Project Report

ON

DAIRY FARMING
TAKEN BY

ASHA DEVI
W/O GANGO MAHTO

AT- Ward No. 02, Kumbhi, Meghaul,

District- Begusarai, Pin-848202 (Bihar)

Compiled by:

M. BHARATI & CO.

(Chartered Accountant)

AT - WARD NO. 15, ROSERA,

DIST-SAMASTIPUR
PIN-848210
(BIHAR)
CONTRACT NO.-9199405560
DISCLAIMER

The purpose and scope of this information memorandum is to introduce the

subject matter and provide a general idea and information on the said area. All the
material included in this document is based on data/information gathered from
various sources and is based on certain assumptions. Although, due care and
diligence has been taken to compile in 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. Mrs. ASHA DEVI does not
assume any liability for any financial or other loss resulting from this memorandum
in consequence of undertaking this activity. Therefore, the content of this
memorandum should not be relied upon for making any decision, investment or
otherwise. The prospective user of this memorandum is encouraged to carry out
his/her own due diligence and gather any information he/she considers necessary
for making an informed decision. The content of the information memorandum does
not bind on Mrs. ASHA DEVI in any legal or other form.
 Index

Page
Particulars No.
A. PURPOSE OF THE DOCUMENT 04
B. CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR
INVESTMENT 04
C. THE PROPOSED PROJECT 04

1. Introduction 05
2. Scope for Dairy Farming and its National Importance 05
3. Financial Assistance Available from Banks for Dairy Farming 05
4. Project Formulation for Bank loan 06
5. Appraisal of the Project 07
6. Sanction of Bank Loan and its Disbursement 08
7. Lending terms - General 08
8. Economics of Dairy Farming 08
8.1 PROJECT COST AND MEANS OF FINANCE 09
8.2 TECHNO ECONOMIC PARAMETERS 10
8.3 Feeding Schedule 11
8.4 Lactation Chart Per animal 11
8.5 PROFIT AND LOSS STATEMENT 12
8.6 BALANCE SHEET 13
8.7 CASH FLOW STATEMENT 14
8.8 IMPORTANT RATIOS 15
8.9 BREAK EVEN POINT CALCULATIONS 16
8.10 CALCULATION OF FINANCE COST 17
A. PURPOSE OF THE DOCUMENT
The objective of the project report 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, which have some bearing on the project itself.

Before studying the whole document one must consider following critical
aspects, which forms the basis of any investment decision.

B. CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT

Before making any investment decision, it is advisable to evaluate the
associated risk factors by taking into consideration certain key elements. These may
include availability of resources, academic knowledge, past experience and specific
managerial and medical health care skill.
At times evaluation and analysis of strengths, weaknesses, opportunities and
threats for a particular project serves the purpose of a basic tool in investment
decision making. Pre-feasibility study should capture all the important factors that
can play an instrumental role in the success of a project. An idea of the competing
centre and general practitioners in geographical zone/ City where the centre will be
set up is very critical.

C. THE PROPOSED PROJECT

Brief Profile: -
NAME M/S ASHA DEVI
AT- WARD NO. 02, KUMBHI, MEGHAUL, DIST-
LOCATION OF THE PROJECT BEGUSARAI, PIN-848202

PROMOTER ASHA DEVI

AT- WARD NO. 02, KUMBHI, MEGHAUL, DIST-
REGISTERED OFFICE BEGUSARAI, PIN-848202
AT- WARD NO. 02, KUMBHI, MEGHAUL, DIST-
BEGUSARAI, PIN-848202
EMAIL: -
ADMINISTRATIVE OFFICE Mobile No.:- 7519090175
LINE OF ACTIVITY DAIRY FARMING
SECTOR PRIVATE
CONSTITUTION PROPRIETORSHIP
INDUSTRY FARMING

1. Introduction
 Dairying is an important source of subsidiary
income to small/marginal farmers and agricultural
labourers. In addition to milk, the manure from animals
provides a good source of organic matter for improving soil
fertility and crop yields. The gobar gas from the dung is
used as fuel for domestic purposes as also for running
engines for drawing water from well. The surplus fodder
and agricultural by-products are gainfully utilised for
feeding the animals.
Almost all draught power for farm operations and transportation is supplied by bullocks.
Since agriculture is mostly seasonal, there is a possibility of finding employment throughout the year
for many persons through dairy farming. Thus, dairy also provides employment throughout the year.
The main beneficiaries of dairy programmes are small/marginal farmers and landless labourers.

