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Project Proposal For Post-Consumer Plastic Recycling Project
Project Proposal For Post-Consumer Plastic Recycling Project
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A.Aruna Shantha
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Chief Consultant
A. Aruna Shantha (PhD)
Executive Summary
Criteria Summary Description
Name of the Emerald Electricals & plastic industries
Project
Year Initiated 2002.04.27
Main Objectives of To conduct a cost benefit analysis for proposed post-consumer and post-
the Project industrial plastic recycling project in Puttalm.
Proposal
Summary of The project is laid out basically under 4 main branches of (a).collecting
Proposed Project plastics from rural areas (b), purification of chemical barrels (c) crushing
plastics and (d) manufacturing products. The water used for the purification
of chemical barrels will be re-used after undergoing a purification process
via water treatment plants. Around 55% of the plastic powder, which is the
final output, will be used in the production of plastic flower pots and
plastic crates and balance 45% will be sold as plastic raw materials.
Total Investment Fixed Cost = Rs. 33.26 Million, Average Variable cost with full capacity
(Rs.M) - Rs/Year = 9.59 Millions, Raw material cost Rs. 48.4 Million per year.
Gross Revenue With Full production capacity 90 Million
(Rs. Per year)
Net Revenue (Rs. With full production capacity 69 Million
Per year)
Total Job Creation 64 direct employments.
National level It is lead to address the behavior change necessary among the Sri Lankan
impact of the consumer to ensure the proper disposal of plastic waste in manner which
project will not be harmful to the environment and Natural Resources.
Project directly support to save the foreign exchange by enhancing
recycling of post-consumer and post-industrial plastic waste
Methodology The methodology adopted for the cost benefit analysis of the investment is
Adopted based on guideline for environmental project assessment generally
recommended by Asian Development Bank and World Bank
Decision Criteria IRR , NPV and B/C ratio (Financial analysis or with financial Benefit
for overall project only),
evaluation IRR, NPV and B/C ratio (Economic analysis or with financial and Foreign
saving )
.
Major Conclusion It was observed that a financing of the prosed post-consumer and post-
under financial industrial plastic recycling project can be well justified in both financial
analysis and terms.
Major Conclusion All these decision criteria presented and discussed in this study, indicate
under overall that the financing of this plastic recycling Project would be well justified
Economic analysis economic terms. Besides, on social point of view, the project is highly
viable.
Major As the project is economically and financially justified, this study proposes
Recommendation to the further extension of project activities with the support of the local
of the Report government.
1
1. Industry and Marketplace Analysis
Among the finished products exports, 60% were packaging materials / packaging goods of
plastics. Cellulose and its Chemical derivatives constitute the highest export value among the
primary forms of plastic exports taking 6% of the total plastic exports in 2009. USA is the
dominant buyer of plastic exports over the last number of years taking 40% of the total exports.
Sri Lanka imports annually a considerable amount of plastic raw materials and finished products
and a major portion of them end up as Post Consumer Plastic Waste causing severe
environmental problems. It is estimated that about 160,000 tons of plastic raw materials and
products are imported and out of this 30% has been exported as finished products and the
remaining are used in the local market. In Sri Lanka dump one million sachet packets - be it with
sauce, jam or shampoo, dump 20 million polythene bags and 15 million lunch sheets landfill per
2
day. (Dangalla, Chandrasena, Semasingha, & Amarasingha, 2013). The Colombo municipal
Council collects 700 tons of garbage on average per day and 6 percent of this is polythene and
plastic waste. Although the share of polythene and plastics of in Municipal waste is only about 6.0 per
cent of the total solid waste, its environmental impact is much greater than the other waste material. This
material i.e. 'thin' polythene when discarded after use (20 and less micron thickness) will remain in the
soil for at least 100 years (Dangalla, Chandrasena, Semasingha, & Amarasingha, 2013). The problems
they create are numerous According to world surveys by every ten years the plastic consumption
increases by three times. This poses a great challenge as well as a threat to the environment.
Life-cycle analysis can be a useful tool for assessing the potential benefits of recycling
programmes. If recycled plastics are used to produce goods that would otherwise have been
made from new (virgin) polymer, this will directly reduce oil usage and emissions of greenhouse
gases associated with the production of the virgin polymer (less the emissions owing to the
recycling activities themselves).
