COMPREHENSIVE PROJECT REPORT

ON
AGARBATTI INDUSTRY

Submitted for evaluation

At
The Faculty of Management Studies
Mody Institute of Technology & Science, Laxmangarh
(Sikar)
(Deemed university u/s 3 of the UGC Act, 1956)

SUBMITTED BY:

NEHA VERMA
Enrollment No.:- 080050
MBA- Semester IV

AUTHENTICATION CERTIFICATE

To Whom It May Concern

This is to certify that the comprehensive project report on

AGARBATTI INDUSTRY is a bonafide work carried
out by me.
The matter embodied in the comprehensive project report
has not been submitted earlier for award of any degree or
diploma to the best of my knowledge and belief.

Signature of the Promoter

Name of the Promoter
Date

FACULTY GUIDES CERTIFICATE

To Whom It May Concern
This is to certify that the Comprehensive project report on
AGARBATTI INDUSTRY submitted by Neha Verma
is a bonafide work carried out by her, under my guidance.
The matter embodies in this comprehensive project report
has not been submitted earlier for award of any degree or
diploma to the best of my knowledge and belief.

Signature of the Promoter

Signature of the guide

Name of the Promoter

Name of Faculty Guide

Date

ACKNOWLEDGEMENT

I would like to express my deepest gratitude to all the people, who have
helped me in the successful completion of the detailed project report.
I pay my heartiest thanks to Mr. Vishal Vyas, faculty FMS for his focused
guidance and strong support, without which I would not have been able to
accomplish the project successfully.
It is indeed my pleasure and privilege to thank all the manufacturers, dealers
and the retailers for helping me in revealing me the facts and figures about
the Agarbatti Industry. I also extend my thanks to them for helping me in
doing the market survey and filling in the true details in the questionnaires.
I am thankful to my Dean, Mr. Saroj Dutta and also owe sincere gratitude
towards him for giving me a chance to exploit my ability under his able
guidance.
Last but not the least; I extend my special thanks to all mighty and my
parents for this great success.

EXECUTIVE SUMMARY
It has been a good learning experience to do the detailed project reports on
setting up of the Agarbatti industry in the RIICO industrial area, Jaipur as a
part of my MBA program. The study has been made an attempt to gain
better understanding about how actually the manufacturing plant is set up.
Under this, at first I generated the product idea of Agarbatti Industry. The
main objective of the project is to the study the feasibility analysis of the
Agarbatti Industry.
Then the market analysis was done through the survey in form of
questionnaires and interviews of the, wholesalers and retailers. After this the
demand analysis was done by using the statistical techniques. With this the
demand estimation, the technical analysis was done.
After completing the technical analysis, the financial analysis was done to
check the financial feasibility of the project.
On the whole it was a wonderful experience & a great learning opportunity.
The complete project added to my theoretical knowledge.

TABLE OF CONTENTS
Promoters Idea

1.) Firm And Promoters

2.) Industry Scenario
3.) Introduction
4.) PORTERS Five Force
5.) SWOT Analysis of AGARBATTI INDUSTRY
6.) Market Analysis
a. Geographical Area
b. Objective of the survey
c. Methodology Adopted
d. Interpretations of questionnaire for wholesalers
e. Interpretations of questionnaire for retailers
7.)

Demand Analysis
a. Demand Estimation
b. Supply Estimation
c. Demand-Supply Gap Estimation
d. Marketing channel
e. Marketing Strategies

8.) Technical Analysis

a. Manufacturing Process
b. Process Flow Diagram
c. Selection of location
d. Plant and Machinery Required
e. Raw Material Required
f. Manpower Requirement
10.) Financial Analysis
a. Cost of the project & Means of Finance
b. Basic Assumptions underlying Financial Projections
11.) Bibliography

PROMOTERS IDEA
The idea of Agarbatti Manufacturing is my own and reasons for
choosing this are as follows
1. The growth rate of this industry is high i.e. 10%.
2. Consumption of Agarbatti is more.
3. New entrants can easily establish themselves in the market
because the % of unorganised sector is high.
Thus, taking all of the above factors into account the idea of Agarbatti
Manufacturing industry was generated.

FIRM AND PROMOTERS

Firm:The firm will be a proprietorship firm and will function from Jaipur under
the concerned persons name.

