PRE-FESIBILITY STUDY
PRODUCTION OF ZINC PHOSPHIDE GRAIN BAIT FOR
RODENT CONTROL
PAKISTAN AGRICULTURE RESEARCH COUNCIL ISLAMABAD
MINISTRY OF NATIONAL FOOD SECURITY AND RESEARCH
Government of Pakistan
February 13, 2014
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Contents
1.Disclaimer
2.Purpose of document
3.Introduction to scheme
4.Executive Summary
5.Brief Description of Project and Product
6.Critical Factors
7.Installed and Operational Capacity for Zinc Phosphide Grain Bait Production
8.Geographical Potential for Investment
9.Potential Target Markets
10.Production Process Flow
11.Project Cost and Revenue Summary
11.1. Project Economics
11.2 Project Financing
11.3Project Cost
11.4Machinery and Equipment
11.5Furniture and Fixture
11.6Raw Material Cost
11.7Human Resource Requirement
11.8Revenue Generation
12.USEFUL LINKS
13.Annexure
14.Key Assumption
List of Tables
Table 1. Project Economics…………………………………………………………………..8
Table 2. Project financing……………………………………………………………………..8
Table 3. Total Project Cost……………………………………………………………………8
Table 4. List of Machinery & Equipment and its cost………………………………………...9
Table 5. List of Furniture & Fixture and its cost……………………………………………..9
Table 6. Raw Material Cost…………………………………………………………………...9
Table 7. Human Resource Requirement cost………………………………………………...10
Table 8. Revenue of the Project……………………………………………………………...10
Table 9. Key Assumption……………………………………………………………………14
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 under taking this activity. The prospective user of this memorandum is encouraged to contact qualified consultant/technical expert, especially designated focal person(s) of this enterprise for reaching to an informed decision.
2.Purpose of document
The purpose of this document is to facilitate potential investors in Production of Zinc phosphide Grain Bait by providing them with a general understanding of the business, with theintention of supporting potential investors in crucial investment decisions. The project pre-feasibility may form the basis ofan important investment decision and in order to serve this objective, thedocument/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 minimallydocumented 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 variousaspects 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 Programme, 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
The business of zinc phosphide grain bait production can be carried out throughout the country. All the prospects of its productionand efficacy have been studied at Vertebrate Pest ManagementProgramme (VPMP), National Agricultural Research Centre (NARC), and Islamabad. After successful experimentation, this product is declared technically feasible for commercial production.Farmers are using zinc phosphide compound in different concentrations for many decades due to its easy availability and low cost. They are well aware of its hazardous effects and safety concerns.
Total capacity is production of 21,100 packs of (30g) during a year in 04 quarters. Whereas total project cost Estimate is Rs. 401600with fixed investment Rs. 50000 and working capital Rs. 351600. Given the cost assumptions IRR and payback and NPV are 68% and 1.72years and Rs. 2,012,905respectively.
5.Brief Description of Project and Product
Following key parameters must be addressed as per pre-feasibility study:
• Techniques: Different techniques are used for zinc phosphide bait production. However, keeping in view the economical, technical and managerial factors, simplest form of this compound in (grain form) is suggested for the proposed project.
• Location:Throughout the country especially in Pothwar as well as irrigated areas.
• Product:Rodents have been a problem to farmers ever since agriculture was started; it includes rats and mice which are of great concern worldwide and in Pakistan too. They cause substantial damage to field and horticultural crops. Moreover they cause post-harvest losses to stored food and feed products. And also cause damage to the health of small farmers and urban communities, and influence productivity/out-put of humans and health-care. The loss of human health and lives cannot be assigned any price tag. Moreover in Punjab, Rice-based wheat and groundnut-wheat cropping systems are highly vulnerable to rodent damage.
Attempts are always made to control this menace. After passing through series of experiences it has been established that use of toxic bait is the most effective solution to this problem. A minor portion of farming communities uses some kind of rodent control measures. Of these, zinc phosphide grain bait is commonly used to prevent rodent damage to some extent. In Pakistan, farmers are using zinc phosphide compound in different concentrations for many decades due to its easy availability and low cost. They are well aware of its hazardous effects and safety concerns.However, to achieve maximum control of rodent populations effective and quality baits are not available to farmers at the village level markets.The market of zinc phosphide grain bait is wide open in the agriculture sector. Some brands are, however, available in the market for use in urban situations. Distribution and marketing network in agriculture sector is virtually absent. The efficacy of rodenticide is often dependent on the quality of bait base than on the active ingredient itself. In most situations the poison bait has to compete in attraction with the non-poisonous food. Before offering any bait to rats it should be kept in mind that rats have very sharp sense of taste and smell. Presently most of the farmers use baits, which are not based on scientific research. Other important aspect, which needs to be addressed, is the bait application methodology. Good bait is that which is easily acceptable by the rats.
6.Critical Factors
- Knowledge intensive business: The person should be well trained and should get intensive knowledge about proper bait formulation and its delivery system both in field area & in structures before starting this business.
- Shelf life of prepared zinc phosphide bait is (maximum 03 months) if properly sealed and packed. In open air phosphine gas from the prepared bait may get liberated causing the bait ineffective.
- Effective marketing: The person involved in the production of zinc phosphide grain bait business should contact the farmers in different areas to provide information about the availability of this product and other technical formalities.
- Proper storage, handling and application of poison bait for effectiveness and to avoid any hazard to non-target organisms.
7.Installed and Operational Capacity for Zinc Phosphide Grain Bait Production
This pre-feasibility suggests that a total of 21,100 packs of (30g) can be produced during a year in 04 quarters with total revenue generation of Rs. 6,33,000 in first year
8.Geographical Potential for Investment
This technology can beoperated throughout the country, especially in Pothwar region.
9.Potential Target Markets
Rural and urban situations including all field crops, grain storage markets, residential & commercial buildings and other strategic organizations.
10.Production Process Flow
The production of rodenticide baits will comprise of the following components:
- Purchase of rodenticide (zinc phosphide), base materials and other equipment in the first step.
- Making of poisoned bait (2% zinc phosphide grain bait) by using basic ingredients i.e. millet+rice in (50:50) ratio in required quantity. In first step electric grinder is used to crack the grains, after grinding the mixture is put in clean plastic tub along with required quantity of poison. When the mixture appears light gray in color than oil is added in the mixture thoroughly to make it more palatable.
Zinc phosphide 2% grain bait (30g Sachet)
- Packing of formulated baits in different quantities according to delivery system. Bulk supplies of 5,10,15 and 20 Kg of baits would also be made available to pesticide distributors and big land owners.
Dead rat in field after consuming zinc phosphide bait
Application of zinc phosphide bait in PVC bait station in Wheat
Application of zinc phosphide bait in PVC bait station in tomato
11.Project Cost and Revenue Summary
A detailed financial model has been developed to analyze the commercial viability of zinc phosphide grain bait production 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 21,100 pack (30g) each of zinc phosphide grain bait. The following table shows internal rates of return and payback period.
Table 1: Project Economics
Description / DetailsNet Present Value (NPV) / 2,012,905
Benefits Cost Ratio (BCR) / 1.68
Internal Rate of Return (IRR) / 68%
Payback Period (years) / 1.72
Factor that influences the profitability of this product isshelf life of prepared bait.
11.2Project Financing
Following table provides details of the equity required and variables related to bank loan;
Table 2: Project financing
Description / DetailsTotal Equity (10%) / Rs. 40160
Bank loan (90%) / Rs. 361440
Mark up to borrower (per annum) / 8%
Tenure of Loan (Years) / 8
Grace Period (years) / 1
11.3Project Cost
Following requirements have been identified for operations of the proposed business.
Table 3: Total Project Cost
Capital Investment / Amount (rupees)Capital Cost (one time investment) / 50,000/-
Total working capital / 351600/-
Total Project cost / 401600
11.4Machinery and Equipment
Table 4: List of MachineryEquipment and its cost
Description / Quantity (Nos) / Unit Price (Rs.) / Total (Rs.)Sealing machine / 01 / 5000/- / 5,000/-
Electric grinder+motor (02hp) / 01 / 15,000 / 15,000
Total / 20,000 / 20,000
11.5Furniture and Fixture
Following table provides list of Furniture and Fixture required for poison bait production.
Table 5:List of Furniture & Fixture and its cost
Description / Quantity (Nos) / Unit PriceFurniture and Fixture / Lump sump / 30,000/- / 30,000/-
Total / 30,000/-
11.6Raw MaterialCost
Following table provides list of Consumable Requirement for final bait preparation.
Table 6:Raw MaterialCost
Description / Nos / Unit Price / TotalRice / 300 Kg / 80 / 24000
Millet / 300 kg / 40 / 12000
Cooking oil / 18 Lit / 200/kg / 3600
Zinc phosphide / 15 Kg / 1400/Kg / 21,000
Packing material / Lump sum / 3000
Kitchen gloves / 04 Doz. / 1200/ doz / 4800
Mask / 04 Doz / 300/doz / 1200
Total / 69600
11.7Human Resource Requirement
The table below provides details of human resource required to for final product. The staff salaries are estimated according to the market trends. However, these requirements and pay scales may vary area to area.
Table 7:Human Resource Requirement its cost
Description / No. of Employees / Salary/person/ month / Total salary per yearLabor / 01 / 10,000 / 120,000
11.8Revenue Generation
Final product will generate 6, 33,000 revenuewith the production of 21,100 packs of (30g) each in a year. The production may increase or decrease, it depends upon the demand and business.
Table 9: Revenue of the Project
Product / Unit / Sales Price (Rs./pack) / First Year Revenue (Rs)Zinc phosphide grain bait / 21,100 packs (30g each) / 30 / 6,33,000
12.USEFUL LINKS
- Vertebrate Pest Management Programme, Department of Plant & Environmental Protection, National Agricultural Research Centre, Islamabad.
- Southern Zone Agricultural Research Centre, Karachi University Campus, Karachi.
- PMAS, University of Arid Agriculture, Rawalpindi.
- Mr. Abdul Aziz KhanCell: 03008354483
- Mr. Shahid Munir Cell: 03004814710, 03345221680
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13.Annexure
1.Income Statement
Sales (Revenues) / Year 1 / Year 2 / Year 3 / Year 4 / Year 5 / Year 6 / Year 7 / Year 8 / Year 9 / Year 10633000 / 696300 / 765930 / 842523 / 933329 / 1019453 / 1121398 / 1233538 / 1356892 / 1503136
Raw Material
Rice / 24000 / 28080 / 32854 / 38439 / 44973 / 52619 / 61564 / 72030 / 84275 / 98602
Millet / 12000 / 13200 / 14520 / 15972 / 17569 / 19326 / 21259 / 23385 / 25723 / 28295
Cooking oil / 3600 / 3960 / 4356 / 4792 / 5271 / 5798 / 6378 / 7015 / 7717 / 8489
Zinc Phosphide / 21000 / 23100 / 25410 / 27951 / 30746 / 33821 / 37203 / 40923 / 45015 / 49517
Packing material / 3000 / 3300 / 3630 / 3993 / 4392 / 4832 / 5315 / 5846 / 6431 / 7074
Kitchen gloves / 4800 / 5280 / 5808 / 6389 / 7028 / 7730 / 8503 / 9354 / 10289 / 11318
Mask / 1200 / 1320 / 1452 / 1597 / 1757 / 1933 / 2126 / 2338 / 2572 / 2830
Cost of Goods Sold / 69600 / 78240 / 88030 / 99132 / 111736 / 126058 / 142347 / 160891 / 182023 / 206124
Gross Profit / 563400 / 618060 / 677900 / 743391 / 821593 / 893395 / 979051 / 1072647 / 1174869 / 1297012
Salaries / 120000 / 132000 / 145200 / 159720 / 175692 / 193261 / 212587 / 233846 / 257231 / 282954
Rent / 48000 / 52800 / 58080 / 63888 / 70277 / 77304 / 85035 / 93538 / 102892 / 113181
Utilities / 72000 / 79200 / 87120 / 95832 / 105415 / 115957 / 127552 / 140308 / 154338 / 169772
Miscellaneous / 15000 / 16500 / 18150 / 19965 / 21962 / 24158 / 26573 / 29231 / 32154 / 35369
R & M / 0 / 2500 / 2750 / 3025 / 3328 / 3660 / 4026 / 4429 / 4872 / 5359
Depreciation / 7000 / 7000 / 7000 / 7000 / 7000 / 7000 / 7000 / 7000 / 7000 / 7000
Interest on Loan / 28915 / 28915 / 25675 / 22175 / 18395 / 14313 / 9904 / 5142 / 0 / 0
Sub - Total (D:J) / 290915 / 318915 / 343975 / 371605 / 402068 / 435653 / 472678 / 513494 / 558487 / 613636
Operating Income / 272485 / 299145 / 333926 / 371786 / 419525 / 457742 / 506373 / 559152 / 616382 / 683376
Tax / 7094 / 12018 / 17351 / 23622
Net Income / 272485 / 299145 / 333926 / 371786 / 419525 / 457742 / 499279 / 547135 / 599031 / 659754
2.Summary Statistics
0 Period / Year 1 / Year 2 / Year 3 / Year 4 / Year 5 / Year 6 / Year 7 / Year 8 / Year 9 / Year 10Initial Project Investment / 401600 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0
Fixed Cost / 50000 / 0 / 0 / 0 / 0 / 32210.2 / 0 / 0 / 0 / 0
Working capital / 351600 / 390240 / 430529.6 / 475182.31 / 524691.25 / 579608.51 / 640552.67 / 708217.42 / 783381.24 / 866918.61
Total Cost (Fixed + working capital) / 401600 / 390240 / 430529.6 / 475182.3 / 524691.3 / 611818.7 / 640552.7 / 708217.4 / 783381.2 / 866918.6
Interest on loan / 28915.2 / 28915.2 / 25674.604 / 22174.761 / 18394.929 / 14312.712 / 9903.917 / 5142.4184 / 0 / 0
Total cost inclusive interest payment (Outflow) / 430515.2 / 419155.2 / 456204.2 / 497357.1 / 543086.2 / 626131.4 / 650456.6 / 713359.8 / 783381.2 / 866918.6
Revenue from sales / 633,000 / 696300 / 765930 / 842523 / 926775.3 / 1019452.8 / 1121398.1 / 1233537.9 / 1356891.7 / 1492580.9
Salvage value of assets / 0 / 0 / 0 / 0 / 6553.6 / 0 / 0 / 0 / 10,555
Gross Profit (Inflow) / 0 / 633,000 / 696,300 / 765,930 / 842,523 / 933,329 / 1,019,453 / 1,121,398 / 1,233,538 / 1,356,892 / 1,503,136
Net cash flow (Inflow – Outflow) / -401600 / 202,485 / 277,145 / 309,726 / 345,166 / 390,243 / 393,321 / 470,942 / 520,178 / 573,510 / 636,217
Payback Period / 1.72
NPV / $2,012,905.37
IRR / 68%
BCR / 1.68
14.Key Assumption
Particulars / AssumptionSales Price Growth Rate / 10%
Increase in cost of raw material / 10%
Increase in cost of rice / 17%
Increase in utilities / 10%
Debt/Equity Ratio / 90:10
Depreciation on Machinery / 20%
Depreciation on Office furniture & fixture / 10%
Loan Period / 8
Grace Period / 1
Loan installments / Annually
Financial charges (interest rate) / 8%
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