Faced with repeated bouts of food inflation, the finance ministry is likely to give fiscal sops in the forthcoming budget, to investment in all segments of the cold storage chain for fruit and other agri products.

As directed by the prime minister's office, the department of industrial policy and promotion along with the department of food and public distribution, ministry of food processing, have begun work on preparing the proposals for consideration of the finance ministry, sources said.

"Investment will be encouraged in supply chains, including provisions for cold storages, which will be dovetailed with organised retail chains for quicker and more efficient distribution of farm products and minimising wastage," the PMO had said yesterday.

While foreign direct investment is not allowed in the multi-brand retail, the organised retail stores promoted by the domestic industrial houses have been steadily growing.

However, the missing link has been the back-end supply chain from the farm gate to the consumer.

The proposals under consideration of the government include 100 per cent depreciation on all investments in physical cold storage assets by the private sector in agriculture and the entire agri-value chain and tax holiday in respect of the profits for 5- 10 years.

As big investment is required in building the supply chain, the industry has been seeking fiscal sops for promoting the organised retail which accounts for less than per cent of the total domestic retail estimated at about USD 450 billion.

It wants tax sops across different segments of the back-end infrastructure.

"Cold chain infrastructure is not confined to cold storages , but extends to temperature handling across the value chain from farms to consumers," FICCI secretary general Amit Mitra said.

The cold chain includes farm level pre-coolers, small capacity chill cold storage refrigerated trucks, food processing plants, refrigerated display cabinets for retail shops and deep freezers.

The measures announced by the PMO to fight food inflation included support to augment storage capacity of cereals and modernising godowns and other infrastructure.

It is for the second time within a year that prices of edible items have shot up. The food inflation,fuelled by high prices of vegetables, milk, meat and eggs, has climbed up, close to 17 per cent at the wholesale level.

The UPA coalition government has come under a severe attack from the Opposition parties for not being able to rein in food prices.