MUSTARD OIL

1.0 INTRODUCTION Consumption of edible oil is substantial throughout the country. All Indian households use it everyday. Various types of edible oils are available in the country for eg. groundnut, cottonseed, rapeseed, sunflower, mustard etc. Edible oils are made from respective oil seeds by extraction process and there are some national as well as regional brands. The North-East region of the country consumes mustard oil in large quantity. Therefore, Assam is the preferred location. 2.0 PRODUCT 2.1 Applications Edible oil is an integral part of the Indian palate since long. India is perhaps the largest producer and consumer of different types of edible oils. Preference for the type of edible oil differs from state to state, e.g. People from western India prefer groundnut or cottonseed oil whereas North-East states like mustard oil. Hence this note is confined to mustard oil. 2.2 Compliances and quality standards

Compliance with PFA Act is necessary whereas registration under AGMARK is advisable. BIS has specified quality standards vide 546 IS 546:1975. 3.0 MARKET POTENTIAL Due to peculiar food habits and preparation methods, Indians use large quantities of edible oils every day. With growing population, demand is increasing every year and the country is importing semi-processed edible oils since long. Mustard oil is preferred as a cooking medium by the people of North-East region including Assam. As per one estimate, there are more than 100 oil mills in Assam but even then mustard seeds are sold to other states and

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2 Machinery Keeping in mind.0 MANUFACTURING PROCESS The process of manufacture is well established and conventional.000/-. storage racks etc. are likely to cost Rs. plant is operated for about 210-220 days per year due to seasonal availability of oil seeds.25 lacs. dry mustard seeds are fed to Table Ghani or oil extractor wherein about 90% of the oil is extracted.000 2.) 60. The cost of land could be Rs. following machines are needed: Item Table Ghani Oil Expellers Filter Press Other Support Equipments.4 Utilities Power requirement would be 25 HP and water shall be required for potable and sanitation purposes. Liquid oil and solid portion is then separated in filters. packing tables. To have this rated production capacity. Further processing in expeller results in additional extraction of oil. 1 2 1 -Total 5.50 lac whereas the built up area would cost Rs. furniture. is sufficient. electric motor and testing facilities Qty.75 lacs. 5.1 Land and Building Around 200 sq. To begin with. jars or food grade plastic pouches.mustard oil produced in other states is sold in Assam in ample quantity. The solid portion known as oil cake is sold as cattle feed. 52 . The oil contents depend upon quality of seeds but the average recovery of oil from seeds is in the range of 30% to 34%. In this industry. total cost of land and building shall be in the region of Rs.2.60. the demand potential and economic viability of the project. The annual cost under this head at 100% activity level is estimated to be Rs. 5. 5. good quality mustard oil produced locally can be sold in the market.000 Assets like storage tanks.25.000 55. Thus.mtrs.50.1. Thus. of plot with built-up area of 100 sq.3 Miscellaneous Assets Price (Rs.000/-. The construction cost is taken on a lower side as this will be a typical Ghani and will not require RCC slab on the entire building. 4. it is advisable to install machinery to produce 72 tonnes of mustard oil every year at 100% capacity.mtrs.000 40. Edible oil is packed either in tins.0 CAPITAL INPUTS 5.000 70. 0.

0 TENTATIVE IMPLEMENTATION SCHEDULE Activity Application and sanction of loan Site selection and commencement of civil work Completion of civil work and placement of orders for machinery Erection.400 2.800 1. trial run expenses.000 1. interest during implementation of the project.000/. 50.000 2. The average recovery of oil is considered to be 30%.0 MANPOWER REQUIREMENTS Particulars Skilled Worker Semi-skilled Workers Helpers Salesman Nos.Mtrs) 200 100 Total Cost (Rs.) 3. etc.500 11. 2.40. 6. Other materials in small quantities like additives and purifying agents shall be available easily.4 Preliminary & Pre-operative Expenses A provision of Rs . jars or plastic pouches shall be required for which prior arrangement is advisable.75.) 1.000 Particulars Land Building 8.3 Miscellaneous Assets The total expenditure is likely to be Rs.000 as explained earlier.200 2.) 50. 2 2 2 1 Monthly Salary (Rs.000 tonnes every year.1 Building Area (Sq.0 DETAILS OF THE PROPOSED PROJECT 8.2 Plant and Machinery The total cost under this head is estimated to be Rs. no difficulty is envisaged in procurement. In view of production of mustard seeds in excess of 75. 53 . mustard seeds to the extent of 240 tonnes shall be required. installation and trial runs Period (in months) 2 1 4 1 8.500 1.5 Raw Material The all important raw material shall be mustard seeds.5. 8. Hence to produce 72 tonnes of edible oil per year at 100% capacity utilisation.500 Total Total Monthly Salary (Rs. Packing materials like tins.25 lacs as narrated before.500 7.600 3.is adequate towards expenditure like establishment charges. 8.

