Model Project Report

Model Project Report

on
Fruit & Vegetable Processing Unit

(JULY 2014)

Plot No C-24, "G" Block Bandra-Kurla Complex

P.B.No 8121
Bandra (E)
Mumbai - 400051
Tel : (91) 022-26539895 / 96 /99
www.nabard.org

Table of Contents
1.0
Introduction ......................................................................................................................... 1
2.0
Type of Concern ................................................................................................................... 2
3.0
Products ............................................................................................................................... 2
3.1
Canned fruit pulp and vegetables ............................................................................................ 2
3.2

Pickle....................................................................................................................................... 3

3.3

Jam& jelly ............................................................................................................................... 4

3.3

Squash ..................................................................................................................................... 4

4.0
Storage and packing ............................................................................................................ 5
5.0
Marketing............................................................................................................................. 5
5.1
Domestic market ..................................................................................................................... 5
Export market.......................................................................................................................... 6

5.2

6.0
Quality control and quality assurance ................................................................................ 6
7.0
Project Cost .......................................................................................................................... 6
7.1
Land and land development .................................................................................................... 7
7.2

Building and civil structures ................................................................................................... 7

7.3

Plant and machinery ................................................................................................................ 7

7.4

Miscellaneous fixed asset........................................................................................................ 8

7.5

Electrical and other items:....................................................................................................... 9

8.0
Water Requirement ............................................................................................................. 9
9.0
Manpower Requirement. ..................................................................................................... 9
10.0 Working Capital: ............................................................................................................... 10
10.1 Raw material and packing material ....................................................................................... 10
10.2

Work-in-Progress (WIP) ....................................................................................................... 10

10.3

Finished goods ...................................................................................................................... 11

10.4

Debtors .................................................................................................................................. 11

10.5

Creditors................................................................................................................................ 11

11.0 Means of Finance ............................................................................................................... 12

11.1 Margin money ....................................................................................................................... 12
11.2

Bank loan .............................................................................................................................. 12

11.3

Grant & subsidy .................................................................................................................... 12

11.4

Interest rate............................................................................................................................ 13

11.4

Security ................................................................................................................................. 13

11.4.1

Primary Security ........................................................................................................... 13

11.4.2

Collateral Security......................................................................................................... 13

11.4.3

Hypothecation of Stocks ............................................................................................... 13

12.0 Financial Analysis .............................................................................................................. 13

12.1 Financial indicators ............................................................................................................... 14

12.2

Repayment period and debt service coverage ratio (DSCR) ................................................ 14

13.0 Depreciation Schedule ....................................................................................................... 14

14.0 Govt. Approvals/ Clearance Required .............................................................................. 14
14.1 Prior to establishment ........................................................................................................... 14
14.2

After establishment ............................................................................................................... 15

DISCLAIMER .................................................................................................................................... 15
Annexure I ........................................................................................................................................ 16
Annexure II ....................................................................................................................................... 17
Annexure III ...................................................................................................................................... 19
Annexure IV...................................................................................................................................... 20
Annexure V ....................................................................................................................................... 21

Model Project Report

1.0

Introduction

India is the second largest producer of fruits and vegetables in the world after China. It
accounts for about 15 per cent of the worlds production of vegetables. The area and
production of horticultural produce is given in Table 1.
Table 1. Area and production of fruits and vegetables
Produce

Fruits

Vegetables

Spices

Production

812.85

1621.9

57.86

69.82

91.0

31.0

(Lakh MT)
Area
(Lakh ha)
(Source: National Horticultural Board 2012-13)
As per the latest estimates, by Central Institute of Post Harvest Engineering and Technology
(CIPHET), Ludhiana, the wastage of fresh horticultural produce is upto 18 per cent due to
poor postharvest management practices. Hardly 2 per cent of perishable horticultural produce
is processed to value added products. Hence, there is huge scope for processing of fruits and
vegetables. This wastage can be easily prevented by adopting various methods of
preservations. At the same time, there is market glut during harvesting season and farmers are
forced to sell their produce at throw away prices. Therefore, food processing industries can
help farmers to get sure income for their produce and also avoid market glut.

There are various methods of preservation of food including thermal processing,

fermentation, pickling, dehydration, freezing etc. The technology for preservation also varies
with type of products and targeted market. Some of fast growing segments of food processing
industries are given as under:

Mango and other fruit pulps

Pickles, chutney, sauces etc.

Tomato products like paste, puree and ketchup

Fruit jam, marmalade, crush, squashes, juices etc.

Canned fruits and vegetables etc.

Frozen products like frozen peas, cauliflower etc.

Ready to cook (RTC), Ready to Eat (RTE) and Ready to Serve (RTS) products

The above list is broad and illustrative. There are many other growing segments of food
industry. The entrepreneurs shall study to sector thoroughly before investing in food industry.
The size and outlay of the project depends upon the market size, type of technology and
degree of automation.

