Government Incentives and Schemes for the Cold Chain Industry

The Government of India under its different ministries and agencies has provided financial assistance and grants for setting up Cold Chain f

The Indian Government has undertaken several measures to boost and grow the cold storage and warehousing industry in India. In this pursuit, it has implemented several carefully designed schemes with the aim of aiding the cold-chain industry with:
  • all the requirements needed for its development;
  • ease of doing business;
  • attracting foreign investors; and
  • growing its market share in the economy.
Several tax exemptions and subsidies have been provided to ensure that this industry has a growth rate at par with other countries. These exemptions and benefits include:
  • National Horticulture Board (NHB),
  • National Horticulture Mission (NHM),
  • Agricultural and Processed Food Products Export Development Authority (APEDA),
  • Ministry of Food Processing Industry (MoFPI),
  • Mission for Integrated Development of Horticulture (MIDH) along with the absolute and complete cooperation of the Department of Agriculture and Cooperation (DAC) which works alongside to grow and boost the cold storage industry in India.
The main objective of the schemes for the cold storage sector is to provide an integrated cold chain and preservation infrastructure facility free from any break from the farms gate to the consumer in the end and therefore includes the creation of some value-adding infrastructure facilities for the whole supply chain sector, such as:
  • pre-cooling, weighing, sorting, grading, waxing facilities at farm level,
  • multi-product and multi-temperature cold storage,
  • CA storage,
  • packing facility,
  • individually quick frozen (IQF) method,
  • blast freezing in the distribution hub and reefer vans,
  • mobile cooling units for facilitating distribution of horticulture, organic produce, marine, dairy, meat and poultry etc.
These schemes provide for extra flexibility as far as project planning is concerned, with a very high emphasis on creating cold chain infrastructural facilities at farming levels.
These integrated cold chain projects are established through partnership or proprietorship firms, companies, corporations, cooperatives, self-help groups (SHGs), farmer producer organizations (FPOs), NGOs, central and state PSUs, etc. provided they adhere to all the prior eligibility conditions given under the guidelines for these schemes.
The schemes for the preservation and growth of the Cold Chain Industry in India have been given below:
1. MoFPI’s Scheme of Cold Chain
Under this scheme, financial assistance, in the form of grant-in-aid is provided for the industry players. The aid is available up to an amount of INR 10 crore every project related to technical civil works and all eligible plant and machinery, subject to the following conditions:
  • In case of infrastructure for storage, which includes the pack house and pre cooling units, the ripening chambers and the transport infrastructure, the grant-in-aid shall be provided at 35% for General Areas and 50% for the North-Eastern States, Himalayan States, Integrated Tribal Development Project (ITDP) Areas as well as islands. This shall be provided at the total cost of the plant and machinery, and all technical civil work.
  • In case of any value addition and processing for such infrastructure including frozen storage and deep freezers associated with such projects and integral to the processing, the grant-in-aid shall be provided for all General Areas at 50% and for North East States, Himalayan States, ITDP Areas and islands at 75%.
  • In case of any irrigation facilities, the grant-in-aid shall be provided at 50% for General Areas and 75% for North East States, Himalayan States, ITDP Areas and islands.
2. Mission for Integrated Development of Horticulture (MIDH)

Any assistance required for the establishment of all new cold storage infrastructures is available to multi-chamber cold storage units with energy efficient technology along with provisions made for thermal insulation, humidity control, advanced cooling systems, automation, etc., which comprises of specifications and standards as per the guidelines of the ministry. At the same time, the cold storages comprising of long term storage and distribution hubs up to 5000 MT capacity have been provided for and promoted under the NHM or the Horticulture Mission for the North-Eastern states and the Himalayan States (HMNEH) while for units with a capacity above 5000 MT but up to 10000 MT provisions have been made under the NHB sub-schemes.
• National Horticulture Board (NHB)

The NHB is a sub-scheme under the MIDH. Under this scheme, any establishment of cold storage units of a capacity of above 5000 MT and up to 10000 MT and their modernization processes are eligible for availing assistance in the form of capital investment subsidy. The subsidy is available on construction, expansion and modernization of the cold storage for horticulture products.. Further, this is an open-ended credit-linked scheme with a scale of assistance at:
  • 40% of the capital cost of the entire project limited to INR 30 lakhs per project in General Areas, and
  • 50% of the capital cost of the entire project limited to INR 37.50 lakhs per project in North-Eastern, Hilly and Scheduled Areas of the India.
• National Horticulture Mission (NHM)

