1st Draft

PRE-FESIBILITY STUDY FOR PRODUCTION OF TROUT FISH FARMING

(INLAND FISH FARMING)

PAKISTAN AGRICULTURE RESEARCH COUNCIL ISLAMABAD

MINISTRY OF NATIONAL FOOD SECURITY AND RESEARCH

Government of Pakistan

www.parc.gov.pk

February, 13 2014

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Table of Contents

1. DISCLAIMER..........................................................................................................................1
2. PURPOSE OF DOCUMENT...................................................................................................1
3. INTRODUCTION TO SCHEME.............................................................................................1
4. EXECUTIVE SUMMARY......................................................................................................2
5. BRIEF DESCRIPTION OF PROJECT....................................................................................2
6. CRITICAL FACTORS.............................................................................................................3
7. INSTALLED AND OPERATIONAL CAPACITY FOR TROU FISH FARMING................3
8. GEOGRAPHICAL POTENTIAL FOR INVESTMENT.........................................................3
9. POTENTIAL TARGET MARKETS........................................................................................3
10. PRODUCTION PROCESS FLOW......................................................................................4
11. PROJECT COST AND BENEFIT SUMMARY..................................................................4
11.1. Project Economics...................................................................................................................4

11.2. Project Financing.....................................................................................................................4

11.3. Project Cost..............................................................................................................................5

11.3.1. Space Requirement..................................................................................................................5

11.3.2. Machinery and Equipment.......................................................................................................5

11.3.3. Furniture and Fixture...............................................................................................................5

11.3.4. Operational and Maintenance cost...........................................................................................6

11.3.5. Human Resource Requirement................................................................................................6

11.4. Revenue Generation.................................................................................................................6

12. KEY ASSUMPTION............................................................................................................7

13. USEFUL LINKS...................................................................................................................8
14. ANNEXURES......................................................................................................................9
Annexures I: Income Statement............................................................................................................... 9

Annexure II: Summary Statistics........................................................................................................... 10

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List of Tables

Table 1. Project Economics -------------------------------------------------------------- 4

Table 2. Project financing -------------------------------------------------------------- 4
Table 3. Total Project Cost -------------------------------------------------------------- 5
Table 4. Space requirement and its cost ----------------------------------------------------- 5
Table 5. List of Furniture & Fixture and its cost -------------------------------------------- 5
Table 6. Operational & Maintenance cost-------------------------------------------- 6
Table 7. Human Resource Requirement its cost -------------------------------------------- 6
Table 8. Revenue of the Project ------------------------------------------------------------- 6
Table 9. Key Assumption ------------------------------------------------------------- 7

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 1. DISCLAIMER

This information memorandum is to introduce the subject matter and provide a general idea and
information on the subject. Although, the material included in this document is based on data /
information generated from experiments and field testing by a team of relevant scientists;
however, it is based upon certain assumptions which may differ from case to case. The contained
information may vary due to any change in any of the concerned factors, and the actual results
may differ accordingly from the presented information. The PARC and its employees do not
assume any liability for any financial or other loss resulting from this memorandum in
consequence of undertaking this activity. The prospective user of this memorandum is
encouraged to contact qualified consultant/technical expert, especially designated focal person(s)
of this enterprise for reaching to an informed decision.

2. PURPOSE OF DOCUMENT

The purpose of this document is to facilitate potential investors in Trout Fish Farming Business
by providing them with a general understanding of the business, with the intention of supporting
potential investors in crucial investment decisions. The project pre-feasibility may form the basis
of an important investment decision and in order to serve this objective, the document/study
covers various aspects of project concept development, start-up, production, finance, and
business management. The need to come up with pre-feasibility reports for undocumented or
minimally documented sectors attains greater imminence as the research that precedes such
reports reveal certain thumb rules; best practices developed by existing enterprises by trial and
error, certain industrial norms and well established research findings that become a guiding
source regarding various aspects of business set-up and it’s successful management. Apart from
carefully studying the whole document, one must consider critical aspects provided later on,
which form the basis of investment decisions.