2. Scope for Dairy Farming and its National Importance

India is endowed with the largest livestock population in the world. The value of output of
milk is Rs. 3,05,484 crore in 2011-12. The total milk production in the country is 127.9 million tonnes
per annum at the end of the Eleventh Plan (2011-12) and the demand is expected to be 180 million
tonnes by 2020. To achieve this demand annual growth rate in milk production has to be increased
from the present 2.5 % to 5%. The Annual growth rate for production of milk is about 5% in 2011-12.
Thus, there is a tremendous scope/potential for increasing the milk production through profitable
dairy farming.

3. Financial Assistance Available from Banks for Dairy Farming

For dairy schemes with large outlays, detailed project reports will have to be prepared. The
items of finance would include capital asset items such as purchase of milch animals, construction of
sheds, purchase of equipment etc. The feeding cost during the initial period of one/two months is
capitalised and given as term loan. Cost towards land development, fencing, digging of well,
commissioning of diesel engine/pump set, electricity connections, essential servants' quarters,
godown, transport vehicle, milk processing facilities etc. can be considered for loan. For high value
projects, the borrowers can
utilise the services of NABARD Consultancy Services (NABCONS) who are having wide experience
in preparation of Detailed Project Reports.

4. Project Formulation for Bank loan

4.1 Project can be prepared by a beneficiary after consulting local technical persons of State Animal
Husbandry Department, DRDA, Dairy Co-operative Society / Union / Federation / commercial
dairy farmers. If possible, the beneficiaries should also visit progressive dairy farms and
government / military / agricultural university dairy farms in the vicinity and discuss the
profitability of dairy farming. A good practical training and experience in dairy farming will be
highly desirable. The dairy co-operative societies, if existing in the villages would provide all
supporting facilities particularly for marketing of fluid milk. Nearness of dairy farm to such a
society, veterinary aid centre, artificial insemination centre should be ensured.
4.2 The project should include the following information on technical, financial and managerial
aspects in detail based on type of unit and capacity.

Technical:
a. Land and land development (Location, area, suitability, proximity to road, site map etc.)
b. Proposed capacity / No. of milch animals
c. Civil structures (Sheds, store room, milk room, office quarters, staff room etc.)
d. Equipment and Plant and Machinery (Chaff cutter, Silo pit, Milking machine, Feed grinder
and mixer, Milking pails/milk cans, Biogas plant, Bulk coolers, Equipment for manufacture
of products, Truck/van)
e. Housing Type of housing (Area requirement – Adults, Heifers (1-3 years), Calves (less than 1
year)
f. Animals (Proposed species, Proposed breed, Source of purchase, Place of purchase, Distance,
Cost of animal)
g. Production parameters (Order of lactation, Milk yield (ltrs. per day), Lactation days, Dry
days, Conception rate, Mortality(%) – Adults, Young stock)
h. Feeding (Source of fodder and feed - Green fodder, Dry fodder, Concentrates. Fodder crop-
rotations- Kharif, Rabi, Summer. Fodder cultivation expenses, Requirement and costs)
i. Breeding Facilities (Source, Location-Distance (km.), Availability of semen, Availability of
staff, Expenditure per animal/year )
j. Veterinary Aid Source (Location-Distance (km.), Availability of labour and other staff, Types
of facilities available, If own arrangements are made-Employed a veterinary
doctor/stockman/consultant, Periodicity of visit, Amount paid/visit (Rs.), Expenditure per
animal per year)
 k. Electricity (Source, Approval from SEB, Connected load, Problems of power failure,
Arrangements for generator)
l. Water (Source, Quality of water, Availability of sufficient quantity for drinking, cleaning and
fodder production, If investment has to be made, type of structure, design and cost)
m. Marketing of milk (Source of sales, Place of disposal, Distance (km.), Price realised - (Rs. per
liter of milk), Basis of payment, Periodicity of payment
n. Marketing of other products (Animal – age, place of sale, price expected, Manure
Qty./animal, Price/unit (Rs.), Empty gunny bags- Number, Cost/bag (Rs.)

