Odisha's cold store policy: Panacea for food inflation is big push to farmer’s income

Retail inflation was the highest in Odisha at 7.05 per cent in March 2024 compared to 4.85 pc in the country.
Image used for representational purposes only
Image used for representational purposes only
Updated on
3 min read

2013 was a landmark year for Indian agriculture. The National Food Security Act (NFSA) was enforced, and the National Centre for Cold-chain Development (NCCD) was established. This was done considering that food pricing is the basic fabric of food security. So, when a lousy potato harvest hit Uttar Pradesh and West Bengal in the second quarter of FY 2024-25, the cardinal vein of Odisha’s food security lay exposed.

The result: Retail inflation was the highest in Odisha at 7.05 per cent in March 2024 compared to 4.85 pc in the country. The rise in retail inflation in Odisha is mainly attributed to an inflation rate of vegetables at 28.34 pc, followed by pulses and products at 17.71 pc, spices at 11.4 pc, eggs at 10.33 pc and food and beverages at 7.68 pc. While experts unanimously pointed at the rocketing costs of buying from neighbouring states, putting food on the plate became very painful for people experiencing poverty.

With all eyes on the new dispensation, the cabinet has approved a Rs 252 crore ‘Financial assistance to cold storage’ scheme from 2025-26 to 2029-30. The plan promises construction of new cold storage units across all 58 sub-divisions of the state, along with the restoration of non-functional ones. The hub-and-spoke model envisions the directorate of horticulture as the facilitating agency for developing agriculture production clusters (APCs).

The Cold Store Policy in Odisha has instilled a new hope in farmers and consumers, anticipating moderation of food prices and reducing post-harvest loss with a rise in per capita availability of fruits and vegetables. For a state that has more than half of its workforce employed in agriculture, a meagre 5.8 lakh MT of the storage facility is grossly inadequate. Bihar, Haryana and West Bengal, states with similar arable land, operate with twice as large capacities. In addition, the capital and scale required to produce potatoes out-pockets medium farmers who end up paying a bulk of their investment as electricity bills. Not only does this discourage the production of essential rabi crops like the humble potato, but the risk associated with post-harvest losses multiplies.

The Cold Store Policy in Odisha has very clearly addressed the financial viability of cold stores and will encourage private entrepreneurs. It ensures capital investment subsidy of 60 pc for SC/ST/transgender/women entrepreneurs and 50 pc for other beneficiaries. One of the most critical input costs is electricity charges. The policy has promised a tariff subsidy of 50 pc on the total electricity bill for seven years.

All this financial support from the Cold Store Policy will enhance the cold stores’ net present value (NPV) and internal rate of return (IRR). Reimbursement of interest expenses on cash credit availed by the entrepreneurs envisaged in the policy will enhance liquidity management which is a major challenge. Besides, financial assistance will be given to revive the nonfunctional cold storage on a case-to-case basis. It is also suggested that subsidy on electricity bills be enhanced to 70 pc for seven years for new entrepreneurs to ensure financial viability further.

The new policy strikes at the right time, perfectly aligned with Odisha’s growth goals and Viksit Bharat @ 2047. These policy interventions will help develop agro-processing plants in the MSME sector, thus cementing agro-manufacturing linkages as we advance. From the income generation perspective of farmers, there are numerous positive externalities of advanced and operational cold storage units on supply chains. Expansive market access to local produce, in-house safety and fortification, regularisation quality control, scaling production for exotic vegetables etc, can be a handful of positive outcomes. More specifically, a cold chain that leverages the vast coastline could become a global seafood processing hub in the long term

(Mohanty is a professor in finance, XIMB; Routray is an economist at Centre of Excellence in Fiscal Policy & Taxation, XIM University)

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