Challenges & Opportunities of Fresh Fruits & Vegetables Supply Chain

It is said that less than 4% of India’s perishable is transported by a cold chain, compare the same to the UK, it is >90%.

Fresh fruits & vegetables (F&V) hit the headlines when the tomato price touch Rs80/- or onion brings tear in the eyes of housewives. Researchers love to write about large postharvest losses (30-40%) in F&V. Often, farmer’s suicides are attributed to low or no farm returns. The news of tomato selling at Rs 2/- or potato being thrown in the highways are not uncommon. When the retail sector opened up, people thought that the scenario would change when investments pour in. But nothing changed, significantly.

The fruits & vegetable supply chain is characteristically complex and complicated. More than just transportation and logistics, there are other factors which impact the supply chain. Most of these products are highly perishable, strongly price volatile and uncertain on demand. Supply-side is marred by seasonality, cyclicality and uncertain weather. There is little value added in the fresh business, except for sorting, grading, and packing. The industry is unorganized to an extent of 99%. The obvious question then is why organized players do not step in.

To manage a retail supply chain for cauliflower in Delhi one has to source it from 5 different geographies during a year. Their spread is from 6 to 600 km in distance and 700 to 7000ft in height. And their situations vary from the deserts of Rajasthan to hills of Himachal. The windows of availabilities are such that one has to create a supply chain every alternate month, knowing pretty well that it is to be broken in the next month. The prices could be anything from 10 Rs/ to 100Rs/-. So can the frozen cauliflower be a substitute when prices are high? No, as long as fresh is available, frozen has little preference. People might reduce the quantity to adjust the budget but would not replace it with frozen.

It is said that less than 4% of India’s perishable is transported by a cold chain, compare the same to the UK, it is >90%. Refer transportation as a solution to the post-harvest loss is easier said than done for the simple reason that we do not have an end to end cold chain. The last mile connectivity of the hawkers/ vendors does not have the cold chain infrastructure. The F&V which when moved in refer & taken out to an ambient environment, deteriorates faster. Additional cost load of cold chain is also not competitive either. The solution, therefore, is not the cold chain but the ventilated, air circulated & humidified transport. There is a wide range of traditional packaging adopted for transportation of different items like a bamboo basket in combination with banana leaves at Barpeta in Assam, wet gunny bags with ice cubes for beetle leaves in Orissa, wooden boxes with straw for Alphonso mango at Ratnagiri. These are traditional, low cost, and highly efficient in preserving F&V during the transit. But not much research has taken place to standardize these for logistic or accounting requirements.

Small farmers keep growing different vegetable throughout the year. But unless there is the scale of production in a cluster, markets do not develop as the cost of aggregation becomes high. Over a period of time, many commodity clusters have emerged as kind of national mandi like onion at Nashik, tomato at Kolar or potato at Agra. But these are only the tip of the iceberg. There are numerous tiny mandi/ hats (about 22,000*) which transact even less a kg of F&V. Unless there is a multi-tier aggregation, these cannot become a logistically viable volume for a commercial lot. But, greater the aggregation, greater would be the quality variation and lesser return. This is endemic to most of the mandi/hats of Bihar, Bengal & Assam.

Another easy solution suggested most often is “eliminate the middleman or de-layer the supply chain”. It is easy to delayer the chain but not easy to delayer the costs. Formal organizations often add costs; there are delays in decision making and are bound by compliances or internal rules. F&V deteriorates and deteriorates at a faster rate as time elapses. Losses pile up with a progression of time. So most organized players tend to lose for their own reasons of an organization. While the small player/ vendors are efficient in operation, it is difficult to scale up or replicate their operations.

Farm acreage sown is largely a function the previous years’ return and not on the future opportunities of sale. Farmer is always tempted to sow more if he had a good return on the previous year and also the vice-versa. As a result of this, there is cyclical high & low availability. This leads to a sharp rise or fall of prices. When there is the disproportionate rise of prices, many speculators, traders or hoarders get into the trade, making it further complicated and unreasonable. The trade gains in uptrend situations while farmers lose on the downtrend. There is no formal or informal planning mechanism to manage quantity, time or the location of sowing.

Farmers lose out considerable value as they do a little on post-harvest management of sorting, grading & packing. There exists opportunity in the standardization of pack size across the commodities & geographies. Today, major government investments are intended to create production technology and a little allocation on post-harvest, fresh distribution or market creation. But, yet there are positive developments like the use of standard boxes in apple trade in Himachal or use of crates in tomato trade of Nashik or selling Alphonso by size grade at Ratnagiri. It would be case-study to see how Washington apple penetrated deep into Indian villages. Crop planning if adopted could improve availability for the consumers and price realization for farmers.

Source:  *DFI-III (Doubling Farmers Income) Committee, Ministry of Agriculture & Farmer’s Welfare


By- Mihir Mohanta

GM – SCM International Business Mother Dairy Fruits and Vegetables Pvt. Ltd.