3. INTRODUCTION TO SCHEME
Prime Minister’s Youth Business Loan Program, for young entrepreneurs, with an allocated
budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide subsidized financing at 8%
mark-up per annum for one hundred thousand (100,000) beneficiaries, through designated
financial institutions, initially through National Bank of Pakistan (NBP) and First Women Bank
Ltd. (FWBL). Loans from Rs. 0.1 million to Rs. 2.0 million with tenure up to 8 years inclusive of
1 year grace period, and a debt: equity of 90: 10 will be disbursed to SME beneficiaries across
Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan, Gilgit-Baltistan, Azad
Jammu & Kashmir and Federally Administered Tribal Areas (FATA).

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 4. EXECUTIVE SUMMARY

Trout is considered for Inland Fish Farming Business in this pre-feasibility document. This
business is proposed to be located primarily in a cold area, having a water temperature range of
05-15 degrees centigrade. All the prospects of Trout i.e. stocking density, nutritional requirement,
reproductive performance and management and development of brood stock has been studied at
Trout Multiplication Research Station, Mountain Agricultural Research Centre (MARC), Gilgit
and Trout Hatchery Madyan, Swat, KPK. After successful experimentation, this species is
declared technically feasible for commercial fish farming. The technology of trout culture and
breeding are in the phase of extension to the farmers. Farmers are already practicing its culture at
their farms. The project can be started at an area of two kanals with 12,000 fish fingerlings of
trout for one and half year cycle with survival rate of 90%. Total cost estimate is Rs.2.17 million,
with fixed investment of Rs.0.85 million and working capital amounting to Rs.1.32 million.
Given the cost assumptions, Net Present Value (NPV), Internal Rate of Return (IRR), Benefit
Cost Ratio (BCR) and payback period are Rs.9348988, 54 %, 1.82 and 2.31 years respectively.

5. BRIEF DESCRIPTION OF PROJECT

Following key parameters must be addressed as per pre-feasibility study:
• Techniques: Different techniques are used for trout farming. However, keeping in view the
economical, technical and managerial factors, semi-intensive fish farming, and monoculture
technique is suggested for the proposed project.
• Location: The business can be initiated in cold area specially Swat, Kaghan, Chitral (KPK),
Murree in Punjab, Gilgit Baltistan and Azad Jammu Kashmir having suitable environment,
particularly freshwater temperature range between 5-15 oC.
• Product: Fish consumption is increasing in Pakistan due to changing food habits and special
preferences for high quality white meat. Trout is becoming very popular due to its taste.
• Target Market: In addition to local market of the regions where it is produced, major cities,
such as Quetta, Karachi, Lahore and Islamabad are the target markets. Moreover, there is an
enormous export potential to Middle Eastern countries.
• Employment Generation: The proposed project will provide direct employment to two
individuals. Financial analysis shows the profitability of proposed business within first year of its
operation.

6. CRITICAL FACTORS

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The commercial viability of the proposed project depends on the following factors:

• Selection of proper location with water, equipment, and staff play very important role in
ensuring the project to run successfully. This species is sensitive to and temperature above 15oC
is not suitable for trout culture.

• Clean water rich in oxygen is mandatory for this species.

• Healthy seedlings must be purchased from reliable/reputed dealers, for the assurance of desired
fish species. Incidence of diseases may be monitored on regular basis.

• Farm is required to maintain the record of production and management practices for successful
marketing and traceability.

• Farm should have strong market linkages for effective disposal of produce.

7. INSTALLED AND OPERATIONAL CAPACITY FOR TROU FISH FARMING

This pre-feasibility suggests a farm operation on two kanals of land with 12,000 fish for one year
of growing cycle (starting with seedlings of 3-4 inches) with survival rate of 90%.This area can
be increased from 02 Kanals with double input and output.

8. GEOGRAPHICAL POTENTIAL FOR INVESTMENT

The proposed location for establishment of the fish farms will primarily be Northern Areas of
Pakistan specially Swat, Kaghan, Chitral, (KPK), Murree in Punjab, Gilgit Baltistan and Azad
Jammu Kashmir that provide suitable environment for species (trout) with particularly water
temperature.

9. POTENTIAL TARGET MARKETS

The marketing of fish follows the traditional distribution channel, through middlemen or
wholesalers at farm who identifies potential buyers and negotiate price, or directly to retailers in
urban markets. The time spent in transportation, from farm to the retail shop, varies from area to
area. Over the years, collection and transportation of fish has improved with the use of loader
vehicles. However, greater the distance between farm and consumer, more complicated will be
the marketing or distribution system, due to the perishable nature of the product. The key factors
in marketing are availability of current market information, quality of fish and supply & demand
which will determine the selling price.