Location:-RIICO Jaipur.

Promoter:Decision for entrepreneurship is always promoted by 5 major reasons. They

are:-

Personal
Characteristics

Personal
Environment

Personal
Goals
Decision to Behave
Entrepreneurially

Business
Environment

Idea

Moreover, it is a Idea/Innovation that leads towards Entrepreneurship i.e.;

idea comes first and entrepreneurship follows afterwards.

INDUSTRY SCENARIO
Industrial development in India has occurred mostly to meet increasing urban
consumer needs and to support the growth of the vital agricultural sector. The
traditional home based enterprises have also been simultaneously experiencing steady
growth, primarily because of the influence of market forces and also because of
multiplier effects. Cottage industries have slowly changed to rural cottage or semiurban micro-enterprises with limited assistance from government. Agarbatti making is
one such industry. It has responded well to increased demand for its products both in
rural and urban areas, mainly because of the continued availability of cheap labour
force dominated by women and children. At the same time, greater advertising costs
and quality improvement have pushed up the prices.

INTRODUCTION
Agarbatti (incense sticks) form part and parcel of the traditional Hindu practice of
offering prayers in temples and other places of worship. In modern days, perfumed
sticks are also used in houses and in other public places as air-fresheners and/or
mosquito repellents. The demand for agarbatti is increasing both in the domestic and
export markets because of the improvement in quality and increase in the types of
products. India is the largest producer of agarbatti in the world.

History
The origin of agarbatti-making as a cottage industry can be traced to Thanjavur region
of TamilNadu from where it spread to the neighbouring state of Karnataka, which
currently is the largest producer in India, and to a lesser extent to Andhra Pradesh,
Gujarat and Bihar. Besides providing employment to unskilled women and children,
in recent years, agarbatti has increasingly become a significant foreign exchange
earner for the country. Under the liberal economic policies of the Government, the
agarbatti industry has potential to expand its global market.

INDIAN SCENARIO
Agarbatti industry is gradually developing a wider base. Of the total domestic sales of
Rs 7.1 billion (approx. US$ 198 million) in 1989/90, South India accounted for 35%,
West 30%, North 18% and East 17%. Almost two-thirds of consumption took place in
rural areas (61.23%). The poor (low-income group) purchases about 46% of the value

of the agarbatti compared with the higher income customers who buy 54%. However,
categorizing purchases into five income classes shows an inverse relationship between
income and the purchase of agarbatti. The factors influencing purchasing decisions
are: the quality, brand name preference and cost.
Rising demand for the products and earning of hard currency has led the agarbatti
industry to orient itself increasingly towards exports. Total exports have increased by
266%, from Rs 1.5 billion (approx. US$ 42 million) in 1989-90 to Rs 4 billion
(approx. US$ ll2 million) in 1993-94. More than 800 registered and 3000 unregistered
units currently exist in the country and only up to 10% of these, mostly in Karnataka,
are engaged in export trade.

CHARACTERISTICS
The agarbatti industry in India operates in the informal sector. The enterprises are
located both in rural and urban areas. The labour force engaged is largely unorganized,
although some workers, especially those working for large establishments and
particularly in Bangalore, receive some of the social security benefits enjoyed by their
counterparts in organized private undertakings. Manufacturing is done on a piece-meal
basis, with individual families being contracted to assemble agarbatti sticks being the
most common mode.

RAW MATERIALS AND SOURCES

The major raw materials used in the agarbatti industry are:
Bamboo sticks

wood charcoal

processed perfumes

jigat powder (an adhesive-like substance made from powdered bark of

the Maclilus makarantha tree)

These are collected through contract labour system, which is widespread in the
unorganized sector and leads to wide differences in wages because of the differences
in minimum wage that exist among different states. Moreover, since families are
contracted and agarbatti workers in these families are mostly women, some child
labour input occurs, mainly to assist the family business.

