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PHD Chamber Favours FDI in Organised Food Retail

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The PHD Chamber of Commerce and Industry pitched for foreign direct investment (FDI) in organised food retail, arguing that it can attract hundreds of crores of rupees, and double its cold storage capacity to over 61 million metric tonne (MMT) by 2015-16 from its 2012-13 estimated level of 31 MMT, and drastically minimise its agri-produce losses, currently estimated to be between 18 and 32 percent.

Existing cold storage infrastructure in India numbers at 6,300 cold storage facilities, with over 3,500 companies in the value chain. Cold chain solution providers constitute 85 per cent of the market, while transportation services, such as refrigerated trucks (known as reefers), account for the remaining 15 percent.

Indian warehousing industry (across commoditie s and modes) is pegged at about Rs 560 billion (excluding inventory carrying costs, which amount to another Rs.4,340 billion). The industry is growing at over 10 percent annually.

The Indian warehousing industry is mostly dominated by unorganised players, accounting for 85 percent of the market. Modern warehousing (organised players) accounts for only 15 percent share. Nevertheless, this segment is growing at a compound annual growth rate (CAGR) of 25-30 percent, and it expected to account for a 30 percent share by 2015-16.

With FDI in place in organised food retailing, India would be able to enhance its cold chain and distribution infrastructure, including warehousing facilities, as these are strictly the subjects that fall in the states’ domain, and most of India’s states suffer from fund crunch, although the India in its current Budget has allocated Rs 5,000 crore for setting up of warehousing facilities.