Pre-Feasibility Study
VIRUS FREE BANANA PLANT PRODUCTION THROUGH TISSUE CULTURE
PAKISTAN AGRICULTURE RESEARCH COUNCIL ISLAMABAD
MINISTRY OF NATIONAL FOOD SECURITY AND RESEARCH
Government of Pakistan
www.parc.gov.pk
January 2014
Contents
LIST OF TABLES 2
1. DISCLAIMER 3
2. PURPOSE OF THE DOCUMENT 4
3. INTRODUCTION TO SCHEME 4
5. EXECUTIVE SUMMARY 5
6. BRIEF DESCRIPTION OF PROJECT 5
7. CRITICAL FACTORS 5
8. INSTALLED AND OPERATIONAL CAPACITIES 6
9. GEOGHRAPHICAL POTENTIAL FOR INVESTMENT 6
10. POTENTIAL TARGET MARKET 6
11. PRODUCTION PROCESS FLOW 7
12. PROJECT COST SUMMARY 8
12.1: Project Economics 8
12.2: Project Financing 9
12.3: Project Cost 9
12.4: Space Requirement 9
12.5: Machinery and Equipment 10
12.6: Raw Material Requirements 11
12.7: Human Resource Requirement 12
12.8: Revenue Generation 12
13. CONTACTS – SUPPLIERS, EXPERTS / CONSULTANTS 13
14. ANNEXURES 14
15: KEY ASSUMPTIONS 15
LIST OF TABLES
Table 1: Project Economics 9
Table 2: Project Financing 10
Table 3: Project Cost 10
Table 4: Land Requirement 11
Table 5: Machinery and Equipment 11
Table 6: Glass Wares for Lab 12
Table 7: Office Equipment and Office Furniture 12
Table 8: Raw Material Requirement 12
Table 9: Human Resource Requirement 13
Table 10: Revenue Generation 13
Table 11: Total Working Capital 14
1. DISCLAIMER
This information memorandum is to introduce the subject matter and provide a general idea and information on the said subject. Although, the material included in this document is based on data / information gathered from various reliable sources; however, it is based upon certain assumptions which may differ from case to case. The information has been provided on an ‘as is where is’ basis without any warranties or assertions as to the correctness or soundness thereof. Although, due care and diligence has been taken to compile this document, the contained information may vary due to any change in any of the concerned factors, and the actual results may differ substantially from the presented information. PARC, its employees or agents do not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. The contained information does not preclude any further professional advice. The prospective user of this memorandum is encouraged to carry out additional diligence and gather any information which is necessary for making an informed decision; including taking professional advice from a qualified consultant / technical expert before taking any decision to act upon the information.
2. PURPOSE OF THE DOCUMENT
The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs in project identification for investment. 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, and production, marketing, finance and business management. The document also provides sectoral information, brief on government policies and international scenario, which have some bearing on the project itself. The purpose of this document is to facilitate potential investors in banana tissue culture by providing them a holistic as well as a micro view of business with the hope that such information as provided herein will help the potential investors in crucial investment decisions. 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 thumbs of rules; best practices developed by existing enterprises by trial and error, and certain industrial norms 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 basis of any Investment Decision.
3. INTRODUCTION TO SCHEME
‘Prime Minister’s Youth Business Loan’ program , for young entrepreneurs, with an allocated budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide subsidized financing at 8% mark-up per annum for one hundred thousand (100,000) beneficiaries, through designated financial institutions, initially by the National Bank of Pakistan (NBP) and the First Women Bank Ltd. (FWBL). Small business loans upto 2 million with tenure up to 8 years, inclusive of a 1 year grace-period and a debt : equity of 90: 10 will be disbursed to SME beneficiaries across Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwah, Balochistan, Gilgit Baltistan, Azad Jammu & Kashmir and Federally Administered Tribal Areas (FATA).
5. EXECUTIVE SUMMARY
The project is for the "production of Virus Free Banana Plants through Tissue Culture" the tissue culture lab will be situated in Sindh Province where 90% of the crop is cultivated.
Product: Virus Free Banana Plants of different varieties.
Capacity: Forty thousand hardened banana plants annually.
Total Cost: The Total cost of the project estimated Rs. 2.6 million with capital investment Rs. 1.24 million and working capital Rs. 1.38 million
Given the cost assumption IRR and pay back are 67% and 3.17 respectively.