2. Industry Profile
Emerald Electricals & Plastic Industries is a wholly Sri Lankan owned private company owned
by Mr.H.S Priyantha Silve, Chairman, and incorporated by Business Names Statute No.4 of
1990, was registered in the Department of the Provincial Registrar of Companies for Western
Province under no. W. U 8691 on 27th April, 2002. The company has taken an Environment
Protection License from Central Environment Authority. Presently the company is one of the
major plastic and polythene collector, recycler and producer in the western province in Sri
Lanka and company head office & factory located in Peralanda, Ragama. At the movement,
Industry is collecting and recycling post-consumer and post- industrial plastic and 25% of
recycled plastic are being used for reproduction (Sunk Boxes, MCB, Ceiling rose, Shoe heel,
Measuring cup and etc.) and balance 75% are being sold as plastic raw materials.
3
Table 01: Summary of Company Profile
The Business Name Emerald Electrical and Plastic Industries
The General Nature of the Business Recycling plastic and Injection Molding
The Principal Place of the Business No. 181/A, Peralanda, Ragama
The Date of the Commencement of the 2002.04.27
Business
Full Name of the Owner Hettiyadura Susil Priyantha Silva
The Nationality of the Owner Sri Lankan
The Usual Residence of the Owner No. 181/A, Peralanda, Ragama
Nature of the Registration Department of the provincial Registrar of Companies,
Western Province
Registration No W.U 8691
Mr. Susil Priyantha Silva is the owner and promoter of Emerald Plastic. His son Mr. H. Nalaka
Silva is working as a Managing Director and he has intensive knowledge and vast understanding
in plastic recycling and management which undoubtedly help in the business. Besides, the elder
son of the owner Mr. Shivanka Silva has a good knowledge of chemicals and their properties,
marketing skills like convincing power, negotiating ability, creating promotional strategies and
sales skills which are extremely helpful in taking the business a long way and prove intensely
valuable to this venture. Thus such potential skills of family members and other qualities like
efficient interpersonal skills, leadership skills and decision making quality of owner, are success
elements of Emerald Electricals & Plastic Industries. Presently the industry is functioning with
six supportive skilled and unskilled labourers The organization chart is briefly explaining the
present management structure as shown in figure 01
4
Figure 01: Organization Chart
Managing Director
Supervisors Supervisors
Sales (Procuanment)
Skilled Workers
Skilled Workers
5
2.3 Further Expansion of the Business
As our per capita plastic consumption is set to increase from current 6 Kg to 8 Kg and plastic has
become an indispensable item in our lives and manufacturing, company believe this is the right
time to strengthen this sector and company is planning to expand our recycling capacity by
establishing new plant at Puttalam. The existing plant has the capacity to recycle 12 tons of
plastics per month but it is not sufficient for monthly collection and fulfills the demand for our
plastic products and powder. Around 25 percent of total recycled plastic is reused for production
and the balance is sold to local plastic manufacturers as raw materials who produced various
plastic items. Since the company has a sufficient post-consumer and industrial consumer plastic
supply chain, present recycle volume could be increased substantially if the factory could get
sufficient storage capacity for waste plastic. The company is now seriously looking for extra
opportunities for post-consumed plastic, especially plastic chemical barrels and cans for
recycling process. Presently, company has a single plant and warehouse at Ragama and company
has planned to extend this facilities to Puttalam District.
6
the production of non-consumer plastics such as plastic flower pots, plastic crates, wesak
Lanterns.
3. Technical Information
7
LDPE Agricultural films
Low density Tough Refuse sacks
polyethylene Flexible Packaging films
(LDPE) Waxy surface Foams
Soft - scratches Bubble wrap
easily Flexible bottles
Good transparency Wire and cable
Low melting point applications
Stable electrical
properties
Moisture barrier
Poly PP Excellent chemical Yoghurt containers
propylene (PP) resistance Potato crisp bags
High melting point Drinking straws
Hard, but flexible Medicine bottles
Waxy surface crates,
Translucent plant pots
Strong Car battery cases
Heavy gauge woven bags
8
4. Production Process
4.2 Storage
The plastic recycling enterprise needs quite a large storage space in order to store all collected
waste items, processed materials and finished products. Plastic waste items, especially chemical
barrels and cans which we have planned to collect, have a large volume and therefore a large
storage place is necessary. At the moment we have only one ware house at Ragama.
