Leading food and grocery retailers are divided over tax sops for setting up cold chains and warehouses for agricultural produce in the country.
While some like RPG's Spencer's and Wadhawan group's Spinach say it will encourage them to invest more in cold chains, others such as Aditya Birla Retail and Future Group said the announcement has come too late and helps fresh produce and chilled product suppliers more than retailers.
In the Union Budget, the finance minister extended investment-linked tax incentives to businesses setting up and operating cold chains and warehousing facilities for storing agricultural produce to encourage rural infrastructure and reduce wastage of fresh produce.
"Tax incentives on cold storages will encourage us to invest more in building cold storage and necessary infrastructure. This, in turn, will bring down wastage, smoothen the flow of agri goods to markets and consumers and result in higher output as farmers can grow more without fear of spoilage," an RPG group official said. The group runs the Spencer's chain of stores.
According to estimates, nearly 40 per cent of fruits and vegetables is spoiled during their transportation from farms to retail stores in the country due to lack of cold chains and warehousing facilities.
"Lack of cold chains was a major bottleneck in agriculture infrastructure. Development of cold chains was seen as a real estate activity. This move will help create a lot of storage space for fresh produce," Yes Bank's Assistant Vice-President (food and agri business advisory) PSR Raju said.
However, some experts said the announcement was not sufficient to boost investments in the cold chain and warehousing sector.
"Since cold chain is an integrated play, those who are setting them up have to invest in various other facilities. But if they are not sure of demand size, they may not invest in such facilities, " OC&C Strategy Consultants' director Naimish Dave said. His firm had advised Tata Chemicals to set up distribution facilities for fresh produce.
Retailers say the government should have extended the sops to all kinds of warehouses as retailers normally use warehouses to store apparel and general merchandise too.
"Right now, we are not setting up any cold chains or agriculture warehouses as mostly central agencies deal with agricultural warehousing. If the incentive was extended to general purposes, the warehousing sector would have immensely benefited," Future Logistics' chief executive Anshuman Singh said. His company is a unit of Future Group.
Retailers say they have already spent huge sums on setting up back-end and supply chain and the announcement will have marginal effect on them.
"Retailers have already spent fortunes on their back-end operations. The announcement will have marginal help in setting up additional warehouses. It will help mostly to suppliers of chilled products and fruits," Aditya Birla Retail's Chief Executive Thomas Varghese said.