CASE STUDY AND ANALYSIS
In 1944, Debi Prasad Aggarawal had realized the need for a cold storage facility. Consequently he established a facility with the latest cold storage equipments from the UK which was mainly utilized by the potatoes harvest.
Debi’s son, Jadish, succeeded him as Managing director in early 1960. Jagdish had successfully opened new markets and brought new clients when he started promoting the facility to fruits producers.
In 1977, Sanjay Aggarawal, Debi’s grandson, joined the company with the task of supervising and the construction of the new 2500 MT facility in Azadpur.
Fruits & Vegetables market
The growers of fruits and vegetables in India mostly harvest their produce manually, transporting to orchards for grading & packing. Afterwards, the fruits and vegetable are shipped to wholesale markets by road.
India being world’s second largest fruits producer with total of 44 mn MT (approx 10% of world’s production) and one of the largest vegetable producers in the world with around 86 mn MT, the new Sabji Mandi at Azadpur is Asia’s and one of the world’s biggest fruits and vegetable market in volume of produce handled contributed to the huge demand for cold storage facilities.
At the arrival of fruits at Azadpur, the commission agents take charge of the produce by offloading, storage and sale at a rate of 6% of the sale amount. During this process all the expenses involved are borne by the growers.
As a way to get business, some of the commission agents offer growers advance loans at the commencement of the fruits season and deduct the same amount when the produce is sold in the market.
As the fruits reach the market, some will be sold on the same day while roughly 45% – 60% need cold storage facility to be sold at a later date or at the off-season.
Wholesalers buy the produce from commission agents which in turn they sell to sub-wholesalers.
Cold storage Industry
A conventional cold storage facility can preserve fruits for a period of 10 days to 2 months depending of the type of the fruits while a CA or GC storage facility can double or triple this period respectively.
The total capacity of storage facilities available was nearly 10.35 mn MT against total produce of over 130 mn MT, this can demonstrate the very high demand of storage facilities.
IPSCL has differentiated itself from the market by upgrading the facility to state-of-the-art Gas Controlled cold storage (3900 MT, around 78% of the capacity), Controlled Atmosphere Cold Storage (100 MT, 2% of the available capacity) and a Deep Freezer storage (1000 MT, 20% of the capacity).
Besides, there was a lack of refrigerated trucks to mobilize the produce from the growers’ location to the wholesale markets and from the markets to sub-wholesalers or retailers. The refrigerated trucks play a vital role in ensuring the freshness, quality and firmness of the produce.
Aimed at encouraging the growing industry, the GoI offered a capital investment Subsidy Scheme for the construction, expansion and / or modification of cold storage units.
Besides IPCSL, no other cold storage facility is operating under the GC or GA technology. However due to this technology differentiation, IPCSL was operating at a very high cost in comparison to the other facilities. In fact, the conventional cold storage facilities where offering their clients a price almost equal to IPCSL’s operating cost.
IPCSL has two types of customer, commission agents & wholesalers who store their fruits to sell at a later date or off-season.
The fruits and vegetables market has seen about 60% growth owing to the increase in income of the middle-class category in India.
The cold storage services is a price driven over quality driven market, the cold storage service providers currently in...