NHM is another sub-scheme under the MIDH. Under this scheme, all cold storage units, which come under the category of long-term storage, and distribution hubs up to 5000 MT capacity are eligible for availing assistance. As provided in the operational guidelines under the MIDH project, such assistance is extended as a subsidy to the credit-linked projects at:
  • 35% of the capital cost of the project in General Areas, and
  • 50% of the capital cost in North-Eastern, Hilly and Scheduled Areas.
3. Small Farmer Agri-Business Consortium (SFAC) Assistance

As part of this assistance, the establishment of any cold storage unit which is a part of any integrated value chain project is eligible for availing subsidies as long as such a cold storage component is not more than 75% of the Total Financial Outlay (TFO) of the project. As per the Integrated Scheme for Agricultural Marketing (ISAM) and the operational guidelines given under the same, the scale of assistance as subsidy to all such projects is at:
  • 25% of the capital cost and a maximum ceiling of INR 2.25 crores in General Areas, and
  • 33.33% of the capital cost and a maximum ceiling of INR 4 crores in North-Eastern states, Hilly and Scheduled Areas
In order to increase and double the income generated for the farmers and reduce any post-harvest losses, the Government has also promoted the setting up of the post-harvest infrastructure. Till now, all such progress has taken place in the development of storage spaces, largely stemming from the earlier success of storing potatoes for the entire year. Thus, as of 31st August, 2020, a total number of 8186 cold storages with a capacity of 374.25 Lakh MT have been established through these subsidies .
4. Agricultural and Processed Food Products Export Development Authority (APEDA) Assistance

In India, the establishment of all cold chain industries is assisted by APEDA as a part of its strategy to develop industries related to scheduled products everywhere. Certain further monetary benefits available through APEDA have been given below:

a) Exemption on Custom Duty

Every project of cold storage or cold room, which includes the farm level pre-cooling, along with all industrial projects for preservation, storage or processing of agriculture, apiary, horticultural, dairy poultry, aquatic and marine produce and meat have been granted an import status with a mere concessional basic custom duty (BCD) of 5%. Furthermore, the truck refrigeration units and refrigeration motor vehicles have been fully exempted from BCD altogether.
Foreign Direct Investment (FDI) in Cold Chain

The Indian Government has now permitted 100% FDI within the cold chain sector in order to witness the much needed boom of this industry on a global scale and to facilitate the growth of the cold chain infrastructure wholly and completely without any hindrances. Under the current FDI policy, a minimum investment of US$100 is mandatory with at least 50% investment in back-ended infrastructure for the same. Moreover, as per the Department of Industrial Policy & Promotion, the exact figure for FDI in only cold chain is still not available. However, since the total FDI in food processing industries including the cold chain industry was USD 904.7 Million in 2019-20 , a nearby deduction as the same can be made.

Fiscal Incentives for Cold Chain

The Income Tax Act, under Section 80-IB, provides some deductions in respect of all the profits earned from industrial undertakings related to the cold chain sector. For the first 5 years, these deductions stood at a 100% and then at 25% or 30% for the next five years. The subsequent fiscal benefits made available for this industry can be explained below:
  • The Income Tax Act, 1961, under section 35-AD, provides for a 150% deduction for all expenditures incurred on capital investments.
  • All cold chain projects are eligible for External Commercial Borrowings.
  • The concessional rate of customs duty is levied at 5% on imported equipment for cold chain facilities under the project import benefits.
The Budget for 2021 has clearly spelt out its vision for the future and its objectives to achieve by 2030 by focusing and making an integrated approach towards agriculture, food preservation, food processing, packaging and maintenance of the cold chain industry. Many high farm production of agricultural and food products shall be witnessed in the coming years due to the implementation of the above-mentioned schemes and incentives for the same. Further, greater productivity will be achieved through modern agricultural practices and value addition due to newer technologies being introduced from the 100% FDI which is now permitted within this sector. An integrated approach towards agriculture, and food processing, preservation, packaging and maintenance of the cold chain will be the focus to bring forth the much-anticipate boom within this industry globally.