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 10. PRODUCTION PROCESS FLOW
The overall production cycle for the trout farming comprises of 12 months. In case of fresh
seedlings the production cycle will take more time to achieve the desired output. It varies
respectively, with the selection of fish (seedlings/fingerlings) size. Keeping in view the economic
perspective, it is suggested that fish with 3-4 inches may be used for different ponds which will
take 12 months.

11. PROJECT COST AND BENEFIT SUMMARY

A detailed financial model has been developed to analyze the commercial viability of Trout Fish
Farming under the Prime Minister’s Small Business Loan Scheme. Various cost and revenue
related assumptions, along with results of the analysis, are outlined in this section.

11.1.Project Economics
All figures in the financial model have been calculated for 12,000 units of fish on 1 kanal of
land. The following table shows internal rates of return and payback period.

Table 1. Project Economics

Description Details
Net Present Value (NPV) Rs. 9,348,988
Benefits Cost Ratio (BCR) 1.82
Internal Rate of Return (IRR) 54%
Payback Period (years) 2.31

Factors that influence the profitability of Inland Fish Farm are farm management, quality of
inputs and environmental factors.

11.2.Project Financing
Following table provides details of the equity required and variables related to bank loan;

Table 2. Project financing

Description Details
Total Equity (10%) Rs. 2,163,33
Bank loan (90%) Rs 1,949,700

Mark up to borrower (per annum) 8%

Tenure of Loan (Years) 8
Grace Period (years) 1

11.3.Project Cost
Following requirements have been identified for operations of the proposed business and along
with details costing (Table 3).
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 Table 3. Total Project Cost
Capital Investment Amount (Rs.)

Total Capital Cost 850,000

Initial Working Capital 1,316,333

Total Project Cost 2,166,333

11.3.1. Space Requirement

Following table gives details of space requirements and its costing for the project under
consideration.
Table 4. Space requirement and its cost
Space Requirement (Sq. ft.) Cost Rs./ Unit Quantity Area Total
(Nos) (Sq. ft.) Cost
(Rs.)
Office Building cum Store 50,000 01 10x14 50,000
Construction of Ponds and 250,000 03 01 kanal 750,000
channels
Total 800,000

11.3.2. Machinery and Equipment

No machinery/equipment is required for trout fish farming.

11.3.3. Furniture and Fixture

Following table provides list of Furniture and Fixture required for Inland Fish Farm.

Table 5. List of Furniture & Fixture and its cost

Description Quantity (Nos) Unit Price PKR

(rupees)
Furniture and Fixture Lump sump 50,000 50,000

11.3.4. Operational and Maintenance cost

Following table provides list of consumable requirement for Inland Fish Farm and accordingly
cost of all the consumable required items using current prices.

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 Table 6 . Operational & Maintenance cost
Description Nos Unit Price (PKR) Total (PKR)
Trout fish Seed* 12000 30 360,000
Fish Feed 6000 kg 100/kg 600,000
Land rent 2 kanal 20000/Kanal 40,000
Depreciation cost - - 8333
Utility Bills - 1000/month 12000
Communication Charges - 500/month 6000
Miscellaneous (cash in - - 50000
hand)
Total 1,076,333
*Madyan Trout Hatchery Swat/MARC, Gilgit

11.3.5. Human Resource Requirement

The table below provides details of human resource required to manage basic fish farm. The staff
salaries are estimated according to the market trends. However, these requirements and pay
scales may vary area to area.

Table 7. Human Resource Requirement its cost

Description No. of Employees Salary/person/ Total salary per year

month
Labour 2 10,000 240,000

11.4.Revenue Generation
Final product of Inland Fish Farm is fish ready for sale in market that will generate revenue. The
capacity of farm is 12,000 units of fish for first year sell price as per market Rs. 1000.

