SMEDA Cold Storage (Fruit & Vegetable)

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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: 111-111-456 Fax:

92-42-6304926-7, 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: 111-111-456, 92-91-9213046-7 Fax: 92-91-286908, Email:

[email protected]

Bunglow No.15-A Chaman Housing Scheme, Airport Road,

Quetta Tel: 831702, 92-81-831623 Fax: 92-81-831922, Email: [email protected] February, 2009

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TABLE OF CONTENT

1 INTRODUCTION TO SMEDA ...4

2 PURPOSE OF THE DOCUMENT ...4

3 PROJECT PROFILE ...4

3.1 PROJECT BRIEF...4

3.2 STORAGE OF POTATO...5

3.3 OPPORTUNITY RATIONALE... 6

3.4 MARKET ENTRY TIMINGS...7

3.5 PROPOSED LOCATION...7

3.6 PROPOSED BUSINESS LEGAL STATUS... 7

3.7 LEGAL BENEFIT...7

3.8 PROPOSED CAPACITY...8

3.9 PROJECT INVESTMENT...8

3.10 PROPOSED PRODUCT MIX...8

3.11 RECOMMENDED PROJECT PARAMETERS...8

3.12 KEY SUCCESS FACTORS/ PRACTICAL TIPS FOR SUCCESS...8

3.13 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 GLOBAL PERSPECTIVE... 10

5.2 LOCAL PRESPECTIVE...12

6 MARKET INFORMATION ...13

6.1 MARKET POTENTIAL... 13

6.2 TARGET CUSTOMER... 13

7 COLD STORAGE TYPES AND INFRASTRUCTURE... 14

7.1 TRADITIONAL TYPE COLD STORAGE... 14

7.2 PRE-FABRICATED COLD STORAGE... 15

8 PRODUCT PROCESS FLOW...16

9 HUMAN RESOURCE REQUIREMENTS ... 16

10 MACHINERY/EQUIPMENT DETAILS... 17

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3 11.1 LAND... 17 11.2 INFRASTRUCTURE REQUIREMENTS... 18 11.3 BUILDING LAYOUT... 18 12 PROJECT ECONIMICS ... 19 12.1 PROJECT COSTS... 19

12.2 ESTIMATED TIME FRAME FOR PROJECT COMPLETION... 19

13 FINANCIAL ANALYSIS... 20

14 KEY ASSUMPTIONS... 23

14.1 CAPACITY... 23

14.2 OPERATIONAL CAPACITY... 23

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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.

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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, start-up, and production, finance and business management.

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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

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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.

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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 40F or below but develops rapidly at 68F.

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 40F for table use

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if they are cured 4 or 5 days at 55 to 65F 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.

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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.

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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.

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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

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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.

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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).

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Pakistan horticulture and export board, harvest calendar

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Pakistan horticulture and export board

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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.

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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 pre-operational 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.

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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.

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Capacity Human Resource Technology/ machinery

60,000 potato bags / 180,000 apple/ kinnu

crates

10 Ammonia Gas Cold Store

Project cost IRR NPV Pay back period

Rs. 82,350,920 26.49% 54,529,922 4.69

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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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 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.

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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 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.

4.1.2 Weaknesses and Threats

 Irregular government policies e.g., abnormal tax increase.  Fluctuation or unexpected increase in electricity tariff.

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 Failure of potato crops due to natural calamity.  Ruthless competition by other business adversaries.

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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.