Managerial:

Borrower’s profile

a. Individual/Partnership /Company / Corporation/ Co-operative Society /Others

b. Capability in managing the proposed business
c. Experience in proposed activity or others
d. Financial soundness
e. Technical and other special qualifications
f. Technical/ Managerial staff and adequacy there of

Others:

a. Name of the financing bank

b. Training facilities
c. Assistance available from State/ Central Government
d. Regulatory clearances, if any etc.

5. Appraisal of the Project

The scheme so formulated should be submitted to the nearest branch of the bank. The bank's officer
can assist in preparation of the scheme or filling in the prescribed application form. The bank will
then examine the scheme for its technical feasibility and economic viability.
6. Sanction of Bank Loan and its Disbursement

After ensuring technical feasibility and economic viability, the scheme is sanctioned by the bank. The
loan is disbursed in kind in 2 to 3 stages against creation of specific assets such as construction of
sheds, purchase of equipment and machinery, purchase of animals and recurring cost on purchase of
feeds/fodders for the initial period of one/two months. The end use of the funds is verified and
constant follow-up is done by the bank.

7. Lending terms - General

7.1 Outlay
Outlay of the project depends on the local conditions, unit size and the components included in the
project. Prevailing market prices may be considered to arrive at the outlay.
7.2 Margin Money
Margin depends on the category of the borrowers and range from 10 to 25%.
7.3 Interest Rate for ultimate borrower
Banks are free to decide the rates of interest within the overall guidelines. However, for working out
the financial viability and bankability of the model projects we have assumed the rate of interest as
9.20 % p.a.
7.4 Security
Security will be as per NABARD/RBI guidelines issued from time to time.
7.5 Repayment period of loan
Repayment period depends upon the gross surplus in the scheme. The loan will be repaid in suitable
monthly/quarterly instalments usually within a period of five to seven years.
7.6 Insurance
The animals and capital assets may be insured annually or on long term master policy, where ever it is
applicable.

8. Economics of Dairy Farming

A model project with 10 buffaloes is given below. This is indicative and the applicable input and
output costs as also the parameters observed at the field level may be incorporated.
8.1 PROJECT COST AND MEANS OF FINANCE
PROJECT COST: AMOUNT (Rs.)

ANIMAL COST 300,000.00

TRANSPORTATION OF ANIMALS 10,000.00

Construction of Animal Shed 155,000.00

Chaff cutter and equipments 25,000.00

Preliminary & Pre-Operative Exps. 10,000.00

Working Capital requirements 50,000.00

TOTAL 5,50,000.00

MEANS OF FINANCING AMOUNT (Rs.)

PROMOTER'S CAPITAL 50,000.00

WORKING CAPITAL LOAN 150,000.00

TERM LOAN FROM SYNDICATE BANK, KORJANA 350,000.00

BRANCH

TOTAL 5,50,000.00

8.2 TECHNO ECONOMIC PARAMETERS

Type of Animal Jersey Cow
No. of Animals 6
No. of animals/batch 2
Cost of Animal (Rs./animal) 50000
Transportation Cost/Animal 2500
Average Milk Yield (litre/day) 15
Floor space (sqft) per adult animal 50
Floor space (sqft) per calf 20
Cost of construction per sqft 1000
Cost of chaff cutter (power operated) (Rs.) 25000
Cost of equipment per animal (Rs.) 1000
Insurance premium (% per annum) 1250
Veterinary aid/animal/ year (Rs.) 1000
Quantity of Concentrate feed in one bag(kgs.) 50
Cost of concentrate feed (Rs./kg) 15
Cost of dry fodder (Rs./kg) 10
Cost of green fodder (Rs./kg) 5
No. of labours 1
Salary of labour per month (Rs.) 3000
Cost of electricity and water/animal/year (Rs.) 70
Margin (%) 25
Rate of interest (%) 12
Repayment period (years) 5
Selling price of milk/litre (Rs./litre) 30
Sale price of gunny bags (Rs.per bag) 10
Lactation days 270
Dry days 95

8.3 Feeding Schedule

 Lactation day Dry day
Type of feed Cost
Cost Per Day Price Qty. Per Day
Price (Rs.) Qty/kg (Rs.) (Rs.) (kg) (Rs.)

