Exciting growth phase ahead propelled by progressive policies, new regulations and incentives
The newspaper reports during 1st week of May this year covered an unusual yet one of the recurring problems faced by the farming community. It was about farmers in Kolar, Karnataka, dumping their tomatoes harvested on the road side not being able to find buyers. The procurement prices from farmers had plummeted to as low as Rs. 2 to 3 per kg as there was glut in the market due to bumper harvest in the region all around; and consumers making merry purchasing ubiquitous tomatoes at a dirt cheap price of about Rs. 6 per kg or lower. The distressed farmers lamented about not being able to recover even the basic costs and were getting prepared to face yet another crushing time ahead with loan repayment sword hanging over their heads – sad development indeed. Move over to the next scenario three months hence to Delhi where there was a big hullabaloo over tomato prices ranging between Rs. 100 to 120 per kg on the retail front; but the farmers were relatively a happier lot, for a change getting a better procurement price. The retail prices had shot up by over four times as tomato crop cultivation took a beating thanks to heavy monsoon and floods – not a happy situation either. Well, the problem and solution to overcome the same, viz., having robust cold chain, are known to decision makers. However, the implementation programs in alleviating the crisis has been lackadaisical leading to such recurring woes to the farmers and end consumers depending on the extreme swings in supply and demand gaps.
The scenarios are no different in other products like meat, fish, poultry, dairy products, confectionery and pharmaceuticals. It has been discussed ad nauseam the wastage of food and dairy products, deficiencies in cold chain, logistics hurdles and challenges. Nevertheless a few key figures recently published need to be cited herein to highlight the daunting tasks ahead. Despite India being world’s largest producer of milk and second largest producer of fruits and vegetables, about 40 to 50 per cent of the total production valued of $440 bn (billion) ends up wasted, noted the 2017 ASSOCHAM-MRSS India study. It also goes on to point out that cold chain market in India valued at $167.24 bn in 2016 is projected to reach $234.49 bn by 2020. Cold chain logistics transport share is as low as 4% of total perishable food transported while the figure is over 80% in the US. Also the logistics costs are one of the highest in India around 14% of the total value of the goods when compared to that in other developed countries averaging between 6 to 8%. All of the above signify the challenges and at the same time the opportunities for a steep growth. With the GST becoming a reality and logistics sector accorded in Nov 17 the infrastructure status, the cold chain has got that much needed boost and the logistics operations freed from the shackles for a rapid expansion to address the urgent needs. Well, the reefer (reference to reefer vehicle herein) segment of logistics is hence poised for a golden era ahead and the business opportunities likely to get further buoyed up by the explosive growth of E-commerce. With the focus herein on reefer transport, we at MOTORINDIA contacted various stakeholders in the segment to get their feedback and as to how they are gearing up to address the opportunities opening up – read on for their compelling viewpoints.
Dawn of a new era
One of the biggest beneficiaries with the GST implementation undoubtedly has been the logistics sector. With a porous border becoming a reality the transit time has been cut down by about 30% as per press reports. With the hub and spoke model becoming the order of the day, for the long haul tractor trailers will be more in demand as compared to the rigid trucks; and this should lead to reefer semi-trailer pushed into operation in the hub section. BS-IV regulation which came into force from April 1, ‘17 has resulted in introduction of new generation trucks with higher HP, better fuel efficiency, less polluting and provided with several advanced safety features. All of this mean that the reefer operation will become more economical contributing to the profitability of the operations and leading also to better demand for the domain players.
Mr. Shatrughan Kumar, Managing Director, Trans ACNR (India Office of Hwasung Thermo), says: “The BS-IV norms necessitates the much needed focus of living and traveling in a cleaner environment. Vehicle powered units, steer towards this direction since an extra diesel engine is done away with. Hwasung Thermo has very recently launched two new vehicle powered units that can take on the challenges of large volume containers, which conventionally are met by self-powered unit. The self-powered units of Hwasung come with Yanmar engines manufactured in Japan. These are industrial engines and as yet do not come under the gamut of the BS norms. Refrigerated units have been brought under the 28% GST purview. However the Government has made the single point sale of refrigerated trucks under 18% GST sale, this paves the way in packaging of unit as well as container as a single point source of sale.”