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1999 2001 2003 2005 2007

Countries Million tonnes

Developed 165.93 166.93 160.97 159.97 159.89 Developing 135.15 145.92 152.11 160.01 165.41 World 301.08 312.85 313.08 319.98 325.30 T Taabbllee55--22::TTooppppoottaattoopprroodduucceerrss,,2200007777 QUANTITIES (Tonnes) China 72,040,000 Russian fed. 36,784,200 India 26,280,000 United state 20,373,267 5

Trade Development Authority of Pakistan

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FAOSTAT

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11 Ukraine 19,102,300 Poland 11,791,072 Germany 11,643,769 Belarus 8,743,976 Netherlands 7,200,000 France 6,271,000 T Taabbllee55--33::PPoottaattoopprroodduuccttiioonnbbyyrreeggiioonn,,2200007788

Harvested area Quantity Yeild

hecters tonnes Tonnes/hecters Africa 1,541,498 16,706,573 10.8 Asia / Oceania 8,732,961 137,343,664 15.7 Europe 7,473,628 130,223,960 17.4 Latin America 963,766 15,682,943 16.3 North America 615,878 25,345,305 41.2 World 19,327,731 325,382,445 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.

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Population Consumption

Total food (t) Kg per capita Africa 904,388,000 12,571,000 13.9 Asia / Oceania 3,934,644,000 94,038,000 23.9 Europe 739,203,000 64,902,000 87.8 Latin America 562,270,000 11,639,000 20.7 North America 330,400,000 19,824,000 60.0 World 6,484,792,000 282,974,000 31.3

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.

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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. T Taabbllee55--55::AAssiiaa’’ssttooppppoottaattoopprroodduucceerrss1100 Sr.no. Countries 1. China 2. India

3. Islamic Rep. of Iran

4. Bangladesh 5. Turkey 6. Japan 7. Pakistan 8. Kazakhistan 9. Nepal 10. Korea DPR 5 5..22 LLooccaallpprreessppeeccttiivvee

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 11 FAOSTAT 12

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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

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Provinces No. of cold storages

Punjab 503 NWFP 16 Sindh 12 Balochistan 2 Total 533

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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.

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Following are the potential customers of cold storage:  Growers

 Traders

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Name Address

Iqra cold storage Chun Group of Industries,Crol Ghaati,Bund Road,Lahore

Kisan cold storage Plot No.07,Phalia Road , Mandi Bahauddin

Malik combine cold storage (Pvt) ltd. Near Mehmood Booti Chungi, Bund road, Lahore

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Dr. Khalid, Chairman of marketing & agri business, University of agriculture, FSD

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pre- investment study on Okara district 2006, directorate of industries Punjab, Lahore

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Pakistan horticulture development & export beaurue

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Rafiq cold storage Fareed town, Sahiwal

Saudagar thermopole industries 49-A, Palace market,3-Cooper road, Lahore

Roshan Rameeez cold storage New fruit market, link Ravi road, Lahore Bao Mohammad Rafique cold storage Bogiwal road, Karool Ghati, near Bano

road, Lahore The premier cold storage & general

mills limited

213-RB,Susan Road, Faisalabad Zamindar cold storage Pasrur road, daska

Sarwar cold storage 8 Depalpur road, Bahadur pura, Kasur Tahir ice & cold storage Pvt Ltd. Badami bagh, Lahore

Haq cold storage (Pvt) ltd. 7-G, Fruit market, Ravi road, Lahore

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Name of Suppliers Contact Person Address of Suppliers

Pakistan Air Conditioning Engineering Co. (Pvt) ltd.

M. Younas Qureshi (chief executive)

Gardee trust building, Naiper road, Lahore

Factory: Bund road, Lahore Tel:7226261-7358497 Dastgir engineering

company

Mr. Taqi Raza 12-A, Lahore road, near Jamia Manzoor ul Islamia, Saddar, Cantt, Lahore Tel: 6665140, 6665202

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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)

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This type of cold storage is being used in many areas of Pakistan. The construction include following components:

 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.

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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.

 Racking

This includes combination of steel racks and wood logs etc. for storing of potato or any other products.