9
4.3 Sorting and identification
Plastics sorting operations may be carried out manually or automatically using appropriate means
of identification. The more accurate and efficient the means of identification, sorting and
separation, the better is the quality of the recovered product obtained. Best suited for sorting
plastics is manual process and we use full time man power for this task. The secondary raw
material obtained by hand sorting is of high quality and offers an excellent basis for producing
high quality products by small and medium scale industry. To aid in identification, it is now
common for plastic containers to have a polymer identification code. Unfortunately, other plastic
applications do not carry such identifiers and are, therefore, more difficult to identify by polymer
type without some experience. There are several simple tests that can be used to distinguish
between the common types of polymers so that they may be separated for processing. We are
applying the following test for identification of plastics.
However in our organization, this separation or segregation process, in many cases, are done by
manual process utilizing the availability of cheap and expert labor force. In case the waste is
contaminated with embedded metals, proper method of separating the metals / other
contaminants is required.
4.4 Washing
The scale of cleaning depends on the type of waste. Whenever a cleaning operation is involved,
it is to be ensured that the water or any other cleaning material used, should be discharged after
ascertaining that the discharge does not contain any objectionable substance. A proper Treatment
Device may have to be deployed – like a water treatment plant / effluent treatment plant. For
drying, a suitably designed drier is used. Many industries situated outside the metropolises, use
10
open space for natural drying of the cleaned waste. If the plastic is dirty, cleaning is necessary.
However, at the moment we don’t have a washing plant to wash the collected plastic and we
have planned to establish the washing plant in the Puttalam branch. The main cleaning steps
which we are planning to apply:
- Draining of remaining fluids from containers into prepared collection barrels.
-Rough cleaning of plastic containers and other pieces of plastic.
- Removing of paper, plastic or metal stickers.
- In the case of PET bottles removing of caps and etiquettes.
- Intensive washing in cold or hot water with addition of detergents or caustic soda. The waste
water can be reused by installing a simple waste water treatment system like a sedimentation
basin
4.5 Cutting
Cutting is usually carried out for initial size reduction of large plastic objects. It can be carried
out with a plastic cutting machine, specifically designed to cut plastic into smaller plastic pieces.
4.6 Shredding
Shredding is suitable for smaller pieces. A typical shredder has a series of rotating blades driven
by an electric motor, some form of grid for size grading and a collection bin. Materials are fed
into the shredder via a hopper which is sited above the blade rotor. The product of shredding is a
pile of coarse irregularly shaped plastic flakes which can then be further processed.
11
5. Employment Generation of the Project
In order to better inform investment decisions, it is important to understand all of the potential
benefits of projects, both direct and indirect. Given that a key feature of government policy is the
creation of jobs, an analysis of the employment impact of investment projects would clearly be
of assistance in the formulation of budgetary decisions. This note estimates the employment
impact of a range of possible infrastructure projects. The purpose of this section is to provide
clarity on the short-term employment effects of a range of potential investment projects.
For each project, the level of employment is evaluated. This includes the level of direct
employment (people employed on the project), indirect employment (people employed in the
supply of goods or services to the project) and induced employment (the additional employment
generated due to the increase in consumption as a result of the direct and indirect employment
increases). There are some individual collectors who earns between Rs 2,000 to 4,000 daily by
collecting plastic waste and once it is expanded to the North and East collectors could sell them
to our collectors at the best current market prices. This will give an opportunity for people to
earn an extra income for their day-to-day living while ensuring an Environment is ensuring the
free of plastic waste. Further, both skilled and unskilled additional labour will be absorbed to the
project.
12
6. With and Without Situation of the Project
“Without” examines the current situation of the project and “With” examine the project situation
with proposed new investment
Table 04: Recycling Capacity of Plastic – With Project and Without Project
13
main plastic products in the country as raw materials which can be used for the production of
finished plastic good. The plastic powder, which is the final output is being used in the
production of Sunk Boxes, Ceiling Rose, MCB and Round Block under the Emerald brand name.
We produce different sizes of chemical measuring cups to Harcross and M-Chem Company as
sub orders. Beside, we produce Wesak Lanterns, Antenna boxes, Three-Wheeler mud cover, rim
cover and tricycle wheel and household level requirements.
14
Figure 03: Market Segmentation
Market Segmentation
15
7.3 Advertising & Promotion Strategy
We will use two different promotional strategies. For our own products we will use flyers which
will have full detail of our product range, price and discounts. These flyers will circulate through
the newspapers across. For all business we will promote through online social media and we will
also develop our website which will enable us to widely spread our contact among various
companies. The site will have full details of product which are available for companies as well as
the end user.
