Download SMEDA Cold Storage (Fruit & Vegetable)...
Pre feasibility Study
COLD STORAGE (Fruit & Vegetable)
Small and Medium Enterprise Development Authority Government of Pakistan www.smeda.org.pk HEAD OFFICE Small and Medium Enterprise Development Authority, 6th Floor,LDA Plaza ,Egerton Road. Lahore, Pakistan Tel: 92-42-111-111-456 Fax: 92-42-6304926-7, Email:
[email protected]
REGIONAL OFFICE PUNJAB
REGIONAL OFFICE SINDH
REGIONAL OFFICE NWFP
REGIONAL OFFICE BALOCHISTAN
6th Floor,LDA Plaza ,Egerton Road. Lahore, Pakistan Tel: 92-42-111-111-456 Fax: 92-426304926-7, Email:
[email protected]
5th floor, Bahria Complex-II, Moulvi Tameezuddin Khan Road, Karachi Tel: 92-21-111-111-456, 5610432, 5610536, 5610459, Fax: 92-21-5610572. Email:
[email protected]
Ground Floor, State life Building, The Mall, Peshawar Cantt. Tel: 92-91-111-111-456, 92-919213046-7 Fax: 92-91-286908, Email:
[email protected]
Bunglow No.15-A Chaman Housing Scheme, Airport Road, Quetta Tel: 92-81-831702, 92-81831623 Fax: 92-81-831922, Email:
[email protected]
February, 2009
Pre feasibility Study
Cold Storage (Fruit & Vegetable)
TABLE OF CONTENT
1
INTRODUCTION TO SMEDA ......................................................................4
2
PURPOSE OF THE DOCUMENT .................................................................4
3
PROJECT PROFILE ......................................................................................4 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 3.13
PROJECT BRIEF ............................................................................................4 STORAGE OF POTATO ...................................................................................5 OPPORTUNITY RATIONALE ...........................................................................6 MARKET ENTRY TIMINGS.............................................................................7 PROPOSED LOCATION ...................................................................................7 PROPOSED BUSINESS LEGAL STATUS ............................................................7 LEGAL BENEFIT ............................................................................................7 PROPOSED CAPACITY ...................................................................................8 PROJECT INVESTMENT ..................................................................................8 PROPOSED PRODUCT MIX ..........................................................................8 RECOMMENDED PROJECT PARAMETERS .....................................................8 KEY SUCCESS FACTORS/ PRACTICAL TIPS FOR SUCCESS.............................8 STRATEGIC RECOMMENDATIONS ...............................................................9
4 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT.......................................................................................................9 4.1 SWOT ANALYSIS ........................................................................................9 4.1.1 Strengths and Opportunities..................................................................9 4.1.2 Weaknesses and Threats .......................................................................9 5
SECTOR & INDUSTRIAL ANALYSIS.......................................................10 5.1 5.2
6
GLOBAL PERSPECTIVE ................................................................................10 LOCAL PRESPECTIVE ..................................................................................12
MARKET INFORMATION .........................................................................13 6.1 6.2
7
MARKET POTENTIAL...................................................................................13 TARGET CUSTOMER .................................................................................... 13
COLD STORAGE TYPES AND INFRASTRUCTURE.............................. 14 7.1 7.2
TRADITIONAL TYPE COLD STORAGE ...........................................................14 PRE-FABRICATED COLD STORAGE ..............................................................15
8
PRODUCT PROCESS FLOW......................................................................16
9
HUMAN RESOURCE REQUIREMENTS ..................................................16
10
MACHINERY/EQUIPMENT DETAILS..................................................17
11
LAND AND BUILDING ............................................................................17 2
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Cold Storage (Fruit & Vegetable)
LAND...................................................................................................... 17 INFRASTRUCTURE REQUIREMENTS ...........................................................18 BUILDING LAYOUT ................................................................................. 18
PROJECT ECONIMICS ........................................................................... 19
12.1 12.2
PROJECT COSTS ......................................................................................19 ESTIMATED TIME FRAME FOR PROJECT COMPLETION ................................19
13
FINANCIAL ANALYSIS........................................................................... 20
14
KEY ASSUMPTIONS................................................................................23
14.1 14.2 14.3
CAPACITY ...............................................................................................23 OPERATIONAL CAPACITY ........................................................................ 23 REVENUE RELATES ASSUMPTION ............................................................ 23
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1 INTRODUCTION TO SMEDA The Small and Medium Enterprise Development Authority (SMEDA) was established with the objective to provide fresh impetus to the economy through the launch of an aggressive SME support program. Since its inception in October 1998, SMEDA had adopted a sectoral SME development approach. A few priority sectors were selected on the criterion of SME presence. In depth research was conducted and comprehensive development plans were formulated after identification of impediments and retardants. The all-encompassing sectoral development strategy involved recommending changes in the regulatory environment by taking into consideration other important aspects including financial aspects, niche marketing, technology upgradation and human resource development. SMEDA has so far successfully formulated strategies for sectors including, fruits and vegetables, marble and granite, gems and jewelry, marine fisheries, leather and footwear, textiles, surgical instruments, urban transport and dairy. Whereas the task of SME development at a broader scale still requires more coverage and enhanced reach in terms of SMEDA’s areas of operation. Along with the sectoral focus a broad spectrum of business development services is also offered to the SMEs by SMEDA. These services include identification of viable business opportunities for potential SME investors. In order to facilitate these investors, SMEDA provides business guidance through its help desk services as well as development of project specific documents. These documents consist of information required to make well-researched investment decisions. Pre-feasibility studies and business plan development are some of the services provided to enhance the capacity of individual SMEs to exploit viable business opportunities in a better way. This document is in the continuation of this effort to enable potential investors to make well-informed investment decisions.