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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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The working of the Cold Storage will be as follows:

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The project would require following Human Resources/Staff:

T Taabbllee99--11::HHuummaannRReessoouurrcceeRReeqquuiirreemmeenntt Designation No. of Employees Monthly Salary (Rs.) Annual Salary (Rs.) Store Manager 1 35,000 420,000 Shift In charge 1 20,000 240,000 Plant Operator 3 12,000 432,000 Accountant 1 18,000 216,000 Security Guards 2 8,000 192,000 Sweepers 2 7,000 168,000 Total 10 1,668,000

Potato Bags received from the customer

Receiving/ Conditioning Chamber Commodities placed in storage compartments Distribution/ Conditioning Chamber Commodities Transported

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The type of equipment needed for the cold storage is as under:

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1. Machinery (Ammonia

Refrigeration System)

Option 1 Option 2

Origin PAECO (Local) Grasso (Holland)

Power 200 HP 200 HP Cost 13,000,000 20,000,000 2. Steel Racks Steel (tons) 180 180 Rate/ton 70,000 70,000 Cost Rs. 12,600,000 12,600,000 Wooden Ballay 6,500,000 5,100,000 Labor Cost 1,000,000 1,000,000 Sub Total 20,100,000 18,700,000

3. Insulation Option 1 (Thermopore) Option 2 (Polyurethane)

Area (Sq. ft) 61,884 61,884

Insulation Rate 75 300

Cost 4,641,300 18,565,200

Mesh and Plaster rate 50 Not Required Cost 3,094,200 Not Required

Sub Total 7,735,500 18,565,200

4. Generator 3,000,000 3,000,000

Total Plant & Machinery

43,835,500 60,265,200

Keeping in view the requirement and project cost option 1 has been selected for potato cold storage. The further calculations have been done accordingly.

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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.

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The project will have the following infrastructure components:

T Taabbllee1111--11::IInnffrraassttrruuccttuurreeDDeettaaiillss Building Area Rs. / Sq.ft. Total Cost (Rs.) Cold Storage 19,095 1,200 22,914,000 Parking/Open Area 5,000 200 1,000,000 Other construction (Boundary wall, Sub

station, OH water tank, Generator Room, WAPDA meter room etc.

1,000,000

Total 24,095 24,914,000

Design & Consultancy Charges @ 3% 747,420

Total Infrastructure Cost 25,661,420

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The cost of the project will be as follows:

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Head Cost (Rs.)

Land 2,650,000

Building 25,661,420 Plant & Machinery 43,835,500 Office Equipment 100,000 Furniture & Fixture 60,000 Pre operational expenses, Utilities Charges, & contingencies 2,908,000

Total Assets 75,214,920

Working Capital

Working capital required for Salaries & other expenses 656,000 Stock & Inventory 6,480,000

Total Project Cost 82,350,920

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IRR % 26.49

NPV 54,529,922

Pay Back Period Yrs 4.69

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Table 13-1: Income Statement

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Revenue from Cold Storage Charges 9,792,000 11,151,360 12,414,600 12,745,656 14,020,222 15,422,244 16,964,468 18,660,915 20,527,006 22,579,707 Revenue from Sale of Potatos 12,960,000 20,908,800 31,036,500 40,968,180 45,064,998 49,571,498 54,528,648 59,981,512 65,979,664 72,577,630 Revenue from Apple / Kinnu 11,520,000 13,939,200 16,552,800 18,208,080 20,028,888 22,031,777 24,234,954 26,658,450 29,324,295 32,256,724 Total Sales 34,272,000 45,999,360 60,003,900 71,921,916 79,114,108 87,025,518 95,728,070 105,300,877 115,830,965 127,414,061 Cost of Goods Sold

Cost of Potatos Purchased 6,480,000 9,979,200 14,139,563 17,815,849 18,706,641 19,641,973 20,624,072 21,655,276 22,738,039 23,874,941 Direct Labor 528,000 638,880 758,670 834,537 917,991 1,009,790 1,110,769 1,221,846 1,344,030 1,478,433 Utility Charges-Electricity Cost for 3,378,000 3,715,800 4,080,630 4,453,068 4,862,750 5,313,400 5,809,115 6,354,401 6,954,216 7,614,013 Total 10,386,000 14,333,880 18,978,863 23,103,454 24,487,382 25,965,163 27,543,955 29,231,522 31,036,286 32,967,387 Gross Profit 23,886,000 31,665,480 41,025,038 48,818,462 54,626,726 61,060,356 68,184,115 76,069,355 84,794,679 94,446,674 Operating Expenses

