kWhfor 30 MT (Rs/MT) - - 35 35

for 6 hours at Rs 7 per kWh)

13. Pre-cooling loading and unloading (Rs/MT) - - 250 250

cost (our estimate for labour costs)

14. Cold storage cost (based on 39 (Rs/MT) - - - 273

kWh and Rs 7 per kWh)

15. Cold storage loading and (Rs/MT) - - 250 250

unloading cost (same as for pre-
cooling above)

A kinnow supply chain study | 2016 18

These parameters are the basis for calculating the supply chain surplus – the revenues from selling 1 MT
at the retail end of the supply chain less the supply chain costs and procurement costs at the orchard and
other costs incurred (Table 3).

Table 3: Revenues for the retailer in Bangalore for 1 metric tonne (MT) of kinnow
under each of the four scenarios, the first two in ‘base’ mode, and the next two as
cold-chain interventions, as well as various costs incurred at different stages in the
supply chain: retailer, distribution, transportation and aggregation
Revenues and costs at different levels

Level S.no. Activity for one MT sold by Sell in cold Sell in cold Sell in cold Sell post
retailer season open season open season season from
truck (mid truck (mid- reefer truck cold storage
Jan16) Feb’16) (mid Feb 16) and reefer
truck (mid
Mar 16)

1. Retailer’s revenues 70,000 75,000 80,000 100,000

2. Spoilage 13.7% 13.7% 5% 5%

Retailer 3. Quantity purchased 1.16 1.16 1.05 1.05

level
4. Operational costs for retailer 38000 38000 42000 50000

5. Procurement cost adjusted for 31286 34762 36842 42105

spoilage/Revenues from distribution

6. Spoilage from transportation/ 5.7% 15% 1% 1%

distribution

7. Quantity received 1.23 1.36 1.06 1.06

Distributor
level 8. Distributor’s commission at 9% 2816 3129 3316 3789

9. Labour cost 2458 2726 2127 2127

10. Cold storage cost - - 45 45

11. Quantity transported 1.23 1.36 1.06 1.06

12. Transportation cost 6554 7271 9845 9845

13. Spoilage at orchard and pack-house 2.5% 3% 3% 3%

14. Quantity purchased 1.26 1.41 1.10 1.12

15. Procurement cost 15123.6 16864.7 13153.8 13430.7

Aggregator 16 Operational cost (Harvesting till 6175.5 6886.4 5371.1 5484.2

Level shipment)

17. Pre-cooling cost 0 - 37.21 37.21

18. Pre-cooling loading and unloading - - 265.82 265.82

cost

19. Cold Storage cost - - - 290.27

20. Cold Storage loading and unloading - - 266 266

cost

21. Cumulative losses 22% 32% 9% 9%

19 A kinnow supply chain study | 2016

With the revenues and costs estimated for the supply chain as a whole, we used these numbers to estimate
profitability for the individual players and the payback on the cold-chain investment. While these numbers
are only indicative because of assumptions around the parameters we used, they do afford comparison
of revenues and costs in the cold-chain intervention scenarios vis-à-vis the base scenarios without
cold-chain.
35
32%
30

25
Cumulative spoilage in %

22%
20

15

10 9% 9%

0
Open trucks- Open trucks, Reefer trucks, Cold storage and
January’16 mid-February’16 mid-February’16 reefer trucks, March’16

4.2 Profitability and Pay back for Aggregator

For the two base scenarios in January and February season and with open truck transportation- the
aggregator earns 2% and 1.8% respectively. Continued supply in open trucks in later months would likely
reduce the profits further due to high spoilage even if this were at all possible. In contrast, in the intervention
scenarios, when using reefer truck for transport in February 2016, the margin of profits increased to12%.
This continued in March when Kinnow was shipped from cold storage via reefer trucks and was selling now
out-of-season in Bangalore and the margin increases to 20% (Table 4).

Table 4: Profitability for Balaji Aggregator

S.no. Profit based on one MT sold by Sell in cold Sell in cold Sell in cold Sell post
aggregator season open season open season season from
truck (mid truck (mid- reefer truck cold storage
Jan16) Feb’16) (mid Feb 16) and reefer
truck (mid
Mar 16)

1. Profit for aggregator per tonne 503 449 4315 8179

shipped
Aggregator
2. Revenues for aggregator per tonne 25461 25500 34650 39600
Level
shipped

3. Aggregator’s margin 2.0% 1.8% 12.5% 20.7%

A kinnow supply chain study | 2016 20

 Profit in Rs for aggregator per tonne shipped
9000 8179
8000

7000

6000

5000
4315

4000

3000

2000
503 449
1000

0
Open trucks- open trucks, reefer trucks, cold storage and
January’16 mid-February’16 mid-February’16 reefer trucks, March’16

The increased margin is based solely on operational profits without taking capex or investment costs
into account. Therefore, we separately calculated the payback period for investment in pre-cooling and
cold storage by considering fixed costs, straight-line depreciation and maintenance. Assuming that Balaji
invests Rs. 40 lakhs in pre-cooling and taking 40 trips and 540 MT as quantity shipped per year using
pre-cooling, the payback period for pre-cooling is only 2.3 years (Table 5). This suggests that investing in
pre-cooler can be quite attractive for kinnow even if these were used for just a few months a year.

