4 1 Project RepoProject_Report-Potato_Flakes_Mfg.pdrt-Potato Flakes Mfg

Project Report on Potato Flakes Processing Prepared for

GUJARAT AGRO INDUSTRIES CORPN. LTD.

Report Contents Sr. No.

Title Executive Summary

1 1.1 1.2 1.3 2

CHAPTER : 1 Introduction About Gujarat Agro Industries Corporation Growth in Potato Cultivation in Gujarat Project Background CHAPTER : 2

P No. 1

12 13 14

Market Analysis

2.1

Description of Products and Its Variants

15

2.2

Quality Parameters

15

2.3

End Uses of Potato Flakes

16

2.4

Benefits of Potato Flakes

17

2.5

Present Domestic Industry Status

18

2.6

Marketing Channels

20

2.7

Major Potato Flakes Users in India

20

2.8

Price of Potato Flakes

21

2.9

2.10

Potential for Potato Flakes 2.9.1 World Export of Potato Flakes 2.9.2 Word Import of Potato Flakes 2.9.3 Imports of Potato Flakes by India 2.9.4 Exports of Potato Flakes by India 2.9.5 Import of Potato Flakes By Neighbouring Country Domestic Market Potential

22 22 23 24 24 26 27

3 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10

CHAPTER : 3 Potato Production & Availability For Processing Potato Nutritional Facts Global Production Trends Potato Production In India Suitability of Indian Potato Varieties For Processing Areas suitable for cultivation of processing varieties Experience with Exotic Varieties Potato Production In Gujarat Potato Storage Facilities In Gujarat Potato Prices Potato Contract Farming In Gujarat

30 31 31 32 35 35 36 38 39 40

4 4.1 4.2 4.3 4.4

CHAPTER : 4 Process & Technology Process Description for Potato Flakes Process Flow for Potato Flakes Input-output ratios in selected mfg. Process Suppliers of Plant & Machinery And Technology

42 47 48 49

I

5 5.1 5.2 5.3 5.4

CHAPTER : 5 Infrastructure, Utilities & Manpower Project Location Comparative Advantage in Gujarat Requirement of Land Requirement of Utilities

50 51 52 52

6 6.1 6.2

CHAPTER : 6 Operation & Management of the project Project Management Manpower Requirement

53 53

7 7.1 7.2

CHAPTER : 7 Regulatory Requirements & Govt. Support Regulations - Food Laws, Environment Compliance with norms of Pollution Control Board (PCB)

55 55

8 8.1 8.2

CHAPTER : 8 Business Plan & Project Implementation Key Features of The Plan Project Implementation Schedule

61 62

9 9.1

CHAPTER : 9 PROJECT COST & FINANCIAL ANALYSIS Estimation OF Capital Cost for all Project Components 9.1.1 Preliminary & Pre-operative Expenses 9.1.2 Land & Site Development 9.1.3 Civil Cost 9.1.4 Plant and Machinery Cost 9.1.5 Electrical and Utilities Equipment 9.1.6 Office Equipments 9.1.7 Contingency 9.1.8 Estimation of Working Capital Requirements 9.1.9 Summary of Project Cost Means of Finance Profitability Assumption Financial Indices 9.4.1 IRR Calculation 9.4.2 Payback Period 9.4.3 BEP Calculation

63 63 63 64 64 65 66 66 66 67 67 68 70 70 71 71

10

CHAPTER : 10 SOCIO-ECONOMIC BENEFITS OF THE PROJECT

74

11

ANNEXURES I Projected Profitability Statement II Quotation of Plant & Machinery ( BMA) III Plant Layout IV Production Trends in Gujarat

9.2 9.3 9.4

II

V VI

Country-wise Import of Potato Flakes Country-wise Export of Potato Flakes

III

A Project Report on Potato Flakes Processing

EXECUTIVE SUMMARY Sl No.

PARTICULARS

A. Project Details 1

Name of the project

Project for setting up manufacturing facility for potato flakes at Dehgam District : Gandhinagar, Gujarat

2.

Name of the applicant/ agency (beneficiary) with complete address and contact details

Gujarat Agro Industries Corporation Limited ( Govt. of Gujarat undertaking) Khet -Udyog Bhavan, Opp. Old High Court, Navrangpura, Ahmedabad-380 014

3.

Name of the Controlling Department/Ministry

Ministry of Agriculture, Government of Gujarat, Gandhinagar.

4.

Whether registered with APEDA, if yes, RCMC No. & date.

GAIC is a virtual office of APEDA for Gujarat

5.

Main Business of the Agency

Promotion of Hi-Tech Agriculture, Agro/ Processing and allied activities in the state

6.

Experience in implementation and operation of such Projects

GAIC has successfully implemented many GoI and GoG assisted projects in the state, related to post value addition and harvest infrastructure, manufacturing of agri-inputs. The list of projects implemented and under implementation is provided in the DPR. The implemented projects are operating successfully under PPP model. GAIC is also setting up a modern 5,000 tons capacity bulk potato store with Dutch Technology at Deesa. This will be very helpful in storing “Sugar Free” potato for proposed project of potato flakes.

7.

In case of state govt. agency, whether the project has been approved by the concerned state Govt. Department.

Govt. of Gujarat is supporting it, a copy of the letter attached.

8

Details of Project Consultant

Dynamic Agri & Foodbiz Consultants Pvt. Ltd, Ahmedabad

9.

Mode of Operation after commissioning of the Project (whether self /lease /PPP or otherwise)

Lease or suitable PPP model by appointing Project Operating Partner.

10.

In case of self operation whether availability of adequate trained manpower has been ensured. Give details

Not Applicable

11.

Details of such projects in the Government sector already

No

Food

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

1

A Project Report on Potato Flakes Processing

existed in the district 13.

Location of the Project

Dehgam District : Gandhinagar, Gujarat

14.

Whether the land on which the project is to be commissioned is in the possession of the agency. Please provide documentary evidence.

Yes, land available with Department of Horticulture in their Nursery at Dehgam. The required piece of land will be made available to GAIC.

B. Export Potential 15.

Identified agriculture products for the project

Potato Flakes and value added snacks mixes made from potato

16.

Location Advantage

Gujarat grows best quality processing varieties of potato due to suitable agro climatic conditions, adoption of required practices by the enterprising farmers of the state and willingness for contract farming. The global leading French Fries processor McCain, has set up plant in Gujarat after carrying out trials all over the country. The processing varieties for chips and french fries contain high dry matter content (more than 20% whereas table varieties have 15-18%). The undersize potatoes of these varieties like Chipsona-II & III, Lady Rosetta, Kennebec are difficult to sell in market for table purpose and price realization is very poor, however, this potato is very good for making flakes due to high dry matter content. The potato storage infrastructure is excellent in the state. GAIC is also implementing a “High-Tech” potato cold store with Dutch Technology for storing 'Sugar Free' potato for an extended period at Deesa In North Gujarat.

Gujarat has very good industrial and social infrastructure. The demand for flakes within Gujarat is more than 3,000 tons which is highest in the country and there is increasing demand from exporters based in Gujarat. 17.

Annual Production of the produce (raw material) in the District

Production of potato in Sabarkantha cluster is around 5.48 lakh tons and production in the nearby other two clusters i.e Banaskantha is 9.24 lakh tons and Kheda Cluster is 3.63 lakhs tons

18.

Production of the target produce in the State and also from the cluster of Districts

Production of potato in state is 18.82 lakh tons. The major potato production areas are within a radius 125 kms

19.

Targeted annual produce to be used as throughput in the facility

The annual requirement of potato at full capacity utilization will be about 22,000 tons which is about Dynamic Agri & Foodbiz Consultants Pvt. Ltd

2

A Project Report on Potato Flakes Processing

on daily or weekly or monthly basis

1.5% of production in the major clusters of potatoes around the proposed location of Dehgam .

20.

Target beneficiaries/users and what benefit they will be accruing and also socio economic benefits?

Farmers will be the major beneficiaries as they will be in a position to conserve the potato when prices are unfavorable. This year a large number of farmers had to simply throw away potatoes for want of processing facility. Some of them sent potatoes to units in UP and Punjab for processing and due to high freight cost their realization was very low. As per the Press Reports the farmers of the state lost Rs.700 crores this year due to wastage of potato. About 22,000 tons of potato can be conserved into value added product which has shelf-life of more than one year in ambient condition which will provide sufficient time to farmers to look for a market and will not have to go in for distress sale of fresh potato. About 1,000 farmers will be benefited Exporters will be in a position to export potato flakes as there are tremendous opportunities in global market. The Gujarat based exporters had inquiries for large quantities last year but could not get the required material due to insufficient production capacity in the country.

21.

Qty of final produce being currently exported from the State

Exporters based in Gujarat (Natural De-hydrated Vegetables) exported around 500 tons of flakes sourced from other states. The exporters had orders of much more quantity but supply was a constraint.

22.

International markets to which the produce is currently being exported

From India exports are taking place Gulf Countries, SARC Countries, Russia and Ukraine, etc.

23.

Projections of export through the commissioned project in quantity and value for the next five years.

Qty-tons, Value-Rs. Crs.

2014

2015

2016

2017

2018

Quantity

1176

1361

1447

1532

1618

Value

7.41

8.57

9.12

9.65

10.19

24.

Target international markets

25.

Briefly explain as to how the produce will be consolidated

Gulf Countries:- Oman, UAE, Qatar, Kuwait, Saudi Arabia and Bahrain. SARC Countries:- Sri Lanka, Pakistan, Nepal, Bangladesh. South-East Asian Countries:- Malaysia, Indonesia, Thailand, Philippines, Singapore The selected Project Operating Partner (POP) will organize cultivation of contract farming within the Dynamic Agri & Foodbiz Consultants Pvt. Ltd

3

A Project Report on Potato Flakes Processing

(backward linkages) and marketed/ exported (forward linkages) through which port of the country

cluster area for cultivation of processing varieties like Chipsona and LR in 1,000 ha. The POP will also be in touch with farmers and traders of processing varieties of potatoes and buy from them “Out of Specs” (undersize, cuts and with other minor defects). The potato will be stored in up- graded cold stores in the state with provision for CIPC treatment to keep it “Sugar Free” and fit for processing.

The product will be exported from the Kandla, Mundra and Pipava ports. 26.

Installed capacity of the facility in MTs (per hour/per day)

500 Kgs /hour about 12 MT per day

27.

Maximum capacity of the facility (per hour/per day)

Plant will be operated for about 285 days in a year with a daily output of approximately 12 tons.

C. Project Cost Outlay 28.

Total Cost of the Project

Rs. 1964.65 lakhs

29.

Total Capital Cost

Rs. 1663.27 Lakhs (Excluding land and Pre-op. exp)

30.

Source of Funding Source

31.

Whether any appraisal has been done through financial institution, if yes, please provide the appraisal note

32.

Civil work details

Rs. Lakhs

Contribution from State Govt.

264.55

APEDA

1000.00

Any other Source- RKVY Loan

700.00

Total

1964.65

No.

Size, area in sq. mtr

Unit cost

Land Cost

12000

1100

132.00

Site Developments

12000

250

30.00

500

3500

17.50

Components

(per sq. mtr)

No. of units

Cost Rs. Lakhs

Land Development

Fencing

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

4

A Project Report on Potato Flakes Processing

Internal Road ( 7 Mtr wide )

2800

1200

33.60

Storm Water Drains ( CC drain with cover slab, recharging wells, cross drainage work, Culvert at entry, Collection of storm water drain tank)

250

4000

10.00

Landscaping

5000

200

10.00

Signage

LS

LS

1.00

Tube well

LS

LS

7.00

25

10000

Security Cabin/ Time office

2 Cabin

Total Cost of land & site development

Main Building

2.50 243.60

Size, area in sq. mtr

Unit cost

No. of units

(per sq. mtr)

Cost Rs. Lakhs

Process hall

1500

10000

1

150.00

Potato reception area

300

6000

1

18.00

Store

200

9000

1

18.00

Laboratory

20

11000

1

2.20

Office

100

11000

1

11.00

Milling and Packaging section

150

9500

1

14.25

Workers amenities

40

8000

1

3.20

Electrical room

20

7000

1

1.40

Boiler room

100

7000

1

7.00

Foundations

20

11000

1

2.20

Total cost of civil work

2450

227.25

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

5

A Project Report on Potato Flakes Processing

33.

Plant & Machinery including Electrical Components

Technical details, capacity, specifications, etc.

Unit Cost

854.76

No. of units

Cost (Rs. Lakhs)

1

Potato reception line ( Imported )

500 kgs/ hour with abrasive pealing

1 drum

1021.32

2

Supporting machinery to potato reception line

--

5.00

3

Silo, Packaging, Weighing & Stitching

SS Silo of 20 tons capacity, bag filler and stitching machine

20.00

1

20.00

4

Laboratory Equipment

Basic chemical test, microbiological test, weight in water machine for potato quality

10.00

1

10.00

5

Plat forms

Waking platforms for blancher, drum, other machines made of MS as per the drawing supplied by machinery supplier

20.00

1

20.00

6

Pipelines fittings, plumbing etc.

SS pipelines as per the drawing by supplier

15.00

1

15.00

7

Stores and material handling equipment

Bines, etc storage chemicals

for of

5.00

1

5.00

9

Racking system

MS racks for packaging and raw material

10.00

1

10.00

10

Plastic pallets

For carrying up to 1 ton finished products

0.02

100

2.00

11

Manual pallet trucks

1-2 tons capacity

0.25

8

2.00

12

Trolleys etc.

MS trolleys for internal

0.10

10

1.00

5.00

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

6

A Project Report on Potato Flakes Processing

movement of potato and finished product. 13

Misc.

10.00

Total Cost of plant & machinery

Components

1121.32

Technical details, capacity, specifications, etc.

Unit Cost

No. of units

Cost (Rs. Lakhs)

Utilities Equipments 1 Steam boiler and Chimney

Multi-fuel boiler of 5 tons/ hour

70.00

1

70.00

2 Water chiller

5,000 LPD/ hour at 10 degree

15.00

1

15.00

3 Air compressors

10 HP

3.00

1

3.00

4 Water storage tank-Overhead

3 lakhs Ltr

--

5 ETP

For given BOD/ 60.00 COD load and about 1 lakh litter per day capacity effluent.

1

50.00

6 Installation and Misc.

Local fabrication work etc.

1

10.00

30.00

10.00

Total Utilities Equipments

178.00

Electrical Equipments 1 Power Distribution network

200 KVA

2

As per requirement

10.00

LS

10.00

Cabels fittings, external lighting

As per drawing of suppliers

5.00

LS

5.00

PLC, Instrumentation etc.

200 KVA

15.00

1

15.00

3 4 Gen Set Total Electrical Equipments

10.00

40.00

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

7

A Project Report on Potato Flakes Processing

Office Furniture & Equipment 1 Work stations

Modular furniture

0.33

15

5.00

2

5.00

1

5.00

Meeting room furniture

Furniture with table and 10 chairs

0.25

10

2.50

PC/Laptop

Latest PC/Laptop with LAN systems.

4 Projector, TV etc.

LCD TV

1.00

1

1.00

5

Steel racks and cabinets

1.00

1

1.00

6 AC, Fans etc.

2 AC + 6 Fans

2.00

7

EPBX Systems, others

3

Filling, cabinets etc.

Communication system, IT

2.00 1.00

Total of office Furniture

17.50

D. Financial Outlay 35.

Key Financial Details Profitability Statement for the project for next 5 years Rs. In Lakhs 2014

2015

2016

2017

2018

2019

1633.88

1891.80

2010.58

2128.73

2249.00

2258.75

15.39

16.42

17.44

18.47

19.49

19.49

Income from Sales of Empty Bag

8.66

9.23

9.81

10.39

10.97

10.97

Closing stock of Finished Goods

120.65

129.10

137.63

146.28

155.06

156.68

0.00

120.65

129.10

137.63

146.28

155.06

1778.58

1925.90

2046.36

2166.24

2288.24

2290.83

1014.60

1082.22

1149.85

1217.53

1285.16

1285.16

Other Ingredients Cost

38.48

41.04

43.61

46.17

48.74

48.74

Packaging Cost Power Cost

25.65 38.48

27.36 41.04

29.07 43.61

30.78 46.17

32.49 48.74

32.49 48.74

Fuel Cost Consumables Cost (Chemicals, Lubri., Det.)