In the present model, a fruit and vegetable processing unit for

manufacture of multiple products is considered. The entrepreneurs may decide upon the type
of products based on raw material availability and also market demand in the project area.

2.0

Type of Concern

New entrepreneurs may start their business as an individual, proprietary concern, partnership
firm or a joint stock company. Individual & proprietary concern should have their PAN
number and should preferably have a bank account. Partnership firms should execute a
partnership deed as per Indian Partnership Act 1932 on a Non Judicial Stamp Paper as per the
Stamp Act of the State Government and register the partnership firm with the Ministry of
Corporate

affairs.

Details

of

procedure

to

be

followed

are

available

at:

http://www.mca.gov.in/Ministry/actsbills/pdf/Partnership_Act_1932.pdf. The joint stock

company can be formed as private limited, public limited or producers company as per The
Company Act 2013, the details of which are given on the website of Ministry as link
http://www.mca.gov.in/MinistryV2/companiesact.html.

3.0

Products

3.1

Canned fruit pulp and vegetables

Canning a method of preservation in which a cooked or uncooked food is sealed in tin plated
and lacquered steel cans. The sealed cans are sterilized by heat treatment under high pressure
in retort. The temperature required for effective sterilization varies with the pH of the product
and is generally higher than boiling point of water (100C or 212F).

Fruit pulp is prepared from selected varieties of fruits. Fully matured fruit are harvested and
quickly transported to the fruit processing plant. The fruits are ripened in controlled ripening
chambers or natural ripening in open yard. Fully ripened fruits are washed, pulped, deseeded,
centrifuged, homogenized, thermally processed and filled hot to maintain sterility. The
preparation process includes cutting, de-stoning, refining packing, processing and cooling.
Fruits are also canned in slices, rings and cubes etc. along with sugar syrup of desired brix.

Washing

Cutting/
Slicing

Filling/

Pulping

Syrup

Exhusting
& Double
Seaming

Processing
Retorting

Cooling

Storage

Figure 1 Process flow for fruit canning

The vegetable canning is similar to fruit canning except that the filling materials in case of vegetables
is brine solution. The vegetables require thorough cleaning and slicing before passing through
canning line. Since vegetables are low in acid it does not require lacquered cans.

Washing

Cutting

Blanching

Brining
& Filling

Exhusting
& Double
Seaming

Retorting

Cooling

Storage

Figure 2 Process flow for vegetable canning

3.2

Pickle

Pickling is a process of preservation by fermentation. The fruits and vegetables are immersed
in 510 per cent salt solution (brine) leading to lactic acid fermentation. Salt prevents growth
of undesirable organisms and allow lactic acid bacteria to grow. The natural sugars present in
fruits and vegetables are converted to lactic acid at 25C. The fermentation process takes a
few weeks finishing at about 1 per cent acidity of final product. In India, spices and edible
oils are used in pickle making. The spices and edible oil inhibit growth of undesirable micro
flora in the product and also gives a desirable flavour. The process flow of pickle making is
depicted in Figure 3.

Washing
&
cleaning

Peeling
Cutting

Curing/
Brining

Blending

Botling

Oil
Topping

Packing

Storage

Slicing

Figure 3 Process flow for pickle making

3.3

Jam& jelly

Fresh fruits contain more than 80 per cent water and 10 to 15 per cent sugars. Therefore,
fruits are good food for microorganisms. The fruits spoil very fast, if not preserved in time.
One of the traditional methods of preservation is conversion of fruit pulp to jam and jelly.
The preservation of fruit by addition of sugar helps in reducing water content required by
spoilage microorganisms. Jam, jelly and marmalade are based on preservation by high sugar
concentration. All fruits can be converted to jam by mashing or slicing it fine, adding an
approximately equal amount of sugar, and simmering until it reaches proper concentration or
gel at 218 to 222F (103105C). A process flow chart for jam making is given in Figure 4.

Washing

Peeling

Cutting

Boiling
Pulping

Add
Sugar
Boiling

Filling

Packing
&

Storage

Cooling

Figure 4 Process flow for jam making

The process of jelly making is also similar except that only fruit extract is used for making of
jelly and pectin is added for gel formation after boiling.

3.3

Squash

Squashes are sweetened juice of fruits containing minimum prescribed quantity of pulp. As
per Indian Standards, squash should contain at least 25 per cent (by volume) of fruit juice.
The squashes are consumed after dilution by drinking water in 1:3 ratio. These beverages
contain added flavours and permitted class II preservatives. Since preservatives are added in

adequate quantities, the shelf life of squashes is fairly longer at room temperature. The
process flow diagram is given in Figure 5.

