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Cold Storage Facility: Legalities, Scope, and Benefits

calendar08 Sep, 2021
timeReading Time: 4 Minutes
Cold Storage Facility Legalities, Scope, and Benefits

Cold storage is an ideal venture for those who seek to establish a business model where a one-time investment is sufficient. It refers to a service where fruits & vegetables are stored under control temperature so that they can remain fresh as long as possible. Although cold storage establishment attracts significant investment as compared to other small businesses, It renders good ROI in the longer term. 

The cold storage business is rapidly growing in and outside India. It usually exists in two forms i.e. product-specific & multi-purpose. The former, as the name suggests, deals with the preservation of specific products; meanwhile the latter offers more flexibility in that regard. Apparently, the profitability offered by multi-purpose cold storage remains on the higher side as compared to the counterpart. 

An Overview on the Significance of Cold Storage Businesses

Preservation of fruits and vegetables is one of the key challenges for agro-producers around the world. The rate at which these commodities get waste is beyond monumental. 

Generally, nations with massive fruit & vegetable production are the ones which have the major contribution to food wastage. Therefore, in these nations, It’s quite imperative for; 

  • Extending the shelf life.
  • Avoiding gluten
  • Reducing transporting loopholes during massive production of fruits.
  • Ensuring the product quality 

Additionally, cold storages are also imperative in minimizing perishable commodity wastage. Moreover, it helps facilitate remunerative costs to agro-producers & make farm produce readily available to end-users in fresh condition at lucrative prices. 

Demand for packaged foods & ever-changing lifestyle habits is also stimulating the need for cold storage business globally.

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Potential Cold Storage plant Benefits

Following are the potential benefits of Cold Storage plant: 

  • It minimizes the wastage of agro products such as fruits & vegetables. 
  • It can be utilized to store medicinal produces. 
  • It reduces the cost of the off-season farm produce
  • It helps in facilitating remunerative prices to agriculturists and farmers.
  • It ensures easy availability of Packaged or processed food to end-users.

Key Licenses for Cold Storage Facility

Investment Cost of Establishing a Cold Storage

The initial quantum of investment is considerably high when contrasted with other small entities. Fundamentally, investment is required in the areas like land acquisition, construction, licensing, building infrastructure, so on and so forth. 

Moreover, you are required to invest heavily in the procurement of cooling equipment. There is ample cutting-edge machinery that offers better efficacy & long-term sustainability. 

Apart from such expenses, there is a certain cost that you ought to consider, like working capital expenditures. Other monthly expenses include utility bill payments, staff salaries, & other advertising costs.

Types of cold storages machinery

Industrial cool rooms, Combi refrigerators, & Modular room refrigerators are among the common equipment that used in cold storage.

Imperative Requisites for Cold Storage Business in India

If a business owner intends to commence a cold storage business, you need to outline a detailed business plan. That business plan must entail all detail related to cold storage business such as details of products and services, employee’s details, so on and so forth. Apart from that, there are some other key details given below that should find a way to the business plan. 

Selecting Apt Location

The location always remains the prime concern for the business owner while steeping into the business domain. The vicinity of the Cold storage must be closer to the producing farms or customer centers. As a general thumb of rule, the cold storage with 10,000 metric tonnes of capacity seeks a minimum area of 2 acres to operate as a multi-commodity or multi-storage unit.

A business owner often takes the volume of produce into account while deciding on the location of the storage facility. 

Selection of Equipment

In summers, the selection of the equipment should be done wisely, taking power cuts & heavy loads into account. There are some key parameters that you should consider without exception while procuring the equipment for cold storage. These factors include the age of machinery, light, fan & product load besides, wall, ceiling, floor, etc.

Basic Requisites for an ideal cold storage Facility

Storage Space Humidity 85-90%
Cold storage dimensions 14 x 10 x 10 ft.
Storage Materials: Fruits & Vegetables
Initial Temp. 28-35 degrees Celsius
Storage Unit Capacity: 10 MT
Refrigeration Capacity: 30000 Btu/hr
Insulation material: Polyurethane Fibre (PUF) – 60mm
Assumed outer temp: 43 degree Celsius

Temperature Requisite : (+-)2-4 degree Celsius

Cleaning & Maintenance

Cleaning & maintenance of cold storage plants is of absolute importance from a productivity point of view. The owner must conduct a regular check of the machines and keep the temperature & humidity level under control. Fumigation should be done at regular intervals to ensure top-notch hygiene. 

Promotion of Product & Target End-Users

There is hardly any business[1] in India that doesn’t foster good marketing strategies to compete with its rival, and the cold storage unit is no different here. From a profitability standpoint, your goal as a business owner should be the targeting of all possible market segments such as; 

  • Warehouse companies
  • Traders
  • Wholesalers
  • Retail markets 
  • Supermarkets
  • Exporters
  • Distributors 

Procuring Funds

Raising funds is perhaps the most daunting undertaking for any new business. Pouring in your hard-earned money in one go is not wise considering the uncertainty of a business model. So, it is better to leave that money as it is and opt more professional way to serve this purpose. Venture capitalists, angel investors, and private lenders including NBFCs are the most viable option of fundraising in the pre-establishment phase of a business. 

Key points to Ponder for the cold storage business

  • Land that is proposed to be used as cold storage must be easily converted to non-agricultural land. 
  • You must get a consent letter from the local body before initiating the construction work.
  • Legally, the operating time of this facility has been maxed out on 12 hours/day
  • Proper drainage & road connectivity is a must-have requisite for a this facility. 
  • Soil testing should be conducted to determine load-bearing strength.
  • As a safety protocol, vacuum & pressure testing of the refrigeration system should be done at regular intervals.
  • The cold storage facility must have alarms, fire extinguishers & proper exists. 
  • Availability of potable drinking and soft water is mandatory. The owner must install a water softening plant if the availability of soft water is very low. 
  • Availing Insurance of the storage facility is important as it keeps the losses triggered by unexpected events at bay. 

Conclusion

The cold Storage business is certainly a win-win venture for new entrepreneurs looking forward to stepping into a reliable business domain. Remember that the success of this business is heavily dependent on the way you undertake the security and hygiene protocols. If you fail to keep the facility as immaculate as possible then the client could run away from you. 

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