2 PURPOSE OF THE DOCUMENT The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs in project identification for investment. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective, the document/study various aspects of project concept development, startup, and production, finance and business management.
3 PROJECT PROFILE 3. 1
Project Brief
All fruits and vegetables require specialized post harvest treatment, appropriate temperature and relative humidity for their storage. Establishment of cold storage provides refrigerated storage and preservation facilities for several fruits, vegetables & flowers. Because of technology advancements and logistic strategies, the cold storage of perishable items has become an important stage in the distribution between manufacturers/processors and retail locations. The cold storage will ensure the increased availability and improved quality of high value perishable fruits and 4
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vegetables for both export and local sale, which would otherwise perish or deteriorate. This project is designed for storing of potatoes and apples/ kinnu but it can be used to store multiple products, stored in different compartments of the unit, where relative temperatures for respective products can be maintained. The major clientele of this business will be the export houses and the local trading and marketing units of potato and apple/ kinnu. The project will further aim at storing fruits & vegetables even during off-seasons. The project will ultimately assist the clientele in maintaining market price equilibrium throughout the year for potatoes. 3. 2
Storage of Potato
The purpose of potato storage is to maintain tuber quality and provide a uniform flow of tubers to fresh market and processing plants round the year. Good storage should prevent excessive dehydration, decay and sprouting. It should also prevent high sugar concentrations which result in dark colored fried products. Following are the requisites for efficient potato storage: Adequate insulation Outside waterproofing Inside vapor proofing Ventilation Air distribution Adequate humidification Properly designed controls for precisely maintaining the storage atmosphere. Temperature, humidity, and air movement are the most important environmental factors affecting storability. Temperature requirements are determined by the intended use of the potatoes. Tubers should always be kept in the dark since very small amounts of light will gradually cause greening. Lights should not be used more than absolutely necessary. Surface greening is due to chlorophyll formation and is harmless. However, its presence in potatoes is undesirable because of marketing restrictions and the fact that at times an alkaloid called solanine increases with the chlorophyll. Solanine and other glycoalkaloids cause potatoes to have a bitter, undesirable flavor. Greening develops slowly in the light at 40F or below but develops rapidly at 68F. Potatoes are usually held in bulk piles 8 to 20 feet deep. Some are stored in pallet boxes for short periods. Pressure bruise and internal black spot are substantially lower with pallet storage but decay is often increased because of poor air circulation within boxes/bags. The proposed project contains racking system build up by using good quality steel and wooden logs. These racks provide space for placing the potato bags & apple/ kinnu crates with sufficient intra spaces for air circulation. Early harvested potatoes are usually stored only briefly if at all. Such tubers are quite perishable and damage easily because of immature skins. Early potatoes free from serious bruising and decay can sometimes be held 4 to 5 months at 40F for table use 5
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if they are cured 4 or 5 days at 55 to 65F to heal wounds before storage. However, early crops should usually be sold immediately because of poor storability and typically high early season prices. Most late potatoes are stored. Storage temperature depends on crop use. A relative humidity of 90 to 95% is typically recommended regardless of temperature regimes. 3. 3
Opportunity Rationale
Securing an adequate food supply has been the fundamental concern of mankind and so has been the preservation of food. The loss of food in the post-harvest system is not new; it has always been a problem for man, even in the highly scientific and technological world of today. Among all the major problems persistent in the world regarding the fulfillment of the basic needs of people, food requirement stands at the top, as without ensuring satisfactory diets, people cannot lead healthy and productive lives. In these present times of high population growth rates, food supply has become diminutive. For filling this gap between demand and supply, there is a need to conserve the food supply, in order to meet the growing and existing food requirements, especially fruits and vegetables, as these are more perishable. The problem related with food loss is more prevalent in the less developed world as compared to the developed world. The developed countries have curbed the loss of food to a great extent by adopting new technologies and ways of storing food. Some examples of such measures are adoption and development of better harvesting equipment; establishment of collection centers at strategic points in major crop producing areas; remodeling of containers to add more protection to the produce; and more importantly the development of commercial storage plants/cold storages. As far as the scenario of food losses in Pakistan is concerned, Pakistan produces a variety of fruits and vegetables like potato, apple, mangoes, dates, banana, cherries, apricots, pomegranates, peas, carrots, etc. Pakistan's total annual production of fruits amounts to nearly 6 million tons and that of vegetables to approximately 5.3 million tons. However, it is estimated that in Pakistan 25% of fruits & vegetables produced each year are lost because of poor harvest conditions. This loss if calculated approximately amounts to 2.7 million metric tons and its estimated local market value reaches somewhere near US $ 522 million. The major reasons for this loss are careless harvesting, rough handling, inadequate transportation, and storage facilities. If we only look at the losses due to lack of storage facilities, it alone reaches 1.24 million metric tons, which values to nearly US $ 239 million1. Furthermore, the purpose of storage of vegetables and fruits is to preserve and maintain the edible quality characteristics until they are consumed in the fresh state, which the cold storage serves.