Bamboo is the preferred species for making sticks, but timber from several other
species are used as substitute. In 1989-90, the preparation of the sticks alone involved
about 30 million workdays. "Rolling" the sticks to glue on the incense paste and
incorporate charcoal powder (the end-product of rolling is "non-masala" sticks) also
employs a large labour force. The raw materials - sticks, paste and charcoal - are
provided by entrepreneurs and the rolling is done largely at home. Rolled sticks
are purchased in units of 1000.
Addition of the incense, to make "masala" agarbatties is usually done in factories
owned by microenterprises. The ratio of labour is approximately 80% home based to
20% factory based. Home based labourers are linked to factories through local
business units.
Finished agarbattis are packed in paper or cardboard tubes. Usually paper from
printing presses or cardboard is supplied to labourers under tie-up arrangements to
produce the requisite packaging.
Previously, bamboo required for making the sticks was available from the Western
Ghats. Currently, most of it comes from North-East India. MacliIus makarantha, the
source for Jigat is rapidly decreasing in South India (where main manufacturing sites
of agarbattis are located) and is increasingly being obtained from the northern states
such as Uttar Pradesh. Charcoal is largely from Prosopis juliflora, which mostly
comes from Tamil Nadu.
The cost of these basic ingredients and the labour to produce the raw agarbattis accounts
for only 10% of the cost of finished agarbattis. Three times that cost represents the
perfumery ingredients of which two-thirds are imported. The various blending and
individual ingredients are generally treated as "trade secrets".

PRODUCTION AND CONSUMPTION PATTERNS

A market survey by the National Council of Applied Economic Research (NCAER)
put the total quantity of agarbatti produced in the country at 147 billion sticks, valued
at around Rs. 7 billion (US$ 196 million) (NCAER 1990). The distribution of the
consumption is skewed in favour of the lower income group, which earns less than Rs
25,000 (US$ 700) per year but consumes a little over two-thirds of the production.

The highest income group, with above Rs, 56,000 (US$1,570) of annual income,
purchases only 3% of the production.

COST STRUCTURE
There are two stages involved in the production of agarbatti. One stage involves the
production of non-perfumed (non-masala) agarbatti, and the second entails the
production of perfumed (masala) agarbatti. The costs of production can also be
disaggregated by these two stages as labour costs are significantly different in these
two stages.
Non-perfumed agarbattis are generally produced at home through the family contract
system and take up to 80% of the total labour required; its share in the total production
cost, however, is about 10% in preparing raw agarbattis. The addition of perfumes is
carried out in factories and takes about 20% of the total workdays required for the
production and, along with packaging, accounts for about 60% of the production cost.
Another 20% of the cost is incurred in marketing.

EMPLOYMENT SPECTRUM
Agarbatti manufacturing is classified as a small-scale industry. Although there are
bureaucratic hurdles that investors have to go through - such, as the procedures for
getting licenses and tax benefits - the low capital requirement and simple technology that
characterize this industry make it easy to establish units in rural or semi-urban areas. It is
a highly labour-intensive industry and is estimated to be directly engaging about 500,000
people, mostly women and children.

The packaging and processing are particularly suitable to women and unemployed in
both rural and urban areas since these provide opportunities for labourers seeking selfemployment and piece-meal work. While adult labourers earn Rs 70 - l00/day,
children earn Rs 30 to 50/day depending on the time spent and their efficiency.

MAJOR PROBLEMS FACED BY THE INDUSTRY

Demand for agarbatti sticks is continuously increasing both in domestic and export
sectors. With the gradual abolition of license and permit systems under the new
economic liberalization policy of the state and central governments, the future
prospect for growth and diversification of the industry looks bright. According to a
rough estimate, the US market alone is worth $200 million.
The problems and constraints faced by the industry are related to the following:
1.

Raw materials

2. Institutional and policy aspects

3. Advertising and marketing costs
1. RAW MATERIAL
Raw materials are getting scarce and distances involved in transportation are
increasing, thus raising the total cost of production. Currently, bamboo comes mostly
from North-East India and as a result, the wholesale and retail prices of bamboo culms
are rising. Similarly jigat and charcoal are becoming scantier, and hence costlier, as
traditional and local sources are fast drying up.
2. INSTITUTIONAL AND POLICY ASPECTS

Policy issues

Taxes on manufacturing establishments are arbitrary, and small manufacturers are

frequently harassed and penalized by the authorities. Taxation is done on an ad hoc
basis: not only is there a sales tax on the finished product, but most of the raw

materials are also taxed. The burden of taxation is more telling in the case of
perfumes, which are imported.

Labour shortage

Shortage of labour, specifically shortage of workers with experience in the industry, is

hampering further development of the agarbatti industry towards improved quality
and export growth.

