Pre-Fesibility Study

PRE-FESIBILITY STUDY

INLAND FISH FARMING

PRODUCTION OF ORNAMENTAL FISHES

PAKISTAN AGRICULTURE RESEARCH COUNCIL ISLAMABAD

MINISTRY OF NATIONAL FOOD SECURITY AND RESEARCH

Government of Pakistan

February 14, 2014

Table of Contents

1.DISCLAIMER

2.PURPOSE OF DOCUMENT

3.INTRODUCTION TO SCHEME

4.EXECUTIVE SUMMARY

5.BRIEF DESCRIPTION OF PROJECT

6.CRITICAL FACTORS

7.INSTALLED AND OPERATIONAL CAPACITY FOR CHANNEL CATFISH FARMING

8.GEOGRAPHICAL POTENTIAL FOR INVESTMENT

9.POTENTIAL TARGET MARKETS

10.PRODUCTION PROCESS FLOW

11.PROJECT COST AND BENEFIT SUMMARY

11.1.Project Economics

11.2.Project Financing

11.3.Project Cost

11.3.1.Space Requirement

11.3.2.Machinery and Equipment

11.3.3.Furniture and Fixture

11.3.4.Operational and Maintenance cost

11.3.5.Human Resource Requirement

11.4.Revenue Generation

12.KEY ASSUMPTION

13.USEFUL LINKS

14.ANNEXURE

Annexure I: Income Statement

Annexure II: Summary Statistics

List of Tables

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

Table 2. Project financing------4

Table 3. Total Project Cost------5

Table 4. Space requirement and its cost------5

Table 5. List of Machinery and equipment and its cost ------5

Table 6. List of Furniture & Fixture and its cost------6

Table 7. Operational & Maintenance cost------6

Table 8. Human Resource Requirement its cost------7

Table 9. Revenue of the Project------7

Table 10. Key Assumption------7

1.DISCLAIMER

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

2.PURPOSE OF DOCUMENT

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

3.INTRODUCTION TO SCHEME

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

4.EXECUTIVE SUMMARY

Ornamental fishes are considered for Inland Fish Farming Business in this project pre-feasibility. This business is proposed to be located warm and semi cold area, having a water temperature range of 05-32 degrees centigrade. All the prospects of ornamental fishes i.e. stocking density, nutritional requirement, breeding (natural and induced), management and development of brood stock and colour development have been studied at Aquaculture and Fisheries Program, National Agricultural Research Centre (NARC), Islamabad. After successful experimentation, ornamental species are declared viz., Shubinkin (Carassius auaratus), Double tail (Carassius auratus auratus), Local Koi Carp (Cyprinus carpio), Hi fin Koi carp (Cyprinus carpio), Guppies (Poecilia reticulata) and Mollies (Poecilia vivipara) technically feasible for commercial fish farming. The technology of Ornamental fish culture and breeding are in the phase of extension to the farmers. Farmers are already practicing its culture at their farms. The project can be started at an area of two acres with 200 pairs of fish seven months cycle. Ornamental fish culture can be practiced in Sindh, Punjab, some parts of Baluchistan and Khyber Pakhtoonkhwa with survival rate of 90%. Total cost estimate is Rs.1.731 million, with fixed investment of Rs.1.08 million and working capital amounting to Rs.0.651 million. Given the cost assumptions, Net Present Value (NPV), Internal Rate of Return (IRR), Benefit Cost Ratio (BCR) and payback period are Rs.24406997, 139 %, 4.39 and 1 years respectively.

5.BRIEF DESCRIPTION OF PROJECT

Following key parameters must be addressed as per pre-feasibility study:

• Techniques: Different techniques are used for ornamental fishes farming. However, keeping in view the economical, technical and managerial factors, monoculture breeding, rearing technique are suggested for the proposed project.