Washing
&
peeling

Extraction

Filtration
& Boiling

Sugar
Syrup

Stirring

Bottling

Packing

Storage

Figure 5 Process flow for manufacture of squash

4.0

Storage and packing

The entire product range manufactured should follow the Weight and Measurement Act and
packed accordingly in different standard keeping units (SKU).The product should be stored
as per batch number allocated to particular product. The product has to be separately stored in
storage area. One can follow either First In First Out (FIFO) or First Expiry First Out
(FEFO) method in dispatch process. The entire products can be stored at ambient
temperature in dry place. Pickle, chutney and sauces need proper curing before marketing,
therefore are stored for a specific period before dispatch.

5.0

Marketing

Marketing of fruit and vegetable product is the biggest challenge. There are several popular
brands in the market, which act as an entry barrier for new food products. Indian market is
also flooded by imported products. Therefore, new comers need to give maximum
importance to marketing of its products. It is always better to engage a professional agency
for product branding and marketing. The units shall also allocate reasonable budget for
advertisement and promotion. The details of the product marketing are discussed in this
section.

5.1

Domestic market

Indians are fond of table enrichers, which are regularly used along with main course of meals
as well as snacks. Apart from individual households, restaurants, roadside eateries, clubs,
hostels, caterers etc. are bulk consumers of fruit and vegetable products. Branded products

available in the market are costly. Therefore, new comers need to work on competitive
pricing. The real competition would be from age-old practice of making pulps, jam, jelly,
pickles or chutneys at home by the housewives. Many Indian households make these items
during season and store them for remaining part of the year. But this practice is gradually
disappearing due to changing lifestyles, hassles of making these items and their availability
throughout the year from market. There are many variants of these products. New comers
may introduce new flavour with certain change in the ingredients to alter taste of the
products. It is imperative to cater to regional palate and ethos e.g. products targeted to areas
populated by Jain community needs to be prepared with no onion and no garlic tag.

5.2

Export market

Apart from domestic market, there is good demand for processed products in export market.
Nowadays Indian products are widely accepted throughout the world for commercial as well
as household consumption. Currently, more than 50 countries import processed fruit and
vegetable products from India. Of late large numbers of Indian have migrated to various
countries and higher numbers of Indian visit other countries. Therefore, the demand for
Indian food products is on the rise in many countries. New entrants may initially join hands
with existing merchant exporters to get entry into such markets. Thereafter, vast export
potential for such products can be tapped slowly.

6.0

Quality control and quality assurance

The processed products should follow the Food Safety and Standard Authority of India
(FSSAI) act 2006. FSSAI Act is applicable pan India for all food products. It prescribes
minimum standards operating procedures, food safety norms, packaging & labelling norms.
The new units need to take a license called FSSAI number from Food Safety and Standards
Authority of India. The licensing procedure is given at FSSAI website link
http://foodlicensing.fssai.gov.in/UserLogin/Login.aspx?ReqID=99887766.

7.0

Project Cost

The major component of a small-scale fruit processing unit are land, building and civil works.
A project cost of Rs.74.78 Lakh has been estimated. The details of project cost are given in
Table 2 and the individual components are discussed in this section.

7.1

Land and land development

For a small scale fruit and vegetable processing unit, a plot of land measuring 0.5 acre, with
built-up area of 3850 sqft is considered sufficient. The land should be free from any
encumbrance and shall be mortgageable. The land should be classified as non-agriculture.
Permission for non-agriculture use, wherever applicable, shall be obtained for the land. The
cost of land up to a maximum of 10 per cent of project cost can be reckoned towards margin
if purchased by the promoters for the project. The land can also be taken on lease and the
lease period should be sufficiently more than the repayment period of loan. The lease land
should be with an enabling clause for mortgage of land to banks or financial institutions. The
land cost varies considerably from place to place. Land cost of Rs.2.50 lakh has been
considered for this profile. Similarly cost of land development also varies from place to place
and should be considered on actual basis. Land development cost of Rs.5.0 Lakh rupees has
been considered in the model.

7.2

Building and civil structures

The processing hall and other utilities would require construction of around 3850 sqft. of
building at a total cost of Rs.23.10 Lakh. The construction cost is assumed as Rs. 600 per
sqft. The building consists of 1000 square feet of processing hall, 1000 square feet of finished
product storage area, 1000 square feet of raw material storage area, 500 square feet of
washing area, 250 square feet of toilets, and 100 square feet of guard room. The remaining
land is kept for future expansion of project. The processing buildings should be constructed
as per the guidelines of FSSAI. The height of the building should be such that sufficient
breathing space is available. All windows and doors should be provided with insect proof
wire mess. Slope as per standard guidelines should be provided in floor. Glazed tiled flooring
shall be preferable to ensure easy cleaning of floor in evening.