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

Payback for pre cooler Units

Pre-cooler capital cost Rs 2,500,000

Installation Rs 1,500,000

Total investment Rs 4,000,000

Annual costs including depreciation @1.5% / month Rs 720,000

Operating profit per MT Rs 4,185

No. of reefers shipped per year to Bangalore No.s 40

Quantity shipped in year @ 13.5 MT/reefer MT/year 540

Annual operating profits Rs/year 2,477,260

Annual profits net of depreciation and maintenance Rs/year 1,757,260

Payback in years years 2.28

Estimating the payback period for cold storage is more complicated because cold storage is used for
much of the year and for storing many other types of produce, including for rental to other aggregators
or farmers. To make our estimates, we assumed 20 trips and 270 MT as quantity shipped per year using
cold storage. We also took the cold storage usage for other fruits and vegetables throughout the year
and calculate profits based on rental value only. The payback period in this case turns out to be 16 years
without kinnow but only 9 years with kinnow (Table 6). These numbers are indicative only but they do show
that making cold storage part of the cold chain, rather than it being stand-alone, can unlock tremendous
value from this investment.

21 A kinnow supply chain study | 2016

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

Cold storage capital cost Rs 3,25,00,000

Installation Rs 75,00,000

Total investment (as per Balaji, without taking any subsidies into account) Rs 4,00,00,000

Annual costs including depreciation over 20 years Rs 20,00,000

Operating profit per MT of kinnow Rs 7,770

No. of reefers shipped per year to Bangalore Nos. 20

Quantity shipped in year @ 13.5 MT/reefer MT/year 270

Annual operating profits from kinnow Rs/year 20,97,982

Annual revenues from renting space for other produce (Capacity x70% loading Rs/year 50,40,000
x Rs 15/month rental for 50kg of vegetables x 9 months of usage)

Cost of electricity (50kW x 6hours/day x 30days/month x 9 months/year x Rs7 per kWh) Rs/year 5,67,000

Annual operating profits from renting space for other produce Rs/year 44,73,000

Annual profits net of depreciation-other produce only Rs/year 24,73,000

Annual profits net of depreciation - including kinnow Rs/year 45,70,982

Payback in years without kinnow (base) years 16

Payback in years with kinnow (with cold chain intervention) years 9

Capital cost of infrastructure is not validated and as reported by the promoter.

4.3 Profitability for Transporter

Our indicative calculations assuming two trips a month from Abohar to Bangalore and the rental income
on the outbound journey with kinnow to be Rs. 1,25,000 show that the transporter would make an annual
profit of Rs. 12.5 lakh on an investment of Rs 29.5 lakhs. This gives a payback period of just above 4 years
(Table 7).

A kinnow supply chain study | 2016 22

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

Transporter

Fixed costs (13.5 Ton) Rupees

Chassis (data from truck dealer) 21,00,000

Cabin + Insulated Body (box) (from truck dealer) 4,00,000

AC unit (from AC unit dealer) 4,50,000

Total investment (from truck dealer) 29,50,000

Revenues

Revenue from outbound journey (source: Balaji) 1,25,000

Return trip revenue percentage (our assumption) 50%

Revenue per return trip 187500

No. of trips/month per truck to Bangalore (based on time taken and on expected utilization) 2

Revenue per month 3,75,000

No. of months of truck usage in one year 8

Revenues in one year 30,00,000

Yearly costs

Monthly Driver + helper compensation (Pay of Rs 25,000 to driver + helper. Rs 8000 as 33,000
allowance for two trips (Rs 4000 per trip)

Annual driver + helper 3,96,000

Annual insurance (Balaji) 65,000

Annual depreciation 2,95,000

Fuel cost for a reefer truck: Abohar to Bangalore (Distance/Avg of truck + reefer fuel usage * 48,150
cost of per liter diesel)

Annual fuel cost depending upon the trips 15,40,800

Total annual costs 22,96,800

Profitability and payback

Profits in one year 7,03,200

Payback in years 4.20

4.4 Profitability for Distributor

The distributor earns a commission of 9% on the revenues it generates in Bangalore for the aggregator.
In doing so, the distributor incurs labor and cold storage costs. Spoilage is also observed when the truck
arrives from the aggregator, depending on scenario. The resulting calculations show that the profit for the
distributor triples for in-season shipments when using reefers and becomes more than four times the initial
profits when using cold storage and reefers (Table 8).