The most critical considerations or factors for success of the project are;
1. Maintenance of phyto sanitary environment and regular culturing of in vitro plants.
2. Availability of skilled/technical manpower.
6. BRIEF DESCRIPTION OF PROJECT
Banana is an important fruit crop of Pakistan cultivated over an area of 80,000 acres. New plantations are done through suckers which carry diseases with planting materials. There is dire need for disease free planting materials for new plantations.
• Technology: Through tissue culture technology disease free banana plants will be produced all-round
the year. These plants are uniform, true to type and mature early as compared to suckers and give
more yields.
• Location: The proposed business can be done in whole Sindh, preferably in banana growing areas
where farmers have accessibility for tissue culture plants.
• Target Market: Banana growers are the target market for tissue culture plants.
• Employment Generation: The proposed project will provide direct employment to 02 people.
Indirectly number farmers will be employed for new plantations.
7. CRITICAL FACTORS
Individuals considering entering the tissue culture business must carefully consider the following factors:
1. Maintenance of phyto sanitary environment and regular culturing of in vitro plants.
2. Availability of skilled manpower
3. The owner/manager must be of an expert in plant biotechnology for running the business.
8. INSTALLED AND OPERATIONAL CAPACITIES
For this project it is assumed that the cycle will start from utilizing 20 in vitro cultures to be supplied by tissue culture labs. Annual production will be 40,000 disease free banana plants and 60000 plants will be produced in second year.
9. GEOGHRAPHICAL POTENTIAL FOR INVESTMENT
All districts of Sindh provinces is suited for this business. The following areas have been have been identified where significant opportunities for production of virus free banana plants:
Sindh:
· Khairpur
· Ghotki
· Sukkar
· N.Feroze
· Nawabshah
· Sangher
· Mirpurkhas
· Umerkot
· Hyderabad
· Matiari
· Tando Allahyar
· T.M.Khan
· Badin
· Thatta
10. POTENTIAL TARGET MARKET
All banana growers of the above mentioned districts will be target market for this business.
11. PRODUCTION PROCESS FLOW
Following production process is generally followed:
In Vitro Multiplication: In Vitro multiplication is a process through we can produce thousands of uniform disease free plants on specified medium.
In Vitro Rooting: Before transfer to soil rooting of shoots is very important and it takes normally four to six weeks.
Hardening of Plants: In vitro plants will be hardened before transfer to fields. It takes 6-8 weeks.
FLOW CHART
Tissue culture of Banana Plants
12. PROJECT COST SUMMARY
12.1: Project Economics
All the figures in this financial model have been calculated for the production of virus free banana plants through tissue culture of 40000 plants production in the first year and 60000 plants for the second year. The following table shows internal rate of return, payback period and net present value of the investment.
Table 1: Project Economics
Description / DetailInternal Rate of Return / 80%
Pay Back Periods (Years) / 1.70
Net Present Value(NPV) / Rs5,814,749.63
Benefit-Cost Ratio / 1.66
The results in the tables show that the net present value, internal rate of return and benefit cost Ratio. Returns on the business and its profitability are highly dependent on experience, suitable location and good technical practices. The project will not be able to cover the potential demand of consumers and recover payments, if these factors are not efficiently managed and will also lead to increased operating cost.
12.2: Project Financing
Following table provides details of the equity required and variables related to bank loan;
Table 2: Project Financing
Description / DetailsTotal own equity (34%) / 878,700
Bank Loan / 1,738,300
Markup to the Borrower(%age/annum) / 8%
Tenure of the loan / 8
Grace Period(years) / 1
The above table shows that the bank will provided the loan of amount of worth Rs.1, 738,300 and owner having the equity in Rs. 878700. The owner will be paid 8% Mark up of the borrowing amount.
12.3: Project Cost
Following requirements have been identified for operations of the proposed business.
Table 3: Project Cost
Capital Investment / Amount(Rs.)Land(leased/Rental basis)
Lab Equipments / 1,106,000
Shed House Equipment / 60,000
Office Furniture / 76,000
Total Capital Cost / 1,242,000
Initial Working Capital / 1,375,000
Total Project Cost / 2,617,000
12.4: Space Requirement
Banana plant production will be produced by using the 600 sq/ft space for the laboratory. The laboratory contains establishment room, tissue culture lab and one growth room in the suitable location in rural area of sindh. Because as mention earlier that this bossiness is suitable for the sindh. The lab space will be taken on the rental/lease basis. The rent is paid in advance for the one year. The hardening process of the plants will be done on the same location.
Table 4: Land Requirement
Area Required / Area(Sq.ft) / Monthly Rent Charges(Rs.) / Yearly Rent(Rs.)Management /laboratory / 600 / 10,000 / 120,000
Total Rent / 10,000 / 120,000
12.5: Machinery and Equipment
Following table provides list of machinery and equipment required in laboratory for production of banana plants.