Child labour

The issue of child labour in the industry needs to be firmly addressed. A large number
of children work full- or part-time in the industry to supplement their familys income.
International opinion and norms strongly discourage international trade in products
manufactured using child labour.
3. ADVERTISING AND MARKETING COSTS
Agarbatti producers are getting lower returns on their investment owing to their
complete dependence on middlemen and wholesalers for marketing. Often 60-70% of
the total cost can be due to transportation, marketing and advertising, and retailers are
completely at the mercy of agents and wholesalers. Continuously increasing transport
costs are especially cutting into profit margins. Means of controlling such costs are
lacking because of the non-existence of cooperatives or an effective association of the
agarbatti manufacturers.

PORTERS FIVE-FORCE MODEL

Rivalry among major competitors
Numerous competitors:
The competition is very high in the industry and many balanced competitors are present in
the industry. Because of which the industry concentration ratio is low.
The major players are:
Cycle brand
Mangaldeep
Z-black
Parnami
Joie
Danim
Price war is there among the competitors to attract customers. They market their products,
give emphasis on advertising, details of all the existing products are available on their sites
on internet even the details of upcoming products are also there.
Among the above given competitors Some brand is the leading one due to following
reasons:

High level of creativity

Stringent quality control

In-house blending

Continuous research and development

Exceptional goodwill generated among trade

Consistent emphasis on relationship building

Ethical practices

Industry growth:

The industry growth is high even the multinational companies are turning towards this
business seeing the demand of product (agarbattis) in domestic and international
market. As an example ITC forayed into agarbatti business.

Storage costs:

The product once produced is not difficult to store. The storage cost is not high as the
product is not vulnerable.

Switching cost:

There is no or very low switching cost which makes the competition more intense.

Bargaining power of suppliers

The natural materials are used in agarbatti making. There are numerous
suppliers of these raw materials so if the supplier charge high prices
company can switch over to other suppliers so the bargaining power of
suppliers is low.

Importance of industry: agarbatti industry is very important or can say main

customer for the suppliers of these raw materials.

The companies purchase the raw materials in bulk which increases the
importance of buyers as for these suppliers this industry is the main
customer of their raw materials.

The purchase of these raw materials represents the significant fraction of the
buyers cost as they are the main constituents of incense stick(agarbatti). So
the buyers are price sensitive.

These raw materials are undifferentiated and can be purchased easily from
other suppliers.

The buyers generally have the full information about demand, actual market
prices and suppliers cost. This make the buyer(agarbatti industry) to ensure
that it get the raw material in most favorable prices.

This clearly shows that the bargaining power of suppliers is low.

Bargaining power of buyers

In an organized sector the companies provide profit margins to their retailers these margins
are according to their cost of production some provide more margin and some players
provide less margin but this also differentiate their quality. For example Cycle brand gives
less margin to their retailers but they dont compromise on quality which differentiate their
product and makes loyal customers.
In this industry there is no bargaining power of buyers.

Threat of substitutes
The substitutes of agarbatti are:
1- Dhoop, it is a very strong substitute of incense stick. In man temples dhoop is used
instead of agarbatti. Dhoop is also not a very costly product it prices more or less
same as agarbatti. So it is easy for it to replace agarbatti.

2- Air freshners, Room deodorizers, Coils, Magical charcoal tablets, Aroma candles.
As incense sticks are also used to fresh the air in rooms and other places, to avoid
mosquitoes at home etc for such purposes these substitutes can be used but they are not
very strong substitute of incense stick(agarbatti) because in worship and prayers only
agarbatti is used.

Threat of new entrants

It is a small scale industry, low investment is required, suppliers of raw materials are easily
accessible. There is no or very low switching cost.
There is a product differentiation in organized sector which forms only 20% of the industry
and rest is unorganized sector in which there no differentiation of the product they are more
or less similar.
The firms which are registered and work at some average level are taxable otherwise the
small players in the industry are non-taxable which makes the new entrants easier to enter.
National and Multinational companies are also seeing the opportunities in the industry as
the demand of agarbattis are increasing in domestic and international market.