179.55

191.52

203.49

215.46

227.43

227.43

12.83

13.68

14.54

15.39

16.25

16.25

Manpower Cost Marketing Exps

101.22 5.39

111.34 6.24

122.47 6.63

134.72 7.02

148.19 7.42

163.01 7.45

YEAR Income from Sales Income from Sales of Starch

Opening Stock of Finished Goods Gross Income Variable Expenses Raw Material Consumption

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

8

A Project Report on Potato Flakes Processing

Development of Backward Linkages

10.00

11.00

12.10

13.31

14.64

16.10

Repair & Maintance

16.63

18.29

20.12

22.13

24.34

26.77

Misc. Manufacturing Cost

5.00

5.50

6.05

6.66

7.33

8.06

Interest on working capital

8.81

19.36

20.62

21.88

23.17

23.36

1456.64

1568.59

1672.16

1777.22

1883.90

1903.56

321.94

357.31

374.20

389.02

404.34

387.27

General Admin Exps.

72.38

79.62

87.58

96.34

105.97

116.57

Insurance Depreciation

6.24 83.41

6.27 83.41

6.30 83.41

8.08 83.41

8.11 83.41

8.12 83.41

Amortization Sub Total

5.77 167.80

5.77 175.07

5.77 183.06

5.77 193.60

5.77 203.26

5.77 213.87

Profit before Taxation

154.14

182.24

191.14

195.42

201.08

173.40

Provision for Taxation Net Profit after tax

0.00 154.14

0.00 182.24

0.00 191.14

0.00 195.42

0.00 201.08

42.47 130.93

Cost of Production (b) Contribution Fixed Expense

Cash Flow Projections for next 5 years Rs. In Lakhs 2014

2015

2016

2017

2018

2019

154.14

182.24

191.14

195.42

201.08

130.93

89.18

89.18

89.18

89.18

89.18

89.18

135.54

13.38

9.66

9.76

9.88

1.47

35.78

4.05

4.05

4.05

4.05

2.50

414.64

288.85

294.03

298.41

304.19

224.08

0.00

0.00

0.00

0.00

0.00

0.00

Increase in Current Assets

223.08

25.82

20.09

20.21

20.40

7.02

Increase in Non C. Assets

0.00

100.00

50.00

100.00

0.00

0.00

223.08

125.82

70.09

120.21

20.40

7.02

0.00

191.56

354.59

578.53

756.73

1040.52

D: Net Surplus(a-b)

191.56

163.03

223.94

178.20

283.79

217.06

E: Closing Balance

191.56

354.59

578.53

756.73

1040.52

1257.58

A: Sources of Funds PAT Depreciation+ W/o of POP exp Increase in Bank Borrowing Increase in Creditors B: disposition of funds Increase in CAPEX

C: Opening Balance

IRR

12.08%

BEP

BEP at Installed Capacity- 39.09%, Cash BEP at Installed Capacity- 18.32%

Payback Period

Eight years. Dynamic Agri & Foodbiz Consultants Pvt. Ltd

9

A Project Report on Potato Flakes Processing

E. Other Information 36. Project Implementation period in case of approval (in months)

Activities Starts from Feb'2012

1

2

3

4

5

6

7

8

9

10

11 12

1 2 3 4 5

Submission of DPR Approval by APEDA Selection of Partner Land and its development Detailed Engineering Negotiation and selection of 6 Vendors 7 Award of 'Turn Key' contract Securing temporary power 8 supply 9 Civil works 10 Order of Imported Machinery 11 Order of Indian Machinery 12 Installation of Machinery 13 Recruitment of key staff 14 Regulatory compliance 15 Commissioning trials 16 Procurements Activities 17 Market Dev. Activities Plant will be commissioned in Feb'2013

37.

In case of cold chain infrastructure e.g. precooling and cold storages, please certify Whether National Horticulture Board Norms on all civil constructions, Insulation and refrigeration, etc have been followed for preparing the estimation

Not Applicable

38.

Please certify that all necessary approvals from the Government and concerned agencies have been taken for

The project is to be implemented by State Government Agency, no difficulty is foreseen.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

10

A Project Report on Potato Flakes Processing

implementation project.

of

the

39.

Details on Availability of uninterrupted Power to the Project

Power availability in Gujarat is good and uninterrupted power supply available to Food Processing Industry with continuous process. Requirement of power is only 150 KVA and no difficulty foreseen. As a backup provision of DG Set is made.

40.

Environmental issues of the project and their redressal

No harmful chemical residues, starch can be recovered ETP will be installed for treatment and after that water can be used for irrigation purpose.

41.

Any other detail relevant to the Project.

In spite of the fact that there is a good availability of processing varieties in Gujarat, there is not even a single potato flakes manufacturing unit in the state and APEDA is requested to support this endeavor. A large numbers of potato farmers want to switch over to cultivation of processing type of potato varieties by working with potato processing companies as the prices offered by them are remunerative and they would have assured buy back therefore the processing of potato particularly for export oriented potato flakes needs to be promoted in the state. There is global trade of 2.9 lakh tons of potato flakes annually and it is further growing, India being second largest producer of potato can seize this opportunity and exports from Gujarat will be very competitive in the target markets due to proximity to ports.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

11

A Project Report on Potato Flakes Processing

1. Introduction 1.1 About Gujarat Agro Industries Corporation Gujarat Agro Industries Corporation (GAIC) was set up in 1969 under the Companies Act, 1956, GAIC acts as a facilitator and nodal agency for implementation of various schemes of Government of Gujarat and Government of India The basic objectives of GAIC are: To accelerate demand-based production of agro-products and develop agro industries in the new global agricultural environment To enhance the productivity of crops in a sustainable manner and give Gujarat a competitive edge through an integrated approach to agriculture To increase the levels of return to farmers by promoting value additions To reduce wastage of agro products and increase the overall income of farmers To establish a significant position for Gujarat in the global market by creating backward and forward linkages between agriculture and industry. In order to achieve these objectives, GAIC has a state-wide network of agro centers reaching the remotest corners, which streamlines the timely supply of agricultural inputs, equipment and services to farmers at reasonable rates. GAIC is focused on promoting use of renewable energy by implementing Bio-gas Programme through its field officers, SEBGS (Self-employed Bio Gas Supervisors) and Non Government Organizations. Their overall scope of work includes selection of beneficiaries, supervision, installation and commissioning of the plant and providing after-sales services up to 3 years.GAIC functions as a facilitator for State Government’s Agro Industrial Policy and provides subsidies and other incentives as per the policies. GAIC is also acting as Nodal Agency for Central Government / Agencies like Ministry of Food Processing Industries, APEDA and SAFC. In the recent past GAIC has implemented a number of projects related to post harvest infrastructure,value addition & manufacture of agri-inputs as mentioned below :Implemented Projects Integrated Pack House for Fruits & Vegetables at Naroda, Ahmedabad under RKVY Scheme Centre for Perishable Cargo Project at Sardar Vallabhbhai Patel International Airport, Ahmedabad under RKVY Scheme. Banana Pack House at Jhagadia, Dist. Bharuch along with two Collection Centres under APEDA and GOG. Under Implementation Projects Hi-Tech Cold Storage for Potatoes at Deesa, Dist. Banaskantha. Under RKVY. Irradiation Plant for Fruits and Agro products at Bavla, Dist. Ahmedabad under RKVY Cold Storage for Onion and its Value Added Products at Mahuva-APMC, Dist. Bhavnagar Under APEDA Dynamic Agri & Foodbiz Consultants Pvt. Ltd

12

A Project Report on Potato Flakes Processing

Rice Flakes Unit at APMC Kosamba, Dist Surat under RKVY Liquid Bio Fertilizer Plant at Naroda, Dist. Ahmedabad under RKVY

Implemented 4 Cold Storages for Tribal Development Department, Government of Gujarat (Only implementing Agency) 100 MT Cold storage at Bartad, Dist. Navsari 100 MT Cold storage at Jhagadia, Dist. Bharuch 75 MT Cold Storage at Nana Pondha, Dist. Valsad 75 MT Cold Storage at Itwada, Jetpur-Pavi, Dist. Baroda 1.2

Growth in Potato Cultivation in Gujarat

Gujarat has achieved highest growth in agriculture among all the states of India during last decade and the major contribution has been through fast growth in horticulture sub-sector. Potato is an important horticultural crop in Gujarat with production jumping to 18.8 lakh tons from 11 lakhs ton during a short span of last five years. Potato is a mainstay of rural economy in North Gujarat Even though in terms of volume Gujarat ranks after UP, West Bengal, Panjab and Bihar but it has a unique importance of being the state capable of producing good quality processing varieties of Potato. The multinational companies like Pepsi and McCains carried out trials all over the country for years and finally zeroed in on Gujarat due to suitable agro climatic conditions (soil type, day length, night and day temperature etc) in the state. The farmers have quickly taken up cultivation of new varieties as per market needs, adopted the required package of practices and are reaping the benefits with highest productivity within country and better price realisation due to better quality. While McCain has set up Potato processing unit in Gujarat, the other major manufacturers of Wafers like Pepsi, ITC, Parle, Haldirams, Balaji are largely sourcing Potatoes from Gujarat. The ‘French Fry’ units Satnam Agri Processing at Punjab and Golden Fries at Coimbatore are also dependent upon supplies from Gujarat. Substantial quantities of potato is exported from India is of Gujarat origin. In spite of the fact that the production of processable varieties of potato is highest in India there is not even a single potato flakes manufacturing unit in the state whereas there is one in Punjab, one in UP and three in West Bengal. Further, farmers of Gujarat are happy with cultivation of processing type potatoes with contract farming with companies and not only are they getting remunerative price but also an assured market. More farmers are willing to join contract farming programme to get insulated from volatality of the market. During the year 2011 there was a bumper crop in the country and due to adequate storages facilities in the state the farmers were in a position to store the additional production and there was not much panic during the harvesting period of March. Subsequently it was realised that the stock in stores was much more than the requirement of markets of Gujarat and it was not possible to send it to other states due to competition from Uttar Pradesh, Madhya Pradesh and Punjab who are the traditional suppliers of two neighbouring states of Maharashtra and Rajasthan as a result the prices nosedived to Rs 2/kg in November when the cold storages shut their operations and fresh crops from Punjab starts coming in. A few traders from Gujarat dispatched about 1,000 tons of potato to flakes factories in Uttar Pradesh and Punjab, however, the realization was very poor due to very high freight cost, in such a scenario an Dynamic Agri & Foodbiz Consultants Pvt. Ltd

13

A Project Report on Potato Flakes Processing

urgent need for conserving the potato in form of value added potato flakes is felt, the flakes can be stored at ambient conditions for up to one year and there is not only huge global market, but fast growing domestic market as well. The conservation of potato at the time of excess production will help in stabilisation of the price and sustained interest of farmers in continuing cultivation of potato which is most remunerative rabi crop for them. 1.3

Project Background

APEDA among its various promotional schemes has a scheme for Infrastructure Development for establishment of common infrastructure facilities by any state governments or Public Sector agency like Airport Authority of India or Port Trust etc. Under the scheme assistance is given as 100% grant except the land which is to be provided by implementing agency. Considering the plight of potato farmers of the state GAIC has approached APEDA to support the project under 'Common Infrastructure Development Scheme'. GAIC has engaged Dynamic Agri & Foodbiz Consultants Pvt. Ltd for preparation of a Detailed Project Report on processing of potato flakes. The consultants have experience of preparing similar project reports and knowledge of domestic and global trade of potato flakes. The DPR has been prepared after consultations with various stakes holders like, farmers, traders, cold store owners, exporters and bulk users. The project cost estimates have been worked out on the basis of quotations received from a leading Dutch supplier of plant & machineries for similar projects in India and cost of other project cost components on the basis of similar projects in India. For profitability analysis the prevailing prices of flakes and potato have been assumed and other operating costs as per the industry norms. The Consultants have examined global production of potato and trade of potato flakes in order to assess strategic long term advantages to India and identification of target markets.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

14

A Project Report on Potato Flakes Processing

Chapter-2 Market Analysis In this chapter the detailed description about potato flakes, its quality parameters, end uses and overview of global trade, domestic market and potential have been presented. 2.1 Description of Product and its Variants The potato flakes are conserved form of potato and can be conveniently used as a substitute for boiled potato. The rehydration property of flakes is very good and product looks like mashed boiled potatoes. Potato flake is perhaps the most popular dehydrated potato product used. The other related products are potato granules (manufactured using a different drying process where in potato cells are preserved), potato flour which is made from potato flakes by milling. The technical differences between different variants are given below: INSTANT MASH, this is called a high quality flake, normally easy to recognize due to the flake parts in it. The flakes are normally very dry, thick and have low free starch content. By rehydration a mash will be formed equal to fresh made mash. This is a product for direct human consumption. FLAKES, are used as the raw material or the additive in frozen mashed potato products like potato croquettes,patties,nuggets, normally requires a higher free starch content, because it is used a gluing agent. Flakes are used in the snack food industry as a raw material the major use in India is 'Aloo Sev'. The users normally want to have a thin flake with high moisture content and high free starch content. FLOUR, is used in the bakery industry, as a bread improver is normally a very fine milled flake, due to the milling the free starch content is higher than normal, but also the effect in reaction with the yeast is important. 2.2 Quality Parameters The quality parameters of generally traded potato flakes are furnished in Table-I: Table-1 Quality Parameter Consistency of product

Product size Additives

Packed in

Moisture < 8 % Additives < 1,5 % Thickness 0,5 mm Adjustable from 0,5 - 6 mm quadrangle Glycerol mono-palmitate/stearate (0,1 0,5 % of dry matter). Anti-oxidant (Butyl 4 hydroxyanisol), (0,05 - 0,1 %, based on dry matter cooked potatoes). Citric acid/ ascorbine acid Acid Sodium Pyro Phosphate (SAPP) (0,1 - 0,15 % based on cooked potatoes) Sulphite (SO2), 400 ppm max. on the basis of dried matter for the dryer Big bags (1 m3). Bags 10 till 25 kg (pre-formed paper bags 3 or 4 layers with plastic liner; or woven bag with liner; or PE or PP bag; Dynamic Agri & Foodbiz Consultants Pvt. Ltd

15

A Project Report on Potato Flakes Processing

Shelf live Quality requirements

or bag made from tubular film PE / PP). Approximately 1 year. Water absorption : 4.5:1 - 5.5 Bacteriological status : Count plate < 15.000 ppm Coliform < 10 ppm Staphylococcus< 100 ppm Salmonella 0 ppm Yeast + fungus < 100 ppm Black points : max. 40 per 100 cm2

). 2.3 End Uses of Potato Flakes Potato flakes have a vast application and through experiments new uses of potato are being developed. In foreign countries the product is generally used for the following end uses. Instant Mashed potatoes - The flakes are mixed with warm milk or water for making instant mashed potatoes which is one of the common items for a continental breakfast. Extruded and other snacks - Fabricated snacks (Pringle, Potato sticks), Croquettes, Pasta. Bakery industries - Used as anti stalling agent to slow the drying effect and to improve crust colour. Meat Processing - In recipes like minced mutton balls, fish cutlets, meat/chicken nuggets etc. Potato flakes are used as extender and binder. As thickener - Creamy frozen desserts, gravies and chocolate milk Soups & Premixes - As a thickener in ready to use soup powders, gravies and other food premixes. Formed products - Patties, Cutlets etc. Instant Noodles etc. - For instant noodles, dried powdered mixes for sauces and stews. In India potato is used for wide varieties of food which are quite different from other countries. The application of potato flakes has been developed successfully for a number of products and culinary experts are continuing their efforts in developing many more applications. The major end uses in India are: Indian snacks - Aloo Bhujiya, Non -cereal snacks Formed products - Aloo Tikki, Cutlets, Aloo Bonda Premixes - Aloo Paranthas mix, Hara bara Kabab,Dosa mix, Pav Bhaji mix etc.