23 A kinnow supply chain study | 2016

 Table 8: Profitability for Distributor
S.no. Profit based on one MT sold Sell in cold Sell in cold Sell in cold Sell post season
by distributor season open season open season from cold
truck (mid truck (mid- reefer truck storage and
Jan16) Feb’16) (mid Feb 16) reefer truck
(mid Mar 16)

1. Profit for distributor per MT 309 347 1087 1537

shipped
Distributor
2. Revenues for distributor per MT 27000 30000 35000 40000
level
shipped

3. Distributor’s margin 1.14% 1.16% 3.11% 3.84%

4.5 Profitability for Retailer

Spoilage at retailers is the highest in the supply chain. A retailer earns a profit of Rs. 7,895 per tonnes
when using a complete cold chain. Calculating retailer’s profit is not straightforward as retailers sell many
categories of items, not just kinnow. We estimated operational costs to ensure margins were about 1
percent in the base scenario overall (see Table 2 for parameters) and then adjusted these costs upwards
for the intervention scenarios to take cooling and reduced space into account. The results show that the
cold-chain intervention can increase the margin for the retailer (Table 9).

Table 9: Profitability for retailer

S.no. Profit based on one MT sold Sell in cold Sell in cold Sell in cold Sell post season
by retailer season open season open season from cold
truck (mid truck (mid- reefer truck storage and
Jan16) Feb’16) (mid Feb 16) reefer truck
(mid Mar 16)

1. Revenues/MT sold by retailer 70,000 75,000 80,000 100,000

Retailer
2. Profit/MT sold by retailer 714 2,238 1,158 7,895
level
3. Retailer’s margin 1.02% 2.98% 1.45% 7.89%

4.6 Environmental Impact

Environmental impact is an important consideration
as regards the cold chain. We considered all
the activities from harvesting at orchards to the
retailer in Bangalore. Even though there is further
downstream spoilage in the consumers’ homes, the
present study is limited up to retail. The numbers for
the CO2 based on spoilage without cold chain are
taken from the interviews and third party sources.

A kinnow supply chain study | 2016 24

As with the profitability calculations, we started We further assumed that 1kWh of electricity produces
out with 1 tonne at the retailer and then adjusted 1kg CO2 forcoal thermal power stations as in the
quantities for spoilage. We also took into account state of Punjab. Even though there is hydroelectric
the impact of the refrigerant leaked from reefer power in the state, recent power plants use coal. For
trucks. This increases CO2 for the two intervention transportation using diesel, we took 1 liter of diesel
scenarios in February and March. This is because to produce 2.68 kg of CO2. Further the cold storage
the refrigerant beingR404a, leaked refrigerant has at Balaji, where fruit is stored for two months, has
a multiplier of 3,940 for CO2 equivalence as regards the load of 65kWh, and taking electricity cost at Rs.
greenhouse impact. We did not take the leakage 7/kWh, and assuming it runs for 10 hours a day, we
from cold storage at retail because there are less calculate the units. For the environmental impact of
moving parts at retail as compared to reefer, so the cultivation, we assumed that 123 kg CO2 is emitted
leakage is quite low compared to that associated per tonne of citrus fruit cultivation adapting these
with a reefer truck. Also, the quantity is stored for a numbers from the cultivation of orange in Brazil.
short period in the retail store, where sometimes it
is sold within a day and this reduces the impact on There are second-order effects that we did not take
a per tonne basis. into account owing to their impact being negligible.
Rotting fruit produces CO2 as well, in roughly 1:1
Another source of CO2 is the methane (CH4) proportion to methane and other gases depending
produced by rotting kinnow. This increases the on aerobic or anaerobic decomposition but we
(equivalent) CO2 quantity for the scenarios with ignore this given that the impact of methane is
high spoilage. Estimation of the CO2-equivalent 72 times more. Another second-order effect, the
emissions from spoilage is not straightforward. We emissions from transporting spoilage to open
have assumed 324 kg C02-equivalent per tonne of dump/landfill via diesel truck, was not included as
spoilage in the calculations here. This is computed quantities obtained turn out to be less than 1 kg CO2
as follows: we took a typical figure of 20.8 kg per tonne of kinnow retailed across the supply chain.
of methane emitted per tonne of food waste for Given the small size of the impact relative to other
perfectly managed anaerobic decomposition. To sources and the heroic assumptions involved in
this we applied a methane conversion factor of choosing among different ways such a number can
0.21, extrapolated from IPCC suggested numbers be computed, we dropped this from consideration.
to get 4.5 kg methane per tonne of spoilage for We also mentioned not including refrigerant
open-dump disposal. Our reasoning is that the leakage from cold storage or pre-cooling earlier as
conversion factor recommended by the IPCC for a second-order effect relative to refrigerated trucks.
unmanaged storage below 5 metres is 0.8 and that
for unmanaged storage shallower than 5 metres is The results show that cold chain can reduce
0.4. We took 0.21 (given the state of open-dump CO2 emissions overall. For February the figures
disposal observed in this supply chain) to get 4.5 are readily comparable: without cold chain the
kg methane per tonne of spoilage. Next we sought emissions are 486 kg per tonne of kinnow sold in
to choose the CO2 equivalent of methane, which retail and with the intervention of reefer trucks, the
varies from 72 over a 20-year period to 25 for a number reduces to 408 kg. As can be expected,
100-year period. We took the impact for the shorter in-season sales and transportation in January have
20-year period given the global urgency around the least environmental impact at 403 kg, but using
greenhouse gases rather than the lower 100-year cold chain, off-season sales in March using cold
number. This means the methane produced has an chain have less impact at 449 kg relative to in-
impact of 324 kg per tonne of rotting kinnow in our season sales in February without cold chain at 408
calculation. kg (Table 10; Exhibit “CO2 emissions”).