The Future
Customs in incense manufacture have changed little over the centuries except in the
range of fragrances offered. In ancient times, only naturally fragrant resins or woods
like sandalwood and patchouli were used for incense. Modern fragrance production
allows virtually any scent to be duplicated, and fragrances are available now that
couldn't be offered before. Examples include green tea, candy cane, blueberry,
pumpkin pie, and gingerbread incense.
The custom of use of incense is also likely to change in the future and in Western
culture. In India, two or three sticks of incense may be burned every day in a typical
home, while, in the United States, users of incense may only burn one stick a week.

Incense-makers hope the variety, effectiveness, and low cost of incense sticks will
make them more popular than air fresheners and room deodorizers made with
artificial perfumes. Also, the popularity of meditation and aromatherapy have spurred
incense sales among clients who want their rare moments of quiet and relaxation to be
healing and beautifully scented.

SWOT Analysis of Agarbatti Industry

STRENGTHS

Large & growing domestic Agarbatti market

Up to date research on New Fragrance

Low cost of raw material both wood and non-wood

WEAKNESS

Small industry structure

Low level of internalization of the industry

OPPORTUNITIES

Enormous domestic market potential

Low labor costs which allows cost effective sorting of imported mixed

waste

Export potential

THREATS

Decline in quality due to environmental pressures

Short term planning for raw material

MARKET ANALYSIS
Geographical Area
Geographical area is Jaipur and Sikar as the product is to be launched in the RIICO, Jaipur.

Objectives of Survey:
Demand analysis.
Demand estimation.
Forecasting demand.
Competitors details.

Source of Information Collection: Primary (Market Survey)

Methodology Adopted
1.

Defining target population- Randomly almost all types of retailers and

wholeseller are covered.

2. Selecting the sample

Convenience sampling

Considering the nature of all retailers in targeted belt as same of those covered for
survey in Jaipur and Sikar survey is done.

3. Sample Size:
50-Retailer , 11- wholesellers.

4.

Research Tool: Questionnaire has been used as the research tool for the
study.In all two questionnaires are prepared. One for the retailers and another for
wholesalers. Developed questionnaire has both open and close ended questions .
Language used in the questionnaire is very simple and no jargons are used.
Questions are framed considering the need of information as previously mention
included.

ANALYSIS OF THE QUESTIONNAIRES

WHOLESELLER

Q1: What is the ratio of sales?

a) Branded
b) Unbranded

M a r k e t Pa tte r n

36%

64%

B ra n d e d U n b ra n d e d

Interpretation:

Unbranded player cover the large % of market. There is a less % of Branded player in the
market. Unbranded and local player cover the 64% market. So in this industry local
manufactures are the key player.

Q2: How much quantity you sell?

a) Monthly
b) Weekly
Interpretation:
After doing the market survey we found that they sold 80,000/ - packets
Monthly. Means they sold approx 5-6 kg .

Q3: Does co. provide any promotional scheme?

a) Gifts
b) Commission
c) Discount
d) Other
Company Trend

0%

9%
9%

82%

Gifts

Commission

Discount

Other

Interpretation:
The co. offers the discount scheme to wholeseller mostly, then they offer
the commission to wholeseller.

Q4: What margin you get (in %) ---------Margin

1. Branded
2. Unbranded
Interpretation:
After doing the market survey we found that the wholeseller get the 10-20%
margin on branded agarbatti and 8-5% margin on local agarbatti.
Q5: Do you get any credit facility from manufacturer?
a) Yes
b) No
Credit facility
Yes

0%

100%

No

Interpretation:
After doing the market survey we found that the maximum manufacturer
give the credit facility to wholeseller of 7 days.

Q6: How often you order the stock?

a )Monthly
b )Weekely
9%

Monthly
W eelky

91%

Interpretation
The wholeseller ordered the stock monthly to manufacturer in bulk.

RETAILER QUESTIONNAIRE

Q1: From which sources you purchase?

a) Manufacturer
b) Whole seller
c) Distributor

Sources of Purchase
14%
30%

56%
Manufacturer

Wholeseller

Distributor

Interpretation
Out of 50 retailers 56% said that they purchase agarbatti from whole seller 30% told
that they purchase from Manufacturer and only 14% said they purchase from distributors.
Mean wholeseller plays the main role. This shows that maximum retailers prefer to buy
stock directly from the wholesalers .