Payroll Administration 1,668,000 1,834,800 2,018,280 2,220,108 2,442,119 2,686,331 2,954,964 3,250,460 3,575,506 3,933,057 Misc. (Maintenance, Telephone, Stationary etc.) 300,000 330,000 356,250 356,250 356,250 356,250 356,250 356,250 356,250 356,250 Amortization pre Ops. Exp. 581,600 581,600 581,600 581,600 581,600

Promotional Expenses 68,544 51,408 41,126 32,901 26,321 21,057 16,845 13,476 10,781 8,625 Depreciation 6,988,692 6,282,233 5,648,924 5,080,625 4,570,279 4,111,722 3,699,525 3,328,886 2,995,537 2,695,675 Total 9,606,836 9,080,041 8,646,181 8,271,484 7,976,569 7,175,359 7,027,584 6,949,072 6,938,075 6,993,607 Operating Profit 14,279,164 22,585,439 32,378,857 40,546,978 46,650,157 53,884,996 61,156,531 69,120,282 77,856,605 87,453,067 Non Operating Expenses

Financial Charges 7,041,004 5,558,687 4,076,371 2,594,054 1,111,737 - - - - -Profit before Tax 7,238,160 17,026,752 28,302,486 37,952,925 45,538,419 53,884,996 61,156,531 69,120,282 77,856,605 87,453,067

Tax 1,809,540 4,256,688 7,075,622 9,488,231 11,384,605 13,471,249 15,289,133 17,280,071 19,464,151 21,863,267 Profit after Tax 5,428,620 12,770,064 21,226,865 28,464,693 34,153,815 40,413,747 45,867,398 51,840,212 58,392,453 65,589,800 PROJECTED INCOME STATEMENT

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Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Current Assets

Cash Balance - 4,530,220 15,930,515 35,247,110 61,213,717 91,836,496 135,882,371 184,935,400 239,553,558 300,350,577 369,562,668 Working capital required for Salaries & other expenses 656,000 721,600 791,510 858,786 932,790 1,014,194 1,103,738 1,202,237 1,310,585 1,429,769 -Stock & Inventory 6,480,000 6,804,000 7,144,200 7,501,410 7,876,481 8,270,305 8,683,820 9,118,011 9,573,911 10,052,607 10,555,237 Receivable - 816,000 929,280 1,034,550 1,062,138 1,168,352 1,285,187 1,413,706 1,555,076 1,710,584 1,881,642

Total 7,136,000 12,871,820 24,795,505 44,641,856 71,085,125 102,289,346 146,955,115 196,669,353 251,993,131 313,543,537 381,999,548 Gross Fixed Assets

Net Fixed Assets 72,306,920 65,318,228 59,035,995 53,387,071 48,306,446 43,736,167 39,624,445 35,924,920 32,596,034 29,600,497 26,904,821 Intangible Assets

Pre-operational Expenses 2,908,000 2,326,400 1,744,800 1,163,200 581,600

-Total 2,908,000 2,326,400 1,744,800 1,163,200 581,600 - - - - - -Total Assets 82,350,920 80,516,448 85,576,300 99,192,127 119,973,172 146,025,513 186,579,560 232,594,273 284,589,165 343,144,033 408,904,369

long term loan 41,175,460 24,705,276 16,470,184 8,235,092

-Current Liabilities

current portion of long term liability - 8,235,092 8,235,092 8,235,092 8,235,092 - - - -Accounts Payable - 972,000 1,496,880 2,120,934 2,672,377 2,805,996 2,946,296 3,093,611 3,248,291 3,410,706 3,581,241

Total 41,175,460 33,912,368 26,202,156 18,591,118 10,907,469 2,805,996 2,946,296 3,093,611 3,248,291 3,410,706 3,581,241 Equity