Table 5: Machinery and Equipment
Description / Quantity / Cost Rs/Unit / Total CostAir-Conditioners (Split) / 2 / 50,000 / 100,000
Autoclave Large Capacity (Local Made) / 1 / 100,000 / 100,000
Moving Culture Trolley / 6 / 3333 / 20,000
Digital Balance / 1 / 100,000 / 100,000
Distillation Unit / 1 / 100,000 / 100,000
Disstilled Water Storage Tank / 1 / 5,000 / 5,000
Growth Room Trolley / 3 / 33,333 / 100,000
Laminar Flow / 1 / 250,000 / 250,000
Magnetic Bars / 1 / 2,000 / 2,000
Burner (Gas) / 1 / 2,000 / 2,000
pH Meter / 1 / 50,000 / 50,000
Refrigerator / 1 / 30,000 / 30,000
Shaker(Local) / 1 / 50,000 / 50,000
Timers / 1 / 10,000 / 10,000
UV lamps / 2 / 7500 / 15,000
Spirit Lamp / 1 / 10,000 / 10,000
Total / 944,000
Table 6: Glass Wares for the Lab
Description / Quantity / Cost Rs/Unit / Total CostGlass Jars / 10,000 / 15 / 150,000
Beakers (2L) / 2 / 2,000 / 4,000
Beakers (1L) / 1 / 2,000 / 2,000
Measuring Cylinder / 2 / 2,000 / 4,000
Measuring Cylinder / 2 / 2,000 / 4,000
Total / 164,000
The following tables shows the office/lab equipment and office furniture which is needed in the office.
Table 7: Office Equipment and Office Furniture
Description / Quantity / Cost Rs/Unit / Total CostOffice Equipment
Computer / 1 / 50,000 / 50,000
Telephone / 1 / 10,000 / 10,000
Furniture and Fixture
Table and Chair / 1 / 6,000 / 6,000
Stools for Lab / 2 / 1,000 / 2,000
Visiting Chair / 4 / 2,000 / 8,000
12.6: Raw Material Requirements
The detail of raw material required for the production of the banana plants is given below.
Table 8: Raw Material Requirement
Description / Total cost/Rs.Laboratory Raw Material
Media Chemicals / 200,000
Hygienic and sanitation (General items) / 100,000
Hardening Raw Material
Beg / 40,000
Soil / 40,000
Total / 380,000
For producing the 400000 plants there is need to raw material for the laboratory and also for the hardening process of the plant. Media chemical and general items required in the laboratory. The total cost for the media chemical Rs. 200,000 and Rs. 100,000 for purchasing the general items and for hardening the plant 2 Rs. / plant will be needed.
12.7: Human Resource Requirement
The table above provides details of human resource required to run a business of banana plants production. Salaries of all employees are estimated to increase 10% annually. There is also assumed that the owner must be technically expert in the production of the banana plants through tissue culture.
Table 9: Human Resource Requirement
Description / Nos. / Salary per Employee per Month(Rs.)Owner/ Technician / 1 / 30,000
Assistant/Helper / 1 / 10,000
Total Staff / 2 / 40,000
12.8: Revenue Generation
The revenue generation through the banana plant production is given below. The price of the plant will be estimated to increase by 5%. In the first year the 40000 plant will be produce and earn Rs. 2000000 and 600000 plants produce in the second year. The sale price of the one plant is Rs. 53 in the second year.
Table 10: Revenue Generation
Year / Unit(Plants) / Sale Price(Rs./Unit) / First Year ProductionFirst Year / 40000 / 50 / 2,000,000
Second Year / 60000 / 53 / 3,150,000
12.9: Other Costs
Miscellaneous expenses have been built into the project at Rs. 35,000 per year which is shown in table 11.
• Working Capital Requirements: It is estimated that an additional amount of approximately Rs. 860000 will be required as cash in hand to meet the initial working capital requirements during operations. The requirement is based on the utilities, salaries. All expanses are estimated on increase in 10% on yearly basis.
Table 11: Total Working Capital
Description / Years / Yearly Charges(Rs.)Utilities / 1 / 360,000
Salaries / 1 / 480,000
Miscellaneous Expense / 1 / 35,000
13. CONTACTS – SUPPLIERS, EXPERTS / CONSULTANTS
DR. AISH MUHAMMAD
PGRI, NARC, ISLAMABAD
Ph: 051-8443108
Email: