COMMUNITY BASED LIVELIHOODS RECOVERY PROGRAM (CBLRP) FOR EARTHQUAKE AFFECTED AREAS OF AZAD JAMMU AND KASHMIR AND NWFP CBLRP-UNIDO

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1 COMMUNITY BASED LIVELIHOODS RECOVERY PROGRAM (CBLRP) FOR EARTHQUAKE AFFECTED AREAS OF AZAD JAMMU AND KASHMIR AND NWFP CBLRP-UNIDO INVESTMENT OPPORTUNITY PROFILE FOR ANIMAL FEED MILL IN NWFP SEPTEMBER 2007 SUBMITTED TO AYESHA KHAN CHIEF TECHNICAL ADVISOR Community Based Livelihood Recovery Program (CBLRP) United National industrial Development Organization (UNIDO) BY Sardar Shahid Farid Chartered Accountant Disclaimer All material included in this document is based on data/information gathered from various sources and certain assumption. Due care and diligence has been taken to compile this document. The document may contain human, mechanical error or non accuracy of the information at the source. No liability for error, or omission or unintentional misrepresentation will be accepted. We reserve the right to make correction and changes wherever desired in this document or its subsequent versions.

2 1. PROJECT EXECUTIVE SUMMARY 1.1 PROJECT BRIEF. The proposed project will be setup in Manshera and will be able to produce 1 ton of compound animal feed per hour and 25 Urea Molasses Block (UMB) per hour. This feed and UMB will be supplemented to livestock in addition to green fodder ad libitum (Freely available to animals) for high production. Different formulae may be used to prepare compound feed such as calf fattening formula and dairy animal formula etc. to facilitate the customers nationwide. The proposed business will be manufacturing compound animal feed and Urea Molasses Block (UMB) for meeting the demand of dairy and livestock farmers. The Rated plant capacity is 2,500 Tons of compound animal feed and 62,500 blocks of Urea molasses per annum working on 8 Hours single shift. The plant will operated in double shifts, producing 4,800 Tons of animal compound feed and 60,000 blocks of urea molasses. The total capital cost of the project is Rs 5,820, employees will be employed directly on the project. The civil works and installation of plant is estimated to complete in 06 months. 1.2 FINANCIAL SUMMARY Sales Rs 51Million Gross Profit Margin 18% Net Profit Margin 14% Internal Rate of Return 24% Net Present Value(14%) 1,486,532 Foreign collaboration sought Joint Venture Loan Market access Sub contracting Buy back arrangement Equipment purchase Management expertise Technical expertise Marketing expertise Technology transfer Joint R&D Other :- Studies Available Feasibility study Other Specify Project description Date: 25 October

3 2. PROJECT RATIONALE Livestock production is an integral part of Pakistan's agriculture sector and plays a vital role in national economy. At present, livestock is contributing about 49.1% to the agricultural sector and 11.4 per cent to the GDP. Its net foreign exchange earnings in were 53 billion, which is about 11 percent of the overall export earnings of the country. The role of livestock in rural economy may be assessed by the fact that 30 to 35 million of the total rural population is engaged in livestock farming, having 2 to 3 cattle/buffalo and 5 to 6 sheep/goats per family deriving 30 to 40 per cent of income from it.. In order of importance, the major feed resources are crop residues (46%), grazing (27%), cultivated fodder (19%), cereal/legume grains and by-products (6%) and oil cakes, meals and animal protein (2%). Most farmers (about 75%) have small land holdings on which most of the livestock population is concentrated. There appear to be deficiencies of 24% of the Total Digestible Nutrients (TDN) and 39.4% of Crude Protein (CP) requirements for livestock. There is a growing trend towards the establishment of more intensive dairy cattle and buffalo production systems in per-urban areas of Pakistan. Despite large increases in the ruminant population (62%) during the past 20 years, the land devoted to fodder crops has declined by about 17%, with a corresponding increase in land used for food grain production.. At present, Pakistan has 215 feed mills, but only few are preparing compound feed for livestock. Generally, mixed compound feeds are prepared at home by farmers. Feed accounts for almost 70% of total cost of production of milk or meat. Hence a balanced feed will positively affect milk and meat production of livestock. The agro industrial by products can be utilized in formulated compound feed. A large number of target populations are available in the area. There are no real competitors in the locality. 3. MARKET INFORMATION The size of this sector is still growing. Animal feed mills have been set up around the areas where the livestock are kept in abundance. Feed is a major cost (about 70%) in livestock and dairy farming. The processing and manufacturing of feed along with the efficient use of feed by cattle also contribute to the cost of feed. NWFP is a relatively poor province with average income levels estimated to be about 10% lower than the rest of country. The provincial economy is mostly agrarian with a limited industrial base. The Agriculture sector contributes 30% of GDP and out of this sub sector Livestock alone contributes 18% to GDP. The demand for compound feed and Urea Molasses Blocks (UMB) is increasing day by day with the increase in awareness among farmers. No animal feeds a mill is operating in the surrounding areas of the project, therefore it is obvious that the project shall yield better results. The trend for concentrate feeding to livestock is changing from the conventional concentrate feeding to a formulated compound feed. Nowadays, compound feed is used by many livestock and dairy farmers to get the maximum potential in terms of milk and meat. Compound feed and UMB are very beneficial as both provide all essential nutrients to the animal. 2

