“ESTABLISHMENT OF A PULSE PROCESSING INDUSTRY”

PROJECT TITLE: “ESTABLISHMENT OF A PULSE PROCESSING INDUSTRY”

MTS-I Date of submission: September 16, 2009

HOST ORGANIZATION:

SOCIETY FOR RURAL INDUSTRIALIZATION, RANCHI

REPORTING OFFICER: MR. DIPANKAR SENGUPTA

FACULTY GUIDE: PROF. NANDINI SEN

SUBMITTED BY:

ANOOP NARAYAN

SHIV SHAKTI KUMAR

SCHOOL OF RURAL MANAGEMENT (SRM) KALINGA INSTITUTE OF INDUSTRIAL TECHNOLOGY

KIIT UNIVERSITY, BHUBANESWAR, ORRISA, INDIA

2009

ACKNOWLEDGEMENT

It gives us immense pleasure when work comes to an end successfully. Our acknowledgements

are many times more than what we are expressing. We shall ever remain thankfully indebted to

all those known and unknown personalities, who have directly and indirectly encouraged us to

achieve our goal and enlightened us with the touch of their knowledge and constant

encouragement.

We are grateful to the Dr. L.K. Vaswani, Pro- Vice Chancellor, SOM & SRM, KIIT University

for having provided us the opportunity to take up this project. With immense pleasure, we

express our profound sense of reverence and gratitude to Prof. Nandini Sen our faculty guide

along with A.V.R. Acharyulu, MRM Coordinator for providing us with an opportunity to work

with Society of Rural Industrialization, Ranchi, Jharkhand.

We find ourself in difficult situation to express our gratitude and indebtedness in limited words

to members of Society of Rural Industrialization, who cooperated with us and gave us an

opportunity to work on the project. We consider ourselves extremely fortunate for expressing

our deep sense of gratitude and indebtedness to our esteemed Major Advisor Dr. A. K. Basu

(Chairman, Society for Rural Industrialization, Ranchi) and Mr. Dipankar Sengupta (CEO and

Reporting Officer, SRI, Ranchi) for his keen interest in the planning and preparation of this

entire project work. We are very thankful to Mr. Samrat Sengupta who guided us throughout

the fieldwork and provided us with necessary facilities which helped us in timely completion of

our assignment.

Our special thanks are due to Mr. D. Pariya, Mr. Asit Sarkar, Mr. Hemant Surin (Field staff,

Jarga Village) SRI, and Mr. Ramanand Gope (field staff, Jarga Village) SRI for their kind co-

operation during our research work and for treating us as members of their research team.

Anoop Narayan Date: 15-09-2009

Shiv Shakti Kumar Place: Bhubaneswar

S.No. Particulars Page No. TABLE OF CONTENT

Chapter 1: Introduction………………………………..…………………………...…...1-7

1.1 Background……………………………………………….…………………1-2

1.2 About Organization (SRI)………………………….………………………..3-4

1.3 Overview of the project………..…………….………………………………4

1.3.1 Project Implementation Strategy……………...…………………4-5

1.3.2 Scope of the study …………….…………………………………5

1.3.3 Limitation of the study………….………………………………..5

1.4 Objective…………………………….……………………………………….5

1.5 Literature review…………………...……………………………………...…6-7

Chapter 2: Methodology……….……….....……………………………….…................8-9

2.1 Location……………………………………….……………………………..8

2.2 Sample design…………………………………………………………….….8

2.2.1 Sample size…………………………………………………….……8

2.2.2 Survey Design ……………………………………………….……..8

2.2.2.1 Collection of primary data………………………….………8

2.2.2.2 Collection of secondary data…………………….………….9

2.3 Tools adopted for data analysis……………………….……………….…….9

Chapter 3: Technical analysis…………………………………………….……….……10-16

3.1 The pulse milling process…………………………………………..………10

3.1.1 Procedure for pulse milling……………………………..……….11

3.2 Products…………………………………………..…………………………11

3.3 Machineries…………………………………….……………...……….…….11

3.3.1 Hand operated pulse dehusking machine………………..………..……11

3.3.2 Pulse cleaner cum grader………………………………...…......……11

3.4 Plant Capacity…………………………………………………...…………12

3.5 Flow chart of black gram processing…………………….…………………13

3.6 Descriptions of various unit operations………………….…………………14

3.6.1 Cleaning………………………………………….……………………14

3.6.2 Grading………………………………………..………………………14

3.6.3 Soaking……………………………………...…………………………14

3.6.4 Conditioning………………………………...…………………………14

3.6.5 Dehusking and splitting……………………………………………..…14

3.7 Utilities…………………………………………………………………..…15

3.7.1 Power…………………………………………………………...………15

3.7.2 Water……………………………………………………………………15

3.8 Location of the industry………………………………………………….…15

3.8.1 Availability of water…………………………………………………….15

3.8.2 Availability of electricity…………………………………………..……15

3.8.3 Availability of transport facility…………………………………..…….15

3.8.4 Availability of raw materials…………………………………….……...16

3.8.5 Availability of skilled and unskilled labor…………………….………...16

3.8.6 Nearness to the market…………………………………….…………..16

Chapter 4: Market Analysis…………………………………………………..…………...17-23

4.1 Major Competitors……………………………………………….……………17

4.2 Market potential……………………………………………….………………17

4.2.1 Demand……………………………………………….…………………17

4.3 Marketing channel……………………………………….……………………20

4.3.1 Existing marketing channel……………………….………………………20

4.3.2 Proposed marketing channel……………………………………………...21

4.4 Marketing strategy…………………………………..………………...……….22

4.4.1 Customer………………………………………...………………….……22

4.4.2 Consumer behaviour……………………………..………………………22

4.5 Competitors Analysis…………………………………..………………..……..22

4.6 Marketing constraints…………………………………...…………………...…23

Chapter 5: Legal compliance for company formation……………….……………………24-28

5.1 Classification of enterprises…………………………………………………….24

5.2 Legal benefits for micro- enterprise…………………………………………….24-25

5.3 Bank finance……………………………………………..……………………..26

5.3.1 Rate of interest and repayment schedule…………………………….…..26

5.4 Proposed beneficiaries under KVIC…………………..………………………26

5.5 Process of registration…………………………………………………………26-27

5.6 Commercial tax reforms……………………………………………………...27

5.6.1 Subsidy/ incentive on VAT…………………….…………………………27

5.6.2 Central Sales Tax (CST)……………………….……………………….…28

5.6.3 Others………………………………………….…………………….……28

Chapter 6: Financial Analysis……………………………….………………..…...…29-37

6.1 Basis and presumptions………………………………….………………….…29

6.2 Fixed cost………………………………………………….………….…….…29

6.3 Working Capital…………………………………………………………….…30

6.4 Project cost……………………………………………………………….……31

6.5 Cost of production…………………………………………………….…….…31

6.6 Sales proceed……………………………………………………….…….……31

6.7 Means of finance………………………………………………………………32

6.8 Terms loan repayment…………………………………………………………33

6.9 Projected profitability……………………………………….…………………33-34

6.10 Break even analysis…………………………………………………………..34

6.11 Net Present Value……………………………………………………….……34

6.12 Internal Rate of Return…………………………………………………….…35

6.13 Debt service coverage ratio…………………………………………….….…35

6.14 Risk analysis…………………………………………………………..……36-37

Chapter 7: Benefits for the society……………………………………………….…38-39

7.1 Source of income………………………………………………...…….……38

7.2 Employment creation….……………………………………………………38

7.3 Benefit to local traders and retailers ………………………………..………38

7.4 SHG empowerment…………………………………………………………38

7.5 Scope of small pulse processing industry ……………...…………...…...…38-39

Chapter 8: Summary…………………….. .……………………….……………...…40-41

REFERENCES…………………………………………………………………………..42

ANNEXURE

ANNEXURE 1: Sensitivity analysis for sales variation at 10%..................................................43

ANNEXURE 2: Sensitivity analysis for variation in variable cost at 10%.................................44

ANNEXURE 3: Sensitivity analysis for variation in fixed cost at 10%.....................................45

ANNEXURE 4: Questionnaire for market survey……………………………..........................46

ANNEXURE 5: Quotation 1 of machines…………………………………………..................47

ANNEXURE 6: Quotation 2 of machines………………………………………......................47

List of Tables

Table 1: Market Demand of black gram kg/ month………………………..……..…………17

Table 2: Demand supply relationship ………………………………………………………18

Table 3: Rate of Subsidy for different Category ……………………………………..……..25

Table 4, 5, 6: Fixed Cost…………………………………….………………………………29

Table 7: Working Capital…………………………………………………………………..30

Table 8: Project cost……………………………………………………………………….31

Table 9: Cost of production…………………………………………………….………….31

Table 10: Sales proceed……………………………………………………….……………31

Table 11: Means of finance…………………………………………………………………32

Table 12: Terms loan repayment……………………………………………………………33

Table 13: Projected profitability……………………………………………………………33-34

Table 14: Break even analysis………………………………………………………………34

Table 15: Internal Rate of Return………………………………………………………..…35

Table 16: Debt service coverage ratio…………………………………………………...…35

Table 17: NPV analysis when sales variation is 10%...........................................................36

Table 18: NPV analysis when variable cost variation is 10%..............................................36

Table 19: NPV analysis when fixed cost variation is 5%......................................................37

Table 20: NPV analysis at different assumptions…………………………………………..37

Table 21: List of pulse processing industry in Ranchi……………………………………...39

List of Graphs

Graph No.1: Market Demand of black gram kg/ month……………………………18

Graph No. 2: Demand Supply Relationship of Black gram………………………...19

List of Figures

Figure 1: Flow chart of black gram processing …………………………….………13

Figure 2: Existing marketing channel ……………………………………………...20 Figure 3: Proposed marketing channel ………………………….…………….…...21

ABBREVIATIONS USED

SRI: Society for Rural Industrialization

GDP: Gross Domestic Product

NGO: Non Governmental Organisation

KVIC: Khadi and Village Industries Commission

MSME: Micro, Small and Medium Enterprises

NABARD: National Bank for Agriculture and Rural Development

SHG: Self Help Group

PMEGP: Prime Minister’s Employment Generation Programme

KVIB: Khadi and Village Industries Board

DIC: District Industries Centre

SIDBI: Small Industries Development Bank of India

PVF: Present Value Factor

NAFED: National Agricultural Cooperative Marketing Federation of India Limited

Title: To make plan for establishing a small pulse processing unit.

Executive summary

Organization: Society For Rural Industrialization, Ranchi, Jharkhnd.

Reporting Officer: Mr. Dipankar Sengupta

Faculty Guide: Prof. Nandini Sen

Students’ Name: Anoop Narayan, Shiv Shakti Kumar

Objectives: To plan for establishing a small pulse processing unit in Jarga village, Angara

Block, Ranchi, Jharkhand.

Methodology: For establishing a small pulse processing unit, we covered various aspects like

market, farmer survey, technical, financial and legal aspects. Total sample size for market study

is thirty two retail shops, five large wholesalers, eight small wholesalers. A questionnaire, semi

structured interview and website of different agency is used for the data collection. The analysis

done for technology, market, financial and risk by using various tools.

Total sample size for farmer survey is 233 farmers, to know the availability of raw materials for

the processing unit.

To know the technical aspects of pulse processing, some websites and four processing units were

visited in the Ranchi district.

To know about the legal aspects of establishing small enterprises some governmental websites

was used.

Findings and Analysis

Technical analysis: There are two machines available in the market for the small pulse

processing unit in which one is manually operated and other is operated with the help of motor of

2 Hp. The motor operated machine has high cost as compare to manually operated machine. So,

we selected manually operated machine for our proposed industry.

There are 2 methods of pulse processing. The proposed pulse processing unit is based on wet

processing method because dry processing method requires more investment.

The capacity of the plant will be 36 tonnes at 100% capacity. One skilled worker and four labors

will be required for running this unit. The industry planned to start at 60% capacity in the 1st year

with 21.6 tonnes. The production at 100% capacity will be reached from 3rd year onwards. The

total time required for implementation of this project is estimated at twelve months.

Market analysis: The proposed industry is planning to sell the products in Tatisilway,

Gondalipokhar, Johna and Uppar bazaar market. Total monthly demand in these markets is 3870

kg. The proposed industry plans to give high margin to wholesaler in comparison to competitors

low cost of production and higher margin in distribution are the two marketing strategies by

which the proposed industry can be penetrate in the market.

Legal analysis: The proposed industry will be established in the rural area. Under KVIC norms,

they will give subsidy of 25% on cost of investment of the project if any industry will be

established in rural area.

Financial analysis: A two month working capital is sufficient for running of industry. The unit

would construct its own building and the total project cost is Rs. 4, 12,263. The Internal Rate of

Return is 28.6% and unit will attain the break-even in fourteen months. The debt service

coverage ratio is 3.38. The most critical variables are sales revenue i.e. sales volume and selling

price as in the risk analysis (sensitivity analysis) for the industry.

Benefits for the society: The proposed unit will create a new employment opportunity in Jarga

village. It will become additional source of income for the small and marginal farmers. The

proposed unit will be run by the SHG members in two shifts of four hours each and also it will

provide benefit to the local traders and retailers.

On the basis of above aspects we can say that the proposed unit is viable in rural area.

ABSTRACT

“ESTABLISHMENT OF MICRO PULSE PROCESSING UNIT IN JARGA VILLAGE, ANGARA BLOCK, RANCHI”

by

Anoop Narayan & Shiv Shakti Kumar

School of Rural Management

Kalinga Institute of Industrial Technology (KIIT) University

Bhubaneswar, India

Year-2009

Faculty Guide : Prof. Nandini Sen

Micro scale pulse processing unit is one of the alternative sources of income in rural area because there is no pulse processing unit is available in the block level. Due to lack of value addition technology for the farmers, they are not able to get right price for their produce. So that, there are large scope of micro pulse processing unit in a block level and it will create an additional source of income for small and marginal farmer.

The main objective of this project is to make a plan for the establishment of micro pulse processing unit in Jarga village, Angara block, Ranchi.

For establishing a small pulse processing unit, there are requirement of various aspects like technical, market, farmer survey, financial and legal aspects.

There are two machines available in the market for the small pulse processing unit in which one is manually operated and other is operated with the help of motor of 2 Hp. The motor operated machine has high cost as compare to manually operated machine. So, we selected manually operated machine for our proposed industry. There are 2 methods of pulse processing. The proposed pulse processing unit is based on wet processing method because dry processing method requires more investment.

The capacity of the plant will be 36 tonnes at 100% capacity. One skilled worker and four labors will be required for running this unit. The industry planned to start at 60% capacity in the 1st year with 21.6 tonnes. The production at 100% capacity will be reached from 3rd year onwards. The total time required for implementation of this project is estimated at twelve months.

The proposed industry is planning to sell the products in Tatisilway, Gondalipokhar, Johna and Uppar bazaar market. Total monthly demand in these markets is 3870 kg. The proposed industry plans to give high margin to wholesaler in comparison to competitors low cost of production and

higher margin in distribution are the two marketing strategies by which the proposed industry can be penetrate in the market.

The proposed industry will be established in the rural area. Under KVIC norms, they will give subsidy of 25% on cost of investment of the project if any industry will be established in rural area.

A two month working capital is sufficient for running of industry. The unit would construct its own building and the total project cost is Rs. 4, 12,263. The Internal Rate of Return is 28.6% and unit will attain the break-even in fourteen months. The debt service coverage ratio is 3.38. The most critical variables are sales revenue i.e. sales volume and selling price as in the risk analysis (sensitivity analysis) for the industry.

Establishment of the proposed pulse processing unit will become a one of the source of income and create new employment opportunity for the small and marginal farmers in a Jarga village. The proposed processing unit will give Rs 4-6 more to the farmers as compared to local traders. This unit will be run by SHG members and create awareness among rural people, which will empower the SHG.

A REPORT ON ESTABLISHMENT OF PULSE PROCESSING UNIT

SOCIETY FOR RURAL INDUSTRIALIZATION (SRI), RANCHI, JHARKHAND Page 1

1.1 Background:

CHAPTER 1. INTRODUCTION

Jharkhand is a one of the most backward state in eastern India. This state comprises of four

divisions and 22 districts and is spread over an area of 79,714 sq. km. About 40 percent of the

state’s population is socio-economically deprived and over 50 percent are below the poverty line

and need priority attention. Most of the workforce in the state is engaged in agriculture, wage

labor, livelihood based on forest produce, animal husbandry, household industry, mining and

quarrying. About 78% population of Jharkhand live in the villages with the prevailing constraints

both of illiteracy (66 %) and poverty (70 %). The State is facing two major problems- poverty,

and low rate of economic growth. Land and forest are the main natural endowment from which

the farmers derive their sustenance and social status. Rural economy of Jharkhand is based

primarily on rain-fed paddy cultivation along with wheat and pulse cultivation. Pulses and oil

seeds are produced in medium upland. In Jharkhand out of 29.5 lakh farmers, 15.2 lakh belong to

marginal category and 7.32 lakh belong to small category. Most of the marginal farmers have a

land holding of less than 1 hectare and are rainfall dependent for agriculture purpose. Another

big problem is that undulating and fragmented land is not suitable for the cultivation of crops and

creates problem for managing agriculture activities. And another big problem is that they direct

sell their produce to the small local traders at a very low price. They are not able to add value to

their produce. For additional income they are migrating to urban areas. So, there is a marginal

shift of working force from agriculture to non-agriculture sector due to marginal land holdings in

Jharkhand.

The location of this project was Jarga village which comes under Angara block of Ranchi district

and has a similar scenario as described across Jharkhand elsewhere. Most of the farmers of Jarga

village are marginal, the major cultivated crop is rice and the second most cultivated crop is

pulse and among pulses, the farmers of Jarga village are cultivated Black gram (urd dal) and

small quantities of pigeon pea. About 54 % population of Jarga village is totally dependent on

agriculture and 30 % population depends on agriculture along with daily wage and 16 %

populations are in service or own businesses. Total area of Jarga village is 766.23 hectare, out of

which 206.18 hectare is a cultivated area and in local language they called it a Don land. This

22land is mainly used for paddy cultivation due to availability of water. About 75.80 hectare



land is a medium cultivated land (Tanr) and mainly used for cultivation of vegetables, pulses like

black gram and pigeon pea, 60.40 hectare of land comes under uncultivated land (Parti), 31.94

hectare of land is homestead land (Bari), 391.91 hectors of land comes under reserve forest.

Almost all the farmers of Jarga village cultivate black gram in small quantity and sell their

produce in a local markets at a very low price. They sell their produce to small traders at the rate

of 12-14 per kg in a local markets named Gondlipokhar and Johna markets. The current price of

processed black gram in market is Rs 40-44 which is much higher than what the farmers get

from small traders. The lack of value addition in their produce is one of the major reasons for the

distress sales. So they are not getting right price of their produce. So that only land based

agriculture is not sufficient source of income for them to overcome this situation. Small-scale

pulse processing industries is one of the routes that the marginal farmers’ family can easily take

up to increase their income.

In Ranchi, there is no pulse processing unit at village level so there is a scope for the small pulse

processing unit at village level due to easy and cheap availability of raw materials. This pulse

processing unit will help farmers get a right price of their produce. Farmer can directly sell their

produce to the dal mill and eliminate small traders’ activities. It will help generate employment

and income source for the marginal farmers and the SHG of women also benefited by this

processing unit because this unit will be run by SHG. In Jarga village, there is sufficient

availability of raw materials for running the small pulse processing unit. From this pulse

processing unit, it is projected that farmers will get about Rs 4-6 more per kg and assured for

their sell of price.

Looking at the importance of pulse processing and the current market price and demand of pulse,

SRI (Society for Rural Industrialization) is planning to establish pulse processing industry at

micro-level at Jarga, in Angara block of Ranchi district in Jharkhand with an aim to provide

nutritious pulses to customers at low cost by maintaining a standard quality and promoting

economic activities among the members of Self-Help Group and developing women

entrepreneurship in rural areas.

For this the researcher prepared a bankable report this project and undertook a different analysis

like market analysis, technical analysis, competitor analysis etc to measure the feasibility of

project.



1.2 About Organization (SRI)

In 1977, four academics at Birla Institute of Technology (Ranchi) started Rural Project

Consultants, RUPCON, as a platform for bringing in Science & Technology in rural

development. On the request of Bihar government, SRI as a Society was registered in 1984 with

Rural Project Consultants (RUPCON) & Institute for Rural Industrialization (IRI) later named as

Society for Rural Industrialization (SRI).

The Society has three major activities:

Research and Consultancy: The research in various branches of science and technology aims to

develop products, processes and systems adaptable and manageable by villagers. Consultancy

services on technical subjects, planning and organization building are offered to governments,

industries, NGOs, field level groups and villagers.

Training: Training on skill formation is exclusively for village youths. Training of trainers and

management training are offered to other organizations including the government. The skill

training includes courses on communication, personality building and enterprise management.

SRI offers short training courses on programme management for various National schemes for

functionaries of NGO and Government.

Extension & Promotion: The work is conducted through both in-house and network mode. RTP

facilitate field verification of technologies and thus creates a replicable field model. Tested

technologies are spread through NGO network.

The main tasks before SRI set are:

• To innovate in the field of science and technology.

• To work with and for the marginalized people aiming at giving them the dignity of

human life.

• To re-examine, modify, invent products, processes and systems so that millions in the

vast countryside can use them.

Relevance of technology innovation at SRI emerges from continuous interaction with various

village groups, with NGOs in many States of India and from study of and linkages with



knowledge sources. In order to render the innovations relevant to the people implementation is

undertaken through the following routes:

• Community based organizations like WSHG, Farmers club, Village Planning Group

Youth leaders group, for specific tasks of income generation.

• Adolescent girls provide community health service and in the process learn health &

hygiene issues.

• Whole village/sub village to overcome poverty and access common services like drinking

water, connectivity, electricity etc.

The process adopted by SRI invariably goes through a chain of steps: Identification of Problem,

Conceptualization, Module preparation, Action Research, before opening up for large scale

multiplication by NGOs and governments.

1.3 Overview of the project:

This proposed is focus on the welfare of the rural people of Jarga village and nearby village

because most of the framers are small and marginal and socio-economic condition of women are

not good and the main aim behind this proposed project are:

• To promote rural pulse processing unit as enterprise so rural youths and women can

replicate it.

• To promote economic activities among the members of Self-Help Group and developing

women entrepreneurship in rural areas.

• To create an alternative source of income for small and marginal farmers and to get right

price for their produce.

1.3.1 Project implementation strategy

The local technology centre (SRI) is equipped with training inputs to put village resources to best

use, thereby creating sustainable employment opportunities for the women SHG. They are

planning to provide training to work on pulse processing machines.

SRI is planning to set a pulse processing unit at small scale, which will be run by the SHG

members. The women plan to work in two shifts of four hours. This will help the rural women



manage their homes as well as to earn money in spare time, which will help them to come out of

the oppression of poverty.

For the replication of this industry, SHG women will be trained by SRI. In the training, they will

be educated on all aspects of establishing and running with the whole picture of running an

industry. SRI will train SHG members in terms of:

• Procedure for setting an industry.

• Legal compliance for setting an industry.

• Operational aspects of the business.

• How to process the pulses at commercial scale.

• Preparation of bankable project.

• Feasibility of the industry.

Over and above this, SRI will guide them in replicating their knowledge, they have gained in

training. Guidance will be much more emphasized on registration of the industry, preparation of

bankable projects, issuing loans from the bank, making them aware of the benefits given by the

state and central government and linkage to the markets.

1.3.2 Scope of study

The study mainly looks into the legal procedure for registration of small and micro pulse

processing unit, preparation of bankable project report, plan sustainability of industry for the

society.

1.3.3 Limitation of the study

The shopkeepers were unwilling to reveal the exact data about the sale real income etc.

One of the primary limitations of the study was that there was a busy schedule for

shopkeepers. So it is not possible for them to spare much time for discussion.

All the prices taken for calculation of cost of production were from wholesale market and

may be vary with time.

1.4 Objective of the project

To plan for establishing a small pulse processing unit in Jarga, Angara Block, Ranchi.



1.5 Literature Review

A report written on “Post Harvest Technology for Employment Generation in Rural Sector in

India” by Nawab Ali, 2001 showed that to increase productivity in agriculture, diversification

and modernization of agriculture is required. For employment generation in rural area selective

mechanization of agriculture and appropriate post-harvest management and value addition of

agriculture produce leads to employment generation in the rural sector and minimization of

losses of the agriculture produce.

A report by Devinder Sharma, 2005 reported that a study undertaken by the Union Ministry of

Agriculture demonstrated that farm incomes had fallen in the past five years. Farmers were

producing more only to find no buyers. And when they eventually got buyers, they were paid

half of what they deserve. Hence there was a need to come up the strategies that provide a stable

and assured income to the farm sector and the best alternative for that is value addition of

agriculture produce through food processing, which can fetch higher prices. To overcome this

problem the Central Ministry of Food Processing Industries, is all geared up for developing a

strong and vibrant food processing sector; with a view to add value to the farm produce, increase

shelf life, create increased job opportunities and income in rural areas, and create surplus for

exports and stimulating demand for processed food. Several Infrastructure Development

Programs Viz., Food Park, packaging centre, integrated cold chain facilities, value added centers,

irradiation facility, are also being undertaken in this regard.

A report on food processing industry in India by Amitabh Sen, said that India’s middle and low

class segment will hold the key to success or failure of the processed food market in India. Of the

country’s total population of one billion, the middle class segments account to about 350-370

million. Though a majority of families in this segment have non-working housewives or can

afford hired domestic help and thus prepare foods of their taste in their own small processing

industry, the profile of the middle class is changing steadily and hired domestic help is becoming

costlier.

According to India Info-line Research Team / Mumbai, the overall food processing industry has

achieved a growth rate of 8% in FY07 with an estimated figure of Rs. 3,584 bn. However, the

unorganized, small players account for more than 70% of the industry’s output in volume terms

and 50% in value terms.



According to literature review given, post harvest management and value addition of agriculture

produce leads to employment generation in the rural sector. Farmers are not getting the right

price for their produce. So the best alternative for getting right price for their produce is value

addition of agriculture produce through food processing, which can fetch higher prices.



2.1. Location

CHAPTER 2. METHODOLOGY

The project implementation area was Jarga village which comes under Angara block of Ranchi

district. It is about 35 km away from Ranchi city. This area is mostly populated by tribal people.

The people in this area are mostly dependent upon agriculture and forest for their livelihood.

2.2. Sample Design

2.2.1. Sample Size

The researchers collected data of 233 farmers for black gram production in the village and

surveyed thirty two retail shops, five large wholesalers, eight small wholesalers, and 25 farmers

for market study. They surveyed eight retail shops in Tatisilway market, eight retail shops, three

large wholesalers and six small wholesalers in Gondalipokhar market, eight retail shops, one

large wholesaler and two small wholesalers in Johna market. They also visited four pulse

processing units in Ranchi and nearby market and Krishi Bazar Prangan in Pandra market.

2.2.2. Survey Design

Both, primary and secondary data were collected during the study. Details of each process are

given below.

2.2.2.1. Collection of Primary Data

Questionnaire

A questionnaire was prepared to collect data for establishment of pulse processing unit in the

study area. Questions were asked orally because respondents had no time to fill it up and some

respondents of small shops were illiterate and the instrument was modified according to their

requirement. Questionnaire consisted of more open ended questions than closed ended.

Interview with key informants

Several interviews were held with key informants from Jarga, Gondalipokhar, Tatisilway and

Pandra for the specific requirement for the project. The key informants selected were resourceful

persons from specific location and in depth interviews were held at informant’s working place.



2.2.2.2 Collection of Secondary Data

The most valuable secondary sources of information were collected from the annual report of

SRI, Krishi Bazaar Prangan, website of NABARD, Ministry of industry, Department of industry,

KVIC and MSME.

2.3. Tools adopted for Data Analysis

1. Questionnaire- The market survey was based on structured and semi-structured

questionnaire. This market survey was participatory in nature.

2. Excel sheet- Excel sheet was used to compile and analyze data like Internal Rate Return, Net

Present Value, Risk factor.



3.1 The Pulse Milling Process

CHAPTER 3. TECHNICAL ANALYSIS (Production Process)

In India most of the pulses are consumed in dehusked and split form. Thus processing of pulses

assumes a lot of importance. Pulses processing industry helps in processing raw grain legumes/

pulses into edible form. Processing activity is undertaken at 3 different levels. They are:

i. Primary processing: Primary processing activities consist of production of cleaned, graded

and packaged pulses.

ii. Secondary processing: Under secondary processing activities such as dehusking, splitting,

polishing, turmeric/ spices/ salt coating and powdered besan and packaged dal are done.

iii. Tertiary processing: These activities mostly consist of preparation of roasted, fried dal and

other associated dal products.

Basic processes in dal milling are cleaning, grading, conditioning, drying, dehusking, splitting,

separation, polishing and bagging. Major variation is involved in dehusking process only. Dals

like Arahar, Urd, Moong and Lentil are difficult to dehusk. As a result repeated operations by

dehusking rollers are required. Repeated soaking, drying, tempering is done to loosen portions of

husk sticking after rolling operations. Sometimes Linseed oil or mustard oil is also used during

milling operation to better dehusking and impart shine to the milled dal.

The removal of the outer layer of husk and splitting the grain into two equal halves is known as

milling of pulses. To facilitate dehusking and splitting of pulses alternate wetting and drying

method is used. In India, traditional milling methods are used to produce dehusked split pulses.

Loosening of husk by conditioning is insufficient in traditional methods. To obtain complete

dehusking of the grains a large number of abrasive forces is applied resulting in losses in the

form of broken and powder. Yield of split & dehusked pulses in traditional mills is only 75 % to

80 %.



3.1.1 Procedure for pulse milling Basically two types of conventional pulses milling methods are commonly used in India. They are:

• Wet milling operations • Dry milling operations

3.2 Products:

Based on availability of raw materials in that area, SRI has chosen Black gram (Urd) processing

in the processing unit. Due to small scale processing unit, it will go through primary processing

by wet milling process.

3.3 Machineries

3.3.1 Hand operated pulse dehusking machine

The capacity of the machine is 25-30 kg pulses/hr. The machine consists of an inverted emery

coated cone fixed to a vertical shaft. The shaft can be raised or lowered by a clearance

adjustment screw with a wheel and a check nut. The emery cone is enclosed in a steel wire mesh

segmented cone strengthen by radial frames fixed on the main frame of the machine concentric

to emery cone, provide with an opening at the top to feed the grains through a conical hopper

having micro system for smooth flow of pulses into the machine. Segmented inverted cone of

wire mesh is covered with a cone made of mild steel sheet. Just below the inverted cone, another

cone made of mild steel sheet is provided which is connected to a discharge outlet at the bottom

of discharges the mill stream through the same in bag or container placed under it. The main

frame is supported on four supports made of mild steel angle section. The shaft is operated

through bevel gears manually by a handle and rpm of machine is 60 to 70. It can process about

30- 60 kg of pulses per hour. It requires additional arrangement of cleaning and grading.

3.3.2 Pulse cleaner cum grader (1 hp)

This machine consists of different size of sieves for cleaning and grading having 1 hp motor. It

helps in removal of dust, chaff, dirt, grits, etc. from the pulses and to segregate the grain legumes

of desired shape and size.



3.4 Plant capacity (at 100%)

No. of working days: 150 days per year

No. of shift: 8 hrs (1 shift)

Total production of black gram: 36 tonnes

Recovery of Urd dal: 80 %

Recovery of broken dal: 3 %

Recovery of husk: 16 %

The production is planned to be started at 60% capacity in the 1st year. The production at 100%

capacity is planned to be started in 3rd year onwards



3.5 Flow chart of black gram processing (wet method)

Chaffs, dirt, etc

Mixture of husk, small Broken and powder

Fig 1: Flow chart

Whole Black Gram

Cleaning

Grading

Soaking

Mix with Red Soil

Conditioning

Dehusking and Splitting

Separation and Grading

Dehusked and Spilt pulses

Husk

Bagging



3.6 Description of various Unit Operations

3.6.1 Cleaning Cleaning helps in removal of foreign materials like dust, chaff, dirt, grits, etc. from the pulses.

3.6.2 Grading

Grading is done to segregate the grain legumes of desired shape and size. It is done using a reel

or rotative screen type cleaner and sieve.

3.6.3 Soaking

Soaking of pulses in water helps loosen the binding action of the gum between seed coat and

cotyledons. Increasing the moisture helps soften the seed coat. Soaking time varies from 6 to 14

hrs. 3.6.4 Conditioning

Pulses are conditioned by alternate soaking/ wetting, drying and tempering. Moisture (3.5%) is

added to the pulses after sun drying for a certain period and tempering is done for about eight

hours. The grain is dried in the sun again. Until all pulses are sufficiently conditioned the whole

process of alternate wetting and drying is continued for two to four days. Pulses are finally dried

to about 10 to 12% moisture content prior to dehusking and splitting.

3.6.5 Dehusking and Splitting

This is done either by using disc shelters or roller machines. A disc shelter used for wet

processing works on the principle of attrition and is useful for removing the husk and splitting

the cotyledons simultaneously. Dehusked split pulses are separated by sieving and the husk is

aspirated off. Un-split dehusked pulses and tail pulses are again dehusked and milled in a

similar way. For complete dehusking and splitting the whole process is repeated two to three

times.



3.7 Utilities

3.7.1 Power

The total connected load for the aforementioned unit will be in the tune of 2.00 Hp or 1.49 kW.

In addition to its power requirement to the tune of 1.00 Hp will be required for general

lightening. Thus the total power requirements for the model project will to the tune of 3.00 Hp.

Accordingly a suitable power connection of 5 KVA is required.

3.7.2 Water

The total water requirement of the unit will be 200 liters per day. Water is mostly required for

soaking and for moisture treatment of the grain pulses.

3.8 Location of the industry

The site selected to set the pulse processing unit is located in Jarga village in Angara block,

Ranchi district, Jharkhand. It is 35 km away from Ranchi. The site has been selected keeping

following points in the mind.

3.8.1. Availability of water

Water source (River) is at 300 meters away from the selected site. Water remains in the river

throughout the year. Because of nearness of the site with source of water, water is easily

available for the industry.

3.8.2. Availability of electricity

The site has electricity. Electricity of 440volt is available in proposed site, only repair and

maintenance will be required for the industry. Therefore, the electricity will be easily available

for industry.

3.8.3. Availability of transport facility:

The site is well connected to the main market (Ranchi, Gondlipokhar, Angara, Tatisilwai and

Johna) by means of road and good transport facility is always available.



3.8.4. Availability of raw materials

In this area both upland and lowland are used for the agriculture purpose. In upland, farmer

mainly cultivate black gram (Urd dal). Therefore, Raw materials are easily available from the

Jarga and other nearby villages.

3.8.5. Availability of skilled and unskilled labor

Though the site for setting up the industry is located in the tribal village, the chances of getting

labors (unskilled) are more. Labors from the village Jarga and other nearby villages can be easily

available.

3.8.6. Nearness to the market:

The market of the manufactured food products are found in Angara block, Tatisilwai, Johna and

Gondhlipokhar which are 20 km, 14 km, and 25 km from the production unit.



The proposed industry is planning to sell the products in rural and semi-urban market. For that

market survey has been done. Market of Tatisilwey, Gondhlipokhar, Johna and Angara were

surveyed.

CHAPTER 4. MARKET ANALYSIS

4.1. Major competitors: The proposed industry is expected to compete with local competitors

having their processing unit in Ranchi. Major competitors are as follows:

• Motika Dal Kutai Kendra, Namkum

• Ambarzi Food Product Private Ltd, Namkum

• Swastik Udyog, Namkum

• Koushal Flour Mill, Ranchi

• J.K Dal Mill, Ranchi

4.2 Market Potential

Black Gram is cultivated throughout the country and they are consumed only after cooking them.

The most common use is preparation of curry, popularly known as "Dal". It is prepared in most

of the households as well as restaurants, dhabas, canteens, hostels and even during social

ceremonies. Black gram is mostly used for preparation of various types of dishes like idli, dosa

and vada.

4.2.1 Demand

Table No. 1: Market Demand of black gram kg/ month

Market Demand (kg/month)

Uppar Bazaar 1400

Gondlipokhar 820

Tatisilway 1050

Johna 600

Source: Market survey

The demand for black gram is high in Uppar bazaar market because it is a whole sale market of

Ranchi and many retail shops and restaurants buy the black gram for their uses.



Graph No. 1: Market Demand of black gram kg/ month

Table No. 2: Demand supply relationship

Market Demand (kg/month) Supply (kg/month)

Uppar Bazaar 1400 460

Gondlipokhar 820 500

Tatisilway 1050 800

Johna 600 400

Source: Market survey



Graph No. 2: Demand Supply Relationship of Black gram

Demand-Supply Relationship



4.3 Marketing channel

4.3.1 Existing marketing channel:



4.3.2 Proposed marketing channel:

Fig No. 2: Existing and new market channel



4.4 Marketing Strategy:

4.4.1. Customer: Customers that have been targeted for the proposed product are middle class

and the main customer for our product were small hawkers and restaurants those who are selling

idli, dosa, vada, etc. Rural as well as urban population market also has been targeted for the

proposed products.

4.4.2. Consumer behavior: The market survey revealed that the identified consumer class were

always seeking for low cost good quality products. In case of black gram, consumers wanted the

products to be clean, wholesome, with uniform shape and size, and free from impurities with low

price. The proposed industry is expected to produce good quality with low price. Therefore,

penetration in market is not be very difficult to attract consumers towards our product given the

prevailing market conditions.

4.5 Competitor analysis:

1. Location of industry: The proposed industry has competitive advantage over locally

situated industries. The other competitors plants are situated in Ranchi and Namkum

therefore the supply of products in the specified market is uneven.

2. Supply: Since proposed industry is situated in the vicinity of specified market, the

product can be supplied on basis of demand of local markets and can be directly supplied

to retail shops and local hawker (idli, dosa). In case of competitor, the retailers would be

required to bring product the product from Ranchi. Thus, the proposed industry stands to

gain as it can supply is produce directly to retailers and thus save on transportation cost.

3. Margin to intermediaries: The proposed industry is planning to give higher margins

than competitors to the hawkers and retailers on their products than competitors because

there is no involvement of middlemen.

4. Availability for labor and hawkers: Cheap labor and hawkers are easily available in

Jarga area. Therefore, regular production and selling of products is not very difficult.

5. Low cost of raw materials: The processing unit is going to be established in the local

area where availability of raw material is easily available. As the proposed unit can



assure its farmers higher prices for their produce than others. Whereas competitor have to

purchase raw material from wholesalers.

4.6 Marketing Constraints

Unstable Price:

Generally, the market price of black gram is highly fluctuating and varies between Rs 40 to Rs

48.

Big Competitors

There are many big competitors in the market who are well known in the market from a long

time and have a good relationship with wholesalers and retailers. Big competitors have good

market penetration in Ranchi.

Limited Products

The pulse processing unit of Jarga village has only one product (i.e. Black garm) whereas

competitors have a many products of pulses.



5.1 Classification of enterprises

CHAPTER 5. LEGAL COMPLIANCE FOR COMPANY FORMATION

Accordance the provision of micro, small and medium enterprises development (MSMED) Act,

2006, the micro, small and medium enterprises (MSME) are classified into two classes:-

Enterprises have been classified broadly into:

(i) Enterprises engaged in the Manufacture / production of Goods pertaining to any industry

(ii) Enterprises engaged in providing / rendering of services.

Manufacturing enterprises have been defined in terms of investment in plant and machinery

(excluding land & buildings) and further classified into:

i. Micro Enterprises - investment up to Rs.25 lakhs.

ii. Small Enterprises - investment above Rs.25 lakhs & up to Rs. 5 crore

iii. Medium Enterprises - investment above Rs. 5crore & up to Rs.10 crore.

Service enterprises have been defined in terms of their investment in equipment

(excluding land & buildings) and further classified into:

i. Micro Enterprises – investment up to Rs.10 lakhs.

ii. Small Enterprises – investment above Rs.10 lakhs & up to Rs.2 crore.

iii. Medium Enterprises–investment above Rs. 2 crore & up to Rs.5 crore

5.2 Legal Benefits for Micro- enterprise

Government of India has approved the introduction of a new credit linked subsidy programme

called Prime Minister’s Employment Generation Programme (PMEGP) by merging the two

schemes namely Prime Minister’s Rojgar Yojana (PMRY) and Rural Employment Generation

Programme (REGP) for generation of employment opportunities through establishment of micro

enterprises in rural as well as urban areas. PMEGP will be a central sector scheme to be

administered by the Ministry of Micro, Small and Medium Enterprises (MoMSME). The Scheme



will be implemented by Khadi and Village Industries Commission (KVIC), a statutory

organization under the administrative control of the Ministry of MSME as the single nodal

agency at the National level. At the State level, the Scheme will be implemented through State

KVIC Directorates, State Khadi and Village Industries Boards (KVIBs) and District Industries

Centres (DICs) and banks. The Government subsidy under the Scheme will be routed by KVIC

through the identified Banks for eventual distribution to the beneficiaries / entrepreneurs in their

Bank accounts. The Implementing Agencies, namely KVIC, KVIBs and DICs will associate

reputed Non Government Organization (NGOs)/reputed autonomous institutions/Self Help

Groups (SHGs)/ National Small Industries Corporation (NSIC) / Udyami Mitras empanelled

under Rajiv Gandhi Udyami Mitra Yojana (RGUMY), Panchayati Raj institutions and other

relevant bodies in the implementation of the Scheme, especially in the area of identification of

beneficiaries, of area specific viable projects, and providing training in entrepreneurship

development.

Levels of funding under PMEGP

Categories of beneficiaries under PMEGP

Beneficiary’s contribution (of project cost)

Rate of Subsidy (of project cost)

Area (location of project/unit) Urban Rural General categories 10% 15% 25% Special (including SC / ST / OBC /Minorities/Women, Ex-servicemen, Physically handicapped, NER, Hill and Border areas etc.

5% 25% 35%

Note: (1) The maximum cost of the project/unit admissible under manufacturing sector is Rs. 25

lakh.

(2) The maximum cost of the project/unit admissible under business/service sector is Rs. 10 lakh.

(3) The balance amount of the total project cost will be provided by Banks as term loan.

Table 3. Rate of Subsidy for different Category

Source: www.smallindustryindia.com



5.3 Bank Finance

1. The Bank will sanction 90% of the project cost in case of General Category of

beneficiary/institution and 95% in case of special category of the beneficiary/institution, and

disburse full amount suitably for setting up of the project.

2. Bank will finance Capital Expenditure in the form of Term Loan and Working Capital in the

form of cash credit. Project can also be financed by the Bank in the form of Composite Loan

consisting of Capital Expenditure and Working Capital. The amount of Bank Credit will be

ranging between 60-75% of the total project cost after deducting 15-35% of margin money

(subsidy).

3. Though Banks will claim Margin Money (subsidy) on the basis of projections of Capital

Expenditure in the project report and sanction thereof, Margin Money (subsidy) on the actual

availment of Capital Expenditure only will be retained and excess, if any, will be refunded to

KVIC, immediately after the project is ready for commencement of production.

5.3.1 Rate of interest and repayment schedule

Normal rate of interest 12 % shall be charged. Repayment schedule may range between 3 to 7

years after an initial moratorium.

5.4 Proposed beneficiaries under KVIC:

Institutions registered under Societies Registration Act, 1860; or any individual can take

benefit from the PMEGP scheme through KVIC.

There is no restriction for a NGO to start an enterprise or support an enterprise.

From KVIC, registration is not compulsory but if registration will be done then it is good for

industry in future aspects.

5.5 Process of registration

First one has to collect loan application form from either KVIC, KVIB; then detail project

report should be submitted. Project should be selected and sanction from district task force.



They will send the loan form and bankable project to bank for loan sanctioning. After loan

sanctioning they will provide subsidy.

The Bank will sanction 90% of the project cost in case of General Category of

beneficiary/institution and 95% in case of special category of the beneficiary/institution, and

disburse full amount suitably for setting up of the project.

Bank will finance Capital Expenditure in the form of Term Loan and Working Capital in the

form of cash credit. Project can also be financed by the Bank in the form of Composite Loan

consisting of Capital Expenditure and Working Capital. The amount of Bank Credit will be

ranging between 60-75% of the total project cost after deducting 15-35% of margin money

(subsidy).

Once the project is sanctioned and before the first installment of the Bank Finance is released

to the beneficiary, Bank will inform the State/Regional Office of the KVIC/KVIBs/State

DICs, as the case may be, for arranging EDP training to the beneficiary, if he/she has not

already undergone such training.

After the successful completion of EDP training arranged by the KVIC/KVIBs/State DICs,

the beneficiary will deposit with the bank, the owner’s contribution. Thereafter, the bank

will release first installment of the Bank Finance to the beneficiary.

5.6 Commercial tax reforms: 5.6.1 Subsidy / Incentive on VAT:

This facility will be available to Small / large / medium industries. The new Units will avail

80% reimbursement against the admitted VAT amount deposited in the account of the

Government, for a period of ten years.

Up to a turnover limit of Rs.30 lakhs per annum S.C / S.T. / Women / Handicapped category

entrepreneurs who run small and tiny industries will avail 100% subsidy of the deposited

amount in the account of Government in the form of VAT for a period of ten years.



5.6.2 Central Sales Tax (CST):

Only 1% CST will be payable on the items produced by the registered small and medium units.

5.6.3 Others New Industrial Units as well as existing units which have not availed any facility of Tax-

deferment or Tax free purchases or Tax free sales under any notification announced earlier,

shall be allowed to opt for set off, of Jharkhand sales Tax paid on the purchases of raw

materials within the State of Jharkhand only against Sales Tax payable either JST or CST on

the sale, excluding stock transfer or consignment sale outside the state, of finished products

made out from such raw materials subject to a limitation of six months or the same financial

year from the date of purchase of such raw materials.

Liability will start from the first day of sale.

There is provision for two rates of concessional sales tax on purchases of raw material and

other inputs. These are 2% and 3%. Both these rates will be reduced to 2% in view of the

provision for set off.

Jharkhand Sales Tax Registration Certificate would be required to be renewed every five

years.

Jharkhand sales tax will not be charged on purchase of raw material and sale of finished

goods from 100% exporting units.

Application fields for Sales Tax registration shall be disposed off within a period of 15 days

of filing such application.



6.1 Basis and Presumption:

CHAPTER.6 FINANCIAL ANALYSIS

i. The unit will work for 6 month (150 Days) per annum on single shift basis.

ii. The unit is expected to run 60 % of its full capacity in the first year and 75 % in the 2nd year.

iii. The unit can achieve its full capacity utilization during the 3rd year of operation.

iv. The unit would construct its own building.

v. Cost of machinery and equipments are based on market price.

vi. Interest on loan is calculated @ 12 % per annum and complete repayment in 5 years.

FINANCIAL ANALYSIS

A.

6.2 Fixed Cost

Land and Building Amount (in Rs.)

1. Land (300 m2) 10,000

2. Building (166 feet2 @ Rs.904/ feet2) 1,50,000

Total 1,60,000

Table 4: Fixed Cost (Land Building)

B. Machineries and Equipments Amount

1. Pulse dehusking machine 27,288

2. Pulse cleaner cum grader (1 hp) 42,036

3. Extra sieves (10) 600

Total 69,924

Table 5: Machineries and equipments

C. Erection and electrification @10% of machinery cost 6992

D. Furniture and Fixture 5,000

E. Pre-operative Expenses ( Training expenses, deposits

with elec. Departments , registration, NOC from

Pollution Control Board)

12,000

Table 6: Fixed cost



Total Fixed Cost = A+B+C+D+E

=Rs. 2, 53,916

S.No

6.3 Working Capitals for six month

Particulars Units Rate (in

Rs)

Amount (in Rs)

1 Skilled Worker 1 4,500 27,000

2 Labour 4 3,000 72,000

3 Power 1 HP 3 Hp 10,000

4 Water 167/mth. 1,000

5 Oil 30 lit 67/Lit. 2,010

6 Other Contingent Expenses@ 10% on

land, Building & Machinery

22,992

7 Urd ( Black Gram) 21.6(T) 14/Kg 302400

8 Gunny Bags 216 12 each 2592

9. Transports 10,000

Total - 4,49,994

10. Sales Tax @ 4 % 25,048

Total 4,75,042

Table 7: Working capital for 6 months

Total working Capital = Rs 4,75,042

Working Capital for 2 months = Rs 1,58,347



Particulars

6.4 Project Cost Amounts (in Rs)

Fixed Cost 2,53,916

Working Capital for 2 months 1,58,347

Total 4,12,263

Table 8: Project Cost

Total Capital Investment = Rs. 4,12,263

6.5 Cost of Production for 6 Months

S.No Particulars Amounts (in Rs)

1. Working Capital 4,75,042

2. Depreciation on Building@ 5 % 7500

3. Depreciation on Machinery@ 10 % 6992

4. Depreciation on Furniture@ 20 % 1000

5. Interest on Loan @ 12 % 31,200

Total 5,21,734

Table 9: Cost of production for 6 months

6.6

S.No

Sales proceed

Particulars Qty (T) Rate/Kg Amounts (in RS)

1. Urd Dal (80% Recovery) 17 35 595000

2. Broken (3 % Recovery) 0.6 12 7200

3. Husk ( 16 % Recovery) 3 8 24000

Total - - 626200

Table 10: Sales



Net Profit = Sales - cost of Production

= 626200- 5, 21,734

= Rs. 1, 04,466

Net Profit Ratio = Sales

Net Profit x 100

= 626200

104466 x 100

= 16.68 %

Rate Of Return On Investment = Capital Investment

Net Profit x 100

= 4, 12,263

104466 x 100

= 25.34 %

Particulars

6.7 Means of Finance

Amounts (in RS)

Subsidy @ 25 % of Project cost 1,03,065

Composite Loan (63.94%) 2,60,000

Own Investment 49,198

Total 4,12,263

Table 11: Means of finance



Particulars

6.8 Term loan Repayments

1st year 2nd year 3rd year 4th year 5th year

Outstanding Loan 2,60,000 2,60,000 1,95,000 1,30,000 65,000

Interest @ 12 % per annum 31,200 31,200 23,400 15,600 7,800

Repayment - 65,000 65,000 65,000 65,000

Table 12: Loan repayments

S.No

6.9 Projected Profitability:

Particulars 1st year 2nd year 3rd year 4th year

1. Capacity Utilization 60 % 75 % 100 % 100 %

2. Sales Realization 6,26,200 7,82,750 10,43,667 10,43,667

3. Raw Materials & Packaging Materials 3,04,992 3,81,240 5,08,320 5,08,320

4. Utilities 13,010 16,262 21,683 21,683

5. Other Contingent Expenses@ 10% on land,

Building & Machinery

22,992 22,992 22,992 22,992

6. Salaries 99,000 99,000 99,000 99,000

7. Transports 10,000 12,000 16, 000 16, 000

8. Depreciation on Building@ 5 % 7500 7124 6769 6430

9. Depreciation on Machinery@ 10 % 6992 6292 5662 5096

10. Depreciation on Furniture@ 20 % 1000 800 640 512

11. Interest on Loan @ 12 % 31,200 31,200 23,400 15,600



12. Sales Tax @ 4 % 25,048 31,310 41,747 41,747

13. Total Cost 521734

609496 748634 740834

14. Profit (Sales Realization- Total Cost) 1,04,466 1,73,254 2,95,033 3,02,833

15. Profit After Tax 79,418 1,41,944 2,53,286 2,61,086

16. Cash Accrual (Profit + Dep.) 94,910 1,57,436 2,68,778 2,76,578

Table 13: Projected profitability

No

6.10 Break Even Analysis

Particulars Amounts (in Rs)

A. Sales 6,26,200

B. Variable Cost 4,75,042

C. Fixed Cost 2,53,916

D. Break Even Point 14 month

Table 14: Break even analysis

NPV at 25 % discount rate = - 412263 + 94910 (PVF1, 0.25) + 157436 (PVF2, 0.25) +

268778 (PVF3, 0.25) + 276578 (PVF4, 0.25)

6.11 Net Present Value (NPV)

= - 412263 + 427698

= 15, 435



Cost of project is Rs 4, 12,263

6.12 INTERNAL RATE OF RETURN (IRR)

Year Cash Accruals PVF, 25% PVF, 30 %

1 94,910 75,928 72,986

2 1,57,436 1,00,759 93,202

3 2,68,778 1,37,614 1,22,294

4 2,76,578 1,13,397 96,802

Total 4,27,698 3,85,284

Table 15: NPV at different rate

NPV at 25 % discount rate = - 412263 + 427698

= 15, 435

NPV at 30 % discount rate = - 412263 + 3, 85,284

= - 26,979

At 30 %, NPV is negative, (NPV < 0), so it is rejected at 30 %

Therefore, IRR = 25 % + (30 % - 25 %) x (427698 – 412263) (427698 – 385284)

= 25 % + 5 % x 42414

15435

= 25 % + 1.8 % = 26.8 %

6.13 Debt service coverage ratio (DSCR

) = cash accrual + interest / interest + repayment

1st yr 2nd yr 3rd yr 4th yr 5th yr Cash accrual 94910 157436 268778 276578 284378 Interest 31200 31200 23400 15600 7800 Repayment 0 65000 65000 65000 65000 DSCR 4.04 1.96 3.30 3.62 4.01 Average DSCR 3.38

Table 16: Debt service coverage ratio (DSCR)



Sensitivity analysis:

6.14 RISK ANALYSIS

It is a way of analyzing change in the project’s NPV (or IRR) for a given change in one of the

variables. It indicates how sensitive a project’s NPV (or IRR) is to changes in particular

variables. The more the sensitive the NPV, the more critical is variable.

When sales variation is taken as 10%

PESSISMISTIC OPTIMISTIC

Year Cash Accruals PVF, 25% Cash Accruals PVF, 25%

1 34795 27836 155025 124020

2 82292 52667 232580 148851

3 168586 86316 368971 188913

4 176353 72305 376771 154476

Total 239124 616260

Table 17: NPV analysis when sales variation is 10%

When variable cost(raw materials, salaries, utilities, transports) variation is taken as 10%



1 46585 37268 143235 114588

2 100335 64214 214537 137304

3 197763 101255 339793 173974

4 206343 84600 346813 142193

Total 287337 568059

Table 18: NPV analysis when variable cost variation is 10%



When fixed cost (land) variation is taken as 5%,



1 92986 74389 96834 77467

2 155512 99528 159360 101990

3 266854 136630 270702 138600

4 274654 112608 278502 114186

Total 423155 432243

Table 19: NPV analysis when fixed cost variation is 5%

NPV analysis at different assumption

Particulars Pessimistic Planned Optimistic

NPV when sales

variation is 10%

(-)1,73,139 15,435 2,03,997

NPV when variable

cost variation is 10%

(-) 1,24,926 15,435 1,55,796

NPV when fixed cost

variation is 5%

10,892 15,435 19,980

Table 20: NPV analysis at different assumptions

The above table shows the project’s NPV when each variable is set to its pessimistic, planned

and optimistic values. The most critical variables are sales revenue.



7.1 Source of income: After the establishment of the proposed pulse processing unit, it will

become a one of the source of income for the small and marginal farmers. There is no any pulse

processing unit in the village and nearby village, so the farmers sell their produce in a local

market at a very low price. The proposed processing unit will give Rs 4-6 more as compared to

local traders. The farmers of nearby village of Jarga can also sell their produce to the processing

unit. They can also get the benefit and help in reduction in the migration to big cities like Delhi

and Kolkata.

CHAPTER.7 BENEFITS FOR THE SOCIETY

7.2 Employment Creation: The proposed unit will create a new employment opportunity in a

Jarga village. This unit will be run by SHG members and create awareness among rural

people especially SHG, motivating them to choose entrepreneurship as a career thus

supporting them to establish their micro- enterprise and become self reliant. It will help to

make rural women (tribal+ non-tribal), economically self-dependent by earning regular

income.

7.3 Local traders and retailers will be benefited: Local traders and retailers of nearby markets

can directly purchase the processed dal from the processing unit and sell it at a good price, the

small idli and dosa hawkers too can purchase the urd dal form the proposed pulse unit at cheap

price for their business.

7.4 SHG Empowerments: The proposed pulse processing unit is by the SHG members. This

will help the rural women manage their homes as well as to earn money in spare time, which will

help them to come out from the oppression of poverty. The SHG members will be trained by

SRI. Guidance will be provided on various aspects like registration of the industry, preparation

of bankable projects, issuing loans from the bank, making entrepreneurs aware of the benefits

given by the state and central government and linkage to the markets.