15.0
Concentrate Feed 0 5 75.00 15 2 30.00

100.0
Green Fodder 5.00 25 125.00 5 20 0

10.0 50.0
Dry Fodder 0 4 40.00 10 5 0

240.0 180.0
Total 0 0

8.4 Lactation Chart Per animal

I Batch II Batch
YEAR
Lactation day Dry day Lactation day Dry day Total

I 2100 600 1500 0 4200

II 2100 600 1500 100 4300
III 2100 600 1800 150 4650
IV 1800 400 1800 400 4400
V 1800 400 2100 400 4700
VI 1500 300 2300 600 4700
VII 1500 300 2400 600 4800

8.5 PROFIT AND LOSS STATEMENT

Particulars 1st YEAR 2nd YEAR 3rd YEAR

REVENUE:
Sale of Milk 504,000 550,400 613,800
Sale of Gunny bags 5,500 6,000 6,500

TOTAL 509,500 556,400 620,300

OPERATING & OTHER EXPENSES

Cost of feeding during lactation period 150,000 165,000 181,500

Cost of feeding during dry period 55,000 65,000 70,000

Veterinary aid and breeding charges 20,000 20,000 20,000

Labour Charges 36,000 43,200 51,840

Electricity & Misc. Expenses 3,000 3,500 4,000

Insurance Cost 4,000 4,000 4,000
FINANCE COST:
Interest on WC Loan - - -
Interest on Term Loan 27,798 17,609 6,442
Misc. Expenditure W/off 2,000 2,000 2,000

OPERATING PROFIT 211,702 236,091 280,518

Depreciation 18,000 16,200 14,580

PROFIT 193,702 219,891 265,938

Provision for taxation - - -

TRANSFER TO RESERVES 193,702 219,891 265,938

8.6 BALANCE SHEET

Particulars 1st YEAR 2nd YEAR 3rd YEAR

A. SOURCES OF FUNDS
PROMOTOR'S CAPITAL 50,000 183,702 323,594

RESERVES & SURPLUS

- PROFIT & LOSS 133,702 139,891 165,938

TOTAL PROMOTOR'S FUNDS 183,702 323,594 489,532

TERM LOAN FROM SYNDICATE BANK,

KORJANA BRANCH 243,842 127,494 -0

UNSECURED LOAN - - -

TOTAL 427,544 451,088 489,532

B. USE OF FUNDS:
GROSS FIXED ASSETS 180,000 162,000 145,800
ADDITIONS - - -
LESS: DEPRECIATION 18,000 16,200 14,580
NET FIXED ASSETS 162,000 145,800 131,220

CASH & BANK BALANCES 110,399 127,410 227,965

NET CURRENT ASSETS 147,145 171,878 126,347

MISC. EXPENDITURE 8,000 6,000 4,000

TOTAL 427,544 451,088 489,532

8.7 CASH FLOW STATEMENT

Particulars 0 YEAR 1st YEAR 2nd YEAR 3rd YEAR
INFLOW
Cash Accruals (Profit before Taxation
& Interest ) - 221,500 237,500 272,380
Promoter’s Capital 50,000 - - -
Unsecured Loan - - - -
Term Loan 350,000 - - -

Increase in Current Liabilities 50,000

Preliminary and Pre-Operative
Expenses w/off - 2,000 2,000 2,000
DEPRECIATION - 18,000 16,200 14,580

TOTAL INFOW 450,000 241,500 255,700 288,960

OUTFLOW
Preliminary and Pre-Operative
Expenses 10,000 - - -

Increase In Capital Expenditure 390,000 - - -

Increase in Current Assets 50,000 -62,855 24,733 -45,531
Decrease in Term Loan - 106,158 116,347 127,494

Decrease in Unsecured Loan - - - -

Finance Cost 27,798 17,609 6,442
Taxation - - - -
Withdrawal by Promoter - 60,000 80,000 100,000

TOTAL OUTFLOW 450,000 131,101 238,689 188,405

CASH & BANK BALANCES

OPENING BALANCE - - 110,399 127,410

NET INFLOW - 110,399 17,011 100,555

CLOSING BALANCE - 110,399 127,410 227,965

8.8 IMPORTANT RATIOS

Particulars 1st YEAR 2nd YEAR 3rd YEAR

DEBT/EQUITY 1.33 0.39 0.00

OPERATING PROFIT/INCOME 1.00 1.00 1.00

PAT/INCOME 0.91 0.93 0.95

RETURN ON TOTAL ASSETS 1.20 1.51 2.03

RETURN ON NET WORTH 1.05 0.68 0.54

DIVIDEND PAYOUT RATIO 0 0 0

DEBT SERVICE CONVERAGE

7.97 13.49 42.28
(PAT BEFORE INTEREST/ INTEREST)