To market the products, the Company will use a number of sales agents/brokers. They have a
customer base of their own, having developed successful relationships with their clients over the
years. Their customer base is currently demanding products so they can expand upon their
current base. Of course, they will expand that to new customers when the product is available. If
the Company grows faster than its prime customer base, additional capacity may be developed.
The company will identify additional prospective customers who can be attracted for our
products
16
our geographic region and look into international markets for expansion. With new plant at
Puttalam we have planned to increase the quality of the product or product development. It refers
to offering new or improved products to present markets. By working closely with our
customers, we may find new and innovative ways to better satisfy our target market. Besides
after the establishment of our new venture at Puttalam we would be able to diversify our current
products. With diversification of our products, it will open completely new lines of business,
with new products in new markets. We have planned to commence the production of plastic
flower plots and plastic crates with the new investment. We will diversify our product mix to
mitigate risks related to economic variables such as recessions.
17
8. Supply Chain (Post- Consumer and Post-Industrial Plastic)
18
Figure 04: Supply Chain
Mega Suppliers
Agents/ Collectors
Purchased and
Transported
Warehouses
19
Table 05: Monthly Average Plastic Collections
Year % Improvement
1 Year 66%
2 Year 125%
3 Year 500%
Out of 100% collection improvement, 50% is supposed to be from chemical barrel collection
which is new area to the industry.
20
8.3 Sorting and storing facilities (Without Project)
Collected plastic raw materials are initially shrted in line with common categories of plastics and
stored in three stores. Since more than 62% of our collections are ABS, we have used two stores
for ABS collections. Capacity of store one is around 5.0 Mt and it is 504 sf2. Our second store is
323 sf2 and storage capacity is 3.2Mt. Third store is allocated for storing HDEP, PP and Ps, its
capacity is 5.7 Mt and it has 180 sf2. After cutting and drying all these collected and sorted
materials, they are again stored in the fourth store with a capacity of 170 sf2.
21
Figure 05: Land Utilization Plan
Crusher
Machine
22
10. Time Targets
Main Activities Duration
2016 2017 18 19
M J J A S O N D J F MA MJ J A S O N D
Preparation of Project Proposal X X
Taking legal approval from local X
authorities
Preparation of land for X
construction
Ordering required machines X
Commence construction X
Establishing electricity, water and X X X
telephone
Establishment of plants/machine X X
And Test run
Commence the initial production X
Commence the Chemical barrels X
recycling
Establishment of plants X
66% improvement of whole X
production process
100% improvement of production X
process
500% improvement of production X
process
23
project activities and observe the financial and economic viability of further expansion of the
project activities in the Puttalam Industrial Zone.
11.3 Methodology
The methodology adopted for the cost benefit analysis of the investment is based on guideline
from environmental project assessment generally recommended by Asian Development Bank
and World Bank. It is based on widely accepted techniques for the appraisal of environmental
based investment projects. The method provides a basis for achieving the necessary degree of
uniformity and comparability between similar projects. The data used and all conclusions are
based on the latest available information with a bearing on the project office at Ragama.
However, reliability and consistence of the information were rechecked with field observation at
each point and finally made reasonable adjustment to minimize the mismatch.
11.4 Approach
The approach followed is that of a cost and benefit analysis with the emphasis on economic
criteria and their impact in the national context. Consequently, elements of multi-criteria analysis
such as environmental impacts and, in particular cost and benefit condition have been dealt with
financial and economic validity of the project. The economic analysis described here has been
carried out on the basis of comparisons of cost incurred and benefit expected “without project
and with project”. With project means; with new investment of the project and without means;
existing situation of the project.
24
11.5 Principles and Procedures
• The economic useful life of project is twenty years
• All benefits and costs have valued in constant in 2016 financial prices
• The overall economic viability of the project has been judged on the basis of four
decision criteria; (a) The Financial Internal Rate of Returns (FIRR), (b) The Financial Net
Present Value (FNPV) , The Cost Ratio (B/C) and Net Profit.
25
Table 07: The Value of Fixed Cost by mid of year 2016 – Without Project
26
Table 08: Total Variable Cost (Without Project) Rs/Year
27
12.1.4 Raw Material Cost – Without Project
Table 10: Average Cost on Raw Material (Rs/ Year) – Without Project -2015
28
12.2.1 Returns from Plastic Raw Materials – Without Project
Table 12: Returns from Plastic Powder (Rs. M/year) – Without Project (Rs.)
Table 13: Average Prices of Plastic Raw Materials (Rs/Mt) – Without Product
Type of Powder Average Sold Price Average Sold Price Average Sold Price
(Rs/.Kg) (Rs/.Kg) (Rs/.Kg)
2013 2014 2015
29
Table 14: Average Selling Prices of Plastic Product (Rs)
Type of Product Average Sold Price Average Sold Price Average Sold
Price (Rs/Unit) (Rs/Unit) Price (Rs/Unit)
2013 2014 2015
Sunk Boxes 20.0 25.0 25.0
Ceiling Roses 30.0 33.0 33.0
MCB 240.0 250.0 250.0
Round Blocks 4.00 4.00 4.00
Measuring Cups 3.00 3.00 3.00
Measuring Lids 3.00 3.00 3.00
Wesak Lanterns 25.0 25.0 25.0
Shoe heels 30.0 30.0 30.0
30
12.2.3 Total Returns – Without Project
Table 16: Total Annual Gross Revenue (Rs. Million) – Without Project
31
12.3 Profit and Loss Account – Without Project
Table 17: Profit and Loss Account (Without Project)
32
13. Financial Analysis – With Project
33
13.1.2 Fixed Costs for Office Equipments (With project)
Table 19: Costs for Office Equipments – Year 2017
34
13.1.3 Total Variable Cost (With Project) Rs/Year
Table 20: Total Variable Cost – With Project
35
13.1.5 Cost of Raw Materials
Table 22: Cost on Raw Material (Rs/ Year) – With Project – Year 2017
Table 23: Cost on Raw Material (Rs/ Year) – With Project – Year 2018
Table 24: Cost on Raw Material (Rs/ Year) – With Project – Year 2019
36
Table 25: Total Projected Raw Materials Cost for next 5 Years (Rs/M)
Apart from this, benefits can be looked into under the basis of financial criteria and /or economic
criteria. The sate of recycled plastic powder which is the final output and different types of
products we produced using plastic powder creates direct and immediate financial benefits.. In
this study, attention has been paid to the assessment of environmental or economic benefits also,
37
since this type of project are be focused on economic and environmental impacts rather than
financial benefits. However, long term sustainability of the project depends on their financial
profitability. Thus this study has done micro level financial analysis while observing the
environmental impact as well.
38
Table 28: Average Selling Prices of Plastic Products (Rs) – With Project
Type of Product Average Sold Price Average Sold Price Average Sold
Price (Rs/Unit) (Rs/Unit) Price (Rs/Unit)
2017 2018 2019
Sunk Boxes 25.0 25.0 25.0
Ceiling Rose 33.0 33.0 33.0
MCB 250.0 250.0 250.0
Round Blocks 4.00 4.00 4.00
Measuring Cups 3.00 3.00 3.00
Measuring Lids 3.00 3.00 3.00
Wesak Lanterns 25.0 25.0 25.0
Flower Pots 65.0 65.0 65.0
Bottle Crates 150.0 150.0 150.0
Plastic 50.0 50.0 50.0
Household items
Shoe heels 30.0 30.0 30.0
Note: As a marketing strategy, the company maintainthe same prices for their products until
2020.
39
Table 30: Average Prices of Plastic Powder (Rs/Kg) – With Project
40
13.3 Profit and Loss Account – With Project
Table 32: Profit and Loss Account (With Project)
41
13.4 Cash Inflow and Outflow of the Project
Table 33: Projected Cash Inflow and Outflow of the Proposed Project
Time
1 2 3 4 5 6 7 8
Income from 17.7 24.2 31.7 31.7 31.7 31.7 31.7 31.7
Plastic Raw
Materials
Income from 13.67 48.05 102.4 102.4 102.4 102.4 102.4 102.4
Products
Total Inflow 31.37 72.25 134.1 134.1 134.1 134.1 134.1 134.1
Fixed Cost 42.1 1.2 10.0
With New 21.5 1.2 10.0
Investment
Without New 20.6 - -
Investment
Total Variable 24.2 28.37 57.99 57.99 57.99 57.99 57.99 57.99
Cost with New
Investment
Running 1.38 2.09 4.01 4.01 4.01 4.01 4.01 4.01
Expenses
Salaries 2.52 3.0 5.58 5.58 5.58 5.58 5.58 5.58
Raw Materials 20.3 23.28 48.4 48.4 48.4 48.4 48.4 48.4
O&M 0.18 0.18 0.25 0.25 0.25 0.25 0.25 0.25
Replacement 39.5
Cost
Total Outflow 66.48 59.37 68,24 58.24 58.24 97.94 58.24 58.24
Net Cash -35.11 12.88 65.86 75.86 75.86 36.16 75.86 75.86
Inflow
42
14. Economic Analysis
With project, one of the major incremental net benefits is the net foreign saving on plastic and
polythene raw material imports. This proposed project has planned to recycle plastic chemical
barrels and finally produce plastic powder which could be substituted for imported plastic virgin.
Total financial value of recycled quantity under project is exactly equal to the net incremental
benefit from the project since in without project that output becomes zero value. Table no 34
shows the financial value of net foreign savings due to new investments. However, the foreign
savings due to project is not included to the IRR, NPV and B/C ratio calculation.
43
The overall value or “natural capital cost” gives indications of the financial cost to companies
were to internalize impacts associated with their current practices. These costs can also be
factored into business and investment decision making. In order to quantify the natural capital
cost of the impacts of plastic, the high-level methodology follows six steps: sector selection,
plastic use quantification, scope and boundary selection, impact quantification, and natural
capital valuation and application (Johnson, 2015). Thus this study does not apply all those steps
to measure natural capital valuation of plastic due to the absence of robust data and scientific
research. However, the report briefly examines the environmental impacts of the recycling
process of plastic as follows.
Generally there are three types of plastics such as Plastic-in-product, plastic-in-packaging and
plastic-in-supply-chain. Plastic-in-product includes the quantity of plastics directly used in the
product, as well as any losses that were incurred during the manufacturing process. Plastic-in-
packing includes the quantity of plastic directly used in the packaging of the product as well as
any losses that were incurred during the packaging of the product. Plastic-in-supply-chain
includes the quantity of plastic used indirectly by consumer goods businesses via their supply
chain. According to the United Nations Environmental Programe (UNEP), 2015 overall, global
weighted average of plastic-in-packaging used in the consumer goods industry is 2 tons per $1m
revenue; of plastic-in-product 2 tons per $1m revenue; and of plastic-in-supply-chain 4 tons per
$1m revenue. This indicates that for every $1m in revenue in the consumer goods industry, 8
tons of plastics are consumed. The expected target of this project is to recycle 648 ton of post-
consumer and post-industrial plastics. Otherwise all these plastics could cause damage to the
whole society. Thus, this project could be reasonably justifiable as an environmentally viable
project.
The economic analysis was carried out by comparing all costs that have been already made and
required in the future to further extend and operate the project with the revenues generated by the
project once in operation. Cost and benefit over the analysis period of 15 years have been
calculated in financial terms. Table E-1 to E-4 in Annex – 1 shows the total economic net
benefits which will be developed From Rs. -35.0 million in the year 2017 to Rs. 75.0 million in
the final year 2031. The bulk of the benefits will be in year 2019. The cash flow becomes
44
positive from the year 2018 onwards, indicating that the project benefits will be able to offset
capital expenditure.
The IRR is calculated for the project in table E1 to E4 in Annex 1 and summarized in table 35. It
indicates that the base case ratio stands at 111% and it is over and well above the social rate of
interest of cost of capital for environmental protection project, because the project produces
significant immeasurable environmental impacts to the country. Base case only considers the
financial returns from the project. With positive environmental impacts of the plastic recycling
process the EIRR would be further increased and it will be over and well above the social rate of
interest. However the study does not measure the environmental impacts in monitory terms while
the study measures the macro economic impacts of the project with the help of foreign savings.
The results of both scenarios are summarized in table 35.In both scenarios B/C ratio is above one
which indicates that the project will provide more benefits than cost.
Table 35: Internal Rate of Returns and NPV of the Proposed Project
Scenarios Description EIRR B/C Ratio ENPV
01 Only with financial Benefits 111% 2.37 199.39
(Base Case)
02 Base Case + Foreign savings of 392% 3.18 652.6
the project
Note: Opportunity cost of capital is 20%
45
Table 36: Sensitivity Analysis
Scenarios Description EIRR ENPV (Net Cash B/C
flow) Ratio
Rs. M
Base Case Benefits include, value of plastic 111% 199.39 2.37
powder and plastic product
2 Base case+ Foreign Saving 392% 652.6 3.182
3 Base case + all cost increased by 94% 60.20 1.64
50%
4 Base case+ all revenue reduce by 41% 55.34 1.18
50%
Note: Opportunity cost of capital is 20%
Sensitivity tests were performed to assess the impact of variations in incremental cost and benefit
streams on the project viability. The results depicted that, without foreign savings , the EIRR is
111% and it is over and above the standard level. Further, if project cost including materials and
management increased by 50%, while without changing the cash inflow, the IRR will reduce to
94%. If project cash inflow reduces by 50%, while without changing the cost structure, the IRR
is 41% and it is still over and above the standard level. These are the possible risks and
uncertainties of the project with present financial returns. Thus, all those switching values
suggest that the project is economically and financially attractive project. Investor as well as
country will gain more benefits from the new investment.
16.1 Conclusion
All these decision criteria presented and discussed above, indicate that a financing of the plastic
recycling Project would be highly justified in both financial and economic terms. Besides, with
an environmental point of view, the project is highly viable. However, it is important to
emphasize that, this type of project should be focused more on social and environmental impacts
rather than the financial returns. Policy makers need to be concerned about the economic
viability rather than financial viability.
46
16.2 Recommendation
As the project is economically and financially justified, this study proposed to the further
extension of project activities with the support of the local government
It was observed that the existing recording, monitoring and evaluation process of the
project needs to be restructured with relevant human capital for the betterment of the
project.
Prepared by
47
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Contents
Executive Summary ........................................................................................................................ 1
1. Industry and Marketplace Analysis ............................................................................................ 2
1.1 Global Context ...................................................................................................................... 2
1.2 Local Context ........................................................................................................................ 2
1.3 Environmental Issues ............................................................................................................ 2
2. Industry Profile ........................................................................................................................... 3
2.1 Background of the Company................................................................................................. 3
2.2 Existing Management Structure ............................................................................................ 4
2.3 Further Expansion of the Business ........................................................................................ 6
2.4 Need Analysis for Proposed Project ..................................................................................... 6
3. Technical Information ................................................................................................................. 7
3.1 Types of plastics .................................................................................................................... 7
4. Production Process ...................................................................................................................... 9
4.1 Collection of waste plastic .................................................................................................... 9
4.2 Storage................................................................................................................................... 9
4.3 Sorting and identification .................................................................................................... 10
4.4 Washing............................................................................................................................... 10
4.5 Cutting ................................................................................................................................. 11
4.6 Shredding ............................................................................................................................ 11
4.7 Extrusion / Palletisation ...................................................................................................... 11
4.8 Fabrication into end Product ............................................................................................... 11
5. Employment Generation of the Project ................................................................................. 12
6. With and Without Situation of the Project ................................................................................ 13
6.1 Scope of Operations (With and Without Project) ............................................................... 13
6.2 Existing Production Capacity (Without Project) ................................................................. 13
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6.3 Production Capacity With New Investment (With Project) ................................................ 14
7. Sales and Distribution System – With Project .......................................................................... 14
7.1 Target Market Segments ..................................................................................................... 14
7.2 Distribution Strategy ........................................................................................................... 14
7.3 Advertising & Promotion Strategy...................................................................................... 16
7.4 Sales Strategy ...................................................................................................................... 16
7.5 Marketing Strategy .............................................................................................................. 16
7.6 Market Comparison ............................................................................................................. 17
7.7 Competitor Analysis ............................................................................................................ 17
8. Supply Chain (Post- Consumer and Post-Industrial Plastic) .................................................... 18
8.1 Supply Chain - Without Project .......................................................................................... 18
8.2 Supply Chain (With project) ............................................................................................... 20
8.3 Sorting and storing facilities (Without Project) .................................................................. 21
8.4 Sorting and Storing (With Project) ..................................................................................... 21