Q2: From which place did you get the supply of agarbatti?
a) From Rajasthan
b) Out of Rajasthan

supply
Out of Rajasthan

From rajasthan

36%

64%

Interpretation
In Jaipur and Sikar market the 62% supply of agarbatti is out of Rajasthan and 38%
market is covered by the manufacturer outside the Rajasthan. This shows that maximum
supply is done , out of Rajasthan.

Q3: Do you receive any credit facility from manufacturer or wholeseller?

Credit Facility
7 days

15 days

30 days

5%
20%

75%

Interpretation
75% retailers got the credit facility of 7 days, and 20% found the credit facility of 15 days
and 5% retailer 30 days. This shows that retailers get the credit facility of 7 days.

Q4: What promotion schemes are offered to you?

a) Commission
b) Gifts
c) Discount
Schemes offered

18%

10%

Comision
Gifts
Discount

72%

Interpretation
Most of the retailers get the discount schemes from the wholeseller side and only 10%get
the gifts, like pen stationary and 18% get the commission.

Q5: How frequently you order

a) Weekly
b) Monthly
stock order
Weekly

Monthly

20%

80%

Interpretation:
The retailer ordered the stock from the wholesaler, weekly as per the
demand they purchased the stock .

Q6: What is the most preferred price range?

a) Rs 5-10
b) Rs 10-15
c) Rs 15-20
d) more than 20
Price Preferred

4%
16%

24%
Rs 5-10
Rs10-15
Rs 15-20
Rs 20 and above

56%

Interpretation:
The most preferred price range is Rs 10-15,56% customer prefer the range
between 10- 15.

Q7: What do customer look for while purchasing agarbatti?

a) Price
b) Brand
c) Fragrance
d) Packaging

20
18
16
14
12
10
8
6
4
2
0
Series1

Price

Brand

Pack aging

Fragrance

12

20

Interpretation
As the survey conducted , I have asked the retailer to rate the customers
look most while purchasing agarbatti from them. So 20 retailer ranked 1st to

fragrance , 12 retailers ranked 2nd to brand , and 9 retailer ranked the 3rd both
price and packaging.
\

Q8: Customer purchase agarbatti?

a) Monthly
b) Weekly

Purchasing Pattern

20%

Monthly
Weekly

80%

Interpretation

Customer purchases the agarbatti from the retailer on monthly basis only 20% customer
purchase the agarbatti on weekly basis. This shows customer like to purchase agarbatti
monthly.

Q9: What margin you get?

a) On Branded
b) On Unbranded
Interpretation
From the survey it was found that retailers get the 5-6% margin in branded agarbatti and
10-20% margin in unbranded agarbatti.

Q10: Which fragrance of agarbatti is preferred most?

a) Rose
b) Chandan
c) Kevara

d) Others
P R EFFER ED FR AGR AN C E
6%
2%

Rose
Chandan

32%

K evara
60%

Others

Interpretation
Most of the retailer preferred rose agarbatti .it is most preferred by the customers, the ratio
is 60%.Then they purchase chandan agarbatti. Only 6%customer not think about the
fragrance at the purchasing time.

MARKETING CHANNEL
Most producers do not sell their goods directly to the final users; between them stands a set
of intermediaries performing a variety of functions. These intermediaries constitute a
marketing channel. The marketing channels just not only serve the markets but they also
make markets.
A new firm typically starts as a local operation selling in a limited market, using existing
intermediaries. Thus, the channel system evolves in response to local opportunities and
conditions.

Currently, the existing marketing channel of the Agarbatti manufactures is as follows:-

Manufacturers

Wholesalers

Retailers

End User

MARKETING STRATEGIES

In order to differentiate the product and capture the existing market and to develop strong
customer base, some strategic marketing plan is necessary to be designed and implemented.
Various strategies that will be used being a new entrant are:

Steady supply with timely delivery and good quality would be one of the strategic
strength of the marketing plan.

Discount scheme will be offered to the customer like 12 ka 13.

I would like to capture the large no. of wholeseller , retailer becaue they are the
main intermediatiory.

Bulk discounts will also be given to the distributors on ordering the bulk order.

Various gifts like calendars, pens, folders, diaries and other utility gifts can be
given to the wholesaler on their anniversaries, birthdays and other occasions.