1
Source: FBS and FAO 6
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Cold Storage (Fruit & Vegetable)
Market Entry Timings2
The harvest season for potato is from December to February and of apple is from July to November so the best time to enter in the cold storage business is December. 3. 5
Proposed Location
For retail sales, location of the cold storage must be near a major road, and the area must have adequate parking space. Proposed locations for cold storage could be from Kasur to Depalpur as potatoes are grown on this belt, apples are brought from Quetta & Kinnus are brought from Sargodha. Location of the cold storage should be done by keeping in view the following factors:
A cold storage facility must be in a well-drained area. It requires drains to remove water from condensation, and cleaning and sanitation operations. Providing good drainage is essential. Availability of water Availability of Electricity Three phase of electricity is necessary when more than 10 tons of refrigeration is needed. Wastewater disposal facility Appropriate sewage collection and disposal system must be considered.
If any of above facility is not available the arrangement for the same must be done prior to construction of cold store.3 3. 6
Proposed Business Legal Status
It is recommended that this project should be started as sole proprietorship or partnership. Moreover, less complications and costs are involved informing, administering and running the sole proprietorship or partnership business. The tax rate applicable for sole proprietorship is lower than private or public limited. Most of the cold storages in the country are operating as sole proprietorship or partnership basis. 3. 7
Legal benefit4
A scheme is launched by Trade Development Authority of Pakistan, it is called, Cool Chain and Cold Storage for horticulture Products will come into operation with immediate effect. Business concerns selected for financial assistance under this scheme will be allowed following incentives. Mark-up cost of loans obtained by business concerns for establishment of cool chain infra-structure will be picked-up by the Trade Development Authority of Pakistan through the Export Development Fund (EDF) up to a maximum of 8% or 50% (whichever is less).
2
Pakistan horticulture and export board, harvest calendar Pakistan horticulture and export board 4 Trade Development Authority of Pakistan 3
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Cold Storage (Fruit & Vegetable)
Proposed Capacity
The proposed cold storage facility has a maximum storage capacity of storing 60,000 bags of potato or 180,000 crates of apple at any given time. It will be operational for potato storing period from February to July and will be available for apple/ kinnu storage in December & January. It is also proposed that owner should maintain a stock of 7,200 bags of potato (15% of total capacity and keep on increasing the capacity by 5% uptil 30%) of his own that will earn extra profits in peak season and remaining 85% capacity will be utilized on rental basis. 3. 9
Project Investment
The proposed project of potato cold storage needs a capital investment of about Rs. 75,214,920, which includes Building (civil work), machinery, Insulation of Expanded Polystyrene (EPS or Thermopore) with Plaster layer, Racking and preoperational expenses of Rs. 2,908,000. Rs. 7,136,000 would be required as working capital and cash requirement for purchase of 7,200 potato bags. The total project cost amounts to Rs. 82,350,920. 3. 10
Proposed Product Mix
In the proposed cold storage there would be a capacity to store 60,000 bags of potato from February to July and 180,000 apple/kinnu crates would be stored in December & January. 3. 11
Recommended Project Parameters
Capacity 60,000 potato bags / 180,000 apple/ kinnu crates Project cost Rs. 82,350,920 3. 12
Human Resource 10 IRR 26.49%
Technology/ machinery Ammonia Gas Cold Store
NPV 54,529,922
Pay back period 4.69
Key Success Factors/ Practical Tips for Success
Following are some of the major factors, which contribute towards the success of the potato cold storage. Better insulation technology and compartmentalization of cold storage as compared to the rest of the cold storages in Pakistan. Energy efficient construction hence low operating/fuel costs due to efficient insulation. Compartmentalization i.e. compartments has the provision of storing different commodities at their respective temperatures.
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Strategic Recommendations It is recommended to develop a chain of dealers who put potato bags and apple/ kinnu crates on regular basis. The dealer deposits a guarantee in the shape of cash security, keeping in view the number of bags/ crates taken out from cold storage on agreed terms. In case the dealer is unable to pick the agreed number of bags/ crates on a particular day, the amount is deducted from his security. For earning higher profits it is recommended to the seller that he should send fruit & vegetable to Karachi, Lahore & Islamabad for sale.
CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT SWOT Analysis
4. 1
A SWOT Analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or business venture. Strengths and weaknesses are internal to the company whereas the opportunities and threats originate from the external environment. A SWOT analysis is usually performed early in the project development process, and helps organizations evaluate the environmental factors and internal situation facing a project. 4.1.1
4.1.2
Strengths and Opportunities Fairly good price. Use of machinary that is durable and fesible. Low operational cost because of energy efficient construction. Compartmentalization provide opportunity to store diferent commodities at their respective temperatures. Extend product range. By using effective marketing strategies cold storage business can attract more growers and traders. The establishment of wholesale market and cold storage facilities would enhance the pace and volumes of business by providing market place for commercial transactions for the domestic and international trade. Sufficient quality control and reduction of waste will directly enhance availability of the produce. Further, the cold storage facilities would result in supplies during off-season which otherwise may not be possible. Timely placement of products in the cold storage will help preserve their quality and improve shelf life. It will also avoid food contamination caused by microbial activity thus assuring availability of quality food products. Weaknesses and Threats Irregular government policies e.g., abnormal tax increase. Fluctuation or unexpected increase in electricity tariff. 9
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Failure of potato crops due to natural calamity. Ruthless competition by other business adversaries.
5 SECTOR & INDUSTRIAL ANALYSIS 5. 1
Global Perspective
Worldwide average food grain losses have been put at 5 percent. In the developed countries, losses have been generally at 1 percent while 10 to 30 percent losses have been reported for developing countries5. Increase need for potato cold storages is because of increase in the demand of potatoes through out the world. It is caused by following factors: Increase in purchasing power Increase in population. Mishandling and wastage of fruits & vegetables. The world potato sector is undergoing major changes. Until the early 1990s, most potatoes were grown and consumed in Europe, North America and countries of the former Soviet Union. Since then, there has been a dramatic increase in potato production and demand in Asia, Africa and Latin America, where output rose from less than 30 million tonnes in the early 1960s to more than 165 million tonnes in 2007. FAO data show that in 2005, for the first time, the developing world's potato production exceeded that of the developed world. China is now the biggest potato producer, and almost a third of all potatoes is harvested in China and India. Table 5-1: World potato production 1999-20076 1999
2001
2003 2005 Million tonnes
Countries Developed Developing World
165.93 135.15 301.08
166.93 145.92 312.85
160.97 152.11 313.08
159.97 160.01 319.98
2007 159.89 165.41 325.30
Table 5-2: Top potato producers, 20077 QUANTITIES (Tonnes) 72,040,000 36,784,200 26,280,000 20,373,267
China Russian fed. India United state 5
Trade Development Authority of Pakistan FAOSTAT 7 FAOSTAT 6
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Ukraine Poland Germany Belarus Netherlands France
19,102,300 11,791,072 11,643,769 8,743,976 7,200,000 6,271,000
Table 5-3: Potato production by region, 20078
Africa Asia / Oceania Europe Latin America North America World
Harvested area hecters 1,541,498 8,732,961 7,473,628 963,766 615,878 19,327,731
Quantity tonnes 16,706,573 137,343,664 130,223,960 15,682,943 25,345,305 325,382,445
Yeild Tonnes/hecters 10.8 15.7 17.4 16.3 41.2 16.8
Asia and Europe are the world's major potato producing regions, accounting for more than 80 percent of world production in 2007. While harvests in Africa and Latin America were far smaller, production was at or near record levels. North America was the clear leader in yields, at more than 40 tonnes per hectare. Table 5-4: Potato consumption by region, 20059 Population Africa Asia / Oceania Europe Latin America North America World
Consumption Total food (t) Kg per capita 12,571,000 13.9 94,038,000 23.9 64,902,000 87.8 11,639,000 20.7 19,824,000 60.0 282,974,000 31.3
904,388,000 3,934,644,000 739,203,000 562,270,000 330,400,000 6,484,792,000
Asia consumes almost half of the world's potato supply, but its huge population means that consumption per person was a modest 24 kg in 2005. The heartiest potato eaters are Europeans. Per capita consumption is lowest, but increasing, in Africa and Latin America. Asia and Oceania includes the world's potato giant, China, which accounts for more than 20 percent of both the global potato-growing area and the world potato harvest. Several other Asian countries - Bangladesh, India, the Islamic Republic of Iran, Japan and Turkey - also figure in the world's top 20 potato producing countries. 8 9
FAOSTAT FAOSTAT
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Some of the world's best yields are recorded in New Zealand - on average, around 50 tonnes per hectare. Total harvested area is 8 732 961 ha, total quantity produced is 137 343 664 t, yield 15.7 t/ha. Table 5-5: Asia’s top potato producers10 Sr.no. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 5. 2
Countries China India Islamic Rep. of Iran Bangladesh Turkey Japan Pakistan Kazakhistan Nepal Korea DPR
Local prespective