7.5 Scope of Pulse Processing Industry

There is no any pulse processing unit in the rural area of Ranchi. It is commonly found that

farmers sell small quantities of their produce in nearby market whenever they need money. They



sell their produce to the middleman only at Rs. 12 to 14. After that middleman collect the

produce and sell it to the wholesalers for further processing in dal mill. Major pulse processing

industries in Ranchi and nearby areas are as follows:

Table 21: List of pulse processing industry in Ranchi

S. No. Name of Pulse Milling Industry

1. Mesars Gaurav Trading, Bano Manzil, Ranchi

2. Mesars Motika Dal Kutai Kendra, Namkum

3. Mesars Ambarzi Food Products Private Limited, Namkum

4. Mesars Jai Jharkhand Udyog, Kamre, Ranchi

5. Mesars J. K. Dal mill, Pandra Basti, Ranchi

6. Mesars Savitri Udyog, Ranchi

7. Mesars Koushal Flour Mill, Khadghada, Ranchi

8. Mesars Kamla Dal Mill, Kamre, Ranchi

9. Mesars Shraddha Industrial, Ranchi

10. Mesars Rani Sati Mill, Kamre, Ranchi

11. Mesars Tulsayan Traders, Ranchi

12. Mesars Vinayak Industry, Kamre, Ranchi

13. Mesars Durga Dal Mill, Pandra Basti, Ranchi

14. Mesars Swastik Udyog, Niche Chutiya, Namkum

Source: Krishi Utapadan Bazaar Samiti, Krishi Prangan, Ranchi

From the above table it can be noticed that only 3 of them are in Namkum. So, it can be easily

predicted that there will be a great scope for processing unit in these areas.

Besides increasing the non-farm skills of rural people, the project will also allow them to

generate income.



The objective of this project is to establish a pulse processing unit in Jarga, Angara block,

Ranchi, for the employment and income generation in nearby area. Based on availability of raw

materials (i.e. Urd Dal), SRI has chosen Urd dal, to manufacture Urd dal in the industry. Black

gram is more in demand in rural as well as in semi-urban market especially in restaurants.

Average monthly demand (according to our market survey) of black gram in Tatisilway and

Gondlipokhar, Johna and Uppar Bazaar are 1050 kg/month, 820 kg/month, 600 kg/month and

1400 kg/ month respectively.

CHAPTER 8: SUMMARY

The proposed industry is planning to sell the products in rural and semi-urban market. The

production is planned at 60% capacity in the 1st year. The production at 100% capacity is

planned from the 3rd year onwards. The quantity of products to be manufactured daily, are

planned according to market demand and the capacity utilized for production. At 60% capacity

utilization, there is target to produce 6000 kg/month. The proposed industry aims to compete

with local players in the market who have their processing unit in Ranchi city, and not within the

block area.

The proposed industry has competitive advantages over locally situated industries. The proposed

industry is planning to give more margin than its competitors to hawkers, distributors and

retailers. Major suppliers of the raw material are Jarga village and nearby village. Pricing done

for each product, is based on the margin given to the wholesaler and production cost per unit of

the product to be manufactured. The proposed industry plans to give higher margins to

wholesalers in comparison to competitors. Lower cost of production and higher margins in the

distribution are the two strategies suggested for market penetration in the semi-urban markets.

In Jarga village nearly all the farmers are growing black gram. For the requirement of raw

materials they will supply black gram to the processing unit and they will gain Rs. 4-6 more. To

fulfill the requirement of raw materials, at least 90 farmers will sell their produce and will be

benefitted.

Installed plant capacity of the unit is 36 tonns per annum at the rate of 100% capacity. When

land and building are taken on rent the total project cost is Rs 412263. Out of this total owner’s

contribution is 11%, subsidy for industry (women owned) is 25% and rest is taken as composite



loan. The internal rate of return is 26.8 %. The net present value is Rs 15,435. The debt service

coverage ratio is 3.38. The most critical variables are sales revenue i.e. sales volume and selling

price as in the risk analysis (sensitivity analysis) for the industry. The total time required for

implementation of project is estimated at twelve months.

SRI is planned to set up a small scale pulse processing unit. It is envisaged that WSHG members

will be trained to run and manage the industry. This will help the rural women to manage their

homes as well as to earn money in spare time, and farmers will get good price for their products

which will help them to come out from the oppression of poverty.



REFERENCES

1. Annual reports of SRI

2. Food processing report of SRI

3. Jharkhand industrial policy, Government of Jharkhand, 2001

4. Website of NABARD:

5. Website of department of industries, Government of Jharkhand

www.nabard.org

6. Website of MSME

www.jharkhandindustry.in

7. Website of ICAR:

www.smallindustryindia.com

8.

www.icar.org.in

9.

www.gvtindia.org

10.

www.niir.org

11.

agricoop.nic.in

12. Pandey I. M. Financial management

agmarknet.nic.in

http://www.nabard.org/�

http://www.jharkhandindustry.in/�

http://www.smallindustryindia.com/�

http://www.icar.org.in/�

http://www.gvtindia.org/�

http://www.niir.org/�



Annexure 1

Sensitivity analysis for sales variation at 10%

sales revenue variation by 10% 1st yr 2nd yr 3rd yr 4th yr Pessimistic

planned

Optimistic

pessimistic

Planned

optimistic

pessimistic

planned

optimistic

pessimistic

planned

optimistic

sales

563580

626200

688820

704475

782750

861025

939300

1043667

1148034

939300

1043667

1148034

var. cost

483250

483250

483250

571012

571012

571012

710150

710150

710150

702350

702350

702350

fixed cost

38484 38484

38484 38484 38484

38484 38484 38484 38484 38484 38484 38484

total exp.

521734

521734

521734

609496

609496

609496

748634

748634

748634

740834

740834

740834

PBT 41846 104466

167086

94979 173254

251529

190666

29503

3 399400

198433

30283

3 407200

tax 22543 25048

27553 28179 3131

0 34441 37572 41747 45921 37572 41747 45921

PAT 19303 79418

139533

66800 141944

217088

153094

253286

353479

160861

261086

361279

Cash accrual

34795 94910

155025

82292 157436

232580

168586

268778

368971

176353

276578

376771



Annexure 2 Sensitivity analysis for variation in variable cost at 10%

Variable cost variation by 10% 1st yr 2nd yr 3rd yr 4th yr Pessimistic

planned

Optimistic

pessimistic

planned

optimistic

pessimistic

planned

optimistic

pessimistic

planned

optimistic

sales 626200

626200

626200

782750

782750

782750

1043667

1043667

1043667

1043667

1043667

1043667

var. cost

531575

483250

434925

628113

571012

513911

781165

710150

639135

772585

702350

632115

fixed cost

38484 38484

38484 38484 38484

38484 38484 38484 38484 38484 38484 38484

total exp.

570059

521734

473409

666597

609496

552395

819649

748634

677619

811069

740834

670599

PBT 56141 104466

152791

116153

173254

230355

224018

29503

3 366048

232598

30283

3 373068

Tax 25048 25048

25048 31,310 31,3

10 31,310

41747 41747 41747 41747 41747 41747

PAT 31093 79418

127743

84843 141944

199045

182271

253286

324301

190851

261086

331321

Cash accrual

46585 94910

143235

100335

157436

214537

197763

268778

339793

206343

276578

346813



Annexure 3 Sensitivity analysis for variation in fixed cost at 5 %

Fixed cost variation by 5 % 1st yr 2nd yr 3rd yr 4th yr Pessimistic

planned

Optimistic

pessimistic

planned

optimistic

pessimistic

planned

optimistic

pessimistic

planned

optimistic

sales 626200

626200

626200

782750

782750

782750

1043667

1043667

1043667

1043667

1043667

1043667

var. cost

483250

483250

483250

571012

571012

571012

710150

710150

710150

702350

702350

702350

fixed cost

40408 38484

36560 40408 38484

36560 40408 38484 36560 40408 38484 36560

total exp.

523658

521734

519810

611420

609496

607572

750558

748634

746710

742758

740834

738910

PBT 102542

104466

106390

171330

173254

175178

293109

29503

3 296957

300909

30283

3 304757

Tax 25048 25048

25048 31,310 31,3

10 31,310

41747 41747 41747 41747 41747 41747

PAT 77494 79418

81342 140020

141944

143868

251362

253286

255210

259162

261086

263010

Cash accrual

92986 94910

96834 155512

157436

159360

266854

268778

270702

274654

276578

278502



Annexure 4

Questionnaire for Market Survey

1. Name of Market Place:

Date:

2. Type of Shop:

3. Size of Shop

a) Wholesalers b) Big Shop c) Medium Shop d) Small Shop

4. How much you sell black gram per month

5. From where, you purchases black gram (Urd Dal)

i.

ii.

iii.

6. How you bring the products (black gram)

7. What types of attributes customers seeking before purchase the black gram.

a) Price

b) Free from impurities

c) Shape and size

d) Others (specific)….

8. Other than the general customers, who are the potential/regular customers for the

black gram



Annexure5



Annexure 6



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“ESTABLISHMENT OF A PULSE PROCESSING INDUSTRY”

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