Paid -up Capital 41,175,460 41,175,460 41,175,460 41,175,460 41,175,460 41,175,460 41,175,460 41,175,460 41,175,460 41,175,460 41,175,460 Retained Earnings - 5,428,620 18,198,684 39,425,549 67,890,242 102,044,057 142,457,804 188,325,202 240,165,414 298,557,867 364,147,668

Total 41,175,460 46,604,080 59,374,144 80,601,009 109,065,702 143,219,517 183,633,264 229,500,662 281,340,874 339,733,327 405,323,128 Total Liabilities And Equity 82,350,920 80,516,448 85,576,300 99,192,127 119,973,172 146,025,513 186,579,560 232,594,273 284,589,165 343,144,033 408,904,369

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Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Operating Activities

Profit before tax - 7,238,160 17,026,752 28,302,486 37,952,925 45,538,419 53,884,996 61,156,531 69,120,282 77,856,605 87,453,067 Amortization of Preoperational Expenses (2,908,000) 581,600 581,600 581,600 581,600 581,600 - - - - -Working capital required for Salaries & other expenses (656,000) (65,600) (69,910) (67,276) (74,004) (81,404) (89,544) (98,499) (108,349) (119,184) 1,429,769 Depreciation - 6,988,692 6,282,233 5,648,924 5,080,625 4,570,279 4,111,722 3,699,525 3,328,886 2,995,537 2,695,675 Stock & Inventory (6,480,000) (324,000) (340,200) (357,210) (375,071) (393,824) (413,515) (434,191) (455,901) (478,696) (502,630) Account Receivable - (816,000) (113,280) (105,270) (27,588) (106,214) (116,835) (128,519) (141,371) (155,508) (171,058) Account Payable - 972,000 524,880 624,054 551,443 133,619 140,300 147,315 154,681 162,415 170,535 Income tax paid - (1,809,540) (4,256,688) (7,075,622) (9,488,231) (11,384,605) (13,471,249) (15,289,133) (17,280,071) (19,464,151) (21,863,267)

Cash provided by operations (10,044,000) 12,765,312 19,635,387 27,551,687 34,201,699 38,857,871 44,045,874 49,053,029 54,618,159 60,797,019 69,212,091

Financing Activities

Share capital 41,175,460 - - - - - -Long term Loans 41,175,460 (8,235,092) (8,235,092) (8,235,092) (8,235,092) (8,235,092) - - - -

-Cash Provided/Used for Financing Activities 82,350,920 (8,235,092) (8,235,092) (8,235,092) (8,235,092) (8,235,092) - - - - -Investing Activities

Capital Expenditure (72,306,920) - - - - -

-Cash Used Provided by Investing Activities (72,306,920) - - - - - - - - - -Net Cash inflow/(outflow) - 4,530,220 11,400,295 19,316,595 25,966,607 30,622,779 44,045,874 49,053,029 54,618,159 60,797,019 69,212,091

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Store's Capacity Bags 60,000

Capacity available on rental basis Bags 40,800 Stock of own purchased potatoes Bags 7,200 First Year Capacity for Potatoes (Rental) % age 85.00% Percentage of own Potato Bags % age 15.00%

Annual Growth rate % age 10.00%

Maximum Capacity % age 95.00%

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Year-1 Year-2 Year-3 Year-4 Year-5 Year-6 Year-7 Year-8 Year-9 Year-10

Operational Capacity (% age) 80% 88% 95% 95% 95% 95% 95% 95% 95% 95% Charges/Bag 240 264 290 319 351 386 425 467 514 565 Operational Capacity (Rental Bags) 40,800 42,240 42,750 39,900 39,900 39,900 39,900 39,900 39,900 39,900 Operational Capacity (Owned Bags) 7,200 10,560 14,250 17,100 17,100 17,100 17,100 17,100 17,100 17,100 Operational Capacity (Crates) 144,000 158,400 171,000 171,000 171,000 171,000 171,000 171,000 171,000 171,000 1 144..33 RReevveennuueeRReellaatteessAAssssuummppttiioonn

Service Charges Per Bag Rs. 240

Sale Price Growth Rate 10%