Although potato was grown on the Indian subcontinent from the late 16th or early 17th centuries, at Pakistan's foundation in 1947 cultivation was restricted to a few thousand hectares and total annual output was less than 30,000 tonnes. In the decades since independence, the aalu has become the country's fastest growing staple food crop. Thanks to strong gains in cultivated area and average yields - both made possible mainly by irrigation - output rose between 1995 and 2007 from one million to a record of more than 2.6 million tonnes. The lion's share of potato production comes from the Punjab, where spring and autumn crops account for 85 percent of the national harvest. Apart from some subsistence growers in the north, most Pakistani farmers produce for urban markets rather than household consumption, and the potato has become a significant source of rural income (worth some $300 million in 2005). At present, annual intake is around 11 kg per capita. In year 2007, Pakistan total harvested area is 131,900 ha, quantity produced is 2,622 300 t, yeild is 19.9 t/ha11. Approximately 12 percent of the 13.67 million tons of annual production of fruits and vegetables in the country is lost due to primitive and poor techniques of handling between farms and the end-consumers In Pakistan, out of 13.674 million tones of fruits and vegetables produced annually, it is estimated that about 35 to 40 percent are wasted. This wastage creates the demand for proper handling through cold storages12. 10
FAOSTAT FAOSTAT 12 Trade Development Authority of Pakistan 11
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There are total 533 cold storages in Pakistan which have installed capacity of 892,000 tons13 out of which 104 units of cold storage/ ice factory having installed capacity of 1,905,907 bags/ crates, 25,208 blocks/ day are in proposed location Okara.14 Table 5-6: cold storages in different provinces of Pakistan15 Provinces
No. of cold storages 503 16 12 2 533
Punjab NWFP Sindh Balochistan Total
6 MARKET INFORMATION 6. 1
Market potential
Most of the existing local Cold Storage’s are constructed on locally developed methods, which maintain a uniform temperature for all commodities stored. The goods are not stored at their recommended relative storage temperatures and life, and because of this the quality of stored commodity is badly affected. Potatoes require specialized post harvest treatment, appropriate temperature and relative humidity control for their proper & optimum storage, which most of the existing local cold stores lack. 6. 2
Target customer
Following are the potential customers of cold storage: Growers Traders Table 6-1: Major players of Lahore & surroundings16 Name Iqra cold storage Kisan cold storage Malik combine cold storage (Pvt) ltd.
Address Chun Group of Industries,Crol Ghaati,Bund Road,Lahore Plot No.07,Phalia Road , Mandi Bahauddin Near Mehmood Booti Chungi, Bund road, Lahore
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Dr. Khalid, Chairman of marketing & agri business, University of agriculture, FSD pre- investment study on Okara district 2006, directorate of industries Punjab, Lahore 15 Pakistan horticulture development & export beaurue 16 www.jamals.com , www.lcci.com.pk 14
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Rafiq cold storage Saudagar thermopole industries Roshan Rameeez cold storage Bao Mohammad Rafique cold storage The premier cold storage & general mills limited Zamindar cold storage Sarwar cold storage Tahir ice & cold storage Pvt Ltd. Haq cold storage (Pvt) ltd.
Fareed town, Sahiwal 49-A, Palace market,3-Cooper road, Lahore New fruit market, link Ravi road, Lahore Bogiwal road, Karool Ghati, near Bano road, Lahore 213-RB,Susan Road, Faisalabad Pasrur road, daska 8 Depalpur road, Bahadur pura, Kasur Badami bagh, Lahore 7-G, Fruit market, Ravi road, Lahore
Table 6-2: Major suppliers of machinery17 Name of Suppliers
Contact Person
Pakistan Air Conditioning Engineering Co. (Pvt) ltd.
M. Younas Qureshi (chief executive)
Dastgir engineering company
Mr. Taqi Raza
Address of Suppliers Gardee trust building, Naiper road, Lahore Factory: Bund road, Lahore Tel:7226261-7358497 12-A, Lahore road, near Jamia Manzoor ul Islamia, Saddar, Cantt, Lahore Tel: 6665140, 6665202
7 COLD STORAGE TYPES AND INFRASTRUCTURE There are two types of cold storages being used in Pakistan 1. Traditional type cold storage (Insulated brick walls) 2. Pre-fabricated cold storage (Walk in type) Traditional Type Cold Storage
7. 1
This type of cold storage is being used in many areas of Pakistan. The construction include following components:
17
Civil work Two types of building may be constructed depending on the external environmental temperature and product type. It might be double wall having 4-6 inch gap between two walls or single wall having 9 inch thickness.
www.jamals.com , www.lcci.com.pk
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Insulation The insulating material that is traditionally used is Expanded Poly-Styrene (Thermopore) having a thickness of 4-6 inches. A recent development in insulating material is Poly-Urethane. The later is 4-6 times efficient than the former.
Refrigeration system Two types of refrigeration systems are used depending on product type and cold storage area. a. Ammonia Based System This type of system is manufactured locally. After sale services and spare parts are readily available. This also contributes low capital investment. No need of highly skilled operators. b. Freeon Based System This system normally utilizes imported compressors. High initial cost and require highly skilled operator for smooth operation.