• Location: The business can be initiated in warm areas and semi cold areas of Sindh, Punjab and some parts of Balochistan and Khyber Pakhtunkhwa having suitable environment, particularly freshwater temperature range between 5-32 oC. Suitable locations are Gujranwala,Lahore, Multan,Faisalabad and Rawalpindi Divisions in Punjab, Thatta,Badin,Dadu and Sukkur in Sindh, Mardan,Peshawar,Nowshera, Charsada and D.I.Khan districts in KPK, and Nasirabad and Jaffarabad districts in Balochistan.

• Product: Ornamental fish will be used in aquarium for recreational purposes. Formerly the ornamental fish was imported from Thailand, China and Philippine. The purpose is to local condition to reduce import.

• Target Market: Previously Pakistan was importing ornamental fish from Thailand. Now after the start of ornamental fishes culture the target market are major cities, such as Quetta, Karachi, Lahore and Islamabad. There is an enormous export potential for Middle Eastern countries.

• Employment Generation: The proposed project will provide direct employment to two individuals. Financial analysis shows the profitability of proposed business within first year of its operation.

6.CRITICAL FACTORS

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

The commercial viability of the proposed project depends on the following factors:
Selection of proper location with water, equipment, and staff play very important role in ensuring the project to run successfully.
Healthy brooders must be of ornamental fish of different species purchased from reliable dealers, for the assurance of desire fish species.
To attract larger number of customers the product must be displayed properly in aquaria.
Farm should have a whole sale distribution of its final product.
Easy access to market.

7.INSTALLED AND OPERATIONAL CAPACITY FOR CHANNEL CATFISH FARMING

This pre-feasibility suggests a farm operation on two acres of land with 200 pairs of fish the first seven month growing cycle with survival rate of 90%.This area can be increased from 02 acres with double input and output.

8.GEOGRAPHICAL POTENTIAL FOR INVESTMENT

The proposed location for establishment of the fish farms will primarily be warm area and semi cold that provide suitable environment for species with particularly water temperature. Suitable locations are Gujranwala,Lahore, Multan,Faisalabad and Rawalpindi Divisions in Punjab, Thatta,Badin,Dadu and Sukkur in Sindh, Mardan,Peshawar,Nowshera, Charsada and D.I.Khan districts in KPK, and Nasirabad and Jaffarabad districts in Balochistan.

9.POTENTIAL TARGET MARKETS

The marketing of fish follows the traditional distribution channel, through middlemen or wholesalers at farm who identifies potential buyers and negotiate price, or directly to retailers in urban markets. The time spent in transportation, from farm to the retail shop, varies from area to area. Over the years, collection and transportation of fish has improved with the use of vehicles supplied with oxygen. The key factors in marketing are availability of current market information, supply & demand which will determine the selling price.

10.PRODUCTION PROCESS FLOW

The overall production cycle for the ornamental fish farming comprises of 07 months. Healthy brooders of ornamental fish species weighing 250-600 gm will be used for breeding and color development by using different feeds. Fish fingerling of ornamental fish of 4-6 inch fetch more price in the market.

11.PROJECT COST AND BENEFIT SUMMARY

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

11.1.Project Economics

All figures in the financial model have been calculated for 200 pairs of fish on two acres of land. The following table shows internal rates of return and payback period.

Table 1. Project Economics

Description / Details
Net Present Value (NPV) / Rs. 24,406,997
Benefits Cost Ratio (BCR) / 4.39
Internal Rate of Return (IRR) / 139 %
Payback Period (years) / 1.00

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

11.2.Project Financing

Following table provides details of the equity required and variables related to bank loan;

Table 2. Project financing

Description / Details
Total Equity (10%) / Rs. 173,100
Bank loan / Rs 1,557,900
Mark up to borrower (per annum) / 8%
Tenure of Loan (Years) / 8
Grace Period (years) / 1

11.3.Project Cost

Following requirements have been identified for operations of the proposed business and along with details costing (Table 3).

Table 3. Total Project Cost

Capital Investment / Amount (Rs.)
Total Capital Cost / 1,080,000
Initial Working Capital / 651,000
Total Project Cost / 1,731,000

11.3.1.Space Requirement

Following table gives details of space requirements and its costing for the project under consideration.