4 4. BUSINESS PLAN 4.1 Product sales The production is anticipated to sell as detailed in the table below. Product Annual quantity Rate Amount in Rs 4,800 Animal compound feed Ton 10,000 48,000,000 Urea Molasses Blocks 60,000 blocks 50 3,000,000 Total 51,000, Raw materials The main raw materials are Cottonseed cake, Maize grain, Corn gluten, Rice Polish, Wheat straw, Rice bran, Molasses Urea, Salt, DCP and Vegetable Oil all the ingredients of grain are locally available at low prices but some vitamins other ingredients will need to be imported. RAW MATERIAL REQUIREMENT 4.3 PRODUCT MANUFACTURING PROCESS The compound feed preparation process requires. a) High accuracy and precision of weighing b) feed ingredient handling and processing c) mixing d) packing e) labeling 3

5 Process Flow Diagram Compound Feed Process Flow of UBM 4.4 MARKETING CHANNELS Compound animal feed and UMB is used in all class of livestock throughout the year that the demand never gets affected with seasons. So the proposed business can be started at any time of the year. At the commencement of the proposed business, it is important that the entrepreneur must have good knowledge of the production and have contacts with the farmers. Following are some of the target clients for a manufacturer of compound feed.. Dairy farmers. Calf fattening farmers. Sheep farmers. Goat farmers Suggested marketing pattern should be as follows 4

6 4.5 HUMAN RESOURCE REQUIREMENT Following is the table showing the detailed, of Human resources required and their cost. 4.6 Project Financials Operational Data The plant is expected to attain 85% capacity in the first year, thereby increasing the capacity by 10 %. The detail of operating capacity is worked out is given below. Year 1 Year 2 Year 3 Year 4 Year 5 Capacity 85% 95% 100% 100% 100% Animal compound feed 4,080 4,560 4,800 4,800 4,800 Urea Molasses Blocks 51,000 57,000 60,000 60,000 60, Fixed Costs The fixed capital cost on the initial fixed assets is estimated as follows. (RUPEES) Land and Building 4,000,044 Plant and Machinery 1,010,100 Furniture and Fixture 70,000 Vehicles 650,000 Pre operating Expenses 40,000 Erection and Installation ( 5% of total machinery Cost) 50 50,505 Fixed Assets 5,820, Working capital Initial working capital to the amount of Rs 4,860,463 will be required for the project. Description Amount in Rs. First Three Months Salaries 135,000 Admin and Marketing expenses 72,463 Inventories raw material 4,463,000 Misc expenses 40,000 Cash balance required 150,000 Total 4,860,463 5

7 4.6.4 Overhead costs Following Overheads are assumed to occur in the first year of production. Admin and Marketing salaries 350,000 Travel and conveyance 45,000 Utilities 210,000 Misc Expenses 4,000 Total 609,000 6