7. 2
Racking This includes combination of steel racks and wood logs etc. for storing of potato or any other products. Pre-Fabricated Cold Storage
This type of cold storage is being used for delicate products that are mainly focused for export purposes. Polyurethane injected panels are manufactured at factory and are fixed together at project site using panel locking system. This type of clod storage requires less civil work (only roof for low heights). The initial cost is higher than the traditional cold storage (more than double). This cold storage provides better hygienic environment for delicate food products and have easy future expansion feature. The cold storage building consists of Pre-fabricated refrigerated (Walk-in type) structure. This type of structure is highly superior to any form of refrigerated storage construction previously available in Pakistan due to its better technology and energy efficiency. Polyurethane insulated panels are used to erect the building because these panels are metal clad and can be easily dismantled for relocating the cold storage site. The cold storage building has a roof of insulated corrugated sheet of galvanized mild steel to protect it from direct sun and rain. The floor has a surface of polyurethane insulated galvanized steel material. The floor is strong enough to withstand the distributed load. An automatic monitoring system is installed in the storage compartments for maintaining relative humidity and temperature and to eliminate any chances of human error during the refrigeration period.
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8 PRODUCT PROCESS FLOW The working of the Cold Storage will be as follows: Potato Bags received from the customer
Receiving/ Conditioning Chamber
Commodities placed in storage compartments
Commodities Transported
Distribution/ Conditioning Chamber
9 HUMAN RESOURCE REQUIREMENTS The project would require following Human Resources/Staff: Table 9-1: Human Resource Requirement Designation Store Manager Shift In charge Plant Operator Accountant Security Guards Sweepers Total
No. of Employees 1 1 3 1 2 2 10
16
Monthly Salary (Rs.) 35,000 20,000 12,000 18,000 8,000 7,000
Annual Salary (Rs.) 420,000 240,000 432,000 216,000 192,000 168,000 1,668,000
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10 MACHINERY/EQUIPMENT DETAILS The type of equipment needed for the cold storage is as under: Table 10-1: Machinery & Equipment Required 1. Machinery (Ammonia Refrigeration System) Origin Power Cost 2. Steel Racks Steel (tons) Rate/ton Cost Rs. Wooden Ballay Labor Cost Sub Total 3. Insulation Area (Sq. ft) Insulation Rate Cost Mesh and Plaster rate Cost Sub Total
Option 1
Option 2
PAECO (Local) 200 HP 13,000,000
Grasso (Holland) 200 HP 20,000,000
180 70,000 12,600,000 6,500,000 1,000,000 20,100,000
180 70,000 12,600,000 5,100,000 1,000,000 18,700,000
Option 1 (Thermopore) 61,884 75 4,641,300 50 3,094,200 7,735,500
Option 2 (Polyurethane) 61,884 300 18,565,200 Not Required Not Required 18,565,200
3,000,000 43,835,500
3,000,000 60,265,200
4. Generator Total Plant & Machinery
Keeping in view the requirement and project cost option 1 has been selected for potato cold storage. The further calculations have been done accordingly.
11 L A N D A N D B U I L D I N G 11. 1
Land
It is recommended that the new storage facility site be located as close to the fields as possible, minimizing handling, preserving product quality and limiting transport costs. The site for proposed business place could be on Kasur to Depalpur belt. Approximately 1 Acre of land would be required for this cold storage. 17
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Cold Storage (Fruit & Vegetable)
Infrastructure requirements
The project will have the following infrastructure components: Table 11-1: Infrastructure Details Building
Area
Cold Storage Parking/Open Area Other construction (Boundary wall, Sub station, OH water tank, Generator Room, WAPDA meter room etc. Total Design & Consultancy Charges @ 3% Total Infrastructure Cost 11. 3
19,095 5,000
Rs. / Sq.ft. 1,200 200
1,000,000 24,095
Building Layout
The tentative lay out of the proposed building is as follows:
18
Total Cost (Rs.) 22,914,000 1,000,000
24,914,000 747,420 25,661,420
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12 PROJECT ECONIMICS 12. 1
Project Costs
The cost of the project will be as follows: Table 12-1: Project Cost Head Land Building Plant & Machinery Office Equipment Furniture & Fixture Pre operational expenses, Utilities Charges, & contingencies Total Assets Working Capital Working capital required for Salaries & other expenses Stock & Inventory Total Project Cost
Cost (Rs.) 2,650,000 25,661,420 43,835,500 100,000 60,000 2,908,000 75,214,920 656,000 6,480,000 82,350,920
Table 12-2: Project Returns IRR NPV Pay Back Period 12. 2
% Yrs
26.49 54,529,922 4.69
Estimated time frame for project Completion
The estimated time frame for the completion of the project is eight months.