9. Operations & Land Utilization (With Project).......................................................................... 21
10. Time Targets ........................................................................................................................... 23
11. Structure of Economic and Financial Analysis ....................................................................... 23
11.1 Objective of the Report ..................................................................................................... 23
11.2 Instrument of Data Collection ........................................................................................... 24
11.3 Methodology ..................................................................................................................... 24
11.4 Approach ........................................................................................................................... 24
11.5 Principles and Procedures ................................................................................................. 25
12. Financial Analysis – Without Project ..................................................................................... 25
12.1 Cost Structure – Without Project ...................................................................................... 25
12.1.1 Fixed Cost (Without Project) ...................................................................................... 25
12.1.2 Variable Cost (Without Project) ................................................................................. 26
12.1.3 Labour Cost (Without Project) ................................................................................... 27
12.1.4 Raw Material Cost – Without Project......................................................................... 28
12.2 Returns of the Project – Without Project ......................................................................... 28
12.2.1 Returns from Plastic Powder – Without Project ......................................................... 29
12.2.2 Returns from Product – Without Project ................................................................... 30
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12.2.3 Total Returns – Without Project ................................................................................. 31
12.3 Profit and Loss Account – Without Project ..................................................................... 32
13. Financial Analysis – With Project .......................................................................................... 33
13.1 Cost Structure .................................................................................................................... 33
13.1.1 Fixed Cost (With Project) ........................................................................................... 33
13.1.2 Fixed Costs for Office Equipments (With project) .................................................... 34
13.1.3 Total Variable Cost (With Project) Rs/Year............................................................... 35
13.1.4 Labour Cost (With Project) ........................................................................................ 35
13.1.5 Cost of Raw Materials ............................................................................................... 36
13.1.6 Total Estimated Cost – With Project .......................................................................... 37
13.2 Benefits of the Project ...................................................................................................... 37
13.2.1 Returns from Plastic Product – With Project............................................................. 38
13.2.2 Returns from Plastic Raw Materials .......................................................................... 39
11.2.3 Total Annual Revenue – With Project ....................................................................... 40
13.3 Profit and Loss Account – With Project........................................................................... 41
13.4 Cash Inflow and Outflow of the Project........................................................................... 42
14. Economic Analysis ................................................................................................................. 43
14.1 Foreign Exchange Saving................................................................................................. 43
14.2 Environmental Benefit of the Project ................................................................................ 43
14.3 Cash Inflow and Outflow of the Project............................................................................ 44
14.4 Economic Internal Rate of Return ..................................................................................... 45
15 Sensitivity and Risk Analysis ................................................................................................. 45
16. Conclusions and Recommendations ....................................................................................... 46
16.1 Conclusion......................................................................................................................... 46
16.2 Recommendation ............................................................................................................... 47
References .................................................................................................................................... 48
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LIST OF TABLES
Table Page
Table: 01 Summary of Company Profile 04
Table: 02 Types of Plastics 07
Table: 03 Employment Generation of the Project 12
Table: 04 Recycling Capacity of Plastics – With Project and Without Project 13
Table: 05 Monthly Average Plastic Collections 20
Table: 06 With Project Productivity Improvement 20
Table: 07 The Value of Fixed Assets by Mid of Year 2016 26
Table: 08 Total variable Cost (Without Project) 27
Table: 09 Labour Cost (Without Project) 27
Table: 10 Average Cost on Raw Material (Without Project) 28
Table: 11 Total Cost of Production (Without Project) 28
Table: 12 Returns from Plastics Raw Materials 29
Table: 13 Average prices of Plastic Raw Materials 29
Table: 14 Average selling Prices of Plastic Products 30
Table: 15 Gross Income from Product – Without Project 30
Table: 16 Total Annual Gross Revenue – Without Project 31
Table: 17 Profit and Loss Account (Without Project) 32
Table: 18 Fixed Cost – With Project 33
Table: 19 Cost of Office Equipments 34
Table: 20 Total variable Cost – With Project 35
Table: 21 Labour Cost – With Project 35
Table: 22 Cost on raw Materials – With Project (2017) 36
Table: 23 Cost on raw Materials – With Project (2018) 36
Table: 24 Cost on raw Materials – With Project (2019) 36
Table: 25 Total Projected Raw Materials cost for next 5 years 37
Table: 26 Total Estimated Cost – With Project 37
Table: 27 Gross Income from Plastic Products – With Project 38
Table: 28 Average Selling Prices of Plastic Products 39
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Table: 29 Financial Benefit of Plastic Raw Materials – With Project 39
Table: 30 Average Prices of Plastic Raw Materials 40
Table: 31 Total Annual Gross Revenue 40
Table: 32 Profit and Loss Account – With Profit 42
Table: 33 Projected Cash Inflow and Outflow of the Proposed Project 42
Table: 34 The Financial value of Import Savings 43
Table: 35 Internal Rate of Returns and NPV of the Proposed Project 45
Table: 36 Sensitivity Analysis 46
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