EPS (RS.) 0 0 0

8.9 BREAK EVEN POINT CALCULATIONS

Particulars 1st YEAR 2nd YEAR 3rd YEAR

GROSS REVENUE 509,500 556,400 620,300

VARIABLE EXPENSES
COST OF FEEDING DURING LACTION PERIOD 150,000 165,000 181,500
COST OF FEEDING DURING DRY PERIOD 55,000 65,000 70,000
VETERINARY AID AND BREEDING CHARGES 20,000 20,000 20,000
LABOUR CHARGES 36,000 43,200 51,840
ELECTRICITY & MISC. EXPENSES 3,000 3,500 4,000

CONTRIBUTIONS 506,500 552,900 616,300

FIXED EXPENSES
FINANCE COST 27,798 17,609 6,442
MISC. ENPENDITURE W/OFF 2,000 2,000 2,000
LEGAL AND INSURANCE COST 4,000 4,000 4,000
TOTAL 33,798 23,609 12,442

BREAK-EVEN POINT (%) 6.67 4.27 2.02

8.10 CALCULATION OF FINANCE COST

TERM LOAN, ITS REPAYMENT AND INTEREST SCHEDULE

Term Loan : Rs. 350,000.00

Repayment Period : 3 Years
 Annual Interest Rate: 9.20%

Principal of Term Principa Principal

Loan at beginning Repaymen l amount at the
Month of the year t Payment Interest end of year
350,00 8,48 2,68 341,52
1 0 11,163 0 3 0
341,52 8,54 2,61 332,97
2 0 11,163 5 8 6
332,97 8,61 2,55 324,36
3 6 11,163 0 3 5
324,36 8,67 2,48 315,68
4 5 11,163 6 7 9
315,68 8,74 2,42 306,94
5 9 11,163 3 0 7
306,94 8,81 2,35 298,13
6 7 11,163 0 3 7
298,13 8,87 2,28 289,26
7 7 11,163 7 6 0
289,26 8,94 2,21 280,31
8 0 11,163 5 8 4
280,31 9,01 2,14 271,30
9 4 11,163 4 9 0
271,30 9,08 2,08 262,21
10 0 11,163 3 0 7
262,21 9,15 2,01 253,06
11 7 11,163 3 0 5
253,06 9,22 1,94 243,84
12 5 11,163 3 0 2
27,79
Finance cost for 1st Year 8
243,84 9,29 1,86 234,54
13 2 11,163 4 9 8
234,54 9,36 1,79 225,18
14 8 11,163 5 8 3
225,18 9,43 1,72 215,74
15 3 11,163 7 6 7
215,74 9,50 1,65 206,23
16 7 11,163 9 4 8
206,23 9,58 1,58 196,65
17 8 11,163 2 1 6
196,65 9,65 1,50 187,00
18 6 11,163 5 8 1
187,00 9,72 1,43 177,27
19 1 11,163 9 4 1
177,27 9,80 1,35 167,46
20 1 11,163 4 9 7
167,46 9,87 1,28 157,58
21 7 11,163 9 4 8
157,58 9,95 1,20 147,63
22 8 11,163 5 8 4
147,63 10,03 1,13 137,60
23 4 11,163 1 2 2
 137,60 10,10 1,05 127,49
24 2 11,163 8 5 4
17,60
Finance cost for 2nd Year 9
127,49 10,18 97 117,30
25 4 11,163 6 7 9
117,30 10,26 89 107,04
26 9 11,163 4 9 5
107,04 10,34 82 96,70
27 5 11,163 2 1 3
96,70 10,42 74 86,28
28 3 11,163 2 1 1
86,28 10,50 66 75,78
29 1 11,163 2 1 0
75,78 10,58 58 65,19
30 0 11,163 2 1 8
65,19 10,66 50 54,53
31 8 11,163 3 0 5
54,53 10,74 41 43,79
32 5 11,163 5 8 0
43,79 10,82 33 32,96
33 0 11,163 7 6 2
32,96 10,91 25 22,05
34 2 11,163 0 3 2
22,05 10,99 16 11,05
35 2 11,163 4 9 8
11,05 11,05 8 -
36 8 11,143 8 5 0
6,44
Finance cost for 3rd Year 2
350,00 51,84 6,412,77
Total 401,848 0 8 4