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Pre feasibility Study
Cold Storage (Fruit & Vegetable)
13 FINANCIAL ANALYSIS Table 13-1: Income Statement PROJECTED INCOME STATEMENT Year 1 Revenue from Cold Storage Charges 9,792,000 Revenue from Sale of Potatos 12,960,000 Revenue from Apple / Kinnu 11,520,000 Total Sales 34,272,000 Cost of Goods Sold Cost of Potatos Purchased 6,480,000 Direct Labor 528,000 Utility Charges-Electricity Cost for 3,378,000 Total 10,386,000 Gross Profit 23,886,000 Operating Expenses Payroll Administration 1,668,000 Misc. (Maintenance, Telephone, Stationary300,000 etc.) Amortization pre Ops. Exp. 581,600 Promotional Expenses 68,544 Depreciation 6,988,692 Total 9,606,836 Operating Profit 14,279,164 Non Operating Expenses Financial Charges 7,041,004 Profit before Tax 7,238,160 Tax 1,809,540 Profit after Tax 5,428,620
Year 2 11,151,360 20,908,800 13,939,200 45,999,360
Year 3 12,414,600 31,036,500 16,552,800 60,003,900
Year 4 12,745,656 40,968,180 18,208,080 71,921,916
Year 5 14,020,222 45,064,998 20,028,888 79,114,108
Year 6 15,422,244 49,571,498 22,031,777 87,025,518
Year 7 16,964,468 54,528,648 24,234,954 95,728,070
Year 8 18,660,915 59,981,512 26,658,450 105,300,877
Year 9 20,527,006 65,979,664 29,324,295 115,830,965
Year 10 22,579,707 72,577,630 32,256,724 127,414,061
9,979,200 638,880 3,715,800 14,333,880 31,665,480
14,139,563 758,670 4,080,630 18,978,863 41,025,038
17,815,849 834,537 4,453,068 23,103,454 48,818,462
18,706,641 917,991 4,862,750 24,487,382 54,626,726
19,641,973 1,009,790 5,313,400 25,965,163 61,060,356
20,624,072 1,110,769 5,809,115 27,543,955 68,184,115
21,655,276 1,221,846 6,354,401 29,231,522 76,069,355
22,738,039 1,344,030 6,954,216 31,036,286 84,794,679
23,874,941 1,478,433 7,614,013 32,967,387 94,446,674
1,834,800 330,000 581,600 51,408 6,282,233 9,080,041 22,585,439
2,018,280 356,250 581,600 41,126 5,648,924 8,646,181 32,378,857
2,220,108 356,250 581,600 32,901 5,080,625 8,271,484 40,546,978
2,442,119 356,250 581,600 26,321 4,570,279 7,976,569 46,650,157
2,686,331 356,250
2,954,964 356,250
3,250,460 356,250
3,575,506 356,250
3,933,057 356,250
21,057 4,111,722 7,175,359 53,884,996
16,845 3,699,525 7,027,584 61,156,531
13,476 3,328,886 6,949,072 69,120,282
10,781 2,995,537 6,938,075 77,856,605
8,625 2,695,675 6,993,607 87,453,067
5,558,687 17,026,752 4,256,688 12,770,064
4,076,371 28,302,486 7,075,622 21,226,865
2,594,054 37,952,925 9,488,231 28,464,693
1,111,737 45,538,419 11,384,605 34,153,815
53,884,996 13,471,249 40,413,747
61,156,531 15,289,133 45,867,398
69,120,282 17,280,071 51,840,212
77,856,605 19,464,151 58,392,453
87,453,067 21,863,267 65,589,800
20
Pre feasibility Study
Cold Storage (Fruit & Vegetable)
Table 13-2: Balance Sheet Year 0 Current Assets Cash Balance Working capital required for Salaries & other expenses 656,000 Stock & Inventory 6,480,000 Receivable Total 7,136,000 Gross Fixed Assets Net Fixed Assets 72,306,920 Intangible Assets Pre-operational Expenses 2,908,000 Total 2,908,000 Total Assets 82,350,920 long term loan 41,175,460 Current Liabilities current portion of long term liability Accounts Payable Total 41,175,460 Equity Paid -up Capital 41,175,460 Retained Earnings Total 41,175,460 Total Liabilities And Equity 82,350,920
Year 1
Year 2
Year 3
4,530,220 721,600 6,804,000 816,000 12,871,820
15,930,515 791,510 7,144,200 929,280 24,795,505
35,247,110 858,786 7,501,410 1,034,550 44,641,856
65,318,228
59,035,995
2,326,400 2,326,400 80,516,448 24,705,276
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
61,213,717 932,790 7,876,481 1,062,138 71,085,125
91,836,496 1,014,194 8,270,305 1,168,352 102,289,346
135,882,371 1,103,738 8,683,820 1,285,187 146,955,115
184,935,400 1,202,237 9,118,011 1,413,706 196,669,353
239,553,558 1,310,585 9,573,911 1,555,076 251,993,131
300,350,577 1,429,769 10,052,607 1,710,584 313,543,537