25 A kinnow supply chain study | 2016

 Table 10: Carbon emission in supply chain

Activity Units Sell in cold Sell in cold Sell in cold Sell post season
season season open season from cold
open truck truck reefer truck storage and
(mid Jan16) (mid-Feb’16) (mid Feb 16) reefer truck
(mid Mar 16)

Retail quantity sold MT 1 1 1 1

Spoilage % 13.7% 13.7% 5% 5%

(source: Gangwar et al., 2007)

Quantity purchased MT 1.16 1.16 1.05 1.05

Quantity spoiled MT 0.16 0.16 0.05 0.05

CO2 equivalent for CH4 from kg CO2 51.43 51.43 17.05 17.05
spoilage (4.5 kg CH4 from 1 tonne
spoilage, factor of 72 for CH4)

CO2 for cooling at retailer kg CO2 - - 25.26 25.26

(1KW/MT * 24 hours * Quantity)

Transportation diesel (4+1) lts/14 lts diesel 0.31 0.31 0.39 0.39
km trip (Assuming 14 kms of travel:
truck diesel consumption 4 lts and
reefer 1 lts)

CO2 for diesel consumed kg CO2 0.83 0.83 1.04 1.04

Distributor quantity shipped MT 1.16 1.16 1.05 1.05

Spoilage % 5.7% 15.0% 1.0% 1.0%

Quantity received MT 1.23 1.36 1.06 1.06

Quantity spoiled MT 0.07 0.20 0.01 0.01

CO2 equivalent for CH4 from kg CO2 22.69 66.25 3.44 3.44
spoilage (4.5 kg CH4 from 1 tonne
spoilage, factor of 72 for CH4)

CO2 for cooling at distributor kg CO2 - - 6.32 6.32

(Assuming 6 hours of cold storage)

Quantity transported MT 1.23 1.36 1.06 1.06

Transportation diesel consumed lts 722.86 722.86 922.86 922.86

(200 lts for AC cooling)

Transportation CO2 for diesel kg CO2 158.70 176.06 194.79 194.79

consumed(2.68 kg CO2/lts)

Transportation leakage of R404a kg CO2 - - 5.46 5.46

(Cooling unit- “Oasis 350” with 6.8
kg of R404a refrigerant with a GWP
of 3940, annual leak at 11% and
assuming 20 round trips)

Pre-cooling at aggregator (5 units kg CO2 - - 5.32 5.32

for cooling 1MT for 6 hours)

Cold storage at aggregator (Rs 273 kg CO2 - - - 41.47

for cold storage/ Rs 7 per unit)

A kinnow supply chain study | 2016 26

Activity Units Sell in cold Sell in cold Sell in cold Sell post season
season season open season from cold
open truck truck reefer truck storage and
(mid Jan16) (mid-Feb’16) (mid Feb 16) reefer truck
(mid Mar 16)

Operational (Harvesting to kg CO2 4.92 5.45 4.25 4.25

shipment) CO2 @4 kg/MT (1
person * 2 days * 2kWh/day * 1
KgCO2/1kWh)

Spoilage during picking % 2.50% 3% 3% 3%

Quantity harvested MT 1.26 1.41 1.10 1.10

Quantity spoiled MT 0.03 0.04 0.03 0.03

CO2 equivalent for CH4 from - 10.21 13.66 10.65 10.65

spoilage (4.5 kg CH4 from 1 tonne
spoilage, factor of 72 for CH4)