New uses like “Halwa mix” has also been developed. With fast growth in Pet Food Industry potato flakes is also considered as one of the ingredient depending upon its cost effectiveness. Since potato flake is having a very high content of carbohydrates, minerals & vitamins. It is considered a very good ingredient in the pet food formulations. C grade of potato flakes which are not considered fit for human consumption are used for this purpose. Dynamic Agri & Foodbiz Consultants Pvt. Ltd

16

A Project Report on Potato Flakes Processing

Potato flakes can be used anywhere where mashed potatoes can be used. Table -2 outlines the suitability of dehydrated potato products for the various uses compared to corn, wheat or tapioca. Table 2 - Suitability of Dehydrated Potato Products for various uses Dehydrated Potatoes Indian Snacks

Corn *

Flour Noodles & Chinese Noodles * Dry Powdered Mixes * Extruded Snacks * Biscuits * Meat Products ** Soups ** Surimi (Fish Products) * Symbols : * Not very appropriate, ** Appropriate, *** Very appropriate

Wheat *

Tapioca *

* * * * ** ** **

** ** ** ** ** * *

2.4- Benefits of Potato Flakes Around the world, potato flakes, flour and granules are used to make fabricated potato chips and sticks, and are combined with other flours to form pellet based snack foods in any shape and size. These products are particularly desirable among snack food manufactures for their ease of use, low cost, and preferred taste. In India use of potato flakes has started for many applications. The associated benefits with these products are: Convenient- The storage of dehydrated potato products is very easy in comparison to fresh potatoes. They are also easy in use, good in solubility and cost effective. Cost-efficient - Dehydrated potato products have no specific storage requirements, making them perfect for use in any climate. When used as an ingredient in baked goods, dehydrated potato products also promote longer shelf life by retaining moisture. Reduced spoilage is a cost-saving returned directly to the retailer or manufacturer. Lastly, without a need for refrigerated containers, shipping costs for dehydrated potato products are low. Nutritious - Fresh potatoes are an excellent source of protein, potassium, calcium, iron, vitamin C and other important vitamins and minerals. Moreover, dehydrated potato products are easily fortified with extra vitamins and minerals to further enhance their nutritional benefits. Importantly, dehydrated potato products are perfect for use by individuals with allergies to wheat (one of the most common food allergies) and gluten intolerance. High Quality -High quality end products are processed due to low bacterial count of potato flakes and consistent quality. Hygienic -Using potato flakes in place of fresh potatoes is more hygienic in quick service restaurants, processing facilities and other places of use. Consistency - Potato flakes assure consistent quality of the end product due to fixed quality parameters while in case of fresh potatoes quality cannot be consistent and would result in inconsistency end products.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

17

A Project Report on Potato Flakes Processing

Use in off season -There is defined period of availability of fresh potato although availability is extended due to storage in cold storages by another 6-7 months, there is a period of 3-4 months when availability of the product is not good and quality is also poor. The potato flakes offer the advantage of use round the year. Use in Non-potato producing areas -Potato flakes are very helpful for consumer in non-potato producing areas like Southern states of Kerela, Tamilnadu, Andhra Pradesh and Karnataka where the availability of fresh potato is at a very high price due to high logistic cost and losses due to limited shelf-life of fresh potato. Due to above reasons the demand for flakes is growing tremendously in India as well as all over the globe. 2.5 Present Domestic Industry Status Potato flakes manufacturing is hardly fifteen years old in India. The first unit in the country was set up at Nagpur by a fast food chain ‘Dosa King’ at Nagpur for captive utilisation as a filling for Dosas. But the project ran into problems due to handling difficulties with Dosa making machines and the company could not set up the chain. As such Nagpur is not a potato producing location and the company was not keen on running the unit, besides, the size of domestic market for potato flakes was hardly 50-100 tons and catered by importers. The demand for potato flakes in the country started increasing with the entry of Fast Food Chains/Quick Service Restaurants like Mc Donalds, KFC, Pizza Hut etc. in late 90’s. These companies require flakes for preparation of formed products with consistent quality round the year for supplies to their restaurants. The processors like Vista Foods came into existence and the demand for flakes had risen to a level of about 500 tons annually. Further, the introduction of extruded snacks in the country also contributed in growth of flakes demand. Some 15 years back a unit called Potato King was set up in West Bengal which was followed by 4 more units in the country. A brief description of the units is given below. 1) Potato King it is located at Bankura, WB and commissioned in 1997. The project was set up using second hand plant, the unit could never produce quality product and due to lack of focus on this project the promoters were never considered a serious player. The company doesn’t have any back end, the plant is operated only at the time of harvest of potato when prices are low and some times on rejects from the cold storages when low price potato is available. The company has reputation of low price low quality. The capacity of the unit is about 15TPD but it is understood that the utilization of the capacity is poor. The company produces about 1200-1500 tons in a year. In the year 2011 the company has done better due to unexpected export demand as a result of failure of crop in China & Europe. 2) Merino Industries Ltd. Hapur, U.P, the unit was set up by Merino Industries known for laminates in the year 2004. The company was already in potato business and had cold storages in Meerut. The company went in for expansion within 2 years of commissioning its plant. The present capacity of the company is about 14.5 TPD. The company is price and quality leader in the market and marketing highest volume i.e about 3400-3600 tons annually. As company has achieved a capacity utilization of 100% the company is setting up another plant with a capacity of 7.2 TPD expandable to 14.4 TPD which is likely to be commissioned in Feb 2012. Dynamic Agri & Foodbiz Consultants Pvt. Ltd

18

A Project Report on Potato Flakes Processing

3) Satnam Agri Processing Ltd., Jallandhar, Punjab, it is a joint venture project of Punjab Agro Industries Corporation and a leading potato grower Mandeep Farms in Punjab. It is multipurpose unit with provision for processing Frozen French fries, IQF Vegetables and Flakes and the unit was commissioned in the year 2007. The capacity of the flakes line is 12 TPD. The annual production of the company is estimated between 1200-1500 tons annually. The company is not performing well as the lines for frozen products are generally underutilized and there are financial difficulties. The company has not been able to establish its brand and marketing network. 4) Ascon, Hoogly it is a joint venture project between a French company and Pailan Group of WB who are into education, construction and etc. The unit was set up in the year 2007 as a 100% EOU but is reported to be not performing well. The unit has no plant backend, the export sales are erratic and there are management problems. Two years back the company launched flakes in consumer packs under the brand “Pota” for domestic market. As per industry information the functioning of unit is quite erratic and last year’s production is estimated between 1400-1600 tons. 5) Basukhinath Food Processor, Kharagpur, the unit was set up by promoter experienced in contract cultivation and storage of potato. The plant has capacity of 12 TPD and was commissioned in Sept- Oct’2010. The unit is doing extremely well and in the year 2011-12 its utilization is expected to be 100%. In the year 2010-11 the reported production was 1500 tons. Current year’s production is estimated between 2400-2800 tons and company is considering expansion. The current status of Indian Potato Flakes Industry is summarized in Table-3 Table-3 Indian Potato Flakes Industry Sr No 1 2

3 4 5

Name of Unit Merino, Hapur Satnam, Jalandhar

Cap KG/HR 600

Estimated production 2011 3400-3600

500

1200-1500

Basukhinath, Kharagpur Potato king, Kolkotta Ascon, Hoogly

500

2400-2700

600

1200-1500

500

1400-1600

Remarks Leader in price, quality, sales going for expansion. Multi product unit, frozen section not doing well, over-capitalized. Financial problems Doing very well in first year itself, planning for expansion. Processes only in season ,no back end problem of raw material Joint venture EOU, less focus on domestic market, no back end

9600-10900 The current level of annual production in the country is around 10,200 tons.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

19

A Project Report on Potato Flakes Processing

2.6 Marketing Channels The potato flakes is more or less like an Agri-commodity and sold in bulk on the consideration of price and quality. The export is entirely dependent upon International prices and India’s competitiveness as such India’s quality is acceptable in foreign markets now. The marketing channels for the potato flakes are as follows: 1) Exports - Direct export or through merchant exporters. The present share of this category is estimated at around 10%. 2). Domestic Bulk users/processors - The major bulk users of potato flakes like manufacturers of Aloo Bhujia, Formed products etc. are buying directly from the manufacturers. The popular companies include Haldiram, Vista Foods, Mc Cains. At present this category of bulk users’ accounts for about 75%-80% of country’s consumption of potato flakes. 3). Wholesale trade - Some companies have also appointed state level wholesalers/traders for catering to needs of QSRs, Small Food Processing Units, Caterers, Restaurants and other end users. The present share of this channel is estimated at 5%-10%. 4). Retail market - Marino has developed branded consumers packs also (Vegit) for premixes for product variants like Aloo Veg Cutlet Instant Mix, Aloo Jhatpat Tikki Instant Mix, Aloo Yummy Cheese Balls Instant Mix, Mazedar Aloo Bonda Instant Mix, Aloo Harabara Kebab Instant Mix, Pav Bhaji Instant Mix, Aloo Nutri Soya Roll Mix, Aloo Veg Burger Patty Instant Mix, Aloo Subz Shammi Kebab Instant Mix. The product is distributed like FMCG by appointing distributor network and also through organised retail. At present the share of this segment hardly 5% but holds lot of potential. Looking at the above it is very clear that the product can be sold through close interaction with the bulk users and keeping in view their quality needs and commercial consideration. However, as a long term strategy manufacturing of value added consumer products and promoting a brand would also be desirable. 2.7 Major Potato Flakes Users in India The list of major buyers of potato flakes in India is given in table-4 below. Table-4 Major Users of Potato Flakes in India Major Users of Potato Flakes in India 1 2 3 4 5 6 7 8

Haldiram ( Noida) Shivpur Industries Balaji Fritolays Haldiram (Nagpur) Haldiram (Kolkota) ITC HUL

Estimated Demand 2011-12 tons 1400 1000 1200 700 600 400 500 400 Dynamic Agri & Foodbiz Consultants Pvt. Ltd

20

A Project Report on Potato Flakes Processing

9 10 11 12

Nestle Vista Foods McCain Others Sub Total

400 400 300 1700 9000

As can be seen from above table that 80% of the total consumption of flakes in India is accounted by eleven companies. The end users have confirmed that their requirement is increasing and many more big players are expected as there is growth of snack manufacturers in the organized sector. As far as geographical distribution of the sales of potato flakes is concerned Northern India and Western India have higher share as the manufacturers of snacks have production base in these regions. In Gujarat there is requirement of more than 2,500 tons due to presence of Balaji, McCain and other snack manufacturers besides there are exporters based in Gujarat who have regular inquiries for potato flakes and last year they exported more than 800 tons by sourcing from other units in the country. According to Mr. Riaz Meghani of Natural De Hydrates the company had requirement of more than 1,500 tons but due to capacity constraints in India they could hardly get 800 tons 2.8 Price of Potato Flakes The prices of flakes are also quite volatile due to linkage of price with the fresh potato price and more over as processing of flakes in India is till November end the price starts rising from November onwards till beginning of next manufacturing season in February- March. It has been observed from the market that there are four price points in the domestic industry as explained below. Bulk Buyers :- Manufacturers like Haldiram, Balaji, Vista Foods, etc who have annual requirement of about 500 tons annually and try to enter into annual contracts so as to have idea of their cost of manufacturing and assured supply throughout the year. The manufacturers of the potato flakes also preferred such contracts as they want assured utilization of their plants. Last year the bulk contracts for good quality flakes were between Rs.70-75 per kg in bulk packs depending upon payment terms. Some bulk buyers do make advance payments to help manufacturers to invest in potato stocks. Small Buyers:- There are a numbers of small players who are not sure of their annual requirement and are not in a position to stock high quantities and buy month to month basis on prevailing market prices. Last year prices varied from Rs.75 to 90 per kg. This players buy directly from the manufacturers or their sales agents. Retail Buyers :- Merino Industries has come out with the retail pack under the brand name “VEGIT” for a variety of variants like Aloo Paratha Mix, Cullets Mix, etc, ASCON of Hoogly has also come out with brand “POTA” for half a kg plain potato flakes. The prices of retail pack are Rs. 120-150 per kg .

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

21

A Project Report on Potato Flakes Processing

Export Buyers:- The export price for merchant exporters or direct export by the manufacturers last year has been in the range of Rs.65-75 kg depending upon the payment terms and quality. 2.9 Potential for Potato Flakes While potato flake is quite an established product in the global market, it has tremendous potential in the domestic market. In this section the potential for export and domestic market has been analysed. 2.9.1 World Export of Potato Flakes In this section and overview of global trade of potato flakes is presented. Looking at the statistics of the recent past the volume of the global trade is around 2.96 lakhs tons valued at around 383 million USD which indicates opportunity for India as India is 2 nd largest producer of potato in the world. The trade has been historically controlled by US and European countries like Germany, Netherlands, Belgium and France. However, China has very successfully entered this market and established itself among the top 10 countries. Even countries like Bangladesh have presence in the global trade. The export from major potato flakes producing countries along with their trade partners is given in Table-5 below. Table 5 - World’s Export of potato flakes in (2007-10) ( Qty in thousand tons & value in US$ thousands) 2006

2007

2008

2009

2010

2010

Country

Qty

Qty

Qty

Qty

Qty

Value

Germany

65.64

72.23

74.95

80.97

83.29

101,828

Netherlands

43.61

49.93

48.06

38.77

53.95

63,927

Belgium

28.33

35.39

33.22

41.64

49.74

63,074

USA

55.48

58.29

36.76

41.64

48.33

63,407

Denmark

10.25

11.02

12.03

14.27

15.75

16,971

Canada

3.97

14.14

6.92

7.48

10.26

16,971

Poland

8.43

5.10

6.33

7.19

7.39

8,704

2.76

4.64

6.95

19,409

Egypt France

6.34

6.75

4.44

6.10

4.61

8,458

Lebanon

0.00

0.08

1.29

2.67

3.33

4,488

Top Ten Countries

222.05

252.92

226.75

245.37

283.58

367,237

Rest of World

41.50

33.98

14.62

20.47

13.00

15,973

Total

263.55

286.90

241.37

265.85

296.57

383,210

Italy, Malaysia, Belgium, USA Italy, Belgium, Germany, France France, Italy, Spain UK Mexico, Japan, Canada, Australia Germany, Philippines, UK, Italy USA, Mexico, Argentina Guatemala Austria, Czech Republic, Israel Libyan Arab Jamahiriya, Sudan, Palestine Spain, Italy, Chile, Belgium Iran, Jordan, Tunisia, Yemen, Egypt

Source : www.trademap.org HS Code 110520 Dynamic Agri & Foodbiz Consultants Pvt. Ltd

22

A Project Report on Potato Flakes Processing

The average per ton CIF value of potato flakes is 1.29 USD / kg. 2.9.2 World’s Import of potato flakes The details of major importing countries along with their sources of import are given in the Table-6 below. Table 6 - World’s Import of potato flakes in (2007-10) ( Qty in thousand tons & value in US$ thousands) Country Italy USA

UK

France Mexico Japan Spain Belgium Germany Malaysia Top Ten Countries

2006

2007

2008

2009

2010

2010

Qty

Qty

Qty

Qty

Qty

Value

29.56

30.08

28.81

26.54

29.24

2.68

3.78

9.59

18.63

27.27

16.56

21.75

25.10

25.59

21.13

14.68

13.23

13.96

13.64

17.00

22.63

17.90

12.81

16.18

16.95

19.53

20.59

17.52

18.24

16.70

10.26

11.17

12.42

11.75

14.02

37.21

30.88

25.48

49.96

13.66

9.88

13.42

7.34

8.18

9.23

4.91

5.23

5.75

6.20

8.45

162.98

162.80

153.02

188.70

165.21

89.25

100.50

92.73

106.14

136.68

35,231

28,995

29,054

Germany, Belgium, Netherlands Canada, Germany, Spain Germany, Netherland, Denmark Belgium, Netherland, Germany

25,853

USA, Germany, Denmark USA, Germany, China

19,944

Germany, Netherland, Belgium

23,003

11,610

Netherland, Germany, Poland Netherland, Belgium, Denmark

10,097

Germany, China, Netherland

15,285

235,537

Rest of World Total

36,465

149,522 252.22

263.30

245.75

294.83

301.89

385,059

Source : www.trademap.org HS Code 110520 While the international trade is generally among the European and American countries, China has been able to enter important market of Japan & Russia and even Bangladesh is a regular supplier to Belgium. The average per ton CIF value of potato flakes is 1.28 USD / kg.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

23

A Project Report on Potato Flakes Processing

2.9.3 Imports of Potato Flakes by India India is importing small quantity of potato flakes as can be seen from the Table-7 below. This import seems to be of some specific formulation or at the times when domestic supplies is poor (Nov -Jan.) and prices are high. Table 7 - Imports of Potato Flakes by India in 2006 -10 ( Qty in tons) Sr. No. 1 2

Country China France

2006 0 0

2007 0 0

2008 0 0

2009 54 0

2010 96 54

3 4 5

Italy Lebanon Netherlands Top Five Country Rest of World Total

13 71 0 84 79 163

6 68 0 74 95 169

17 93 0 110 153 263

11 42 0 107 108 215

30 20 16 216 38 254

Source : www.trademap.org HS Code 110520

2.9.4 Export Potential from India The average export from India during last three years was around 300 tons. The exports from India during last 6 years are given in the following Table-8. (Qty in tons)

Table 8 - Exports of Potato Flakes from India in 2006 - 10 Sr. No.