7.3

Plant and machinery

Selection of plant and machinery is the most important decision for setting up a food
processing unit. All machinery and equipments used in the processing line should have
proper efficiency. The matching the capacities of different machines and equipments in a
processing line require an expert guidance. Therefore, a suitable consultant/ food technologist
should be appointed to set up a fruit and vegetable processing plant. The estimated cost of
plant and machinery is Rs.40.23 lakh. All the plant and machinery should be erected in such

a way that the material flow is unidirectional to avoid cross contaminations. The machinery
should not occupy more than 1/3rd of the total floor area for smooth operation of labour.
Various plant and machinery proposed for this model are discussed in this section.
Fruit washing machine - The fruit washing machine is used for different fruits and
vegetables. The purpose of machine is to reduce the initial microbial load by washing raw
materials with chlorinated water. Water used for washing has to be replaced at an interval of
3 to 4 hours. The anticipated cost of fruit washing machine having capacity of 1.5 MT per
hour is Rs.2.0 Lakh.
Sorting or inspection conveyer - This belt conveyor can be used for cutting, inspection and sorting
purpose. The anticipated cost of conveyer belt is Rs.1.75 Lakh.
Screw feeder - The screw feeder is used for feeding of sorted and cut fruit to fruit mill. The capacity
of feeding can vary from fruit to fruit. Therefore, a slightly higher capacity screw feeder of 2MT per
hour is proposed. The cost of machine is Rs.3.33 Lakh.
Twin pulper- The pulping is major activity in this project. The pulper crushes fruit and fine pulp is
extracted. Therefore, a pulper of 3 MT per hour for fruits is required to ensure the regular supply of
pulp. The fruit pulp passes through a sieve where stone or waste is removed. The cost of twin pulper
is Rs. 2.70 Lakh.

Steam jacketed kettle Steam jacketed kettle is a double walled cooking vessel. Pulp / other
products requiring processing are heated in steam jacketed
kettle at desirable temperature to reduce microbial load. During
this process some ingredients like sugar and citric acid are also
added to standardize the product. The estimated cost of two
steam jacketed kettles of 375 kg each is Rs.3.60 Lakh.
Miscellaneous equipments - A fruit and vegetable processing
unit will also require some supporting equipments like retort,

Figure 6 Steam Jacketed Kettle

crates, electric hoist, rotary flat can body reformer, body blanks
(empty cans),washer & sterilizer, working table, steam boiler, MS trolleys, plastic barrels,
knives, weighing scale etc. The entire set of miscellaneous equipments will cost
approximately Rs. 20.0 Lakh.

7.4

Miscellaneous fixed asset

In order to run a day to business, some other fixed assets like furniture & fixtures, computers
etc. shall also be required for which a provision of Rs.2.0 Lakh is made.

Table 2
S.
No.

Project Cost
Particulars

1
2
3
4
5
6

Land
Land Development
Civil Work
Plant and Machinery
Miscellaneous Fixed Assets
Preliminary and Preoperative Expenses

Unit
acre
Sq ft
Sq ft

Qty.

Rate
(Rs.)

0.5
500000.00
20000 LS
3850
600.00

TOTAL

7.5

Amount
(Rs. Lakh)
2.50
5.00
23.10
40.23
2.00
1.95
74.78

Electrical and other items:

Various machines have to be connected to electrical motors of suitable power ratings for
supplying power to them. Accordingly AC-3 phase motors of different power ratings, varying
from 2.50 Hp to 7.50 Hp will be required for powering various unit operations of the unit.
The total cumulative Hp ratings of all these motors will be 55 Hp. The costs of electrical
motors have been included along with the cost of plant and machinery.

8.0

Water Requirement

The total water requirement of such unit will be 1000 litres per day. Water is mostly required
for washing and also in various unit operations during processing. Apart from it, water will
also be required for domestic consumption purpose. The water should be clean and treated
well for hardness before use. It is preferable to carry out water testing from a reputed testing
laboratory before setting up a plant. Nowadays RO plants are installed to meet water
requirement of food processing industry.

9.0

Manpower Requirement.

Fruit and vegetable processing is a highly labour intensive operation. Majority of labour is
engaged on contract basis during season. These labourers are skilled and mostly women folk.
In order to perform day to day work, manpower requirement of a small-scale fruit processing
unit is given in Table 3.

Table 3. Manpower required of fruit and vegetable processing unit

Salary

Number

Plant manager
Manager Technical
Supervisors
Accountant
Electrician
Peon
Guard
Total

1.00
1.00
3.00
1.00
2.00
1.00
2.00

Salary
(Per Month)
15000.00
10000.00
7000.00
8000.00
6000.00
5000.00
5000.00

Total
(Rs. Lakh)
1.80
1.20
2.52
0.96
1.44
0.60
1.20
9.72

In addition, seasonal contract labour during peak processing periods will also be required to
be engaged. As a thumb rule an expenditure on wages @ Rs.250/- per MT of raw material is
considered adequate.

