Cold Storage Subsidy, Loan, and Business Plan

Introduction to cold storage business in India, the cost of building, license, and subsidy

Are you about starting a cold storage business? If yes, here’s a complete guide to building the cold storage business along with subsidy and loans available.

The Cold storage industry is important and essential. The temperature level is maintained low with the help of precision instruments. Cold storage is used to preserve vegetables and fruits. Once they are kept in the Cold storage, and they do not get spoiled even after many months. Cold storage is necessary for extending the shelf life. It is, therefore, necessary that Cold storages are to be constructed in main producing as well as consuming centers. Cold storage construction design and build services need expertise in the intricacies of these very specialized facilities. To help reduce energy consumption and improve facility efficiencies Cold storage freezers should be properly designed and built, and they must integrate the most energy-efficient systems available. In this article we also discussed below topics;

• How do you build a cold storage room
• How many types of cold storage are there
• How does cold storage work
• Steps to start a cold storage business
• Subsidy for the cold storage business
• How cold storage business works in India

A step by step guide to cold storage business subsidy and setup

Cold storage is a one-time investment business, wherein the initial investment required is on the higher side. Though, the returns are higher and are on a long-term basis, as compared to other small businesses. The Cold storage facility is categorized mainly in two types, the first is used for single products and the other is for multiple products. Food items that require Cold storage include fruits and vegetables, poultry and fish products, meat products, and products such as tobacco and beer.

Scope for cold storage in India

A basic problem that all small and even medium-size farmers face in preserving produce and distributing is a lack of Cold storage facilities in their locality. Though, owing and maintaining cold storage is not within reach of most farmers in India. High Cold storage investment is therefore ruled out for marginal farmers because farm sizes are too small to justify any big investment; it is simply not economical.

The Cold storage business in India is still a long way away in India and not even main production centers enjoy the benefits of Cold storage. The Cold storage business in India has been for a long time neglected and shunned because of the high costs involved and lack of proper infrastructure, but attitude is fast-changing and more businesses are finding it profitable to Cold storage units set up that help farmer to preserve their produce for longer durations. If you are looking for a profitable rural-based agriculture-related activity then Cold storage investment makes sense and it is profitable and holds big opportunities for expansion.

Need for cold storage

One of the major problems that Indian farmers face in selling their produce is storing and dispatching it at the proper time. Farmers face difficulty in finding Cold storage near their farms or proper cold supply chain to get their products from farm to market in proper conditions and stipulated time frame. When there is excess production, there is a glut in the market and prices come down to unreasonably low levels.

The major consuming areas are big cities and food processing industries that are generally thousands of miles apart. Raw produces are perishables and must be preserved until it is the time ripe for realizing better prices or moving it over long distances. Also, changing lifestyles and demand for processed or packaged food is creating the need for Cold storage solutions globally.

The initial investment is high in this Cold storage business. Generally, the Cold storage business investment includes acquiring the land, building construction, obtaining permissions and licensing, arranging utilities like water, electricity, etc. Also, you will need to invest a major startup capital in procuring the cooling machinery. Usually, modern and updated machinery ensures better performance and long-term sustainability.

Is cold storage a profitable business in India?

Globally, the wastage of vegetables and fruits is huge. Normally, food crop growing countries hold the maximum share in the wastage for fresh foods. Cold storages are essential for extending the shelf life, and maintenance of the quality of the product. Also, Cold storages have an important role in reducing the wastages of perishable commodities. Also, it helps in providing remunerative prices to the growers and to make available farm products to the consumers at competitive and affordable prices.

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Functions of cold storage

Here, we discuss the functions of Cold storage;

Protect Perishable Food – At room temperature perishable food items such as fish, meat, and milk made products tend to get decayed. Nowadays industries are using blast freezers for the storage of fish and meat. Before making a delivery to final consumers and logistics companies store perishable food items in refrigerators with high storage.

Protect perishable nutrient products – There are various nutrient items such as cold-blooded aquatic vertebrates and flesh of animals that turn into the radioactive product when they are kept in building temperature. At present, there are several Cold storage warehouse logistics that provide blare freezers to the flesh of animals and cold-blooded aquatic vertebrate’s products.

Storage of dairy products – Along with food items, dairy products need proper care or Cold storage. Storage equipment for dairy products needs control of temperature levels.

Storage of food and vegetables – Fruits and vegetables need certain kinds of Cold storage but they do need to be frozen. They just want to be kept at a cool temperature.

Classification of cold storage in India

1. Bulk Cold Stores – Generally for storage of a single commodity, these mostly operate on a seasonal basis e.g., stores for potato, chilies, apples, etc.
2. Multipurpose Cold Stores – These stores are designed for storage of a variety of commodities which operate, practically, around the year. The products stored in these types of cold stores are fruits, vegetables, pulses, dry fruits, spices, and milk products.
3. Frozen Food Stores – These come with or without processing and freezing facilities for fish, meat, poultry, dairy products, and processed vegetables and fruits. These units have helped the promotion and growth of the frozen foods sector, in the domestic and the export markets. Though, the percentage of foods so processed is extremely low and great potential exists for growth in this category.
4. Small Cold Stores – These come with pre-cooling facilities for fresh fruits and vegetables, mostly, for export-oriented items like grapes. The concentration of these units is in Maharashtra but the trend is now picking up in other states like Karnataka, Andhra, and Gujarat.
5. Mini Units or Walk-in Cold Stores – These stores are located at hotels, restaurants, malls, and supermarkets.
6. Controlled Atmosphere (CA) Stores – These are meant for certain fruits and vegetables like apples, pears, and cherries.
7. Ripening Chambers – These are mainly set up for bananas and mangoes.

How to build a cold storage unit

Steps involved in setting up Cold storage business;

• Select a promising location and do a market survey on potential produces for which you can provide Cold storage services.
• Choose appropriate land. It must be easily accessible and have proper roads and uninterrupted power supply round the clock.
• Contact Cold storage manufacturers and obtain a firm quote for machinery and erection charges.
• Contact Cold storage construction companies to design the building and infrastructure related to it.
• Based on the quote and the costs involved get investments right. Study the Return on Investment and the time it takes to get the unit up and running profitably. Always give a time frame for gestation.

Cold storage business plan

To start a Cold storage business, the business owner needs to create a detailed business plan that should contain all the business-related information, details regarding products and services to be used, and employee details with full name address.

Are you looking for how to build Cold storage? Here is a step-by-step process to start Cold storage business;

Step 1) Finalizing Location

Location plays a vital role in business. For Cold storage businesses, it must be kept as close as possible to producing farms or consumer centers. Approximately, once acre of land is required for a multi-storage or multi-commodity Cold storage facility with a capacity of about 5000 metric tonnes.

Step 2) Equipment Selection

During summers as the heat is immense, equipment to be used must be cautiously selected and installed to manage heavy loads and power cuts. There are the following factors to be considered before finalizing on equipment for Cold storage business, such as equipment’s age, and light, fan, and product load, the heat produced from stored products, ceiling, wall, and floor, etc.

Step 3) Maintenance and Cleaning

Maintenance of the Cold storage plant holds equal importance and should be checked regularly like temperature, humidity level, and preserved produce. Timely servicing or cleaning of containers, trays, and storage bins is necessary.

Step 4) Promotion and Target Audience

The success of a Cold storage business relies on the effective implementation of marketing strategies and advertising campaigns. In the initial, as well as the later stages of business, an entrepreneur must target various market segments, including traders, wholesalers, marketers, promoters, retail markets, and warehouse companies, supermarkets in rural and urban areas. For further increase in sales and profit, business owners can approach retailers, business growers, producers, distributors, and exporters, etc.

Step 5) Arranging Funds

Arranging finance is one of the difficult tasks, as the Cold storage business requires substantial capital investment. Managing total investment for Cold storage business from the hard-earned savings is not a viable option, neither is it recommended as savings are used to meet urgent financial requirements or cash crunch situations.

Entrepreneurs who want to start a Cold storage business can opt for business loans offered by several financial institutions. They can check and compare numerous loan deals obtainable in the financial market and choose the best loan deal that suits their business requirements.

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Loans and subsidy for cold storage business in India

The Cold storage business is a capital-intensive business. You must have an investment capacity of about 3 to 4 crores for commencing this business. Generally, you can set up this Cold storage business with financial help from banks. Also, check if there is any subsidy or Govt. grants are available for this business in your District or State. In India, the National Horticulture Board provides financial assistance for this Cold storage business for the entrepreneurs. To set up multi-commodity Cold storage of about 10,000 tonnes capacity, investment of around Rs 20 crore is needed with a payback period of 6–7 years.

India is offering Financial Assistance for the Establishment of Cold storage Chain. These integrated Cold storage chains from the farms to the consumer ensures the safety and also the preservation of the food products. The government offers a grant-in-aid ranging from 35% to 50% of the total cost of plant and machinery installation along with pre-cooling, weighing, sorting, grading, waxing facilities at farm level, multi-product or multi-temperature Cold storage, packing facility, blast freezers, and the technical civil work depending on the location. Cold storage business can be done with an 80% loan from a nationalized bank. If the land is rented, the loan available is 90% of the total rental cost of Cold storage.