Country

2006 2007 Qty Qty 1 China 0 0 2 Oman 22 98 3 Indonesia 76 873 4 United Arab Emirates 65 100 5 Israel 0 0 Top Five Countries 163 1071 Rest of World 161 605 Total 324 1676 Source : www.trademap.org HS Code 110520

2008 Qty 0 206 0 39 0 245 85 330

2009 Qty 0 141 0 7 0 148 154 302

2010 Qty 81 39 38 27 14 199 45 244

% Share 33.20 15.98 15.57 11.07 5.74 81.56 18.44 100.00

From India some exporters are exporting dried potato also which includes de-hydradated potato cubes and the quantity exported during 2010-11 was 1768 tons. It is believed that some exporters may also be exporting potato flakes under the HS Code-7129060 which is meant for dried potato.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

24

A Project Report on Potato Flakes Processing

2.9.5 Import of neighbouring countries of India Import of Gulf Country The Imports of potato flakes by neighbouring countries of India and other countries with whom India has bi-lateral trade treaties are presented in Table-9 as these countries could be targeted for export from India. Table 9 - Import of Potato flakes in Gulf Countries (2006 - 10) ( Qty in tons) Sr. No. 1 2 3 4 5 6

Country Oman UAE Kuwait Qatar Saudi Arabia Bahrain

2006 Qty 1961 NA 92 389 628 103

2007 Qty 1726 887 157 68 609 24

2008 Qty 2264 493 142 28 NA 131

2009 Qty 2204 *542 *156 *31 NA 493

2010 Qty 1816 *596 *172 *34 447 644

* Estimated Source : www.trademap.org HS Code 110520 The total import by Gulf countries is around 3000-3500 tons annually. Import of SAARC Countries The import of potato flakes by SAARC countries is about 1500 tons annually and Bangladesh has major share in it. Even though Pakistan may not directly import from India the export can be affected via UAE as is happening in case of dehydrated vegetables. The details are given in Table-10. Table 10 - Import of Potato flakes in SAARC Countries (2006 - 10) ( Qty in tons) Sr. No.

Country

2006 Qty 444 1794

2007 Qty 431 969

2008 Qty 208 162

1 Sri Lanka 2 Pakistan 3 Bangladesh 198 379 *417 4 Maldives NA 3 14 5 Nepal NA NA NA *Estimated Source : www.trademap.org HS Code 110520

2009 Qty 284 390 *459 14 109

2010 Qty 285 287 *505 *20 119

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

25

A Project Report on Potato Flakes Processing

South-East Asian Countries South-East Asian Countries as a target market for potato flakes, is imported 16917 tons of potato flake in the year 2010 shown in Table-11. Table 11- Import of Potato flakes in South-East Asian Countries (2006-10) ( Qty in tons) Sr. No.

Country

2006 Qty 1 Malaysia 4911 2 Indonesia 3879 3 Thailand 1145 4 Philippines 423 5 Singapore 182 Total 10540 Source : www.trademap.org HS Code 110520

2007 Qty 5229 4858 1575 671 246 12579

2008 Qty 5754 2973 1469 1546 205 11947

2009 Qty 6204 3995 2121 1228 232 13780

2010 Qty 8447 4761 2576 875 258 16917

Considering above statistic India has a big market around it and rather than entering very competitive European market the focus could be on the above mentioned countries 2.9.5 Import of Potato Flakes By Neighbouring Country In the current year (2011) there have been a large numbers of inquiries to Indian Manufactures and due to lack of facility in the country and increasing domestic demand the Indian Manufacture could not seize the opportunity. It is estimated that India’s export of flakes this year would be 1,500 tons whereas we could have exported more than 10,000 this year looking at global trade of 2.9 lakhs tons. Due to inadequate processing facilities in India, the buyers from other countries are not taking India seriously and in the past they have found Indian supplier unreliable. Due to proximity to markets, advantage in freight cost, existing trade links and bi-lateral treaties India can be very competitive in Gulf Countries, SARC Countries and South-East Asian Countries. An analysis of the potential to this market is presented in the Table- 12 (Qty in tons)

Table- 12 Potential Export Market Sr. No

Country

2013 Est.

2014 Est.

2015 Est.

2017 Est.

2018 Est.

1

Est. 3894

4089

4293

4508

4733

4970

1198

1258

1321

1387

1456

1529

1605

South Asian Countries

16917

17763

18651

19584

20563

21591

22671

Total Feasible Market Share Feasible Export Volume

21824

22915

24061

25264

26527

27853

29246

15% 3609

17% 4295

20% 5305

22% 6128

25% 7312

2011

2012

Gulf Countries

Actual 3709

2

SARC Countries

3

It will not be difficult at all to capture 15-25% share of the above markets.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

26

A Project Report on Potato Flakes Processing

2.10 Domestic Market Potential The various end uses of the potato flakes are given in para 2.3. According to trade estimates about 5% of the fresh potato sold by wholesalers and retailers is used for making potato based products like Aloo Bhujia, Dosa, Samosa, Cutlets, Aloo Tikki, Aloo Parantha, Pav Bhajji,Patties etc. Considering that if 50% of country’s production is traded the amount of potato used for making these products would be about 8 lakhs tons which is equal to about 1.2 lakhs tons of potato flakes which shows tremendous potential for this product. As potato flakes after rehydration are as good as freshly boiled potato the use of flakes is bound to grow rapidly with increased availability, further the use of flake is convenient and product offers a consistent quality. The current level of production in India is about 10,200 tons annually. Considering export of about 1500 tons annually and import of 300 tons about 9000 tons is consumed in the domestic market. The growth drivers for the potato flakes are Growth in Quick Service Restaurants :- A fast growth has been witnessed in India by the foreign Fast Food Chains like Mc Donald, Pizza Hut, KFC, Wimpy etc. A number of Indian companies have also adopted this model and companies like King Burger, Nirula, Haldiram, Goli Vada,Chattakas,Havfun, Bikanerwala and many other regional players are expanding the network of their outlets at a fast pace. A fast growth in expected in fast food chains, star hotel, pub & bars, catering in trains, railway station and air ports in India which is expected to spur growth of processed snacks like chips. The projective growth of Quick Service Restaurant and Star hotel is given in Tables- 13 Table-13

Quick Service Restaurants (QSRs) in India QSR

Outlets

Expansion

Café Coffee Day

900

20-25 cafes/ month

Dominoes’ Pizza

220

300 by 2012

McDonalds

255

500 by Dec 2015

Pizza Hut

175

200by 2012

US Pizza

100

500 by 2012

KFC

150

1000 by 2014

Yo-China

80

200 by 2012

Barista

200

250 by 2012

Subway

165

200 by 2012

Chick

50

100 by 2012

Wimpy

50

100 by 2012

Some new chains like Pizza Express by Bharti Group and one by Reliance group are also expected soon.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

27

A Project Report on Potato Flakes Processing

Growth in Star Hotels : -Summary of numbers of hotel in India is furnished in Table-14 Table-14 Category wise no. of Hotels in 54 major locations in India Type No. of Hotels Heritage 54 54 5 Star Deluxe 81 81 5 Star 79 79 4 Star 102 102 3 Star 290 290 2 Star 163 163 1 Star 48 48 Unclassified/ Approved 369 369 Licensed 7515 7515 Total 8701 Source: Ministry of Tourism Report - 2008 Modern processing technology of Ethnic Snacks : - The production of potato based snacks like Aloo Tikki, Aloo Bhujia etc. were fragmented and preparations were at home scale level. During last 10 years a consolidation has been witness which is facilitated by use of automated lines and modern packaging for making snacks. With appropriate marketing and brand creation there are many well known brands are Aloo Bhujia, Extruded Snacks and same as expected for Aloo Tikki etc. Emergence of Cold Chains : - With increasing availability of cold chains and their reach to small town has made distribution of frozen food products easy in India and there are many success story like Ice Cream, Frozen Peas, French Fries etc. Same channels are being used by the manufactures of Aloo Tikki etc. for marketing of the products. Product Innovation :- It has been mentioned earlier that potato flakes can be put to several uses like freshly boiled potato and will have many advantages like convenience, consistency in quality, easy availability and cost efficiency. As India is a vast country with different regional food habits there is tremendous scope for development of “Ready to Use” premixes like Pav Bhaji mix, Dosa mix, Halwa mix etc. Considering the above factors the growth rate in the domestic market is estimated at 15 25% annually for at least another 10 years and the consumption of potato flakes in India is estimated at 26000 tons in the year 2018 as can be seen from Table-15 below.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

28

A Project Report on Potato Flakes Processing

Table 15 - Projected demand for potato flakes in India. 2011 Sr. No.

Major end use category

Gro

2012

2013

2014

2015

2016

2017

2018

% Shar e 61

Present Share (tones) 5500

wth rate (%) 15%

Projected sale in MT

6325

7274

8365

9620

1106 3

1272 2

14630

1

Aloo Bhujia

2

Formed products (Processors, Fast Food Service) Dry mixes, Retail (Pav Bhaji, Aloo Bonda etc.) Extruded Snacks

18

1600

20%

1920

2304

2765

3318

3982

4778

5734

2

200

20%

240

288

346

415

498

598

718

8

700

20%

840

1008

1210

1452

1742

2090

2508

Other ( Mashed potato, Soups, Ketchup etc.)

11

1000

15%

1150

1323

1521

1749

2011

2313

2660

100

9000

12197

14207

16554

19296

22501

26250

3

4 5

Total

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

29

A Project Report on Potato Flakes Processing

Chapter-3 Potato Production & Availability for Processing 3.1 Potato Nutritional Facts The potato is the most popular food crop cultivated in the world and area under its cultivation is 4th largest following rice, wheat and maize. It is a starchy, tuberous crop from the perennial Solanum tuberosum of the Solanaceae family. In certain countries due to high level of carbohydrates it is a staple food. The potato also includes other important ingredients of human diet which can be seen in the Table-15 below. Table 16 - Nutritional value of Potato Nutritional value per 100 g of raw Potato Energy 321 kJ (77 kcal) Carbohydrates 19 g Starch 15 g Dietary fiber 2.2 g Fat 0.1 g Protein 2g Water 75 g Thiamine (Vit. B1) 0.08 mg (6%) Riboflavin (Vit. B2) 0.03 mg (2%) Niacin (Vit. B3) 1.1 mg (7%) Vitamin B6 0.25 mg (19%) Vitamin C 20 mg (33%) Calcium 12 mg (1%) Iron 1.8 mg (14%) Magnesium 23 mg (6%) Phosphorus 57 mg (8%) Potassium 421 mg (9%) Sodium 6 mg (0%)

Considering importance of potato in human diet and requirement round the year and also at places where potato is not cultivated processing of potato has assumed a great importance. While there are many ways of preserving and processing potatoes - french fries, wedges etc. in frozen form and dehydrated products like potato flakes, granules, potato dices and spray dried powder etc.: the most of potato is processed in form of French fries and potato flakes. In this chapter a macro view of global production of potato India’s positions, National level production of potato with state wise statistics is presented. A detailed analysis of the raw material availability at the project location is given in this chapter.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

30

A Project Report on Potato Flakes Processing

3.2 Global Production Trends of Potato India occupies 3rd position in the world in potato production. With increasing productivity of potato in India and also area under cultivation (due to remunerative prices to farmers) India is likely to overtake Russian Federation to occupy 2nd position. The production trend of potato in top 10 potato growing countries is given in Table-16. Table 17 - Trends in production of potato in major producing countries ( Production in MT Thousand ) Sr. No. 1

2005 70907

2006 54076

2007 64837

2 3

Country China Russian Federation India

37280 28788

38573 29175

4

USA

19462

19713

5 6 7 8

Ukraine

9 10

% Share 22.55

36784 28600

2008 70839 28874 34658

20373

18627

5.93

19545

6.22 3.33 3.30 2.79

19229 11624 10369 8185

19467 10031 8982 8329

19102 11791 11644 8744

Netherlands Sub total Rest of world

6777 6605 219226 105880

6363 6240 200949 104697

7183 6870 215928 107615

Total

325106

305646

323543

Poland Germany Belarus France

10462 10369 8749 6872 6923 215918 98222 314140

9.19 11.03

2.19 2.20 68.73 31.27 100.00

Source: UNComtrade

It is interesting to note that the major potato flakes importing countries i.e. Belgium, Italy, UK and Japan are not one of the important producers of potato therefore, would always be dependent upon potato producing countries which offers India a good opportunity to build -up exports. 3.3 Potato Production in India Potato is most important vegetable crop in India accounting for 20-25% of area under cultivation of vegetables. The crop is grown largely in the Rabi season in major production areas in UP, West Bengal, Bihar, Gujarat and Punjab. In Karnataka and hilly states of Himachal Pradesh and Uttrakhand it is grown in other seasons also. The state wise production of potato in India is given in the Table-18.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

31

A Project Report on Potato Flakes Processing

Table 18 - State- wise production trends of Potato in India Sr. No

STATE

2006-07 Area

Prod. Prod.

1. 2 3 4 5 6 7 8 9 10

2007-08

Uttar Pradesh West Bengal Bihar Punjab Gujarat MP Assam Jharkhand Haryana Karnataka Subtotal Rest of India TOTAL

478 408 323 77 50 49 78 38 22 66 1587 156 1743

10538 5052 5741 1313 1340 648 505 360 342 682 26520 2080 28600

2008-09 Area

Prod. Prod.

Area 505 401 316 79 65 50 79 40 20 68 1622 173 1795

11095 9901 6020 1477 1494 650 515 377 352 572 32453 2205 34658

2009-10

527 401 310 81 57 66 80 38 23 72 1655 178 1834

10810 9901 5034 2001 1449 883 669 359 490 606 32202 2270 34472

% Share

Area 541 370 314 83 60 61 87 38 23 81 1657 178 1835

13447 8880 5387 2117 1657 608 590 573 495 460 34214 2363 36577

36.76 24.28 14.73 5.79 4.53 1.66 1.61 1.57 1.35 1.26 93.54 6.46 100.00

Source- National Horticulture Board, Gujarat ranks fifth in potato production in India and the productivity is the highest than national average and the increase in the production in recent years is due to productivity gains. The state has unique position of producing very good quality of processing type of potato varieties and has attracted major processing companies who have set up manufacturing base or are sourcing potato from the state. For sake of comparison the data in the above table is given up to 2009-10 however, the reported production in Gujarat in 2010-11 was 18.81 lakh tons. 3.4 Suitability of Indian Potato Varieties for Processing All potato varieties are not suitable for processing. The tuber dry matter and reducing sugar content of potatoes are the two most important parameters in selecting raw material for processing as these determine the yield, texture and quality of processed potato products. High levels of reducing sugars results in dark color of fried products. Thus the potatoes required for processing need to have tuber dry matter in the range of 21 -23% and reducing sugars below 250 mg per 100 gm fresh weight of tubers. Round to oval potatoes are preferred for the preparation of chips and long tubers for the french fries. The relationship between tuber dry matter and use of the potato is given in Table-19.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

32

A Project Report on Potato Flakes Processing

Table 19 - Relationship Between Tuber Dry Matter and Optimum Use Specific Gravity

Dry Matter, %

Texture

Below 16.2

Very soggy

1.060-1.069 (low)

16.2-18.1

Soggy

1.070-1.079 medium)

18.2-20.2

Waxy

1.080-1.089 (high)

20.3-22.3

Mealy, dry

Above 1.089 (very high)

Above 22.3

Very mealy or dry

Below 1.060 (very low)

Typical Uses Pan frying, salads, canning Pan frying, salads, boiling, canning Boiling, mashing; fair to good for chip processing and canning Baking, chip processing, frozen french fry processing; some cultivars tend to slough when boiled Baking, frozen french fry processing, chip processing; tendency to produce brittle chips & to slough when boiled

In the country, all the potato varieties are not process able. Therefore, a surplus in potato production does not per se imply a surplus in material availability for the processing industry. Given the increased interest in India by important food processors and food service companies, specific development has been in place for nearly 15 years to release varieties that are not only suitable for needs such as chips, flakes and french fries but also have reasonably good yield to provide economic returns to the farmers. The country’s premier research institute dedicated to R&D on potato, The Central Potato Research Institute (CPRI) has released 5 varieties that are considered suitable for processing, of which two-Kufri Chipsona I, Kufri Chipsona II were released that were exclusive for processing. Variety - Kufri Chipsona I Maturity :

Medium (90-110 days)

Yield potential :

40 t/ha

Dormancy :

Medium (6-8 weeks)

Diseases :

Resistance to late blight

Processing quality : Easy to cook, Waxy texture, Mild flavor, Free from discoloration after cooking, High dry matter, Low reducing sugars and low phenols, The variety is highly suitable for making chips, french fries and flakes.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

33

A Project Report on Potato Flakes Processing

Variety - Kufri Chipsona II Maturity :

Medium (90-110 days)

Yield potential :

40 t/ha

Dormancy :

Medium (6-8 weeks)

Diseases :

Resistance to late blight

Processing quality : Easy to cook, Waxy texture, Mild flavor, Free from discoloration after cooking, High dry matter, Low reducing sugars and low phenols, The variety is highly suitable for making chips, french fries and flakes. Characteristics of process able varieties in India are given in below Table-20. Table 20- Characteristics of Indian processing potato varieties Name

Duration and adaptability

Kufri Jyoti

90-100 days; hills, plains and plateau region 80-85 days; plateau region 100-110 days; Indo-Gangetic plains, central plains 100-110 days; Indo-Gangetic plains, central plains 70-80 days; Gangetic plains, central plains

Kufri Lauvkar Kufri Chipsona I Kufri Chipsona II Kufri Chandramukhi Source : CPRI, Shimla

Dry matter 18-21 %

Reducing sugars 106-275

18-20% 21-25%

200-250 45-100

21-25%

44-93

19-20%

250-324

Suited for Chips, flour, flakes Chips, flakes Chips, flakes, French fries Chips, flakes Tikki, wedges, chips

Kufri Chipsona I & II are suitable to be grown even in the different northwestern plains characteristic of low dry matter and reducing sugars. They are flexible for planting at different points during the long season, normal, late crop, spring crop and late spring, enabling extended availability period to suit processors needs without storage. They yield acceptable dry matter more than 20% and acceptable product color in all important regions, northeastern plains, central plains and northwestern plains, besides a good tuber yield of 25-35 tons per ha. It is understood that Kufri Chipsona III has also been released and field trials have been successful It is understood that CPRI has also release a variety Kufri Frysona specifically for french fries processors. The potato of this variety is oval in shape and has the required length.This can also be used for chips processing.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

34

A Project Report on Potato Flakes Processing

3.5 Areas suitable for cultivation of processing varieties Location suitable for cultivation is based on the average minimum temperature in crop season and in the last 30 days of growth in the field, which impact the tuber formation and maturity period of the variety in the given agro climate conditions. Areas with average minimum temperature more than 12° C result in dry matter above 20% and are most suitable for processing. Even though the Indo Gangetic and Northwestern plains are suitable areas for the potato cultivation from all other parameters like soil, climate, water availability etc. but on account of low temperature for short period, the level of dry matter used to be low. But now varieties like Chipsona I & II are available which are suitable for Northwestern plains also. And potato with high dry matter is available for processing from these areas. According to Dr. N. Patel of Dantiwada Agricultural University the trials of Chipsona in the Deesa area have shown very good results and farmers would be interested in taking up commercial cultivation through contract farming. The trials for Kufri Fry Sona also need to be conducted in the area to determine its performance. Prior to the introduction of the Chipsona varieties, processing industry’s needs were being met only from four locations - Deesa, Malwa (MP), Badayun (UP) and Nagrota (HP), aggregating to less than 40,000 hectare, less than 4% of the total potato acreage in the country. The share of Deesa is highest and cultivation of processing varieties has started taking place in other potato producing areas in Gujarat like Dehgam and Kheda also. At present Gujarat is the major producer of processing type of potato and this will be of advantage to the companies planning to set up potato processing unit in the state. 3.6 Experience with Exotic Varieties Indian conditions are considerably different from the temperature climate in other important potato growing nations. The development of processing grades has also involved extensive testing of exotic varieties from Europe and US to determine performance under subtropical conditions and identify the extent of their adaptability in India. The results of all experiments till date suggest that existing highly successful varieties in other countries have not produced satisfactory result in the trials conducted by CPRI, but with the new agronomic approach even exotic varieties can perform well. To suit our needs, some of exotic potato varieties like Atlantic, Frito lay hybrids 1533 are being used for chip processing by leading MNC processors. There are certain limitations on local adaptation of exotic varieties due to agro climatic influences. Therefore, initiatives at the cultivation level will need to be based on investment in development of new indigenous varieties in the ICAR program or through private research programs. Private research in potato is presently restricted in so far as import of germ-plasm and true seed potato is concerned. The seed policy and the Plant Seeds and Fruits (Control of import into India) Order allows the import of potato seed only through the CPRI to obtain their germplasm requirements for further propagation. The CPRI release imported consignments only after growing them for 3 years under controlled conditions. Past experience indicates that private research programs have invariably not succeeded, for reasons not fully known. However, a few important food-processing companies have engaged in collaborative research with CPRI itself to develop specific varieties for their own Dynamic Agri & Foodbiz Consultants Pvt. Ltd

35

A Project Report on Potato Flakes Processing

use. PepsiCo, US and Agrico, the Netherlands, have ongoing programs under which the sponsors will share the commercial results with the CPRI in a pre-agreed manner as outlined in the respective agreements. Imported germ-plasm and parent lines will also be supplied to CPRI under such ventures with strict intellectual property provisions. 3.7 Potato Production in Gujarat An increase in area under potato cultivation & production can be seen in the Table -21, in Sabarkantha the increase in area has been more than 70% in a short span of last three years. This has occurred due to increasing demand for processing varieties from the area and increase in income of farmers by cultivation of potato. Some progressive farmers have started contract farming with companies like McCain , Balaji & Pepsi and are having good returns. The top five potato producing district in Gujarat is presented in Table-21 given below. Table-21 District wise Potato production trends in Gujarat Area in 000 Ha., Production in 000 M.T. 2008-2009 2009-10 2010-11 % of state Area Prod. Area Prod. Area Prod. production Banaskantha 28.0 784.0 28.5 826.5 29.8 923.8 49.1 Sabarkantha 5.0 150.0 6.3 189.6 8.8 272.3 14.5 Anand 5.8 145.0 6.0 198.0 6.1 193.6 10.3 Gandhinagar 4.3 132.1 4.4 145.4 4.8 160.8 8.5 Kheda 6.5 97.3 6.8 136.3 7.3 153.2 8.1 Top Five District 49.5 1308.4 52.0 1495.8 56.7 1703.8 90.5 Rest of District 7.4 140.4 8.1 161.2 8.6 178.0 9.5 Total State Production 57.0 1448.8 60.1 1657.0 65.3 1881.8 100.0 Source :- http://agri.gujarat.gov.in/hods/dir-horticulture.htm Even though Gujarat accounts for about 5.4% of national production of potato it has a unique status of being a preferred destination for the processors and exporters. For the manufacture of potato wafers a size of more than 45 mm is preferred by the processors, besides, high total solids (>18%) and low reducing sugar. The farmers of Gujarat by adopting the required package of practises are in a position to deliver the potato of required specifications. Similarly for processing of french fries, special varieties of potato having a length of more than 75 mm and high solids as well as low sugar are required. These varieties are cultivated in Gujarat only. The MNCs like Pepsi & Mc Cains have done trials all over the country and have found Gujarat and parts of M.P. only suitable for cultivation of processing varieties of potato due to factors like suitable soils, day length, day & night temperature, and availability of irrigation facilities. These companies have worked with the farmers for many years and have also started contract cultivation due to their specific requirements. Varieties like Kennebec, Shepody & Santana have been introduced by Mc Cains for processing French Fries and other potato products and Pepsi has introduced Atlanta and Lady Rossetta for processing of Wafers. The farmers have reported high profits as their yields of potato have increased up to 40 tons/hectare due to the good quality seed and technical services provided by these companies. In fact Mc Cains have also set up their Dynamic Agri & Foodbiz Consultants Pvt. Ltd

36

A Project Report on Potato Flakes Processing

processing unit in Gujarat considering good availability of potato. The other companies like Pepsi, ITC, Parle, Haldiram & Balaji are sourcing large volume of potatoes for the processing of wafers from Gujarat. Most of the potato exported from India is also of Gujarat origin. The production of potato in Gujarat is confined to three clusters accounting for almost 98% of the state’s production as shown in Table-22 Table-22

Cluster-wise Production

Cluster

District

Cluster-I Cluster-II Cluster-II Cluster-II Cluster-III Cluster-III Cluster-III

Banaskantha, Sabarkantha, Gandhinagar Mehsana Kheda, Anand Baroda

Total production 923.8 272.3 160.8 115.5 153.2 193.6 16.5

Cluster production 923.8

Production in 000 M.T % state production 49.09

548.7

29.16

363.3

19.31

1835.8

97.6

Source :- http://agri.gujarat.gov.in/hods/dir-horticulture.htm The maximum cultivation of processing varieties is in Cluster-I comprising of Sabarkantha,, Mehsana and Gandhinagar. This is due to presence of McCain in Mehsana, logistically convenient location for processors and skilled farmers and their good experience in contract farming with the companies. Gujarat is the best not only in term of productivity but also in terms of quality. The table varieties of ‘Kufri Badasha’ and ‘Kufri Lavkar’ have good size, color and luster and are preferred not only by exporters but domestic customers in other states like Maharashtra and Southern states also. During last two years a significant volumes of fresh potato have been supplied to Mumbai, Pune, Trichy, Mudhurai, Kochi and Hyderabad. Farmers of Gujarat have started cultivation of early varieties of potatoes ‘Kufri Pukhraj’& ‘Kufri Pushkar’ which are available to customers from end of January to February when stocks of stored potatoes are over. Cultivation of Processing type of varieties The large production and availability of potato is not quite relevant for processing. In India, more than 95% potato is cultivated for table purposes and as this potato has less dry matter it is not suitable for processing. The table varieties popular in the country include Kufri Bahar, Kufri Jyoti, Kufri Pukhraj, Kufri Badshah and Kufri Labkar, etc which are very popular among the farmers. The processors had to do lots of research for development of suitable processing varieties including import of cultivars from Europe. The companies like Pepsi, ITC, McCain have done lots of research in India on identification imported varieties suitable to Indian climatic condition and which are suitable for processing. The center potato research institute has also developed processable variety looking at the requirement of the processors. The requirement of processing varieties is gradually increasing and at present it is estimated around 6.6 lakhs ton annually as shown in Table-23. Dynamic Agri & Foodbiz Consultants Pvt. Ltd

37

A Project Report on Potato Flakes Processing

Table 23 - Demand for Potato by Processing Industry Sr. No. 1 2 3 4 5 6

Name of Unit

Product

Pepsi ITC Parle Balaji McCain Satnam Agri

7 8 9 10 11 12 13

Golden Fries Merino Simplot Basukhinath, Eskon Potato King Others Total

Wafers Wafers Wafers Wafers French Fries, Tikkies Potato Flakes, French Fries, Tikkies, etc French Fries Potato Flakes French Fries Potato Flakes Potato Flakes Potato Flakes Wafers, Flakes, Tikkies, etc

Estimated Potato demand 200 50 60 60 50 20 10 40 20 20 10 10 150 700

(000’tons) Expected growth % 10-Aug 10-Aug 10-Aug 10-Aug 20 20 20 20 20 20 20 20 15

The processable varieties of potato are generally cultivated through contract farming organized by the companies like Pepsi, Mc. Cain , Marino, Balaji, etc. Keeping in the view of their specific requirement at present most of the cultivation is done in states like Gujarat, MP, UP and WB. It is understood that climatic conditions of Gujarat are suited best and more than 30% of potato is sourced by the processor from Gujarat. From farmers’ perspective as cost benefit ratio of growing potato is better than other alternative crops in the area, the cultivation of potato is likely to continue increasing in the near future. The processors of wafers and french fries use specific sizes of potatoes - for wafers 4570 mm. and for fries > 70 mm. only where as farmers like to realize a good price on their entire production. Since the processing varieties are also suited for processing of flakes about 25-30% of the production can be used for processing flakes which will be of great advantage for the unit.

3.8 Potato Storage Facilities in Gujarat At present there are 217 potato cold storages in the state of Gujarat and another 5-6 stores are reported under construction. The cold stores are according to the production of potato and maximum cold stores are in Banaskantha as can be seen from the Table-24

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

38

A Project Report on Potato Flakes Processing

Table 24 - Area wise number of cold storages and Potato storage capacity in Gujarat Sr. No

Area

1 2 3 4 5

Banaskantha Mehsana, Gandhinagar & Sabarkantha Kheda, Anand &Baroda Ahmedabad Saurashatra

6

Surat Total Source: The Gujarat cold storage owners’ association

No. of cold storages

Potato storage capacity bags in lakhs

76 42 54 15 20

100 65 40 5 6

07 217

216

Out of the some 217 cold storages 10-15 have facilities for storage of processing type of potatoes which are generally booked by processors/traders. These cold storages are having some of facilities like CIPC fogging for maintaining low level of sugar. Considering increase in requirement for processing type of varieties and special storage conditions required for the same GAIC decided to set up a ‘Hi-tech’ cold storage at Deesa for bulk storage of processing varieties.

3.9 Potato Prices The price of potato would be a critical factor in determining the viability of the project. The prices of potato fluctuate in a wide range due to factors like production, storage capacities and demand. In a particular wholesale market the price is affected by arrival of fresh potato on a particular day. Generally the prices are low in a harvesting season (Feb. - Apr.) as some farmers are not keen on the storage of potato. Potato future contracts are there in the national futures exchanges MCX, NCDEX and NMCE which also influence in price discovery. The trends in arrival for last 4 years of potatoes of Deesa origin in Ahmedabad APMC are given in graph below. Potato Deesa arrival in Quintal (2006 - 2009)

The trends in prices for last 4 years of potatoes of fair average quality of Deesa origin in Ahmedabad APMC are given in graph below. Dynamic Agri & Foodbiz Consultants Pvt. Ltd

39

A Project Report on Potato Flakes Processing

Potato Deesa price (Min.) in Quintal (2006 - 2009)

While the price of table potato fluctuate keeping in view factors like production in the state and country storage capacity, demand from local markets and neighboring states and export markets. During last year the potato prices fluctuated from Rs. 5-6 per kg in March to Rs.2-3 per kg in November. The prices nosedived to Rs.2 per kg in November due to excess stock in the cold stores, end of cold store season deteriorating quality and arrival of fresh potato. The traders and farmers of Gujarat could not sell in the neighboring of Rajasthan and Maharashtra due to strong presence of traditional suppliers of UP, MP and Punjab. Due to the factors, farmer and traders of Gujarat had to incur heavy losses. Interestingly the price of processing type of potato was not affected. While the price of table varieties was Rs.2-3 per kg in November it was around Rs.20 per kg for processing varieties of chips like LR and Chipsona. This trend has been witnessed during last 4-5 years in the Gujarat and increasing number of potato farmers are willing to switch over cultivation of processing type of potato. 3.10

Potato Contract Farming In Gujarat

The cultivation of processing type of potato is generally promoted by leading processing companies under contract farming. The list of companies active in Gujarat and price paid by them is given in the Table-25 below. Table-25 Potato Contract Farming In Gujarat Sr. No

Company

Varieties

Use

1

McCain

Kennebek, Shephody, Santana, Innovator

2 3 4 5 6

Balaji Pepsi* ITC*

LR, Chipsona LR, Chipsona LR, Chipsona LR, Chipsona LR, Chipsona

Himalaya *

Hyfun

French Fries

Annual Approx qty (MT) 50,000

Assured price (Rs/ Kg) 6.507.50

Wafers Wafers Wafers French Fries French Fries

60,000 50,000 25,000 10,000 8,000

6.0-6.50 6.0-6.50 6.0-6.50 6.0-6.50 6.0-6.50

Remarks

Subject to quality specs and market linked incentives. -do-do-do-do-do-

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

40

A Project Report on Potato Flakes Processing

Foods 7 Others LR ,Chipsona *contract farming through traders

Wafers

20,000

6.0-6.50

-do-

It is estimated that about 2 lakhs ton of processing type of potato which is approx 10% of state’s production is cultivated through contract farming. Due to assured market and better price increasing numbers of farmers are showing interest. As the processors require potato of certain size (more than 45 mm) and without any defect about 20-25% of the potato is available for flakes units as it has high dry matter and size does not make difference for processing flakes.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

41

A Project Report on Potato Flakes Processing

Chapter-4 Process & Technology There is a distinct process of dehydration of potatoes for the manufacture of flakes which is different from dehydration of other vegetables. As the product is required to have good aroma, taste and rehydration properties so as to function like freshly boiled potatoes a process of a quick thermal drying has been developed. As the processing of the potato is concentrated in USA and European countries like the Netherlands, Italy, Belgium, Poland etc. the technology was developed in these countries. In India food processing industry is in the stage of infancy and hardly 1-2% of fruits and vegetables are processed as compared to more than 70% in USA & European countries. In case of potato although wafer processing started some 20 years back and there are several units now, the potato flakes processing has started recently and there is dependence upon foreign suppliers for plant and machinery. As a few companies have started fabricating equipment for wafers processing the machinery for receiving of potatoes washing, cutting, blanching can be sourced from India and critical machinery like steam peeler& drum dryer will only need to be imported. The process for the manufacture of potato flakes is given below that will indicate the requirement of processing equipment. 4.1 Process Description for Potato Flakes A. Reception, de-stoning, washing and peel removal The line is assumed to be fed with potatoes in bulk boxes, of one ton contents each in foreign countries; however, in India the potatoes will be received in gunny bags or loose potatoes in trolleys. The bags are tipped in the elevator or directly into dosing hopper, which brings the product into the line. The product is conveyed up with an inclined belt elevator to the cyclone de-stoner. In the cyclone de-stoner the product comes in spiral water movement, stones and heavy particles will sink against the current into the stone collecting chamber. The potatoes are floating over to the drum washer. The stones are taken out continuously by belt or have to be done by hand once in a while. The drum washer is cleaning the potatoes with water from the cyclone de-stoner and the rubbing effect against each other. The used water is circulating to the de-stoner for a closed loop. Fresh water is adding at the end of the washer. From the water collecting bin an overflow for dirty water is available. To make flakes from potatoes it is important that the dry matter content of the raw material is as high as possible. Potatoes with a low dry matter contents requires too much energy to dry and supply too less end product. For that reason it is right to install a density separator in the line between washer and peeler. This unit will remove all potatoes with a lower dry matter contents than set. Also floating debris will be taken out of the line. Normally the potatoes will have a proper dry matter contents, and procurement will be done after testing the quality at farm level or from the farms which company will contracted for farming. It is however, desirable to have a density separator (brine grader) in order to separate the low density potatoes. From the brine grader, the product is collected in a screw conveyor to bring the product to the peeler. In the flake processing two different peeling methods are used. The peeling result Dynamic Agri & Foodbiz Consultants Pvt. Ltd

42

A Project Report on Potato Flakes Processing

of the peeling part of a flake line is not important. A peel removal from the tubers of about 70 to 80% is found sufficient enough. It is an economical choice. For smaller lines the investment in an abrasive peeler is much lower than a steam peeler installation. The peel losses are higher. The small-scale lines have a batch abrasive peeler. The peel is removed mechanically and water is used to remove the peel from the tuber and the peeler. The peel waste is discharged and fed to a screw press-dewatering unit, peel can be collected in waste bin, and the water goes in the floor gutter. This water contains still a lot of organic matters. The larger scale lines have a standard steam peeler, the peel losses are less than with abrasive peeling. Steam peeling means that the potatoes are brought under pressure by means of steam and by means of the steam heat, the outer layer of the product is heated above atmospheric boiling temperature. Then the pressure is released rapidly, so the potato cell moisture starts boiling and rubs the cell wall. The skin will hang loose around the tuber. In the dry brush machine this loose skin is brushed away. The dry removal gives relative dry peel waste, which is directly usable as cattle feed. This matter can be pumped to the waste bin outside the processing room. The last part of the dry brush machine is equipped with thinner hair and a water spray above to rinse the potatoes from the last loose parts. This water with small pieces has a separate funnel with discharge in the floor drain. Finally the product passes an inspection belt to remove all foreign objects, green potatoes and too much damage or rotten potatoes. For larger lines 3 and more drums it might be useful to install an optical sorter installation with a laser unit to separate the foreign matters and bad potatoes from the line and save an inspector. B. Cutting, blanching and cooking The product is collected in a vertical screw to bring the product in a bunker with dosing screw. This hopper has a buffer for at least 5 minutes to cope with fluctuations in the feed. The dosing screw brings the product to the weigh belt to set the line capacity according the dry matter content of the raw materials. The weigh belt brings the product immediately into the slice cutter. The cutting machine cuts the potatoes in slices of 10 to 15 mm. It is advisable to have a measuring device in the line to control the in feed of the line and also therewith the efficiency of the dryers. A weigh belt is one of the best measuring devices there is with a high reliability. Whole peeled potatoes are easy to store and to dose, slices are easy to store but more difficult to dose, blanched and cooled product should not be stored not even for a few minutes, to keep the product properties as equal as possible. Cooked product cannot be stored and to dose is a disaster. During cutting unfortunately some small debris is made and some potato cells are broken and starch is released. Most of the time free starch is not desired in the blanching and cooking step.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

43

A Project Report on Potato Flakes Processing

To remove the free starch and the small cutting threads there are two options, for the smaller lines the use of a sliver remover is a good option with a spray-bar with water above to remove the starch the small pieces are falling between the rolls. The water is collected in a rotary screen with water buffer and a circulation pump back to the spray nozzles. For the larger lines, product is collected in a small water flume to bring the product into a slice washer. This is a rotating perforated drum in a shallow water bath; the end of the drum is equipped with flights and is contracting so the product is discharged above water level . Direct into the blancher. The overflow water of the washer is fed to the rotating screen to remove the debris from the water and a circulating pump for the flume system. Optional equipment can be used for a starch recovery system for the wash system, including a pump filter and starch cyclone. The blancher is a so-called pre-cooker where the starch in the potato cells is pre-gelatinised in 20 to 25 minutes with water of 65° to 70° C. The product is then immediately conveyed into the cooler where the product is cooled down till 25° C core temperature, to retro-gradate the starch, and more important to reinforce the cell wall but make them permeable as well. So that during cooking the mechanical forces are not rupture the cells and dry matter is kept in the cells. For some kind of flakes the amount of free starch in the flakes should be high, then the blanching step is or reduced a lot or completely deleted from the process (filled with cold water and only a transport unit.) There are two types of blanchers suitable for this work, drum blanchers and horizontal screw blanchers. The drum blancher is a perforated drum rotating on wheels at the entrance discharge neck, submersed in water. The water is pumped around and is steam heated by injection in the water. The screw blanchers are a hull filled with water and a perforated screw is moving the product through the blancher, hot water is injected on several places in the hull, therefore a circulation system is available. To take the product out of the water a Ferris wheel is used. Steam is injected in the water of the circulation system. The cooler is a counter current drum cooler, mainly chosen because it uses the minimal amount of cooling water. The water enters at the product discharge end and is moved through the drum to the product entrance side where it is separated from the product. The cooler is a closed cylinder running on trunnion wheels. In the cooler are circular chambers made with a product water separation and switch. From the cooler, the product is pumped to the cooker that is placed at a high level. This pump system has a closed loop and includes a parabolic dewatering screen. The cooker can be of various types. Some producers prefer belt cookers, while other rather use screw cookers. Both options are possible. We prefer to use single screw cookers, due to the simplicity of the machine. For larger lines the screw cookers become too large and two of them are placed in line, alternatively a twin-screw cooker can be used as well. These units require less diameter and length than single screw cookers.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

44

A Project Report on Potato Flakes Processing

The cooker is a machine that is directly heated by steam, at which steam is transported through the product. Any condensate at the bottom of the machine is separated from the product. Depending on the kind and variety of potato, the cooking time varies between 30 to 40 minutes. To prevent steam escaping from the cooker the product in feed is equipped with a lock. At the same time the out feed is sealed by the rising screw that has been fit directly to the cooker. C. Drying The additives are prepared in mixing tanks and pumped to the feed screw, in which they are immediately mixed with the product. The mash is fed to the drum, in case of one drum this is straight on; by two drums the dividing screw has an opening with dividing valve in between which is movable, the movement is controlled by two measuring units in the drum dryer feed screw. For a three, four and six drums line this is done in an equal way. At this stage, potato mash is transported with a screw to the drum dryer. At the drum dryer, the potato mash is divided over the width of the dryer. To bring the product on the drum dryer, a first applicator roll is installed to roll the product equally and to bring the product in contact with the hot drum. A thin product layer stays on the drum; the major part of the product is collected on the applicator rolls, and these rolls should be completely covered with product. The dry product on the drum has high adhesive forces to attract product from the applicator rolls to form the desired potato flake film. For this purpose 5 applicator rolls are available. The uncooked and black parts, including peel remnants, adhere with difficulty to the drum and stay thus on the applicator rolls and can be extracted from the drum and put away as waste. The product is fed in at the upper side of the drum and divided by means of applicator rolls over an angle of 135°. This part is the application part, the product is heated and 50% of the water is evaporated. Afterwards, the product runs under the drum and is scraped off the drum at an angle of 300° (perimeter degrees). Underneath the drum the temperature of the flake stays at about 100°C, when it comes up the temperature of the flake will rise and the last moisture is removed. If the process goes smoothly, the potato mash will leave the drum as a flake film just in front of the knife. This means that the temperature of the drum and the dry matter content of the potato flakes are correct. The dry product comes off the drum and falls into a vertical screw with break plates that break the potato film in pieces. The drum dryer is a cast iron drum, optional flame spray coated with stainless steel. This makes the drum look much more handsome, furthermore by regular stopping and starting fewer products losses are found. Also less metal particles are found back in the product. The frame of the drum itself is made of stainless steel as all other parts of the drum drier are. The applicator rolls become filled with “dirt” this has to be scraped off; this can be done automatically but lead most of the time till too high losses of good product. The alternative is a manual pneumatically operation of the scrapers at the applicator rolls. On the bottom applicator roll the material should be very poor and once in a while scraped off and is Dynamic Agri & Foodbiz Consultants Pvt. Ltd

45

A Project Report on Potato Flakes Processing

available as waste (cattle feed). By lines of more than two drums it is possible to pump all waste to one drum, which produces a different kind of flakes (higher allowance of black spots and free starch). This will improve the yield of the line. The drum dryer is controlled by means of the steam pressure in the drum, the condensating steam determines the surface temperature of the drum. D. Inspection and milling With a pneumatic transport system the product is moved to the inspection table for manual visual inspection. The product passes a magnet to remove eventually metal parts prior to entering the miller. Several sizes of screen can be placed for different kind of flake use. E. Storage and packing The milled product is moved to the storage hopper by means of a bucket elevator. This storage bunker is only required to equalize the final moisture content of the flakes and to be able to do the packaging in another rhythm than the production. The product is collected in a silo. Under the silo an out feed unit is mounted, which takes the product into a bulk weigher for the weighing of bags from 10 to 25 kg.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

46

A Project Report on Potato Flakes Processing

4.2 Process Flow for Potato Flakes The process of potato flake manufacturing is summarised in the flow chart below:

Reception of Potatoes

Cooling at 25° C

De-stoning

Cooking (30-45 min.)

Washing

Mixing of additives

Density separators

Drum drying

Steam peeling

Inspection of dried flakes

Dry peel by brush machine

Magnet removal of metal particles

Inspection belt (Optical sorter)

Milling of flakes from screen

Weighing belt

Equalization of moisture

Slice cutter

Stored in silo

Slice washer (removal of starch)

Packaging

Blancher for 20 to 25 min. (65° C to 70° C)

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

47

A Project Report on Potato Flakes Processing

4.3 Input-Output Ratios in Selected MFG. Process The potato with the dry matter content of 20% will give a yield of 15.4% as shown in the chart below: PROCESS FLOW CHART & MASS BALANCE INFEED

MASS BALANCE

INFEED

100 Kg.

100 Kg.

CLEANING 0.5%

100 Kg.

99.5 Kg.

PEELING 8%

99.5Kg.

91.50 Kg.

90.0

90 Kg.

90Kg.

90 Kg.

90Kg.

88.0 kg.

88.0 Kg.

84.0 kg.

84 Kg.

85.0 kg.

85.0 Kg.

85.0 Kg.

85.0Kg.

85.0 Kg.

RICING MIXING

85.0 Kg.

85.5 Kg.

DRUM DRYING 82.0%

85.5 Kg.

15.53 kg.

PARTICLE SIZING 1%

15.53 kg.

15.40kg.

INSPECTION 1.5%

CONTROL FEED

CUTTING 2% BLANCHING 2%

COOLING +1%

HYDRO TRANSPORTING

STEAM COOKING

PACKAGING

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

48

A Project Report on Potato Flakes Processing

4.4 Suppliers of Plant & Machinery and Technology Efforts have been put in to identify the manufactures of potato flakes processing equipment world over. There are only a few reputed companies who offer the entire line or certain critical machinery like drum dryer and steam peeling. Since potato processing plants are concentrated in Europe, the technological development has taken place in countries like Netherlands and Germany. The companies in Netherlands have taken a lead and some of the companies have a dominant market share. Of late potato flakes manufacturing has started in China also in a big way and a few Chinese companies have started fabricating the equipment in collaboration with European companies. As a few companies in India have also started supplying the wafer processing plants the fabrication of some potato handling machinery has also started in India. The information is summarized in the Table-26 below. Table 26- Country wise major suppliers of potato flake manufacturing plants S No. 1 2 3

Country The Netherlands The Netherlands The Netherlands

4

The Netherlands

5

China

6

China

7

China

8

China

9

USA

10 11

Germany India

12

India

13

India

Company Name BMA Kirmeko Gouda Processing Solutions Tummers

Equipment Entire flake line Entire flake line Drum dryer

Sino-German Technology Development Co. China Light Industry Machinery Association China National Packaging and Food Machinery Sinmore Enterprises Ltd. Aeroglide-National Drying Corporation EIMA Oditin Food Solutions Limited, Indore Wintech Taparia Flavorite PPM Technologies

Potato peeling, Blanching & Drum dryer Entire flake line Entire range of potato processing equipment Entire range of potato processing equipment Entire range of potato processing equipment Potato handling and drying equipment Complete line of potato flakes Potato handling and drying equipment Potato receiving, washing, blanching and cooking lines Potato receiving, washing, blanching and cooking lines

For budgeting purposes quotations of BMA of The Netherlands which is having three lines in India has been considered.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

49

A Project Report on Potato Flakes Processing

Chapter-5 Infrastructure, Utilities & Manpower 5.1 Project Location GAIC has identified land at Dehgam, in Gandhinagar district which is near the major production area of potato particularly the processing varieties. The plot belongs to State Dept of Horticulture and was being used as a Nursery. It will be possible to get required land of 12,000 mtrs in this plot. This plot is right on the National Highway and has very good connectivity with Gandhinagar, Ahmedabad and Sabarkantha.