10.0 Working Capital:

Working capital is the most crucial input for viability of any fruit and vegetable processing
unit. The raw materials being seasonal in nature, fruit and vegetable processing units need to
maintain high inventories. Nowadays, banks are free to finance working capital based on
actual need of the borrower. A provision of adequate working capital needs to be considered
by the financing banks. The banks provide Cash Credit Limit, commonly known as CC limit
to the borrowers for meeting their day to day expenses. The different components of working
capital are discussed in this section.

10.1

Raw material and packing material

The raw material required would be fruits and vegetables, which are directly procured from
the farmers. Other inputs age generally available locally in general stores. As the fruits and
vegetables are highly perishable in nature, raw material stock only for 7 days is considered
for assessment of working capital.

10.2

Work-in-Progress (WIP)

The raw materials need to be converted to semi-finished products and preserved for
processing in future. Therefore, the WIP has been considered for 30 days.

10

10.3

Finished goods

Processed fruit and vegetable products can be stored for a period of 12 - 18 months at
ambient conditions. However, finished product storage for 15 days has been considered to
keep the inventory level under check.

10.4

Debtors

The processed fruit and vegetable products are sold to whole sellers/ retailers by the
processing units. In general, it takes about one month to recover dues from them. Hence, a
period of 30 days debtors has been considered adequate.

10.5

Creditors

The fruit and vegetable are purchased from farmers by making cash payments. Therefore, no
creditors have been considered.

The estimated working capital for the project is given in Table 4.

Table 4.Working Capital Assessment for F&V processing unit
(Rs. Lakh)
S.
No.
1

Particulars

Period
(days)

Yr1

Yr2

Yr3

Raw materials stock

0.71

1.65

2.12

Work in progress

30

4.10

9.57

12.31

Finished goods

15

2.23

5.37

6.74

Debtors

30

4.45

10.75

13.49

7.03

16.59

21.16

0.00

0.00

0.00

7.03

16.59

21.16

1.76

4.15

5.29

5.28

12.44

15.87

Total current assets

5
6

Creditors (current
liabilities)
Working capital gap

Margin money for W.C.

Bank loan (CC Limit)

11

25%

Remarks

11.0 Means of Finance

Financing to food processing falls under priority sector lending. The loans to units meeting
the criteria of MSME are classified under MSME sector. Such units can be financed by any
scheduled commercial banks, Regional Rural Banks and Cooperative Banks. Important terms
and conditions of financing such units are discussed in this section.

11.1

Margin money

The promoters of the units need to bring their margin as per the requirement of financing
banks and also as per RBI guideline issued from time to time. The margin money varies from
minimum 10 per cent to 25 per cent of project cost. We have assumed margin money of 25
per cent in this model scheme.

11.2

Bank loan

The promoters of the units can approach any financing bank for finance. It is compulsory to
take bank loan to avail various subsidy schemes of government. Therefore, the promoters
should be careful in deciding means of finance.

11.3

Grant & subsidy

There are numbers of incentive from Sate Government for promotion of food industry. Some of the
states have formulated their Agro Industry Policy. The new comers should go through these
guidelines. Various incentives are available depending upon location of the unit from District Industry
Centres (DIC). Therefore, to take maximum advantage of these incentives, entrepreneurs may contact
the District Industry Centres in their state.
Ministry of Food Processing Industry, GoI is implementing a centrally sponsored scheme for known
as National Mission on Food Processing (NMFP) jointly with State Governments. The scheme will be
operational during 12th Five Year Plan. Subsidy is available under this scheme for various purposes
under food processing industries. GoI has appointed State Nodal Agencies for implementing this
scheme

in

different

states.

The

details

of

the

scheme

are

available

at

http://www.mofpi.nic.in/SchemeViewPage.aspx?OPsNrN8PJA9sTrxLD7BvfB2hBlJg+pfldJPrxZAjV
pDNZljdsLVU2Gbcbo6343MQnfLHw3hYt7Q=. The entrepreneurs should visit State Nodal
Agencies in their states to avail this scheme. The details of the State Nodal Officers is given at link
http://www.mofpi.nic.in/H_Dwld.aspx?KYEwmOL+HGqHeLlRhVlZUABVfKtILFmuPNWgdG0C7
0PqfSu+Dkvx1A== .

12

11.4

Interest rate

The banks are free to charge rate of interest above its base rate within overall RBI guideline issued
from time to time. It generally varies from customer to customer based on credit appraisal of the
borrower. Base rate of a bank is a minimum lending rate below which bank is not allowed to lend.

However, we have considered an interest rate of 12 per cent for working out the bankability
of the model project.

