40
AUG2017
FOOD FOCUS THAILAND
SPECIAL
FOCUS
The valueof this business couldgrowby double
to at least US$ 18 billion in 2018. Modern cold
chain isa trend that isconsistentwithdemand in
the agricultural and food processing sectors in
the future, especially in the newly established
Mega Food Parks area.
transportationserviceon railway isnotavailable.Thus, the transportwith
temperature controlled vehicles is the only way to transfer agricultural
products fromproduction toconsumers. Following India’sgovernment’s
estimation, it has forecasted that thenumber of reefer vehicleswill grow
by six folds from 9,000 units to 52,800 units. Existing businesses will
need to develop to make the cooling systemmore efficient and save
moreenergy, while they shouldalsoadopt the telemetric technology for
increasing its efficiency in tracking system along the transit route.
• Pack-House Business
has high growth potential. This business
is in theareaof agriculturalproduction.Thisbusiness is thestartingpoint
tomake theagricultural production reach thedestinationeffectively, and
help reduce rotten products during shipping. However, Indian farmers
are not aware of the importance of cleansing, selecting, cutting and
trimming, and packing. India government is expected to increase the
number of production rooms tonot less than70,000units fromonly249
units in current.
• Ripening Chamber
is the last businesses along the agricultural
supply chain before entering to the retail and wholesale market. This
type of business can serve the export market demand and suitable to
invest inall areas.Todo thiskindof business, investorsneed toconcern
highlyon the temperatureandhumiditycontrol,aswellascarbondioxide
level in the air to ensure that the products stay fresh and edible at the
right pacewhen it reachesconsumers. The Indianauthority isexpected
to increase thenumber of ripeningchamber from thecurrent of only812
units to 8,000 units in the future, aiming to add more value added for
fresh fruits and vegetables.
Moreover, the cold chain business in India will enjoy special tax
privileges for importing capital goods such as cold storage equipment,
insulation, and coldcurtains (PVCStripcurtain). The import tax ratewill
be reduced from10percent to5percent,while theexcise tax for importing
of refrigerated containers will be down from 12.5 percent to 6 percent,
thanks to theoverall investmentpromotionsupportmeasureswhichhave
decreased service tax to 0.5 percent since June 1, 2016 according to
the Indianbudgetplan for2016-2017and thecancellationof theexisting
service tax at the rate of 14 percent sinceApril 1, 2016. In addition, for
Start-up businesses, which have registered their business license
betweenApril 2016 toMarch 2019, will get profit tax exemption for 3-5
years.
Although Indiahasagap todevelopmoderncoldchainbusiness, to
invest in thisbusiness isnot easy for foreign investorsbecause it needs
huge amount of investment capital for renting large area, constructing
buildingsand investing in the installationsystem for temperaturecontrol
and reefer vehicles. It takes a long time in order to get return of
investment. Enterprises shouldalsoprepareaplan to improve skills for
Indian labours to be proficient in this business, while they need to
understand the rules and regulations, whichare vary in each state.
Inconclusion, every factor indicates that India isstill shortageof the
cold chain business. This business is the key to unlock problems in
farmingand foodproduction, andhelp increasemanagement efficiency,
leading to goods price stabilization in accordance to the government’s
target.Thai investors,whoare ready to takepart incoldchainbusiness,
have bright future to do this business in India as follows:
Warehousebusiness, integrated logisticsbusiness, or development
of food industry zone, which provide the full-service cold chain, those
businessesshouldgetwell received in linewith thegovernment’ssupport
to open an opportunity for investors to help develop the industry. Thai
investors have good opportunity to invest in the reefer vehicles or
temperature controlled transportation businesses, but it still has many
challenges.Thoseobstaclesaresuchas infrastructure,whichneedhigh
cost of production, while they need to ensure sufficient number of
customersalong thesupplychainso that theycancompete in themarket.
The Thai food processing business in India, which has a strong
fundamental, has the opportunity to expand into modern cold chain
business for serving both their own business lines, as well as other
businesses.
The areaswhere have great business opportunities are likely to be
in the Mega Food Parks, which is suitable for every new businesses.
Theestablishment of a logistics network by forminga joint venturewith
Indianbusinessmen, ormakeamerger andacquisition (M&A) isaway
to facilitate investors. Inaddition, toconsider invest in theareawithhaving
Thai businessmen network, have large market size, and good basic
infrastructure development such as in Gujarat, Andhra Pradesh, Tamil
Nadu, andMaharashtra, these areas should increase the chances for
successful businesses than inother areas.
India is a bigmarket. There are wide gap for logistics business to
grow continuously as this businesses are open widely for foreign
investors.Yet, forThai entrepreneurs, it isstill verychallenging for them.
Thai investorsneed toweighonvarious factors, including largenumber
of laboursbut still lackof skills, especially for cold chain service, cost of
rental fee,and turnovercostssuchasutilities.Thisbusinessalso requires
strong working capital because it takes a long period to get return of
investment. Also, high interest rate at 6.5 per cent is a negative impact
onfinancial costs. Inaddition, theyneed to relyon Indianbusinesspeople
tohelp seeking for customersas local people know themarket well and
knowwhichmarketing tool have highefficiency to reach consumers.
In addition, the growth of the cold chain business in India, which is
moving towards themodern cold chainmodel, is another boon for Thai
businesses that need to take advantage of this business to invest
effectively in the future, such as for manufacturing and processing of
agricultural products, and foodprocessing. Thiswill help reduce logistic
time, reduce losses during shipping from farm to end-consumers or to
processingprocedure. It also reduces thecost of shipping,which isone
of major problems in current.