Harvesting @123 kg/MT kg CO2 155.02 172.86 134.83 134.83

Total CO2 per MT sold at retailer kg CO2 403.79 486.56 408.42 449.89

600

486.56
500 449.89
403.79 408.42
400
kg CO2

300

200

100

0.00
1 2 3 4

CO2 emissions in the supply chain per tonne of Abohar kinnow retailed in Bangalore for the four scenarios:
(1) Open trucks- January’16, (2) open trucks, mid-February’16, (3) reefer trucks, mid-February’16 and (4) cold
storage and reefer trucks, March’16.

27 A kinnow supply chain study | 2016

 For the specific supply chain, we studied, cold chain
investment is beneficial to all of the stakeholders.
These findings can be summarized as follows:

5. • As an aggregator using the cold chain, Balaji

IMPLICATIONS
benefits a great deal, getting attractive payback
periods for the investments needed. Making the
cold storage part of a cold chain greatly reduces
the payback period thus unlocking value in a
highly capital intensive investment.

• Transporting the supply to Bangalore in reefer

trucks reduces spoilage of the fruit supply and
prevents considerable losses to aggregators.
Investment in reefer trucks is profitable for a
transporter with a fairly short payback period.

• For the aggregator’s investment of Rs.40 lakhs

in pre-cooling, the payback period is only 2.3
years. For an investment of Rs. 4crore in cold
storage, the payback period for aggregator is
16 years in the base mode without kinnow (with
cold storage space rented for other fruits and
vegetables) but reduces to only 9 years when
this cold storage becomes part of the kinnow
cold chain using reefers and pre-cooling.

• Commission-based distributors in the supply

chain also increase their profitability and margins
by becoming part of the cold chain.

• For the transporter, an investment of Rs 29.5

lakhs in reefer trucks gets paid back in just above
4 years.

• Note that we did not assume any government

incentives that are available – these would only
further the attractiveness of the investment.

Therefore, there is a strong business case for all

the stakeholders to invest in the cold chain for
supplying kinnow to Bangalore in off-season. This
is not just hypothetical: we have already seen that
Balaji have moved from renting to purchasing
reefers along with investing a considerable amount
in pre-cooling. The distributors and retailers at the
Bangalore end are strong advocators for cold-chain
for kinnow supply and one distributor had already
made considerable investment in reefers and cold
storage while the other one was beginning to invest
in cold chain towards the end of this study.

A kinnow supply chain study | 2016 28

This type of profitability analysis can be readily 4. Assess crop potential on those new markets in
extended to other fruits and vegetables. In general, terms of prices
for other supply chains with other origins and
destinations and other fruits and vegetables, our 5. Apply the cold chain framework provided
approach shows one way to do profitability analysis above to determine operational profitability and
for all the commercial entities in the supply chain. payback period of the investment
We have developed a generic framework for any
fruit or vegetable for estimating the business case
6. Rollout the cold in a structured manner (starting
for an aggregator. For quantity, any applicable
from the field with pack house to the reefer),
volume-or weight based unit can be used (kg, case,
keeping in mind that the cold chain unlocks the
crate, etc.). These calculations assume operating
value of the investment when used in its entirety
costs and the resulting operational profits can allow
from the pack-house to the retailer.
computation of payback period on investment in
cold storage, pre-cooling and reefer trucks. As in
our approach, the calculations can take all these The Appendix (Table A2-1-A2-4) provides a
activities at each level in the supply chain and for framework for calculation of payback periods for any
different scenarios: (1) – In the peak season, with aggregator investing in cold chain (pre-cooler and
no cold chain intervention, (2) – Towards the end cold storage) and payback period for a transporter
of season, with no cold chain intervention, (3) – wishing to invest in reefers (Table A2-5).
Towards the end of season and using reefer trucks
for transportation and (4) - Out of season, with Besides the implications for aggregators, distributors
complete cold chain i.e. cold storage and reefer and transporters, there are implications for farmers
trucks. The spoilage content at different levels of
and the government. Our interviews with farmers
supply chain needs to be considered carefully: in clearly pointed to price and its volatility as a major
our reading of the literature, these numbers based challenge. Cold chain has the potential for increasing
on overall estimates can vary quite a bit so it is volume of flows, which will result in better returns
worthwhile examining stage-by-stage spoilage for farmers. Improved quality results in better
from the farmer to the retailer. See the Appendix prices too. With contract farming, prices could be
(Table A1) for a generic model for the different
settled in advanced, thus lowering price volatility as
considerations to include (or not) in any scenario. well. Moreover, as the government – encouraging
creation of cooperatives FPOs, then these can reap
The process to decide whether cold chain is viable the same benefits as aggregators as shown in our
or not for a specific crop can be the following: study. NCCD has frequently highlighted that the
benefits really come through when the cold chain
is an integrated chain of activities all the way from
1. Identify crop volume and cold infrastructure that
the farmer to the retailer. Therefore, any incentives
would be needed and when
by way of subsidies should be designed taking a
supply-chain perspective.
2. Assess holding life extension of the fruit/
vegetable using cold storage