Potato Clusters Project Location

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

50

A Project Report on Potato Flakes Processing

5.2 Comparative advantage in Gujarat In the long run potato flakes will behave like a typical Agri-commodity. The price will depend upon the cost of raw material, stocks of flakes with the processors, production of potatoes not only in India but in the world market. Therefore, the success of the project would hinge on basics of any business that is efficiency in purchase of raw material and processing and marketing efficiency. In this regard Gujarat has many advantages as given below. Better Quality Raw material :- Gujarat is among top five potato producing states and as explained in Chapter-III, the quality of potato cultivated specifically for processing is better in terms of dry matter content, colour, etc which are desirable traits for potato required for flakes Low price raw material :- As mentioned in Chapter 3 about 2 Lakhs tons of processable varieties like LR, Chipsona, Kennebec, Santana, Shephody, etc is cultivated in Gujarat and out of that about 20-30% is undersize which is not used by processor of french fries and wafers / chips but has high dry matter contents these undersize potatoes does not find any buyers in the fresh market as customers not only prefer big potatoes but also varieties like “Badshah” and “Lavkar” therefore, these potatoes is available at a price between Rs.2 -3 per kg. Proximity to ports :-The ports like Kandla, Mundra and Pipavav are close to the proposed location of the project which will offer a comparative advantage for the export markets. Trade Links :- A number of agri commodities / food ingredients like de-hydrated onion, mango pulp, Isabgul, Guvar gum, Spices are being exported from Gujarat and the exporters based in the state have very good connections with importers of other countries. It has been told by the exporters that they generally inquiries for potato flakes but due to non -availability cannot take up the order. Good Availability of Social and Industrial Infrastructure :- Gujarat can boast of excellent industrial infrastructure and social amenities which is attracting investment in all the sectors. There is good availability of required power, water, manpower, etc for the industry.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

51

A Project Report on Potato Flakes Processing

5.3 Requirement of Land & Building The requirement of land for the project is about 12,000 sq. mtrs for construction and a built up areas of 2,450 sq. mtr is required besides a lot of space is required for parking of trucks, ETP, and other utilities. The required land will be available with State Dept of Horticulture. 5.4 Requirement of Utilities The line requires the supply of steam, fresh water for washing potatoes, cold water of drinking quality and compressed air for control equipment and for pneumatically movement, besides electricity supply for running all the process and utility equipments. Steam:- The requirement of steam is about 5000 kg / hour out of which 80% is of 13 bar pressure. Power Requirement:- The total electrical load requirement is estimated at 150 KVA. Since, it is a continuous process and the supply of uninterrupted supply is desirable it is planned to have a Generator set of 150 KVA capacities. Water:-The requirement of water will be 12,000 litres/ hour for processing and boiler. The water is also required for chilled water line for cooling blanched potatoes however, this water can be re-circulated. Besides, water would be required for cleaning of the plant and workers use. The daily requirement for water would depend upon treatment of the waste water and recirculation of the same however, a minimum quantity of 2,00,000 would be required and it is planned to set up and water tanks of 2 lakhs litres /day capacity. Compressed Air:- The compressed air will also be required for operating some machines.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

52

A Project Report on Potato Flakes Processing

Chapter-6 Operation & Management of the project 6.1 Project Management The project will be implemented by GAIC who will award the contract for construction on “Turnkey” basis by following the selection through competitive bidding process. The project will be managed under Public Private Partnership (PPP) model wherein project will be set up by GAIC and managed & operated by an experienced Project Operating Partner (POP). The selected POP should have experience in handling potato value chain, managing potato post harvest infrastructure, availability of professionally qualified staff with the organization. It is recommended that GAIC may select a the POP at the time of implementation of the project itself so that, the company’s professional inputs will be available during construction and erection stage and there will not be any issue at the time of handing over the assets to the POP. The unit may be leased to the selected partner company for a period of 5 years or as per the best negotiated terms through a process of competitive selection process. 6.2 Manpower Requirement Success of any project also depends upon the quality of manpower employed. No difficulty is envisaged in recruitment of the experienced staff. The services of the suppliers of process equipment will be utilized in training of key personnel of production and maintenance departments. Considering nature of the business and requirement of the manufacturing unit the man power requirement has been worked out as per the Table-27 below. Table 27- Man power requirement for potato flake unit

Manpower Cost

Per Month Salary

Nos. of Employee

Annual Salary

1

General Manager

1.20

1

14.40

2

Production Managers

0.60

2

14.40

3

Procurement Manager

0.60

1

7.20

4

Maintenance Engineer

0.60

2

14.40

5

Marketing Officer

0.50

6.00

6 7

Finance Manager Quality Control Officer

0.50 0.40

1 1

8 9

HR Executive Boiler operator

10

2

6.00 9.60

0.40 0.20

2 3

9.60 7.20

ETP Operator

0.15

3

5.40

11

Potato receiving

0.08

3

2.88

12

Wet area

0.08

9

8.64

13

Additive preparation

0.08

3

2.88

14 15

Drying area Milling and Packaging

0.08 0.08

6 9

5.76 8.64

16

Dispatch/store

0.08

6

5.76

17

Boiler and Misc.

0.07

6

5.04

18

Unskilled Labour

0.06

15

10.80

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

53

A Project Report on Potato Flakes Processing

Total Employee Cost

5.76

75

144.60

-- Variable Employee Cost @ 70%

101.22

-- Fixed Employee Cost @ 30%

43.38

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

54

A Project Report on Potato Flakes Processing

Chapter-7 Regulatory Requirements & Government Support 7.1.

Regulations - Food Laws, Environment

The following commercial approvals / registration are required to obtained.. Registration with District Industries Centre Registration under Factories Act. Registration with FSSAI Registration for VAT Trader’s Licence from APMC Import -Export License NOC from the state pollution control board. 7.2 Compliance with norms of Pollution Control Board (PCB) While above said licences and registration can be obtained as a matter of routine but there are stringent rules for compliance as far as Pollution Control Board is concerned. A detailed note is given below on treatment of the waste water in the plant. Process Waste Water and its Treatment Potato Chips manufacturing process generates organic wastes and proper treatment is necessary to minimize its undesirable impact on environment. The quantity of the effluent and its composition is dependent upon the use of processing method and equipment as can be seen the Table-28. Table-28 Wastewater Quality in the Different Applied Peeling Methods in Potato Processing Plants Parameters Flow (litre/ton, raw potato) BOD COD Total solids Volatile solids Suspended solids Ph

Abrasion 3000 8kg/ton (4000 ppm) 40 kgs/ton (18,000 ppm) -

It is difficult to generalize the quantities of wastewater produced by specific operations, due to the variation in process methods. Many references and studies in this respect show wide variations in water usage, peeling losses, and methods of reporting the waste flow. Processing involving several heat treatment steps such as blanching, cooking, and steam peeling, produces an effluent containing gelatinized starch and coagulated proteins. The composition of the effluent of a potato processing plant is given Table-29.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

55

A Project Report on Potato Flakes Processing

Table 29- Composition Percentage of Potato Waste Solids Component Amount (%) Total organic nitrogen as N 1.002 Carbon as C 42.200 Total phosphorus as P 0.038 Total sulfur as S 0.082 Volatile solid 95.2 Depending on the abovementioned characteristics of potato processing wastewater, the following should be highly considered: Potential methods for reducing the load of waste production including in-plant measures for water conservation, by product recovery, and water recycling. Choosing the wastewater treatment systems that take into account the wide variations of wastewater compositions, due to wide variation in potato processing steps and methods, in order to reduce the wastewater contaminants for meeting in-plant reuse or the more stringent effluent quality standards required in the potato processing industry. Treatment Methods Wastewater from potato processing plants contains mainly carbohydrates such as starches, sugars, pectin, as well as vitamins and other components of the cell wall. About 75% of the total organic matter is soluble; therefore, it cannot be removed by mechanical or physical means. Thus, biological and chemical oxidations are the preferred means for wastewater treatment. Waste Treatment Processes An integrated waste treatment system usually consists of three phases: primary treatment, secondary treatment, and advanced treatment. Primary treatment involves the removal of suspended and settle able solids by screening, flotation, and sedimentation. Secondary treatment involves the biological decomposition of the organic matter, largely dissolved, that remains in the flow stream after treatment by primary processes. Biological treatment can be accomplished by mechanical processes or by natural processes. The flow from the biological units is then passed through secondary sedimentation units so that the biological solids formed in the oxidation unit may be removed prior to the final discharge of the treated effluent to a stream. When irrigation is used as the secondary treatment system, bacteria in the topsoil stabilize the organic compounds. In addition, the soil may accomplish removal of some ions by adsorption or ion exchange, although ion exchange in some soils may fail. In all cases, great importance should be given to the steps that contribute to reducing the waste load in the plant itself. As for the industrial wastewaters, most of them require equalization (buffering) and neutralization prior to biological treatment, according to the characteristics of the resultant effluents. Advanced waste treatment is needed in many cases to remove pollutants that are not removed by conventional secondary treatment. Advanced treatment can include removal of nutrients, suspended solids, and organic and inorganic materials. Dynamic Agri & Foodbiz Consultants Pvt. Ltd

56

A Project Report on Potato Flakes Processing

Currently, different treatment units are combined as a highly effective system for the secondary (biological) treatment that covers both anaerobic and aerobic processes. Note that it is quite acceptable and applicable that wastewater after pre-clarification (screening and primary treatment) can be discharged into the public sewer system to be treated together with sewage water in the municipal treatment plants. The following describes in detail the current wastewater treatment units and subsystems.
In-Plant Treatment Minimizing waste disposal problems requires reduction of solids discharged into the waste stream and reduction of water used in processing and clean-up. To reduce the solids carried to waste streams, the following steps should be undertaken: improvement of peeling operation to produce cleaner potatoes with less solids loss; reduction of floor spillage;
Primary Treatment Sedimentation is employed for the removal of suspended solids from wastewater. After screening, wastewater still carries light organic suspended solids, some of which can be removed from the wastewater by gravity in sedimentation tanks called clarifiers. These tanks/clarifiers can be round or rectangular, are usually about 3.5 m deep, and hold the wastewater for periods of 2 to 3 hours. The required geometry, inlet conditions, and outlet conditions for successful operation of such units are already known. The mass of settled solids is called raw sludge, which is removed from the clarifiers by mechanical scrapers and pumps. Floating materials such as oil and grease rise to the surface of the clarifier, where they are collected by a surface skimming system and removed from the tank for further processing. Potato Wastewater Treatment There are various methods of treating the potato waste water which have been summarized in Table-30 Table 30-Treatment Units, Unit Operation, Unit Processes, & Systems for Potato Processing Treatment unit or Subsystem In-plant

Pre-treatment Primary treatment

Equalization

Unit operation/unit process/ treatment system Conservation and reuse of water Reduction of waste flow and load Process revisions & control New products Screening (mesh size: 20 - 40 per inch) Sedimentation Flotation Earthen ponds Balancing tank/buffer tank

Remarks

10-25% BOD5 removal 30-60% BOD5 removal 20-60% COD removal Constant flow concentration

and

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

57

A Project Report on Potato Flakes Processing

Neutralization

Conditioning tank

pH and temperature corrections

Secondary treatment 1. Aerobic processes

80-90% BOD5 removal

Natural systems a)Irrigation land treatment b) Stabilization ponds and aerated lagoons c)Wetland systems Activated sludge Rotating biological contactors Trickling filters 2. Anaerobic Up flow anaerobic sludge blanket processes (UASB) reactors Expended granular sludge bed (EGSB) reactors Anaerobic contact reactors Anaerobic filters and fluidized-bed reactors Advanced Micro straining treatment Granular media filtration

70-80% COD removal

80-90% BOD5 removal 70-80% COD removal

90-95% BOD5 removal 90-95% COD removal (Sometimes .95%)

Chemical coagulation/ Sedimentation Nitrification-denitrification Air stripping and ion exchanging Membrane technology (reverse osmosis, ultra filtration) Water volume can be reduced by reusing process water, with several advantages. First, the size of wastewater treatment facilities can be decreased accordingly. Secondly, with concentration of the waste, the efficiency of a primary settling tank is increased. In the final processing stages, chlorinated water should be utilized to prevent bacterial contamination of the product. Other steps to reduce wastewater volume include alternate conveying methods of transporting potatoes other than water fluming, improved cleaning facilities for equipment and floors (high-pressure nozzles, shut-off nozzles for hoses), collecting clean waste streams, and discharge to natural drainage or storm water systems. The Figure below depicts the generation of waste in french fries manufacturing unit at different points and treatment of the same.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

58

A Project Report on Potato Flakes Processing

By Product Usage Various by products are usable as described below I. Potato Peels Potato peels provide a good source of dietary fiber, particularly when processed by a lye peeling technique. Potato peels contain 40 g dietary fiber/100 g dry matter, depending on the variety of potato processed and the method of peeling. Application of extruded and unextruded potato peels as a source of dietary fiber in baked goods has been evaluated. In USA acceptable muffins were made with a 25% replacement potato peel for wheat flour. Potato peels were also found to prolong muffin shelf-life by controlling lipid oxidation. Extrusion cooking of potato peels affects the colour of baked goods, and some physical and chemical properties of the peels. Potato peels have also been used in limited quantities in a commercial snack food potato skin type product. II. Potato Processing Wastes as Soil Conditioner Potato processing solid wastes are often applied to agricultural land as a disposal medium. Research supports this method. Solid potato processing wastes containing nitrogen are obtained by filtering or centrifuging the settled solids from the primary clarifiers. Wastes are applied to land and used for crops, which utilize the applied nitrogen. The soil does not accumulate the nitrogen or other organic waste and becomes increasingly fertile with continued wastewater application. Applying wastewater and solid wastes from potato processing provides an effective method of applying reusable nutrients that would be otherwise wasted, and thus reduces pollution levels. Dynamic Agri & Foodbiz Consultants Pvt. Ltd

59

A Project Report on Potato Flakes Processing

III. Potato Wastes as Substrate for Organic Material Production Potato wastes have also been evaluated as a potential source from which to produce acetone, butanol, and ethanol by fermentation techniques. This application of biotechnology in membrane extraction resulted in a procedure to extract a bio fuel that utilizes potato wastes as a renewable resource. IV. Cattle Feed Filter cakes and dry potato peels are used as an excellent carbohydrate source in cattle feed. Using potato wastes instead of corn in cattle feed does not affect the metabolic state or milk status of the cattle. Typically, potato wastes are fed in a dry, dewatered form. The use of wet potato wastes in cattle feed has been investigated to reduce drying expenditures. Wet potato processing wastes can be introduced into cattle feed up at to 20% without negative results

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

60

A Project Report on Potato Flakes Processing

Chapter-8 Business Plan and Project Implementation 8.1 Key Features of Plan It is proposed to set up an economic sized project with following key features: A. Production Capability - Potato flakes with international quality standards and value added premixes for export and domestic market. B. Capacity of the Project - 500 kgs. /hour approximately 3420 tons /annum, assuming that plant will be run for 285 days in a year. C. Sources of Plant and Machinery - Most of the machinery will be sourced from Internationally renowned companies and only platforms, utility equipments will be sourced from domestic companies E. Contract Farming - The availability of right kind of raw material is very critical for the success of this project and company would focus on this aspect.POP would enter into an agreement with a group of farmers for cultivation of potatoes for processing. The company will have a potato development department headed by a qualified professional who will provide technical services to the farmers, seed for high yielding and having dry matter of more than 20%. The contract farming activities would be under taken in 1,000 ha. of land with development of three clusters of farmers in district of Sabarkantha, Mehsana, Gandhinagar and Banaskantha. The farmers would be selected on the basis of land holding, irrigation facilities, level of skills etc. The company will also keep in touch with farmers and traders of processing type of potatoes in the major production areas of the state in order to procure under size potato from them. G. Storage of Raw Material - POP will enter into agreements with short listed cold storages for storage of potato using CIPC to ensure availability of raw material round the year. H. Marketing Plan - The build-up of the sales will be as given in the Table-31. Qty in tons

Table 31- Projected sale of potato flakes Product

2014

2015

2016

2017

2018

2019

-- Annually Contracted Sales ( 10% of total sales) -- B 2 B Sales ( 40% of total

235

272

289

306

324

325

940

1089

1157

1225

1294

1300

1176

1361

1447

1532

1618

1625

2351

2722

2893

3063

3235

3249

1175

1361

1446

1531

1618

1625

12197 9.63

14207 9.58

16554 8.74

19296 7.93

22501 7.19

26250 6.19

sales) -- Export Sales ( 50% of total sales) Total Qty Company’s share in domestic market India's Projected Demand Company's Share (%)

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

61

A Project Report on Potato Flakes Processing

The company will focus on major institutions who are having large bulk requirement like Haldiram, Vista Foods, ITC, Pepsi, etc. To start with the company would focus on bulk sales and initiate product and market development activities. In the initial years the bulk sale is expected to be 40% of its sale. The company will promote its own brand and also create a marketing network for selling range of its products. 8.2 Project Implementation Schedule The implementation of the project in shortest possible time is very important to avoid cost escalation and projected generation of revenue. It is expected that the project would be commissioned within a period of 12 months as can be seen from following schedule. Implementation Schedule Activities Starts from Feb'2012 1

Submission of DPR

2

Approval by APEDA

3

Selection of Partner

4 5

Land and its development Detailed Engineering

6

Negotiation &selection of Vendors

7

Award of 'Turn Key' contract

8

Securing temporary power supply

9

Civil works

10

Order of Imported Machinery

11

Order of Indian Machinery

12

Installation of Machinery

13 14

Recruitment of key staff Regulatory compliance

15

Commissioning trials

16

Procurements Activities

17

Market Dev. Activities Plant will be commissioned in Feb'2013

1

2

3

4

5

6

7

8

9

10

11

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

62

12

A Project Report on Potato Flakes Processing

Chapter-9 Project Cost & Financial Analysis In this chapter the details of project cost have been worked out on the basis of offers received from the plant and machinery suppliers, civil contractors, and inputs from knowledgeable persons. The financial analysis has been carried out taking into consideration the prevailing prices of potato flakes, raw potatoes and other operating cost as per the industry norms. 9.1 Estimation of Capital Cost for all Project Components 9.1.1

Preliminary & Pre-operative Expenses

The pre-operative expenses of the project are summarized in the table-32 below Table -32 Preliminary & Pre-operative Expenses Particular 1 2 3 4 5

Rs. Lakhs 1.00 15.00 31.68 5.00 5.00 57.68

Statutory Approval Expenses Electricity Deposit Consultancy Fees ( PMC/ Consultancy) Travelling Exps. ISO / HACCP Certification Total

The major expenditure under this cost head is electricity deposit, consultancy fees and salary during construction for the project. 9.1.2 Land & Site Development The developed piece of land will be provided by Govt. of Gujarat however, the cost for the same has been budgeted as per the details given in table-33 below Table 33 - Land and Development cost Land & Site Development 1 2 3 4

5 6 7 8 9

Land Site Developments Compound Wall Internal Road (7 Mtr wide ) Strom Water Drains ( CC drain with cover slab, recharging wells, cross drainage work, Culvert at entry, Collection of storm water drain tank) Landscaping Signage Tube well Security Cabin/ Time office (2 Nos) Sub Total

(Area in mtr)

(Rate / mtr)

Total

12000 12000 500 2800 250

1100 250 3500 1200 4000

132.00 30.00 17.50 33.60 10.00

5000 LS LS 25

200 LS LS 10000

10.00 1.00 7.00 2.50 243.60

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

63

A Project Report on Potato Flakes Processing

9.1.3 Civil Cost The rate of construction is considered as per prevailing market rate and similar project. The details on working areas have been provided by supplier of plant & machineries and consultant’s knowledge of similar project in India. The estimates of civil cost are given in table-34 below. Table 34- Civil Works Cost Particular 1 2 3 4 5 6 7 8 9 10

Process hall Potato reception area Store Laboratory Office Milling and Packaging section Workers amenities Electrical room Boiler room Foundations

Area / sq.mtr

Rate per sq.mtr

Rs. Lakhs

1500 300 200 20 100 150 40 20 100 20 2450

10000 6000 9000 11000 11000 9500 8000 7000 7000 11000

150.00 18.00 18.00 2.20 11.00 14.25 3.20 1.40 7.00 2.20 227.25

9.1.4 Plant and Machinery Cost In order to keep the project cost low only critical equipment will be imported and rest of the plant & machinery will be purchase from domestic suppliers. The drum dryer will be imported under EPCGs scheme where in only 3.25% custom duty will be payable and company would be in a position to achieve the required export sales. The summary of cost towards plant & machinery is given in Table-35. Table 35- Plant and Machinery Plant & Machinery Particular Imported Plant Cost of imported plant (in Euro) Euro Rate Total Cost Custom duty (%of Basic cost) Handling & Freight Charge (%of Basic cost) Total landed cost of imported plant

Basic cost

Rs. lakhs

15.00 65.00 3.25% 1.50% A

975.00 31.69 14.63 1021.32

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

64

A Project Report on Potato Flakes Processing

Indigenous plant 1 2 3 4 5 6 7 7 9 10 11 12

Potato reception line Silo ( 20 ton) , Packaging, Weighing & Stiching Laboratory Equipment Plat forms Pipelines fittings, plumbing etc. Misc. Stores and material handling equipment Racking system Plastic pallets Manual pallet trucks Trollies etc. Potato reception line Total cost of Indigenous Plant Total cost of plant & machinery

Qty 1 1 1 1 1 1 1 1 1 1 10 1

Rate 5.00 20.00 10.00 20.00 15.00 10.00 5.00 10.00 2.00 2.00 1.00 5.00

Total 5.00 20.00 10.00 20.00 15.00 10.00 5.00 10.00 2.00 2.00 1.00 5.00 100.00 1121.32

9.1.5 Electrical and Utilities Equipment The requirement of utilities has been worked out in consultation of suppliers of plant & machineries and cost estimated as per quick feedback from the suppliers. The summary of electrical and utilities equipments is provided in table-36 Table 36- Electrical and Utilities Equipment

1 2 3 4 5 6

1 2 3 4

Qty

Particular Utilities Equipments Steam boiler and Chimney Water chiller Air compressors Water storage tank ETP Installation and Misc. Total Utilities Equipments

A

Electrical Equipments Power Distribution network Cables fittings, external lighting PLC, Instrumentation etc. Gen-set Total Electrical Equipments Total Utilities & Electrical Equipments

B ( A+B)

Total 70.00 15.00 3.00 30.00 50.00 10.00 178.00

10.00 10.00 5.00 15.00 40.00 218.00

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

65

A Project Report on Potato Flakes Processing

9.1.6 Office Equipments The basic office furniture and equipment cost has been considered as per prevailing market prices. The summary is given in table-37 below. Table-37 Office Equipments

1 2 3 4 5 6 7

Rs. lakhs 5.00 5.00 2.50 1.00 1.00 2.00 1.00 17.50

Office Equipments Work stations ( 15 Nos) Meeting room furniture PC/Laptop (10) Projector, TV etc. Filling, cabinets etc. AC, Fans etc. Communication system, IT Total

9.1.7 Contingency The provision for contingency has been kept 5% of the project cost excluding land & site development cost and preliminary & pre operative expense so as to provide for price escalation, un-foreseen expenses and exchange rate for imported equipment. 9.1.8 Estimation of Working Capital Requirements The working capital will be arranged by POP and the margin money for the same has not been included in the project cost however, for understanding the requirement of working capital the details have been worked out and presented in Table-38 Rs. Lakh Month

2014

2015

2016

2017

2018

2019

Raw Material

0.25

21.14

22.55

23.96

25.37

26.77

26.77

Packing Material

1.00

2.14

2.28

2.42

2.57

2.71

2.71

Consumables

1.00

1.07

1.14

1.21

1.28

1.35

1.35

Finished Goods

1.00

120.65

129.10

137.63

146.28

155.06

156.68

Sundry Debtors-D Total Curr. Assets

0.50

68.08 213.08

78.83 233.90

83.77 248.99

88.70 264.20

93.71 279.60

94.11 281.62

Sundry Creditors Total WC requirement

0.25

23.28

24.83

26.38

27.93

29.48

29.48

189.80

209.07

222.61

236.27

250.12

252.14

Bank Borrowing 135.54 148.92 158.58 168.34 178.22 179.69 Margin Money for WC 54.26 60.15 64.03 67.93 71.90 72.45 The total working capital requirement in the first year of operation will be Rs.189.80 lakhs and the same will be from bank borrowing of Rs. 134.54 lakhs land POP’s contribution towards margin of Rs. 54.26 lakhs Dynamic Agri & Foodbiz Consultants Pvt. Ltd

66

A Project Report on Potato Flakes Processing

9.1.9 Summary of Project Cost From the above cost components, the project cost has been summarized in table-39 below. Table 39- Project Cost Summary Cost Of Project Land and Site development Building Plant and Machinery --Imported --Indigenous Utilities Office equipments Contingencies @ 5% Preliminary and Pre-operative Total Cost of Project

Rs. Lakhs 243.60 227.25 1121.32 1021.32 100.00 218.00 17.50 79.20 57.68 1964.55

9.2 Means of Finance The project will be supported by APEDA under Infrastructure Development Scheme for Export Oriented Project subject to a limit of Rs.1000 lakhs. Under RKVY Scheme an assistance of Rs. 700 lakhs will be provided and remaining amount of Rs. 264.55 Lakhs will be funded by GAIC. Considering above the financial structuring of the project has been shown in Table-40. Table 40 - Means of Finance Particular Contribution from GoG RKVY Loan APEDA Assistance Total Means of Finance

Rs. Lakhs 264.55 700.00 1000.00 1964.55

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

67

A Project Report on Potato Flakes Processing

9.3 Profitability Analysis of the Project A detailed profitability analysis of the project has been done for a period of 6 years. The major assumptions underlying profitability analysis are given here under: 1. Capacity of the plant worked out on the basis of drying capacity of drum - 500 kgs /hours and 12 tons per day considering 285 working days it would work out to about 3420 tons. 2.

Projected sales estimated on the basis of growth, locational advantage for domestic and export markets as per the details are given in Table-31.

3. Input Output ratio considered 6.75 kgs potatoes per kg of flakes on the basis of process losses and dry matter content in the local varieties. It is possible to bring down the ratio to 6.50 kgs. potato /kg of flakes. 4. Price of potato flakes ex factory net of taxes Rs. 72 /kg in annually contracted sales( 10% of total sales), price of B2B sales is assumed as Rs.77/ kg ( 40% of total sales) and price of export sales is assumed as Rs.63/ kg (50% of total sales). The current market price is 1200-1250 USD / ton in neighbouring countries. The price in domestic market was in range of Rs.75 to Rs. 100 /kg in the year 2011. Current market price Rs. 75 to Rs.80 per kg., a low sales price assumed as entry strategy and achievement of good capacity utilisation. 5.

Purchase price of potato Rs. 5.86 per kg ex factory (weighted average annual price) as shown in Table-41 below.

Table-41 Months

Landed Cost Calculation Basic Price

January 4.50 February 4.00 March 3.50 April 3.50 May 3.50 June 3.50 July 3.50 August 3.50 September 3.50 October 3.50 November 3.50 December 3.50 Total Cost Average Price

Cost Bag

Freight to Cold store

Cold Store + CIPC Charges

0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.00

0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50

0.70 1.40 1.40 1.40 1.40 1.60 1.60 1.60 0.00

Freightto factory 1.00 0.70 0.50 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 2.00

Storage Losses

0.10 0.14 0.17 0.20 0.22 0.26 0.29 0.32 0.24

Total landed cost

Utilization Index

5.50 4.90 4.00 5.40 6.14 6.17 6.20 6.22 6.46 6.49 6.52 6.24 70.24

500 500 2100 2100 2100 1750 1750 1750 1650 1500 1500 500 17700

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

68

2750 2450 8400 11340 12894 10798 10850 10885 10659 9735 9780 3120 103661 5.86

A Project Report on Potato Flakes Processing

6. Ingredients added are Glycerol mono-palmitate/ stearate (0,1 - 0,5 % of dry matter). Anti-oxidant (Butyl 4 hydroxyanisol), (0,05 - 0,1 %, based on dry matter cooked potatoes). Citric acid/ ascorbine acid (0,1 - 0,2% of dry matter). Acid Sodium Pyro Phosphate (SAPP) (0,1 - 0,15 % based on cooked potatoes). Sulphite (SO2), 400 ppm max. on the basis of dried matter for the dryer. The cost is estimated at Rs. 1.50 /kg. 7. Packaging material - Bags 20 to 25 kg (pre-formed paper bags 3 or 4 layers with plastic liner; or woven bag with liner; or PE or PP bag; or bag made from tubular film PE / PP). The estimated cost is Rs. 1.00 per kg including printing and stitching etc. 8. Salary as per table-27 estimated manpower requirement with 15% annual increase. 9. Fuel (lignite or husk)as per consumption norms of boiler, estimated cost Rs. 7.00 per kg of flake. 10. Electricity consumption as per use of the installed capacity of motors and electricity installations. Electricity rate Rs. 5.5 /unit, estimated cost Rs. 1.5/kg. of flake. 11. Insurance of fixed asset and stock @ of 0.35% /year. 12. Interest rate & financial terms :- Working capital interest has been considered at 13.0% 13. 100% income tax exemption for first 5 years and 30% for next 5 years as per section 80ib

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

69

A Project Report on Potato Flakes Processing

9.4 Financial Indices The Project will be highly profitable as can be seen from the following financial indices 9.4.1 IRR Calculation The IRR for the proposed project has been worked out at 12.08% for 20 years operation. The IRR calculation is furnished in table-42 Table- 42 IRR Calculation IRR Calculation

Out Flow

Inflow -1964.55

1964.55 1

2014

243.32

243.32

2

2015

271.42

271.42

3

2016

280.32

280.32

4 5

2017 2018

284.60 290.26

284.60 290.26

6

2019

220.11

220.11

7

2020

220.11

220.11

8

2021

220.11

220.11

9

2022

220.11

220.11

10 11

2023 2024

220.11 220.11

220.11 220.11

12

2025

220.11

220.11

13

2026

220.11

220.11

14

2027

220.11

220.11

15

2028

220.11

220.11

16 17

2029 2030

220.11 220.11

220.11 220.11

18

2031

220.11

220.11

19

2032

220.11

220.11

20

2033

220.11

1626.52

IRR salvage value of Rs. 1406.41 lakhs is considered

12.08

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

70

A Project Report on Potato Flakes Processing

9.4.2 Payback Period The payback period of the project is approx Eight years as can be seen from the table-43 below. Table-43 Payback Period Calculation Year

Project Cost

Cumulative Cash Accruals

1964.55 1 2

2014

243.32

2015

514.74

3

2016

795.06

4

2017

1079.66

5

2018

1369.92

6

2019

1590.03

7 8

2020 2021

1810.14 2030.25

9.4.3 BEP Calculation The BEP and cash BEP in the first year comes at 39.09% 18.32% which is satisfactory. The calculation of breakeven point is furnished in table-45. Table- 39 BEP Calculation BEP Calculation

2014

2015

2016

2017

2018

2019

75% 1778.58

80% 1925.90

85% 2046.36

90% 2166.24

95% 2288.24

95% 2290.83

1014.60

1082.22

1149.85

1217.53

1285.16

1285.16

Other Ingredients Cost

38.48

41.04

43.61

46.17

48.74

48.74

Packaging Cost

25.65

27.36

29.07

30.78

32.49

32.49

Power Cost Fuel Cost Consumables Cost (Chemicals, Lubri., Det.)

38.48 179.55

41.04 191.52

43.61 203.49

46.17 215.46

48.74 227.43

48.74 227.43

12.83

13.68

14.54

15.39

16.25

16.25

Manpower Cost

101.22

111.34

122.47

134.72

148.19

163.01

Capacity Utilization Net Sales (A) Variable costs Raw Material Consumption

Marketing Exps Development of Backward Linkages

5.39

6.24

6.63

7.02

7.42

7.45

10.00

11.00

12.10

13.31

14.64

16.10

Repair & Maintance

16.63

18.29

20.12

22.13

24.34

26.77

Misc. Manufacturing Cost

5.00

5.50

6.05

6.66

7.33

8.06

Interest on working capital

8.81

19.36

20.62

21.88

23.17

23.36

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

71

A Project Report on Potato Flakes Processing

Provision for Taxation Total Variable Cost (B)

0.00

0.00

0.00

0.00

0.00

42.47

1456.64

1568.59

1672.16

1777.22

1883.90

1946.03

Fixed Costs General Admin Exps.

72.38

79.62

87.58

96.34

105.97

116.57

Insurance

6.24

6.27

6.30

8.08

8.11

8.12

Interest on Term loan

0.00

0.00

0.00

0.00

0.00

0.00

83.41

83.41

83.41

83.41

83.41

83.41

Amortization Total Fixed Cost ( C.)

5.77 167.80

5.77 175.07

5.77 183.06

5.77 193.60

5.77 203.26

5.77 213.87

Contribution (D=A-B)

321.94

357.31

374.20

389.02

404.34

344.80

BEP at Installed Capacity

39.09

39.20

41.58

44.79

47.76

58.93

Cash BEP at Installed Capacity

18.32

19.23

21.33

24.16

26.80

34.35

Depreciation

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

72

A Project Report on Potato Flakes Processing

Chapter-10 Socio-Economic Benefits of the Project The project will have tremendous socio-economic benefits some of which are highlighted below: Value addition to horticultural produce :- At present only 1-2% of fruits and vegetables produced in India are processed and value addition is very poor. Through this project not only potato will be conserved there will be opportunity for processing value added products like pre-mixes for Aloo Tikki, Samosa, Dosa etc. For the retail market medium sized potatoes are preferred and manufactures of wafers also prefer medium to large size (45 -70 mm) as a result small and extra large get sold at a very low price. This project will be using these types of potatoes and value addition will be substantial. Reduction in post-harvest losses:- Due to imbalance in production, storage and demand of potato the loses are sometime very high and price realization to farmer is very low. As per an estimate up to 15-20% of potato production is wasted as post harvest loss. After harvesting the surplus potato can be conserved in the form of potato flakes. The increase in processing will reduce post harvest losses and benefits to the economy. Creation of additional jobs:- The project will create 100 direct jobs in the manufacturing facility and many more indirect jobs will be created in storage and transportation of potatoes and trading of finished products. Stable and remunerative price to farmers:- At present there is a wide fluctuation in the prices of potatoes due to demand and supply factors. Particularly in the years of abundant production the prices crash due to lack of processing and storage facilities. This project will have facilities to process 22,000 tons of potatoes which will help in stabilisation of prices. About 1,000 farmers joining the contract farming programme will get insulated from the market fluctuation and risk and shall have benefit of remunerative as well as assured price. Export Earnings:- There will be additional export earnings of Rs.7.41 Crore in the first year and increasing to Rs.10.24 Crore in sixth year of project operation. The total export earnings during six years will be Rs.55.18 Crore. In view of such socio economic benefits of the projects it is hoped that APEDA would support this project.

Dynamic Agri & Foodbiz Consultants Pvt. Ltd

73