Table 8. Revenue of the Project

Product Unit Survival Average First Year Sales First Year
@90% Weight of Production Price Revenue (Rs)
fish (Kg) (Rs./Unit)
Fish 12,000 10,800 0.25 kg 2700 1000 2,700,000

Total Sales Revenue 2,700,000

12. KEY ASSUMPTION

Table 9. Key Assumption*
Particulars Assumption
Sales Price Growth Rate 10% per year
Increase in cost of raw material 10% per year
Increase in utilities 10% per year
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Debt/Equity Ratio 90:10
Building & Ponds 5%
Office furniture & fixture 5%
Loan Period 8 years
Grace Period 1 year
Loan installments Annually
Financial charges (interest rate) 8%
* Average inflation rate of past 10 years is used as proxy of input and out prices growth rate.
(Source: Economic Survey of Pakistan)

13. USEFUL LINKS

 Resource/focal Person

PSO/Program Leader Aquaculture and fisheries program,

Livestock research institute, National Agriculture Research Center, Islamabad
Phone: 0518443868 OR 0519255331
Email: afzal_afri@hhotmail.com
 Aziz Ahmed, MARC, Juglot, Gilgit
Cell: 03468487776,
Email: azizglt_73@yahoo.com
 aqua.ucdavis.edu/DatabaseRoot/pdf/TROUTMAN.PDF
 www.fao.org

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 14. ANNEXURES

Annexures I: Income Statement

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Sales (Revenues) 2,700,000 2,970,000 3,267,000 3,593,700 3,953,070 4,348,377 4,783,215 5,261,536 5,787,690 6,410,823
Seedling Cost 360000 396000 435600 479160 527076 579783.6 637762 701538.2 771692 848861.2
Feeding Cost 600000 660000 726000 798600 878460 966306 1062937 1169230 1286153 1414769
Cost of Goods Sold 960000 1056000 1161600 1277760 1405536 1546090 1700699 1870768 2057845 2263630
Gross Profit 1740000 1914000 2105400 2315940 2547534 2802287 3082516 3390768 3729845 4147194
Repair &
Maintenance 0 42500 44625 46856.25 49199.06 51659.02 54241.97 56954.06 59801.77 62791.86
Salaries 240000 264000 290400 319440 351384 386522.4 425174.6 467692.1 514461.3 565907.4
Rent 40000 44000 48400 53240 58564 64420.4 70862.44 77948.68 85743.55 94317.91
Utilities 12000 13200 14520 15972 17569.2 19326.12 21258.73 23384.61 25723.07 28295.37
Communication
charges 6000 6600 7260 7986 8784.6 9663.06 10629.37 11692.3 12861.53 14147.69
Depreciation 8333.333 8333.333 8333.333 8333.333 8333.333 8333.333 8333.333 8333.333 8333.333 8333.333
Other Office
Expenditure 50000 55000 60500 66550 73205 80525.5 88578.05 97435.86 107179.4 117897.4
Interest on Loan 155976 155976 138495 119616 99227 77206 53424 27740 0 0
Sub - Total 512309.3 589609.3 612533.7 637993.9 666266.2 697656.3 732502.8 771180.5 814104 891691
Operating Income 1227691 1324391 1492866 1677946 1881268 2104631 2350013 2619587 2915741 3255503
Net Income 1227691 1324391 1492866 1677946 1881268 2104631 2350013 2619587 2915741 3255503

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 Annexure II: Summary Statistics
0 Period Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Initial Project
Investment 2166333 0 0 0 0 0 0 0 0 0 0
Fixed Cost 850000 0 0 0 0 0 0 0 0 0
Variable cost 1316333 1489633 1635638 1796138 1972575 2166539 2379777 2614209 2871949 3155320
Total Cost (Fixed +
Variable) 2166333 1489633 1635638 1796138 1972575 2166539 2379777 2614209 2871949 3155320
Interest on loan 155976 155976 1384951 119616 99227 77206 53424 27740 0 0
Total cost inclusive
interest payment
(Outflow) 2322309 1645609 1774134 1915754 2071802 2243746 2433201 2641949 2871949 3155320
Revenues from fish
production 2,700,000 2970000 3267000 3593700 3953070 4348377 4783215 5261536 5787690 6366459
Salvage value of assets 0 0 0 0 0 0 0 0 0 44,365
Gross Profit (Inflow) 2,700,000 2,970,000 3,267,000 3,593,700 3,953,070 4,348,377 4,783,215 5,261,536 5,787,690 6,410,823
Net cash flow (Inflow –
Outflow) -2166333 377,691 1,324,391 1,492,866 1,677,946 1,881,268 2,104,631 2,350,013 2,619,587 2,915,741 3,255,503

Payback Period 2.31

NPV Rs. 9,348,988
IRR 54%
BCR 1.82