DEMAND ANALYSIS
After conducting the market survey in the form of questionnaire and interview of the
wholeseller, Retailers, the next step is to estimate the effective demand in the past and the
present.
As per the dealers survey, the demand of the agarbatti in Jaipur and Sikar is as follows:Total demand in Jaipur is

:-

Total demand in Sikar is

:-

Total demand

653199 Kg per month

102066 Kg per month
755265 Kg per month

The demand has been calculated on the basis of population of Jaipur and Sikar.
The urban Population of jaipur is 2592067 and Sikar is 472538
From this population the below poverty line was deducted and on the basis
of middle and upper middle class the monthly family consumption of Jaipur and sikar is
180 gm was estimated depending upon the family size of jaipur(6) and Sikar is (7)
Total Demand of Agarbatti is 755265 kg per yr.

SUPPLY ESTIMATION:
The supply has been estimated on the basis of responses of 50 retailers. And the total
no. of retailers estimated in Sikar is 650 and Jaipur is 2350. The total supply of agarbatti is
139968 kg per yr.
Total Supply: 139968 kg per year

DEMAND -SUPPLY GAP ESTIMATION

Therefore the supply of Agarbatti is 139968 kg per yr from the retailer Survey .
So this demand-supply gap is:
= 755265 kg per yr 139968 kg per yr
= 615297 kg per yr
There is a large gap between demand and supply and there are many local manufacturer In
jaipur there are approx 30 local manufacturer in jaipur and approx 10 manufacturer in
sikar . The % of each manufacturer is less.
Hence the proposed manufacturing unit would have the installed capacity of 14000 kg per
year and production capacity of 6152 kg per year.

TECHNICAL ANALYSIS OF AGARBATTI

MANUFACTURING
The manufacturing process of agarbatti Manufacturing is as follows:
All the ingredients in powder form are mixed well in the proper proportion with water to a
semi solid paste. This paste is applied to bamboo sticks and rolled on wooden-planks with
hands uniformly. The raw sticks are then dried and packed in suitable bundles. For
manufacture of perfumed agarbattis the concentrated perfume is diluted first with white oil
or diethyl phthalate (Generally 1:3) and raw agarbattis are dipped suitably in dipping trays.
The perfumed batties are packed immediately in butter paper bags or polypropylene bags
and finally in printed cartons.
Proportion for making 1 kg incense stick

A. charcoal Powder

300gm

B. Jiget Powder

500 gm

C. Bamboo Stick

300 gm

D. Perfume

400ml

FLOW CHART OF MANUFACTURING PROCESS

OF AGARBATTI
Charcoal powder + Jiget Powder mixed with water
Semi solid paste rolled on bamboo Stick
Keep masala sticks for dry
Dip masala stick into White oil
Dip these stick into perfume
Kept dipped stick to soak incense

Perfumed agarbatti obtained

Packaging
Transport

SELECTION OF LOCATION
The location of my project that I am going to select is in Rajasthan in Jaipur.
And the site will be in outskirts of Jaipur there is an industrial area the name is RIICO
industrial area in this place 35 plots are vacant and the rate of the plot is 1300/-per sq.mt.
. Thats why Ill choose 139.4sq.mt. According to my plant capacity.

Land size for my project.

1. LAND
A piece of land 139.4 sq m

181226

at Riico Industrial Area @Rs 1300 per sq. m.

-------------Total

1,81,226
--------------

2. BUILDING
[ 139.4sq feet @ 301per sq m. ]

42,000

Total

Size of the room

Production room

9*8.16

Packaging Room

7*5

= 35 sq meter

Store room

5*5

= 25sq meter

Toilet

3*2

TOTAL

= 73.4sq mtr.

= 6sq meter
139.4 sq m

-------------42,000

3. PLANT & MACHINERY

S.No. Description
Weighing balance 10
1.
kg. Capacity
2. Hand sieves 100 mesh
Wooden Racks 8 x 6
3.
x 2
Plastic trays 20 lit.
4.
Capacity
Aluminum trays for
5.
dipping
Buckets for incense
6.
mixing
Total

No.