11.4

Security

As per RBI guidelines, the banks are required to take adequate security for the loans extended
by them. The borrowers should plan projects in such a manner that they have enough fixed
assets to offer as security against bank loan. Various types of securities considered by the
Banks are given here:
11.4.1 Primary Security
The land and buildings acquired with by bank loan are mortgaged to financing banks. The
mortgage can be registered or equitable in nature. The plant, machinery and other
miscellaneous fixed assets acquired by bank loan shall have to be hypothecated to the bank.
The value of all these assets is known as primary security for the bank.
11.4.2 Collateral Security
As the value of primary assets, especially buildings and plant and machinery is not enough to
cover the bank loan, the banks insists for mortgage of any other property or asset of the
company or promoters. This is known as collateral security.
11.4.3 Hypothecation of Stocks
All stocks, inventories and debtors are hypothecated to financing banks as security against the
bank loan extended by them.

12.0

Financial Analysis

In order to test the financial soundness of business, key financial indicators are assessed.
Based on historical data on cost and prices, techno-economic assumptions are made for
preparation of this model. The key techno-economic assumptions are presented in Annexure
I. The assumptions made might vary from place to place, hence need to be considered on
case-by-case basis.

13

12.1

Financial indicators

Based on the assumptions on input and output parameters, an Income Expenditure statement
(Cash Flow Statement) prepared is presented at Annexure II. The financial indicators like
Net Present Worth (NPW), Benefit Cost Ratio (BCR), Internal Rate of Return (IRR) etc.
analysed by discounting cash flow @15% discounting rate are given in Annexure III and
summary is presented in Table 5.
Table. 5 Estimated Financial Indicators
Financial Indicators
NPW @ 15 % DF`

12.2

Estimated

Requirement

43.96

Should be +ve

IRR

36.73%

> 15%

BCR

1.09

Should be >1.0

DSCR

1.68

Should be >1.5

Repayment period and debt service coverage ratio (DSCR)

The repayment period has been drawn by considering net surplus available for repayment.
The bank loan with interest is repayable within 8 years with a grace period of one year. The
details are presented in Annexure IV. The debt service coverage ratio based on assumed
techno economic parameters is found satisfactory.

13.0 Depreciation Schedule

There are two different methods for assessment of depreciation on fixed assets namely
Written Down Value Method (WDV) and Straight Line Method (SLM). These methods are
used invariably to submit the returns to Registrar of Companies & Income Tax Authorities.
We have followed WDV method for computation of depreciation in the present model and
the schedule of depreciation is presented in Annexure VI

14.0 Govt. Approvals/ Clearance Required

14.1
i.

Prior to establishment
Registration of concern with Registrar of Companies (ROC)

ii. NOC from Local Bodies like Gram Sabha/ MC etc. - mandatory
iii. Consent to establish from State Pollution Control Board - mandatory
iv. Approval of Layout plan for construction - mandatory

14

v. Permission to dug bore well

from Ground Water Survey and Development Authority

(GSDA)
vi. Registration with District Industry Centre (DIC) for as Small and Medium Enterprise
vii. Application to State Electricity Board/ Authority for sanction of requisite power load

14.2
i.

After establishment
Licence from FSSAI

ii. Permission to commence production from State Pollution Control Board

iii. Licence from Boiler Inspector
The list is only illustrative. The entrepreneurs should undertake an exhaustive study of all rules and
regulations prior to establishment of any such unit. The new entrepreneurs may take help of suitable
consultant to avoid unnecessary expenditure for compliance later on.

DISCLAIMER
The views expr essed i n thi s model pr oject ar e advi sor y in
nat ur e. NABARD assume no fi nanci al l i abi li t y to anyone usi ng
the r epor t for any purpose. T he actual cost and r etur ns of
pr ojects wi ll have to be tak en on a case by case basi s
consi der i ng t he speci fi c r equi r ement of pr ojects

15

Annexure I
Techno Economic Parameters

Assumptions for working out economics of a 300 MT/ Annum capacity fruit and vegetable
processing plant
1. Total Installed Capacity 300 MT per annum.
2. The unit will operate in a single shift of 8 hours for 250 days.
3. Share of products considered is 60 per cent, 20per cent, 10per cent and 10 per cent for
each canned pulp, pickle, jams and canned vegetables, respectively.
4. Capacity utilization: First year 30 per cent, second year - 70per cent and third year
onwards - 90per cent.
5. Sales price will be Rs.62000/MT for pulp, Rs.5000/MT for pickle, Rs.60000/MT for
Jam and Rs.62000/MT for canned products.
6. Power cost @ Rs. 6.0 per unit and that for fuel @Rs. 55.0 per litre.
7. Labour charges are considered as Rs.250 per metric ton.
8. Insurance charges for the fixed assets considered as 0.5% of the depreciated cost of
the assets.
9. Interest on working capital considered at 14% per annum and interest on term loan
considered at 12% per annum.
10. Margin money considered at 25% of the financial outlay.
11. Depreciation rate of 10%, 13.91% and 15% has been considered for civil structures,
plant & machineries and miscellaneous fixed assets, respectively.
12. Repayment period of seven years with one year grace period has been considered.

16

Annexure II
Profitability Statement
i.

Installed Capacity (MT)

Installed Capacity
Mango and other fruit pulps
Pickles, chutney, sauces etc.
Fruit jam, jelly, squashes etc.
Canned fruits and vegetables etc.
Total

ii.

Yr 1

Total

Yr 5

Yr 6

Yr 7

Yr 8

180.0

180.0

180.0

180.0

180.0

180.0

180.0

180.0

60.0

60.0

60.0

60.0

60.0

60.0

60.0

60.0

30.0

30.0

30.0

30.0

30.0

30.0

30.0

30.0

30.0

30.0

30.0

30.0

30.0

30.0

30.0

30.0

300.0

300.0

300.0

300.0

300.0

300.0

300.0

300.0

Yr 1

Yr 2

Yr 3

Yr 4

Yr 5

Yr 6

Yr 7

Yr 8

30%

70%

90%

90%

90%

90%

90%

90%

54

126

162

162

162

162

162

162

18

42

54

54

54

54

54

54

21

27

27

27

27

27

27

21

27

27

27

27

27

27

90

210

270

270

270

270

270

270

Yr 3

Yr 4

Yr 5

Yr 6

Yr 7

Yr 8

Yr 1

Yr 2

28.08

65.52

84.24

84.24

84.24

84.24

84.24

84.24

9.72

22.68

29.16

29.16

29.16

29.16

29.16

29.16

4.77

11.13

14.31

14.31

14.31

14.31

14.31

14.31

4.95
47.52

11.55
110.88

14.85
142.56

14.85
142.56

14.85
142.56

14.85
142.56

14.85
142.56

14.85
142.56

Expenditure Calculation (Rs. Lakh)

Particulars
Raw material pulp
Raw material pickle
Raw material jam RTS squashes
Raw material canned F&V
Packing material pulp
Packing material pickle
Packing material jam RTS squashes
Packing material canned F&V
Fuel
Power
Salary

17

Yr 4

Sales Revenue (Rs. Lakh)

Products
Mango and other fruit pulps
Pickles, chutney, sauces etc.
Fruit jam, jelly, squashes etc
Canned fruits and vegetables etc
Total Income

iv.

Yr 3

Capacity Utilisation (MT)

Installed capacity
Capacity utilisation
Mango and other fruit pulps
Pickles, chutney, sauces etc.
Fruit jam, jelly, squashes etc.
Canned fruits and vegetables etc.

iii.

Yr 2

Yr 1

Yr 2

Yr 3

Yr 4

Yr 5

Yr 6

Yr 7

Yr 8

14.98

34.94

44.93

44.93

44.93

44.93

44.93

44.93

4.14

9.67

12.43

12.43

12.43

12.43

12.43

12.43

3.23

7.53

9.68

9.68

9.68

9.68

9.68

9.68

2.873

6.70

8.62

8.62

8.62

8.62

8.62

8.62

3.310

7.72

9.93

9.93

9.93

9.93

9.93

9.93

2.052

4.79

6.16

6.16

6.16

6.16

6.16

6.16

1.026

2.39

3.08

3.08

3.08

3.08

3.08

3.08

0.552

1.29

1.65

1.65

1.65

1.65

1.65

1.65

0.41

0.96

1.23

1.23

1.23

1.23

1.23

1.23

1.20

2.79

3.59

3.59

3.59

3.59

3.59

3.59

0.42

0.98

1.26

1.26

1.26

1.26

1.26

1.26

Particulars
Wages
Repair and maintenance
Insurance
Promotion and marketing
Administrative overheads
Total
v.

Yr 1

Yr 2

Yr 3

Yr 4

Yr 5

Yr 6

Yr 7

Yr 8

2.92

9.72

9.72

9.72

9.72

9.72

9.72

9.72

0.00

0.07

0.18

0.35

0.53

0.53

0.53

0.53

0.29
0.12

0.25
0.28

0.22
0.36

0.19
0.36

0.17
0.36

0.15
0.36

0.13
0.36

0.11
0.36

0.1
37.60

0.10
90.18

0.10
113.12

0.10
113.27

0.10
113.42

0.10
113.40

0.10
113.38

0.10
113.36

Financials

Particulars
Profit Before Depreciation and Interest
(PBDIT)
Depreciation
Interest on Term Loan
Interest on working capital
Intangible assets written off
Profit After Depreciation and Interest
Tax
Profit After Depreciation and Interest
and Tax
Surplus available for repayment