3. Identify potential new markets reach with cold

chain – in-season with pre-cooling and reefer
and off-season with cold storage and then
shipment with reefer trucks

29 A kinnow supply chain study | 2016

 FURTHER READING

Barrett, J., Vallack, H., Jones, A., and Haq, G. Mandal, G. (2015). Effect of lac-wax, citrashine and
(2012). A Material Flow Analysis and Ecological individual shrink wrapping of fruits on storage
Footprint of York. Technical Report, Stockholm life of late harvested kinnow under ambient
Environment Institute, Sweden - see Table 3.14, conditions. International Journal of Bio-resource,
p. 42. Environment and Agricultural Sciences, 1(3), 84-
89.
Choudhury, M. L. (2006). “Recent developments
in reducing postharvest losses in the Asia-Pacific NCCD (2012). Challenges to cold chain
region.” Post-harvest management of fruit and development, NCCD, New Delhi
vegetables in the Asia-Pacific region: 15-22.
Desai, A. (2011). Case study on Potential for NCCD (2015). Guidelines & Minimum System
Scaling Up: Waste to wealth by incubating mini Standards for implementation in Cold-chain
cold storage technology ventures in India”- World projects. NCCD, New Delhi.
Bank, 2011.
NCCD (2015). All India Cold-chain Infrastructure
Gangwar, L. S., D. Singh, and Singh, D. B. (2007). Capacity (Assessment of Status & Gap), NCCD,
“Estimation of post-harvest losses in Kinnow New Delhi
Mandarin in Punjab using a modified formula.”
Agricultural Economics Research Review, 20(2).
Rais M, Sheoran A (2015) Scope of Supply Chain
Management in Fruits and Vegetables in India. J
IPCC (2006). IPCC Good Practice Guidance and Food Process Technol6:427. doi:10.4172/2157-
Uncertainty Management in National Greenhouse 7110.1000427.
Gas Inventories, IPCC, Geneva.
Rana, K.R., Karol A., Dahiya, P.S., Pandey, N.K.
Jha SN, Vishwakarma RK, Ahmad T, Rai A and Kumar N.R. (2005). Estimation of post-harvest
and Dixit AK (2015). Report on assessment of losses in kinnow marketing in India. Indian Journal
quantitative harvest and post-harvest losses of of Agricultural Marketing, 19(3), 92-102.
major crops and commodities in India. ICAR-All
India Coordinated Research Project on Post-Harvest
Shashi, S., and R. Singh. “Modeling cold supply
Technology, ICAR-CIPHET.
chain environment of organized farm products
retailing in India.” Uncertain Supply Chain
Mahajan, B., Singh, R., & Kumar, M. (2016). Management 3.3 (2015): 197-212.
Quality Assurance and Shelf-Life Extension of
Kinnow Mandarin Fruit Under Supermarket
Conditions. International Journal of Fruit Science,
16(1), 94-102;

A kinnow supply chain study | 2016 30

 APPENDIX: A GENERIC FRAMEWORK FOR
COLD CHAIN INVESTMENT

Table A1: Generic model for evaluating supply chain surplus on fruits and
vegetable

Level S.no. Activity for one MT sold by Peak End of End of Off season:
retailer season - No season : No season : Cold storage
intervention intervention Reefer truck and reefer

1. Retailer’s revenues Revenue from one unit quantity sold, for example, 1 MT
or 1Kg, etc.

2. Spoilage Spoilage at retailer level

Retailer
level 3. Quantity purchased Quantity purchased at retailer

4. Operational costs for retailer Operational costs for retailer

5. Procurement cost adjusted for If retailer had to purchase 1.1 units to sell 1 unit (adjusting for
spoilage/Revenues from distribution wastages) the procurement cost of 1.1 units will come here

6. Spoilage from transportation/ Spoilage from transportation/distribution

distribution

7. Quantity received Quantity received by the distributor from the aggregator

Distributor
level 8. Distributor’s commission Distributor’s commission, e.g., 9% of the aggregators’
revenues from selling to the retailer

9. Labour cost Labour cost at distributor level

10. Cold storage cost Cold storage cost at distributor level

11. Quantity transported The quantity the aggregator has to sell so that the retailer is
able to sell one unit after adjusting for wastages at each stage