90 0.95 -2.25 0.1 Production Capacity and Build-up Production capacity at 100% would be 72 tonnes of mustard oil considering working of about 220-230 days every year.61 0.85 6.5 Working Capital Requirement (Rs.8.31 : 1 30% Financial assistance in the form of grant is available from the Ministry of Food Processing Industries. the working capital needs would be as under: Particulars Stock of Raw and PM Stock of Finished Goods Receivables Working Expenses Period ½ Month ½ Month ½ Month 1 Month Margin 30% 25% 25% 100% Total Total 0.25 2. Govt. towards expenditure on technical civil works and plant and machinery for eligible projects subject to certain terms and conditions.30 0.20 1.10 4.0 PROFITABILITY CALCULATIONS 9.6 Cost of the Project and Means of Financing Item Land and Building Plant and Machinery Miscellaneous Assets P&P Expenses Contingencies @ 10% on Land & Building and Plant and Machinery Working Capital Margin Total Means of Finance Promoters' Contribution Loan from Bank/FI Total Debt Equity Ratio Promoters' Contribution (Rs.40 0. It is assumed that the plant would be operated at 60% and 75% respectively during first 2 years.20 3.30 0.10 6. in lacs) At 60% capacity utilisation in the first year. 54 . in lacs) Amount 2. 9.45 1.20 1.95 2.10 8.91 1.30 0.56 Bank 0.95 2.50 0.46 Promoters 0. of India.25 0.

50 3.000/-. in lacs) Sales 46.80 (Rs.9.85 lacs is calculated @ 12% considering repayment in 5 years inclusive of a moratorium period of 1 year.30 Mustard Seeds Others Packing Materials 9.000 50.20 1.80 4. 9.3 Product Raw Materials Required at 100% Qty. 55 . (Tonnes) 72 80 Total Selling Price (Rs) 65. 9. (Tonnes) 240 --Rate per Ton 13.5 Interest Interest on term loan of Rs.2 Sales Revenue at 100% Qty.60. Interest on working capital assistance from bank is taken at 14% per annum.6 Depreciation It is computed on WDV basis and rates assumed are 10% on building and 20% on machinery and miscellaneous assets.000 5. 4.60 36.000 --Total (Rs.4 Utilities The annual expenditure at 100% activity level is assumed to be Rs. in lacs) Value 31.00 Product Mustard Oil De-oiled Cake 9.

21 1.29 0.10 ---.50 4.34 30.40 1.55 0.48 2nd Year 75% 38.97 0.[B] Fixed Costs Break-Even Point (D ÷ C) 21.41 0.43 0.24 26.58 -27.55 3.30 2.48 (Rs.94 0.72 Tonnes ---- 11.92 0.55 0.98 2.5% Administrative Expenses Total C Profit before Interest & Depreciation Interest on Term Loan Interest on Working Capital Depreciation Net Profit Income-tax @ 20% Profit after Tax Cash Accruals Repayment of Term Loan 21.90 2.25 0.36 33.63 53% 56 .55 0.34 0.56 3.15 1st Year 60% 30.85 3.0 BREAK-EVEN ANALYSIS No [A] [B] Particulars Sales Variable Costs Raw and Packing Materials Utilities (70%) Salaries (70%) Stores & Spares Selling Expenses (80%) Admn Expenses (50%) Interest on WC [C] [D] [E] Contribution [A] . in lacs) Amount 25. in lacs) No.45 1.83 0.42 2.10.36 1.0 PROJECTED PROFITABILITY (Rs.30 0. A Particulars Installed Capacity Capacity Utilisation Sales Realisation B Cost of Production Raw and Packing Materials Utilities Salaries Stores & Spares Repairs & Maintenance Selling Expenses @ 7.21 0.45 1.86 0.16 4.68 2.22 0.78 0.38 0.78 0.35 0.12 0.70 2.

08 1.61 2.69 2nd Yr 3.34 ------------------------------------- 57 .08 4.12 0.30 1.30 3.35 = 2.17 4.36 3rd Yr 3.13 0.33 3.60 4th Yr 3.20 1.55 -0.61 0.12.65 [B] Debt Service Coverage Ratio (DSCR) (Rs.37 2.20 0.55 3.58 0.12 = 0.17 1.24 ÷ 2.94 5th Yr 4.98 ÷ 2.35 = 1.86 0.41 3.15 -----------------------------------.91 0.20 1.0 [A] LEVERAGES Financial Leverage = EBIT/EBT = 3.3.12 Degree of Total Leverage = FL/OL = 1.03 0.41 1.20 1.55 5.38 Operating Leverage = Contribution/EBT = 4.81 0.25 1.40 0.50 2. in lacs) Particulars Cash Accruals Interest on TL Total [A] Interest on TL Repayment of TL Total [B] DSCR [A] ÷ [B] Average DSCR 1st Yr 2.38 ÷ 2.

40 3.45 32% 1.57 24% 2.44 1. 2. 3.78 The IRR is around 34%.95 lacs.21 28% 2.B-34 Mini nagar.07 1.86 4.89 1.[C] Internal Rate of Return (IRR) Cost of the project is Rs.57 1.72 1.96 1. Dahisar(E). Tel No. 28114536 58 .21 1.27 1. 25773416/6324 4.20 8.63 1. Sadanand Aprotech Pv.08 2.40 9. (Rs.95 1.12 17. Goplarai Thakur Rd. Other suppliers are 1. Industrial Equipments. Company. The above stated machines are easily available locally.. Ltd.03 7. 173/1. 6. Guwahati Archana Machinery Stores.02 2. in lacs) Year 1 2 3 4 5 Cash Accruals 2. . Mumbai-400068. Guwahati Eastend Engg.58 3. Kolkata-700035 Tel No.61 3.

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