Table 4. Space requirement and its cost

Space Requirement (Sq. ft.) / Cost Rs./ Unit / Quantity (Nos) / Area (Sq. ft.) / Total Cost (Rs.)
Office Building cum Store / 600 / - / 300 / 180,000
Construction of Rearing/ Nursery Ponds / 15,000 / 08 / 01 kanal each / 120,000
Fiber Glass Circular Tanks / 20,000 / 04 / 6x6x4 ft / 80,000
Concrete Raceways with Shed / 50,000 / 04 / 15x5 ft / 20,000,0
Total / 580,000

11.3.2.Machinery and Equipment

Given below is the list of all machinery and equipment and accordingly the cost of all machinery and equipment.

Table 5. List of Machinery Equipment and its cost

Description / Quantity (Nos) / Unit Price / Total Price
Tube Well and Channels / 01 / 250,000 / 250,000
Pump with Motor and pipe / 01 / 100,000 / 100,000
Aerators, filters and pump / 05 each / 10000 / 50000
Electricity connections / 50,000 / 50000
Total / 450,000

11.3.3.Furniture and Fixture

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

Table 6. List of Furniture & Fixture and its cost

Description / Quantity (Nos) / Unit Price / Total
Furniture and Fixture / Lump sump / 50000 / 50,000
Total / 50,000

11.3.4.Operational and Maintenance cost

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

Table 7. Operational & Maintenance cost

Description / Nos / Unit Price / Total
Fish Brooders * / 200 pairs / 500/pair / 100,000
Fish Feed / 1000kg / 55/kg / 55,000
Utility Bills (Electricity/ Diesel) / - / 50,000 / 50,000
Miscellaneous / - / 50,000 / 50,000
Nets / - / 20,000 / 20,000
Land Rent / 02 Acre / 40,000/acre / 80,000
Communication Charges / - / 500/month / 6000
Depreciation cost / - / - / 50000
Total / 410,000

* NARC, Islamabad/ local market

11.3.5.Human Resource Requirement

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

Table 8. Human Resource Requirement its cost

Description / No. of Employees / Salary/person/ month / Total salary per year
Labour / 2 / 10,000 / 240,000

11.4.Revenue Generation

Final product of Inland Fish Farm is fish ready for sale in market that will generate revenue. The capacity of farm is 80000 pairs of fish for first year sell price as per market Rs. 100/pairs.

Table 9. Revenue of the Project

Product / Unit / Survival @90% / First Year Production / Sales Price (Rs./pair) / First Year Revenue (Rs)
Fish / 80000. / 72000 (36000 pair) / 36000 pairs / 100 / 3,600,000
Total Sales Revenue / 3,600,000

12.KEY ASSUMPTION

Table 10. Key Assumption

Particulars / Assumption
Sales Price Growth Rate / 10% per year
Increase in cost of raw material / 10% per year
Increase in utilities / 10% per year
Debt/Equity Ratio / 90:10
Building / 5%
Machinery / 5%
Office furniture & fixture / 5%
Loan Period / 8 years
Grace Period / 1 year
Loan installments / Annually
Financial charges (interest rate) / 8%

13.USEFUL LINKS

Resource/focal Person

PSO/Program Leader Aquaculture and fisheries program,

Livestock research institute, National Agriculture Research Center, Islamabad

Phone: 0518443868 OR 0519255331

Email:

Muhammad Ramzal Ali

Aquaculture and fisheries program,Livestock research institute,

National Agriculture Research Center, Islamabad

Phone: 03005198843

E mail

 › FAO Home › Fisheries & Aquaculture

14.ANNEXURE

Annexure I: Income Statement

Sales (Revenues) / Year 1 / Year 2 / Year 3 / Year 4 / Year 5 / Year 6 / Year 7 / Year 8 / Year 9 / Year 10
3,600,000 / 3,960,000 / 4,356,000 / 4,791,600 / 5,270,760 / 5,797,836 / 6,377,620 / 7,015,382 / 7,716,920 / 8,723,423
Fish Brooders Cost / 100000 / 110000 / 121000 / 133100 / 146410 / 161051 / 177156 / 194872 / 214359 / 235795
Feeding Cost / 55000 / 60500 / 66550 / 73205 / 80526 / 88578 / 97436 / 107179 / 117897 / 129687
Cost of Goods Sold / 155000 / 170500 / 187550 / 206305 / 226936 / 249629 / 274592 / 302051 / 332256 / 365482
Gross Profit / 3445000 / 3789500 / 4168450 / 4585295 / 5043825 / 5548207 / 6103028 / 6713330 / 7384663 / 8357941
Repair & Maintenance / 0 / 54000 / 56700 / 59535 / 62512 / 65637 / 68919 / 72365 / 75983 / 79783
Salaries / 240000 / 264000 / 290400 / 319440 / 351384 / 386522 / 425175 / 467692 / 514461 / 565907
Rent / 80000 / 88000 / 96800 / 106480 / 117128 / 128841 / 141725 / 155897 / 171487 / 188636
Utilities / 50000 / 55000 / 60500 / 66550 / 73205 / 80526 / 88578 / 97436 / 107179 / 117897
Nets / 20000 / 22000 / 24200 / 26620 / 29282 / 32210 / 35431 / 38974 / 42872 / 47159
Communication charges / 6000 / 6600 / 7260 / 7986 / 8785 / 9663 / 10629 / 11692 / 12862 / 14148
Depreciation / 50000 / 50000 / 50000 / 50000 / 50000 / 50000 / 50000 / 50000 / 50000 / 50000
Other Office Expenditure / 50000 / 55000 / 60500 / 66550 / 73205 / 80526 / 88578 / 97436 / 107179 / 117897
Interest on Loan / 124632 / 124632 / 110664 / 95579 / 79287 / 61691 / 42688 / 22165 / 0 / 0
Sub - Total / 620632 / 719232 / 757024 / 798740 / 844787 / 895616 / 951724 / 1013658 / 1082024 / 1181427
Operating Income / 2824368 / 3070268 / 3411426 / 3786555 / 4199037 / 4652591 / 5151304 / 5699672 / 6302639 / 7176514
Tax / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0
Net Income / 2824368 / 3070268 / 3411426 / 3786555 / 4199037 / 4652591 / 5151304 / 5699672 / 6302639 / 7176514

Annexure II: Summary Statistics

0 Period / Year 1 / Year 2 / Year 3 / Year 4 / Year 5 / Year 6 / Year 7 / Year 8 / Year 9 / Year 10
Initial Project Investment / 1731000 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0
Fixed Cost / 1080000 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0
Variable cost / 651000 / 765100 / 833910 / 909466 / 992436 / 1083554 / 1183627 / 1293544 / 1414280 / 1546909
Total Cost / 1731000 / 765100 / 833910 / 909466 / 992436 / 1083554 / 1183627 / 1293544 / 1414280 / 1546909
Interest on loan / 124632 / 124632 / 110664 / 95579 / 79287 / 61692 / 42688 / 22165 / 0 / 0
Total cost inclusive interest payment (Outflow) / 1855632 / 889732 / 944574 / 1005045 / 1071723 / 1145245 / 1226316 / 1315709 / 1414280 / 1546909
Revenues from fish production / 3,600,000 / 3960000 / 4356000 / 4791600 / 5270760 / 5797836 / 6377620 / 7015382 / 7716920 / 8488612
Salvage value of assets / 234,811
Gross Profit (Inflow) / 3,600,000 / 3960000 / 4356000 / 4791600 / 5270760 / 5797836 / 6377620 / 7015382 / 7716920 / 8,723,423
Net cash flow (Inflow – Outflow) / -1731000 / 1,744,368 / 3,070,268 / 3,411,426 / 3,786,555 / 4,199,037 / 4,652,591 / 5,151,304 / 5,699,672 / 6,302,639 / 7,176,514
Description / Details
Net Present Value (NPV) / Rs. 24,406,997
Benefits Cost Ratio (BCR) / 4.39
Internal Rate of Return (IRR) / 139 %
Payback Period (years) / 1.00