12. Transportation cost Transportation cost

13. Spoilage at orchard and pack-house Post-harvest spoilage at orchard and pack-house

14. Quantity purchased The quantity the aggregator has to buy so that the retailer is
able to sell (for E.g. 1 MT or 1Kg) after adjusting for wastages at
each stage

15. Procurement cost Procurement cost

Aggregator 16 Operational cost (Harvesting till Cost of all operations, primarily labour and transportation from
Level shipment) harvest to pack-house

17. Pre-cooling cost Pre-cooling cost

18. Pre-cooling loading and unloading Labour-related pre-cooling loading and unloading cost
cost

19. Cold Storage cost Cold storage cost of electricity

20. Cold Storage loading and unloading Labour-related cold storage loading and unloading cost
cost

31 A kinnow supply chain study | 2016

 TABLE A2-1: Investment-related costs for pre-cooler Units

Pre-cooler capital cost Rs

Installation Rs

Monthly Installment for capital cost: X% for Y years Rs

Months of pre-cooler usage with one batch per day Months

Total quantity processed per year @ X MT/per batch MT

Monthly Installment / MT Rs

Monthly Installment / MT sold in 3rd scenario (End of season : Reefer truck) Rs

Monthly Installment / MT sold in 4th scenario (Off season: Cold storage and reefer) Rs

TABLE A2-2: Fixed costs for cold storage Units

Cold storage capital cost Rs

Monthly Installment for capital cost: X% for Y years Rs

Capacity MT

Capacity Utilization @ X % MT

Inventory turnover per year

Total MT processed/month MT

Monthly Installment / MT MT

Monthly Installment / MT sold in 4th scenario (Off season: Cold storage and reefer) Rs

Table A2-3: Payback for pre cooler Units

Cold storage capital cost Rs

Installation Rs

Total investment Rs

Annual costs including depreciation @X % / month Rs

Operating profit per MT Rs

No. of reefers shipped per year to Bangalore No.s

Quantity shipped in year @ 13.5 MT/reefer MT/year

Annual operating profits Rs/year

Annual profits net of depreciation and maintenance Rs/year

Payback in years years

A kinnow supply chain study | 2016 32

 Table A2-4: Payback for cold storage Units

Cold storage capital cost Rs

Installation Rs

Total investment Rs

Annual costs including depreciation over X years Rs

Operating profit per MT of kinnow Rs

No. of reefers shipped per year to Bangalore No.s

Quantity shipped in year @ 13.5 MT/reefer MT/year

Annual operating profits from kinnow Rs/year

Annual revenues from renting space for other produce Rs/year

Cost of electricity Rs/year

Annual operating profits from renting space for other produce Rs/year

Annual profits net of depreciation-other produce only Rs/year

Annual profits net of depreciation - including kinnow Rs/year

Payback in years without kinnow years

Payback in years with kinnow years

33 A kinnow supply chain study | 2016

 TABLE A2-5: Payback period calculation for Transporter

Fixed costs (13.5 Ton) Rupees

Chassis

Cabin + Insulated Body (box)