369,562,668 10,555,237 1,881,642 381,999,548
53,387,071
48,306,446
43,736,167
39,624,445
35,924,920
32,596,034
29,600,497
26,904,821
1,744,800 1,744,800 85,576,300 16,470,184
1,163,200 1,163,200 99,192,127 8,235,092
581,600 581,600 119,973,172 -
146,025,513
186,579,560
232,594,273
284,589,165
343,144,033
408,904,369
8,235,092 972,000 33,912,368
8,235,092 1,496,880 26,202,156
8,235,092 2,120,934 18,591,118
8,235,092 2,672,377 10,907,469
2,805,996 2,805,996
2,946,296 2,946,296
3,093,611 3,093,611
3,248,291 3,248,291
3,410,706 3,410,706
3,581,241 3,581,241
41,175,460 5,428,620 46,604,080 80,516,448
41,175,460 18,198,684 59,374,144 85,576,300
41,175,460 39,425,549 80,601,009 99,192,127
41,175,460 67,890,242 109,065,702 119,973,172
41,175,460 102,044,057 143,219,517 146,025,513
41,175,460 142,457,804 183,633,264 186,579,560
41,175,460 188,325,202 229,500,662 232,594,273
41,175,460 240,165,414 281,340,874 284,589,165
41,175,460 298,557,867 339,733,327 343,144,033
41,175,460 364,147,668 405,323,128 408,904,369
21
Pre feasibility Study
Cold Storage (Fruit & Vegetable)
Table 13-3: Cash Flow Statement Year 0 Operating Activities Profit before tax Amortization of Preoperational Expenses (2,908,000) Working capital required for Salaries & other expenses (656,000) Depreciation Stock & Inventory (6,480,000) Account Receivable Account Payable Income tax paid Cash provided by operations (10,044,000) Financing Activities Share capital 41,175,460 Long term Loans 41,175,460 Cash Provided/Used for Financing Activities 82,350,920 Investing Activities Capital Expenditure (72,306,920) Cash Used Provided by Investing Activities (72,306,920) Net Cash inflow/(outflow) -
Year 1
Year 2
Year 3
Year 4
Year 5
7,238,160 581,600 (65,600) 6,988,692 (324,000) (816,000) 972,000 (1,809,540) 12,765,312
17,026,752 581,600 (69,910) 6,282,233 (340,200) (113,280) 524,880 (4,256,688) 19,635,387
28,302,486 581,600 (67,276) 5,648,924 (357,210) (105,270) 624,054 (7,075,622) 27,551,687
37,952,925 581,600 (74,004) 5,080,625 (375,071) (27,588) 551,443 (9,488,231) 34,201,699
45,538,419 581,600 (81,404) 4,570,279 (393,824) (106,214) 133,619 (11,384,605) 38,857,871
(8,235,092) (8,235,092)
(8,235,092) (8,235,092)
(8,235,092) (8,235,092)
(8,235,092) (8,235,092)
(8,235,092) (8,235,092)
4,530,220
11,400,295
19,316,595
25,966,607
30,622,779
22
Year 6 53,884,996 (89,544) 4,111,722 (413,515) (116,835) 140,300 (13,471,249) 44,045,874 44,045,874
Year 7 61,156,531 (98,499) 3,699,525 (434,191) (128,519) 147,315 (15,289,133) 49,053,029 49,053,029
Year 8 69,120,282 (108,349) 3,328,886 (455,901) (141,371) 154,681 (17,280,071) 54,618,159 54,618,159
Year 9 77,856,605 (119,184) 2,995,537 (478,696) (155,508) 162,415 (19,464,151) 60,797,019 60,797,019
Year 10 87,453,067 1,429,769 2,695,675 (502,630) (171,058) 170,535 (21,863,267) 69,212,091 69,212,091
Pre feasibility Study
Cold Storage (Fruit & Vegetable)
14 KEY ASSUMPTIONS 14. 1
Capacity Bags Bags Bags % age % age % age % age
Store's Capacity Capacity available on rental basis Stock of own purchased potatoes First Year Capacity for Potatoes (Rental) Percentage of own Potato Bags Annual Growth rate Maximum Capacity 14. 2
Operational Capacity Year-1
Operational Capacity (% age) Charges/Bag Operational Capacity (Rental Bags) Operational Capacity (Owned Bags) Operational Capacity (Crates)
14. 3
60,000 40,800 7,200 85.00% 15.00% 10.00% 95.00%
Year-2
Year-3
Year-4
Year-5
Year-6
Year-7
Year-8
Year-9
Year-10
88%
95%
95%
95%
95%
95%
95%
95%
95%
240 264 290 319 351 386 425 467 514 40,800 42,240 42,750 39,900 39,900 39,900 39,900 39,900 39,900
565 39,900
7,200 10,560 14,250 17,100 17,100 17,100 17,100 17,100 17,100
17,100
80%
144,000 158,400 171,000 171,000 171,000 171,000 171,000 171,000 171,000 171,000
Revenue Relates Assumption
Service Charges Per Bag Sale Price Growth Rate Sale Price of own Bag (120 kg)
Rs. 240 10% Rs.1,800
23
