GIS based Supply Chain Analysis of Maize & Business Plan for Maize Feed Industry in

Chhattisgarh

Submitted By Sudarshan Kumar Patel

(PGDMA-1320)Under Guidance of

Dr. NH Rao & Dr. K. SrinivasPrincipal Scientist & Professor

Flow of Presentation

1.Introduction

2.Objectives

3.Research Methodology

4.Results & Discussions

5.Conclusion

6.Learnings

7.References

Introduction

•The production of maize in 2013-14 was 23 million tones in India.

• In India, maize is the third important food crops after wheat & Rice.

• Agriculture in Chhattisgarh (CG) is the means of livelihood of about 77% of the population of the state living in villages with over 80% as small and marginal farmers.(Agricultural census,2011)

• The five major crops produced in Chhattisgarh are Rice, Gram, Maize, Wheat and Soybean.

•The total area and production of maize in Chhattisgarh is 107.23 (000MT) and 207.50 (000Ha) respectively.

• There are only 6 feed plants running in Chhattisgarh within 3 districts.

•The rising incomes have also led to an increased consumption of meat, particularly of poultry, which has increased the demand for maize as feed in Chhattisgarh.

Objectives

This study focuses on using GIS tools to assess the maize feed industry supply chain in Chhattisgarh state with the objective of developing a viable business model for the industry in the SME category. The specific objectives are:

• To develop a geospatial database of maize production, resources, and storage and , marketing related infrastructure in Chhattisgarh state.

• To assess the business potential for maize feed industry in Chhattisgarh.

• To identify a suitable location for a maize feed plant and create a value driven business model for maize feed industry in the region.

Research Methodology

• Study Area- Chhattisgarh State• Data Collection

The research is based on secondary data available from NAARM GIS Lab and different websites, literatures, reports & journals.

Data Analysis

District Wise Rainfall & productivity of Maize using GIS

•An Average 600-1100 mm rainfall is required for maize.

•All the districts have adequate rainfall.

•Average productivity of the State is 2,069 kg/ha. as against 2430 kg/ha maize average productivity of the country.

•There are 5 districts with high productivity. (Dhamtari,Raigarh,Beejapur, Narayanpur , Bastar)

Data Source: www.apy.dacnet.in(2012); GIS map using QGIS1.7.4

District wise irrigation Facility and maize irrigated area

• Gross cropped area is 5.561 million ha in Chhattisgarh.

• 8 districts of Chhattisgarh has no proper sources of Irrigation.

• Irrigation potential created so far whereas total irrigated area less which is 33.15% of gross cropped area

• In 8-9 districts maize have enough area for irrigation.• Rest of the districts have no irrigated area of maize even though productivity is more.

Data Source: cgstate.gov.in , GIS map using QGIS1.7.4

District wise Total consumption of (N/P/K) in tonnes

•For maize average recommended dosage of fertilizer in CG should be used 80:50:30 kg/ha(N: P2 O5: K2O)

Data Source: Economic Survey ,CG ,2013; GIS map using QGIS1.7.4

Poultry and Cattle Population

Except few districts , the population of poultry as well as cattle are in lakhs in number. Raipur and Durg district has huge population of livestock and poultry. Huge Opportunity for feed industry.

Source- CG Official website, Map using QGIS 1.7.4

Demand and Supply of Feed Requirements

The demand for dairy and poultry products is increasing with growth in the economy and incomes. As a result, feed requirement is also increasing. As our economy growing the demand of dairy and poultry products is increasing. The total Feed requirement in Chhattisgarh state is calculated based on total poultry and cattle population in the state.

In figure the feed demand is more among all districts in Chhattisgarh , the maize supply for feed is less to meet that demand.

In figure the feed demand is more among all districts in Chhattisgarh , the maize supply for feed is less to meet that demand.

Supply Chain of Maize in Chhattisgarh

Quantity Farm gate

Wholesaler

Gross revenue

Operational cost

Net revenue

Per kg ₹11.8/kg

₹12.10/kg

₹0.30

1 quintal ₹1180/Qtl

₹1210/Qtl

₹30

50 quintal

₹59000 ₹60500 ₹3000 ₹1500 ₹1500

Expenses Rate Total per quintalPurchase price ₹12.10/kg 1210Mandi tax 0.5% of MSP 6.05Labour charge ₹8/quintal 8.00Total cost ₹1224 /quintalSale to private agency/feed plant

₹12.50/kg ₹1250/quintal

Profit ₹26/quintal

Storage Capacity and Number of Mandis

Data source : Chhattisgarh Agricultural Marketing Board,2013 and INDIASTAT

‘To create a value driven business model for Maize Feed Plant

Business Model

It is proposed to established a maize feed plant named Patel Feed Industries Pvt. Ltd. With capacity of 100MT/day. The enterprise will also be responsible for procurement, sales & marketing of products. The Plant will be establish in Sarguja District.