AC unit

Total Fixed Cost

Revenues

Revenue from outbound journey

Return trip revenue percentage

Revenue per return trip

No. of trips/month per truck to destination

Revenue per month

No. of months of truck usage in one year

Revenues in one year

Yearly costs

Monthly Driver + helper compensation

Annual Driver + helper

Annual Insurance

Annual Depreciation

Fuel cost for a reefer truck: From - To

Annual fuel cost depending upon the trips

Total annual costs

Profitability and payback

Profits in one year

Payback in years

A kinnow supply chain study | 2016 34

 GLOSSARY OF COLD-CHAIN

The common terminology of cold-chain and terms used for the purpose of this
study are given as under:
1. Cold-chain: An environment controlled 4. Storage: Static infrastructure designed with
logistics chain, ensuring uninterrupted care insulated and refrigerated chambers for long
from source-to-user, consisting only of storage term or transient storage of whole fresh, ready-
and distribution related activities in which the to-retail, or processed forms of perishable
inventory is maintained within predetermined products.
ambient parameters. Cold-chain does not alter
the essential characteristics of the produce or 5. Pre-Cooling Unit: A specialized cooling system
product handled. Cold-chain is not just about designed to rapidly remove field heat from freshly
the “cold” but that it refers to all logistical process harvested produce and thereby prepares the
applied, to maintain multiple parameters, during cargo for subsequent travel in the cold-chain. A
the pre-conditioning, handling, transport, Precooling unit can be in the form of forced-air
storage and retail of products. The cold- cooling, hydro cooling, vacuum cooling, room
chain includes varied aspects of packaging, cooling, icing, etc. Precooling or post-harvest
atmospheric gases, biology, injury, humidity, cooling is the heart of a modern pack-house
traceability, infrastructure, people & product and is one of the key steps in preparing fruits
flow, besides temperature. In fact, temperature and vegetables for the extended cold-chain.
control can only work with all others in synch
6. Sorting: The activity at source when produce is
2. Pack-House: A modern infrastructure with assorted into target lots basis qualitative criteria
facilities for conveyer belt system for sorting, viz. as non-edible, as reject or dump, by quality,
grading, washing, drying, weighing, packaging, by shelf-life, by market value, etc. It is the first
pre-cooling and staging. Modern pack-houses stage categorisation of received produce and
are the first step in organised post-harvest separates them into differentiated value-based
management for horticulture, and are in effect flow towards an ascertained and useful end-
the first mile sourcing points for this sector. A use. Thus, the process of sorting is key to direct
modern integrated pack-house unit enables the flow of collected produce into existing and
small lot sourcing of horticulture produce, and multiple value-based productive use.
should be built close to farm-gate.
7. Grading: The activity at source for physical
3. Refrigerated Transport: The refrigerated segregation of goods into optimal packing lots,
transport system, with an insulated carrier and after undergoing initial sorting. It is a pre-cursor
equipped with active refrigeration, designed for to effective packaging, performed such that the
temperature controlled carriage of perishable space in a unit package can be maximised for
products. This can include refrigerated trucks safe carriage, and leads to efficient shelf space
(reefer trucks), vans, rail, containers and ships utilisation and graded shelf presentation.
for transporting perishable products.

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8. Cold Room (Staging): An insulated and refrigerated chamber which serves as a transient staging
space, and is a necessary attachment to a Pre-Cooling Unit. Appended to pre-coolers, a staging cold
room frees the pre-cooler space for the sequential batch of incoming freshly harvested produce. This
component is typically installed at farm-gate as part of a modern pack house, and temporarily stores
preconditioned fresh produce, awaiting transport link to a distribution point (a cold store close to
market).

9. Cold Storage (Bulk): Environment controlled warehousing space with multiple chambers intended
for the bulk storage of perishable produce. It is designed for long duration storage of produce so as
to build an inventory buffer which will serve to smoothen the episodic production by stabilising &
sustaining the supply lines. These are normally constructed in areas close to producing areas (farm-
gate) to facilitate quick access to producers for a selective set of crops only.

10. Cold Storage (Hubs): Environment controlled warehousing space with multiple temperature zones
for functioning as a distribution hub. It is designed for short term handling of products so as to serve
as a distribution logistics platform for market ready packaged produce and ready to retail products.
Cold storage (Hubs) are key to effective distribution of perishable foods and essentially at the front end
of the cold-chain, constructed close to consuming centres.

11. Reefer Vehicles: Road transport vehicles with a fixed insulated body equipped with active refrigeration
designed for environment controlled carriage of products. These are effectively cold rooms on wheels
– or mobile cold stores. The refrigeration on long haul trucks is powered through integrated diesel
driven motors, independent of the main truck engine. In case of small vehicles, the use of direct drive
systems linked to the vehicle engine or battery powered refrigeration is the norm. Normally Reefer
trucks incorporate GPS based location tracking system and are installed with data logging temperature
and humidity sensors.

12. Batch-Load: A capacity measurement utilised when the infrastructure is used to sequentially throughput
goods after a time based activity or procedure. Usually used for pack-houses where the pre-coolers
operate to cool a few tons of produce at a time, in multiple runs or batches per day. For example, a
pre-cooler with holding volume of 5 tons can output 15 tons of conditioned vegetables if operated
every 6 hours for three times in a day. The batch load in this case would compute to 5 tons/batch
in 3 batches/day, or 15 tons per day. Similarly, in case of sorting and grading lines, the batch load is
assessed in the volumetric throughput – or tons per hour or per day.

13. Holding Life: Also called Product Life, refers to the Saleable Life Span of a product. In case of Fresh
produce, this commences at harvest and extends until the produce perishes. In case of processed food
products, this is initiated after the manufacturing process and extends up to the predetermined expiry
date. Holding life is divided into time spent in each activity in the supply chain, with Shelf Life being the
time spent in the front end, on shelf.

Holding Life (saleable Life span of produce)

Harvest Preconditioning at Transport Retail Store /

Pack House Cold House Kitchen Shelf
Preparation Transit Shelf Life

The holding life of produce is extended with cold-chain, creating more opportunity for producers by
expanding the range and accessibility to markets.

A kinnow supply chain study | 2016 36

A kinnow supply chain study
2016