Yr 1

Yr 2

Yr 3

Yr 4

Yr 5

Yr 6

Yr 7

Yr 8

9.92

20.70

29.44

29.29

29.14

29.16

29.18

29.20

8.21

7.15

6.24

5.44

4.75

4.14

3.62

3.16

6.73

6.73

5.77

4.81

3.85

3.85

3.85

3.85

0.74

1.74

2.22

2.22

2.22

2.22

2.22

2.22

0.00

0.00

0.39

0.39

0.39

0.39

0.39

0.00

-5.76

5.08

14.83

16.44

17.94

18.56

19.10

19.97

0.00

1.83

5.34

5.92

6.46

6.68

6.88

7.19

-5.76

3.25

9.49

10.52

11.48

11.88

12.23

12.78

9.18

17.13

21.49

20.77

20.07

19.87

19.69

19.79

DSCR
Coverage Available

Yr 1

Yr 2

Yr 4

Yr 5

Yr 6

Yr 7

Yr 8

9.18

17.13

21.49

20.77

20.07

19.87

19.69

19.79

Debt

6.73

14.74

13.78

12.82

11.86

10.90

9.94

8.97

Value
DSCR Ratio
Average DSCR Ratio

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.364

1.162

1.560

1.620

1.693

1.823

1.982

2.205

Cash Accruals

4.16

23.96

38.93

39.81

40.62

41.04

41.41

41.98

18

Yr 3

1.68

Annexure III
Calculation of IRR, BCR and NPW - As per IT Act
Sr.
No
1

Yr 1

Yr 2

Yr 3

Yr 4

Yr 5

Yr 6

Yr 7

Yr 8

Capital Cost

74.78

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Recurring Cost

37.60

90.18

113.12

113.27

113.42

113.42

113.42

113.42

Total Cost

112.38

90.18

113.12

113.27

113.42

113.42

113.42

113.42

Benefits

47.52

110.88

142.56

142.56

142.56

142.56

142.56

142.56

Depreciated value of structures

Total Benefits

47.52

110.88

142.56

142.56

142.56

142.56

142.56

145.72

Net Benefits

-64.86

20.70

29.44

29.29

29.14

29.14

29.14

32.30

Discounting Factor

15%

NPW @ 15 % DF

43.96

10

IRR

36.73%

11

BCR

1.09

19

Particulars

Rs.
490.18

3.16
Rs.
534.15

Annexure IV

Balance left

O/S Bank
Loan at End
of Year

Total Outgo

Repayment of
Principal

56.09
56.09

Interest
Payment

Total loan
outstanding

56.09

Interest

Disb, During
the year

0.00
56.09

Surplus for
Repayment

O/S Bank
Loan at Start
of Year

Repayment Schedule

9.18
17.13

6.73
6.73

6.73
6.73

0.00
8.01

6.73
14.74

56.09
48.07

2.45
2.39

48.07
40.06
32.05
24.04
16.02

48.07
40.06
32.05
24.04
16.02

21.49
20.77
20.07
19.87
19.69

5.77
4.81
3.85
2.88
1.92

5.77
4.81
3.85
2.88
1.92

8.01
8.01
8.01
8.01
8.01

13.78
12.82
11.86
10.90
9.94

40.06
32.05
24.04
16.02
8.01

7.71
7.95
8.21
8.97
9.76

8.01

8.01

19.79

0.96

0.96

8.01

8.97

0.00

10.81

20

Annexure V
Depreciation as Per the WDV Method: IT Act
Particulars
Civil Works

Yr 1
Yr 2
Yr 3
Yr 4
Yr 5
Yr 6
Yr 7
Yr 8
23.10 20.79 18.71 16.84 15.16 13.64 12.28 11.05
2.31

2.08

1.87

1.68

1.52

1.36

1.23

1.10

Depreciated Cost

20.79

18.71

16.84

15.16

13.64

12.28

11.05

9.94

Plant and Machinery

40.23

34.63

29.82

25.67

22.10

19.02

16.38

14.10

5.60

4.82

4.15

3.57

3.07

2.65

2.28

1.96

34.63

29.82

25.67

22.10

19.02

16.38

14.10

12.14

Miscellaneous Fixed Assets

2.00

1.70

1.45

1.23

1.04

0.89

0.75

0.64

Depreciation

0.30

0.26

0.22

0.18

0.16

0.13

0.11

0.10

Depreciated Cost

1.70

1.45

1.23

1.04

0.89

0.75

0.64

0.54

65.33

57.12

49.97

43.74

38.30

33.55

29.41

25.79

8.21

7.15

6.24

5.44

4.75

4.14

3.62

3.16

57.12

49.97

43.74

38.30

33.55

29.41

25.79

22.63

Depreciation

Depreciation
Depreciated Cost

All Assets
Depreciation
Depreciated Costs

21