Total Market of Maize Feed in Chhattisgarh :

Average Production of Maize in Chhattisgarh(000 MT)

Maize kept for seed(@10%)(000 MT)

Maize Available for feed(000 MT)

Value of Maize feed @ Rs.17000/MT

207.51 20.751 117.66

₹ 200.02 cr.

Supply Chain of Maize with Business Opportunity

Manufacturing Process of Feed

SWOT of Maize feed Industry

Strengths Weaknesses

1. Huge production potential of maize2.Low labour cost (Geographic location).3.Nutrient Content for cattle and poultry4.Large no. of small and marginal farmers involved in dairying 5. Very large no. of animals and huge scope to enhance productivity

1. New to business.

2. Lack of experience.

3. Time to establish market linkages.

4. Lack of storage facility.

Opportunities Threats

1.Increasing demand of dairy and poultry products2.Increasing per capita income3. Increased farmer income by exploiting the high demand

1. Others big private player like Cargill, Godrej agrovet, Amrit feeds, Kapila etc.

Porter’s five forcesForces High/Medium/low RemarksIndustry rivalry low No players in the district.

Chhattisgarh has only 6-7 feed industries

Threat of substitute low Other feed sources like fodder and grasses

Threat of new entrant high No constraint

Supplier power low Lack of infrastructure and fund

Buyer power high Substituted by other feed products

Future strategy

For more profits and business expansion Feed

Company can go for

Increasing the processing capacity : As the

facility can do more processing, after two years of

operation till some profit comes in hand producer

company can also go for processing procured

from other farmers.

Installing an extra machinery : Utilizing the built

market linkages, trust and mill space, feed

company can purchase another machinery for

processing .

Strategy

Positioning Value chain Analysis

Low cost Feed with unique quality, added protein , and other sources Inbound logistic:

•Procurement from village aggregator

•Operations:Increasing capacity utilization

Outbound logistic:Direct selling to consumer to capture value and also with dealer and trader

Marketing &sales:

Inbound Logistic

Operations Outbound Logistics

Marketing & Sales

Service

Control over Supply chain.

Supplier relationships

Operating system.

Hi-tech machinery

Storage and distribution.

Long-term agreements with wholesalers

Quality product offering.

Penetration pricing strategy

Product quality offered to customer

Marketing Mix

Product-

Maize Feed is value-added feed processed from feed plant. Product is sold in various packets

like 10 Kg, 25 Kg and 50 Kg both for poultry and livestock.

Price-

Penetration pricing, low price than competitors.Place- Plant will establish in Sarguja District. Dealers and directly feed shops.

Promotion - We can promote these products through various Farmer fairs. Through posters,

hoarding and other activities like vehicle promotion are the suitable marketing promotions.

Good quality with less price is our main motto.

Financial Projections

The estimated capital outlay of the project is Rs. 300 lakh.

Means of Finance: Consortium's contribution Rs.80 lakh and Fund Grant from DCSSI under small industries cluster development programme for setting common facility centre is expected to Rs. 280 lakh.

Assumptions

The unit will produce 100MT of extracted feed per day and the unit will work for 300 days in year. 2. The installed capacity of the unit is 30000 MT of feed per year. 3. The capacity utilization is at 50% first year, 55% during second year, 60% third year and 70% fourth year onwards.4. The main utilities are power, water, steam etc. The Power requirement is 600-700 unit per day. The power charge is calculated considering the tariff fixed by CGSEB (Chhattisgarh State Electricity Board) which is 3.65 per unit.₹5. Repair and Maintenance is provided @ 1% on building and 2% on Plant and Machinery.6. Administrative Expenses are provided in the profitability estimate. It includes rates and taxes travelling expenses, postage telephone and telegram, printing & stationary, other expenses etc.