Cold storage loan is a type of agricultural loan that is available to farmers, individuals, and groups of individuals who run the business of Cold storage. Then, this loan is used to set up Cold storages or for expanding the existing business of Cold storages.

Eligibility criteria for cold storage loan;

Following are the eligibility criteria laid out for those who would like to avail this loan:

• Individuals/Group of Individuals
• Cooperatives/Companies/Proprietary/Partnership concerns
• Banks check the reputation of the promoters of such business.
• Capacity storage should not exceed more than 5000 Metric Tonnes.
• If it is an existing facility, it should be in a running condition and must be a profitable business for the last 3 years.
• Accounts must have been maintained as per rules.
• For new projects, the feasibility study must be submitted to the bank for assessment.

Top banks offering cold storage loans

Some of the banks that offer Cold storage Loans are SBI, NABARD, Corporation Bank, Union Bank of India, Canara Bank, Vijaya Bank, and IDBI Bank.

Setting up of cold chain is assisted by APEDA (Agricultural and Processed Food Products Export Development Authority) as a part of a strategy to develop the industries relating to the scheduled products for export. And, the Scale of assistance as 40% subsidy subject to a limit of Rs 75 lakhs for cold chain projects with mechanized handling system.

The cost of the cold storage refrigeration system

The cost of Cold storage Refrigeration System with capacity 5 MT to 5000 MT is approximately Rs 25 Lakh/ Piece

Cold storage investment cost

The investment cost includes acquiring the land, building construction, obtaining permissions and licensing, arranging utilities like water, electricity, etc. Additionally, you will have to invest the main startup capital in procuring the cooling machinery. Normally, modern and updated machinery ensures better performance and long-term sustainability. Apart from the above-mentioned fixed costs, you will want to consider the working capital expenses also. The main considerations are staffing, utility bill payment, and promotional expenses.

The cost and investment will mainly depend on the scale of the Cold storage unit. Though, according to experts, the estimated project cost for setting up 5000 MT Cold storage may be in the range of Rs. 3 Crore – 4 Crores in Indian Rupees.

Benefits of a cold storage room

1. Cold storages help prevent products from degradation. Cold storages work on the principle of refrigeration. Cold storages are used to store fruits and vegetables and keep them fresh for a specific period. They are used to reduce the post-harvest losses of economic productivity.
2. A Cold storage plant is a great place to store fruits and vegetables, as well as other products, as they prolong life and also help prevent spoilage of foods.
3. Cold storage rooms are temperature adjustable; they can be used for different functions by adjusting the temperature. These units are airtight, they will help to protect products from extreme temperature and weather changes that will happen outside of the unit.
4. A Cold storage room can keep fruits and vegetables at the correct temperature while controlling the moisture level to help extend the life of the fresh produce longer until it can be used and this will help to minimize waste and save money.

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Commonly asked questions about the cold storage business

What is MT in cold storage?

MT in Cold storage means per metric ton of product, based on the maximum amount of product that can be stored in each chamber. This is necessary for the rapid cooling of the produce.

What is the temperature of cold storage?

Keep foods 4°C or colder, the safe temperature for refrigerated storage. Keep these factors in mind when storing fresh meats, poultry, and also produce all carcass meats should be unwrapped and hung so that air can circulate them.

Why fruits are kept in cold storage?

Cold storage is the main method for extending the life of fruits. Apples and pears quickly soften and become mealy in texture when kept at ambient temperature levels. To keep the quality longer than one week, the fruit must be kept in refrigeration.

What is the importance of cold storage?

Cold rooms are important because they help to prolong the shelf life of fresh goods. They are effective in reducing the amount of waste and in lengthening the timeframe for marketing these foods.

What type of food is stored in cold storage?

The good thing about Cold storage units is that it is capable to keep any type of food in the optimal temperature level where it won’t perish or get decomposed fast. Meat, fish, vegetables, and fruits are best put on the fridge after having groceries.

Which gas is used in cold storage?

For large Cold storage facilities, ammonia has the refrigerant of choice. Because it produces the greatest net refrigerating effect and the lowest BHP/TR (brake horsepower per ton of refrigeration) of any industrial refrigerant.

That’s all folks, you may use the same information for cost and subsidy of 100 mt cold storage in India, the cost and subsidy of 500 mt food cold storage, the cost and subsidy of 1000 mt cold storage, the cost and subsidy of 2000 mt agriculture cold storage, etc.. In case if you are interested in this: How to Make Money from Organic Farming Business.