The recent move during Nov 17 to accord infrastructure status to logistics sector has been welcomed by all as it is an acknowledgement of its significant contribution to the nation’s growth. This will enable many firms to enter the domain and same should lead to a healthy competition and reduction in logistics costs. This augurs well for the reefer segment as the demand is likely to shoot up.
Technology-driven change
Digital revolution is sweeping across all sectors and trucking has also seen disruptions galore on many fronts. Fleet owners monitoring the truck movement and noting the performance parameters thro’ a mobile app is becoming a common sight. In the reefers too this trend is being increasingly witnessed.
Mr. Pankaj Mehta, Managing Director, Carrier Transicold, indicates: “Carrier Transicold India has introduced advance telematics solutions for Diesel Truck and Trailer units. These systems empower our customers to remotely monitor and control the refrigeration units, and help them track their consignments with a strict watch over temperature integrity. This also helps them track and reduce theft, secure and control the number of door openings, and optimize time for loading/unloading. Smart features such as alerts and alarms, geo-fencing and geo-tracking have helped our customers greatly improve their delivery timelines. The data generated by the telematics helped our customers in better operational efficiencies and appropriate decision making.”
Telematics is indeed causing a paradigm shift in the reefer operations. “Thermo King has launched Telematics for T Series units for India application. Though this solution is available for Thermo King customers in Europe / USA, an innovative and cost competitive solution has been developed for India customers. This solutions gives impeccable features of monitoring real time reefer unit parameters including set, return air temperatures, compressor, engine running status, engine rpm, unit mode and unit hours. It provides real time unit service alarms and the 2 way control enables changing of unit parameters remotely. Thermo King Telematics system generates alerts when there is a deviation on the set parameters to protect the cargo. Complete dealer network is mapped and point of contact for reaching nearest Thermo King dealer is provided in case of any service support on en-route. Various customised reports are enabled in the system to support customer for analysis and increasing the productivity of reefer truck,” explains Mr. Sanjeev Seth, Country Leader, Thermo King.
Growth drivers
The Reefer segment is still dominated by players in the unorganised sector. With the new rules and regulations coming in fast the shift is imminent towards the organised sector. With the same in conjunction incentives on various fronts, the sector is likely to see a steep growth. The current market demand for reefers as per estimates of domain players ranges from 3000 to 6000 nos. per year in various models.
Mr. Rohan Bellikatti, Regional Technical Sales Manager, Lamilux, mentions: “In my opinion and study I feel there is a market for around 60,000 Reefer truck requirement of various sizes. Majorly the last mile delivery vehicles play a major chunk. The next 5 years will be very crucial for India to establish itself to be a benchmark as still currently we waste around 35% of food in India – which is wasted because we don’t have a better cold chain in place. This will definitely come down if a good cold chain system is put in place and executed.”
What are the growth drivers for the sector and specifically the reefers? “Growth in dairy industry and a gradual shift in transportation mode from insulated to reefer containers for fruits/vegetables, milk/curd/processed dairy products has been steadily driving the transport reefer industry. Still, most of these products continue to be transported in dry containers, however, with increased awareness of the doing away with spoilage, retaining taste and texture of product being transported in reefer trucks, a time is bound to come when all such products will be transported in reefer containers. In fact, in South Korea, there are more number of reefer containers, than insulated containers! The pharma sector has also been shifting towards better temperature controlled supply chain. The electric battery driven DC units makes precise temperature settings a breeze. Consistent profitability at all levels of the supply chain in the fruits and vegetables sector, due to a seamless and efficient cold chain, drives investment in the truck reefer industry. Business houses, channel brokers, as well as farmers have seen the tangible benefits of doing away with the wastages and edibles which score low in taste, texture and nutrition owing to an interrupted/unchecked cold chain,” states Mr. Shatrughan Kumar, Hwasung.
There is definitely a palpable excitement in the entire gamut of cold chain transport confident of catching up with the international trends vis-a-vis technology and efficiency factors to address the business opportunities opening up in a big way. We should indeed see the sector playing an important role contributing to the nation building by cutting down the enormous food wastage and increasing the GDP. Though belatedly taking the centre stage, we are verily going to see this sunrise sector soak in the limelight for a long period, in the time to come.