Cost of Project

Sales revenue @ 50 % capacity utilization:

Sr. No. Particulars Cost( in lakh)₹1 Land 25

2 technical civil work 25

3 Plant and machinery 150

4 Supporting equipment 50

5 Contingency 20

6 Preliminary and preoperative expenses 19

7 Operating cost 11

300

sales revenue generation Selling price/tonne

Total production Annually

Total Revenue

Product

Maize Feed(50% of total capacity)

16000 15000(50MT per

day*300 days)

₹ 240000000

(16000*15000)

Cash Flow

Year 0 1 2 3 4 5 6 7 8 9

Total Capacity 30000 30000 30000 30000 30000 30000 30000 30000 30000 30000

Capacity Utilization 0 0.5 0.55 0.65 0.65 0.7 0.7 0.75 0.75 0.75

Capacity Used 0 15000 16500 19500 19500 21000 21000 22500 22500 22500

Cost of Raw Material 0 180525000 200227500 237607500 237607500 255885000 256116000 270787500 271170000 272711250

Electricity Cost 0 766500 924000 960000 1147500 1207500 1273125 1323000 1350000 1404000

Salary and Wages 0 2400000 2640000 3000000 3360000 3480000 3600000 3744000 3840000 4080000

Procurement Cost 0 78000 80000 85000 90000 120000 130000 150000 155000 160000

Transportation Cost 0 78000 80000 85000 90000 120000 130000 150000 155000 160000

Promotion Cost 0 12000000 11260000 11270000 11280000 11300000 11340000 11360000 11380000 11400000

R & M on Plant & Machinary 0 3000000 4000000 4200000 4400000 5000000 5400000 5800000 6000000 6400000

R & M on Building 0 5000000 6000000 6500000 7000000 7400000 7600000 7800000 8000000 8200000

Processing Cost 0 3610500 4004550 4752150 4752150 5117700 5122320 5415750 5423400 5454225

Total Cost 0 207458000 229216050 268459650 269727150 289630200 290711445 306530250 307473400 309969475

Administration Cost 0 20745800 22921605 26845965 26972715 28963020 29071144.5 30653025 30747340 30996947.5

Depreciation 0 4149160 4584321 5369193 5394543 5792604 5814228.9 6130605 6149468 6199389.5

Interest on WC 0 500000 6000000 6500000 6600000 6800000 7000000 7200000 7300000 7400000

Grand Total Cost 0 232852960 262721976 307174808 308694408 331185824 332596818.4 350513880 351670208 354565812

Total Revenue 0 240000000 272250000 331500000 339300000 369600000 370650000 397575000 398025000 405000000

Pofit 0 7147040 9528024 24325192 30605592 38414176 38053181.6 47061120 46354792 50434188

Tax 30% 0 2144112 2858407.2 7297557.6 9181677.6 11524252.8 11415954.48 14118336 13906437.6 15130256.4

Net Profit 0 5002928 6669616.8 17027634.4 21423914.4 26889923.2 26637227.12 32942784 32448354.4 35303931.6

NPV>0 so, Project is acceptable.

Internal Rate of Return (IRR) is calculated at Present value =0 which is 44%. IRR> discount rate (14%) so project is acceptable.

Payback Period: Initial Investment/Annual cash flow = 3 years and 22 days

Benefit Cost Ratio : 3.17

Conclusion

• Establish plant with using all resource according to high demand by market.

• GIS can be used as effective tool for value creation.

Learnings

• In depth knowledge of GIS.

• Use of GIS to find business opportunity.

References

• 1.Rehanul Hasan (2002). Potassium Status of Soils in India . Better Crops International Vol. 16, No. 2, November 2002 .

• 2. Ramamurthy, B. and J.C. Bajaj. 1969. Soil Fertility Map of India, Indian Agricultural Research Institute, New Delhi

• 3. Myerson J. M., (2007), RFID in the Supply Chain: A Guide to Selection and Implementation, FL, Auerbach

• 4. M.V.Singh.(2008).Micronutrient Fertility Mapping For Indian Soils. All India Coordinated Research Project of Micro and Secondary Nutrients and Pollutant Elements in Soils and Plants[Online] Availble from http://www. iisc.nic.in.

• 5. Ministry for Micro, small &medium enterprises .Micro & Small Enterprises Cluster Development Programme. [Online] Availble from www.dcmsme.gov.in/schemes

• 6.Lowe, T.J., Preckel, P.V., 2004. Decision technologies for agribusiness problems: A brief review of selected literature and a call for research. Manufacturing & Service Operations Management, Vol. 6, No. 3, pp.201–208.

• 7. Ghosh, A.B. and R. Hasan.1980. Soil Fertility Map of India, Indian Agricultural Research Institute, New Delhi