Values

2 No.

2,000/-

6 No.

300/-

9 No.

6,750/-

20 No.

1000/-

2 No.

1,600/-

9 No.

2700/14350/-

RECURRING EXPENSES
(i)

No. of working day in a year

(ii)

No. of shifts in a day

360
1

(iii)

No. of working hours in a shift

(iv)

Employee Potentials

(v)

Wastage of raw material

1%

COST OF PRODUCTION
RAW MATERIAL CONSUMPTION
Cost of 1 Kg Agarbatti
S. No.
1.
2.
3.
4.

Raw Material
Charcoal Powder
Jiget Powder
Bamboo Sticks
Perfumes
Total

Weight in gm.
300gm.
400 gm.
300 gm.
400 ml.

Cost in per kg
30/10/22/200/-

Yearly Production = 6152* 100

= Rs. 615200/-

POWER CONSUMPTION
Monthly consumption is 500 unit
Therefore, yearly consumptions is.6000 unit
Commercial price for each unit is Rs 6
Fixed charges is 600(every month it will be included in the bill)

Cost of 1 kg
9.00
4.00
6.6
80.00
Rs-100 per Kg

So, the yearly amount for electricity is Rs. 36000

ADMINISTRATIVE EXPENSES:

MANPOWER

NO. REQUIRED

MANAGER

WAGE/SALARY
( per month in Rs.)
10000

SUPERVISOR

3000

Other Administrative
Expenses
Stationary Expenses

500

Total

13500

Yearly Expense = 13500*12 = Rs.162000/SALARY & WAGES

Particulars

Nos.

Unskilled worker

Monthly
Salary
(Rs.)
2400

Total
Monthly
salary (Rs.)
12000

Yearly salary
(Rs)
144000

Women for Rolling

agarbatti
(Machine Operator)

23

1200

27160

331200

TOTAL

475200/-

MISCELLANEOUS FIXED ASSETS

S.No.

Item

Quantity

Price

Total

1.

Tubelight

240

1200

2.

Fan

1190

4760

3.

Bulb

15

30

4.

Chair

900

2700

5.

Rolling Chair

6000

6000

6.

Table

1000

1000

Total

15660

Legal Environment
Licence is required in two basic perspectives:
Manufacturing licence( payable amount: Rs. 5000)
Procedure:
STEP 1: Application
STEP 2: Officer Will come for survey
STEP 3: Cheking the various parameters
STEP 4: Confirmation & licence
Sales licence( payable amount: Rs. 2000)
Process:
STEP 1: Filling up the application
STEP 2: Submitting the application to sales tax department
STEP 3: Receiving the licence

FINANCIAL ANALYSIS

COST OF THE PROJECT

Particulars
Land
Building
Plant & Machinery
Miscellaneous Fixed Assets
Preliminary Expenses

Rs.(in lakhs)
181226
42000
14350
15660
9698

Preoperative expenses
16164
Contingency Margin
WC Margin
Total

16164
28023
323285

MEANS OF FINANCE
Particulars
Promoters Capital
107762
Long/Medium Term loan from Banks
Total

215523
323285

ASSUMPTIONS UNDERLYING FINANCIAL PROJECTIONS

The profitability and other projections may be prepared on the basis of following
assumptions:1.) The company would work for 360 days per year on a 1 shift basis. .
2.) The expected capacity utilization will be 44% in first year, 48% in the second year,
and 53% for the third year and so on.
3.)

The Sales realization will be Rs 2307000 in the first Year and this will increase
depending upon the increase in production per year

4.) The term loan will be repaid in 14 equal half-yearly installments, with the first
installment due at the end of the second operating year.
5.)

The bank finance for working capital will cost 12% interest rate.

6.)

The depreciation rates for company law purposes are as follows:Building

:- 3.34%

Plant and Machinery

:- 8%

Miscellaneous Fixed assets

:- 5%

12.) The depreciation rates for the income tax purposes are as follows,
under the written down value method:Building

:- 10%

Plant and Machinery and

:- 33.33%

Miscellaneous Fixed assets

13.) The income tax rate applicable is 35%.

BIBLIOGRAPHY
Books referred
Chandra

Prasanna,

Project-Planning

Analysis,

Selection,

Financing, Implementation and Review, New Delhi, Tata

McGraw-Hill Publishing Company Limited, Sixth Edition 2006.
Websites referred

www.censusindia.com

www.economywatch.com

www.indiabudget.gov.nic

www.magicbricks.com

www.google.com