Project Report EDIBLE OIL RIFINERY

Transcription

1 1 Project Report EDIBLE OIL RIFINERY PURPOSE OF THE DOCUMENT he objective of the pre feasibility study is primarily to facilitate potential entrepreneurs to facilitate investment and provide an overview about Edible Oil Refinry manufacturing unit.the project pre feasibility may form the basis of an important investment decision and in order to serve this objective, the document covers various aspects of the business concept development, start up, production, marketing, and finance and business management. This particular pre feasibility is regarding Edible Oil Refinry manufacturing unit. which comes under MSME a priority sector. Prepared By: M/S Institute for Industrial Development A unit of M/S Samadhan Samiti 27/1/B Gokhle Marg Lucknow Social Media : Youtube: Facebook: Twitter: Website: Enquiry iidincubator17@gmail.com Contact: ,

2 2 ABOUT THE PRODUCT AND DEMAND POTENTIAL The product envisaged under this project is refined edible oil. Most of the vegetable oils are unsuitable for human consumption in their crude form due to presence of impurities and therefore requires refining. The term refining refers to removal of certain minor constituents from crude oil yielding purified oil. Edible oil is basically a fat in the form of vegetable oils is also an essential ingredient of the diet. It is the most concentrated source of energy and the body reserves are built thereby. It also act as a vehicle for carrying the vitamins and serves as a padding in the human body. It is therefore a great challenge to meet the ever increasing demand of the protein enriched and the fat concentrated type of balanced diet by the constantly growing population of the world today. That is where the oil processing industry comes to the rescue of the human beings. Food,cloth and shelters are the basic necessities of human beings, out of which food ranks first. The edible oil is a medium of cooking food. Whether vegetarian or non vegetarian. It provides taste and protines to the food. Almost all kinds of people whether rich or poor, vegetarians or non vegetarians uses the oil in one or other ways. It is a product of daily necessity. It is used as cooking medium in houses, sweet shops, hotels etc. mainly for preparing vegetable, hot dishes, sweet dishes and other varieties. The oil has an important place in any nutritive diet and therefore share a major part on the expenditure schedule. The demand of oil has increased steadily because of various reasons like increase in population, desire of common man to use more oils, general awareness for the nutritive value of the food and rapid development of industries based on vegetable oils. The consumption of edible oil depends mainly on population and the standard of living. It has been observed that during the past years, the edible oil industry has seen steady growth and this will continue since the population and the standard of living are growing continuously and edible oil is an indispensible part of Indian cooking. India s edible oil demand is growing at about 3.5 to 4.0 percent which translates into something like an additional / tonnes a year. India s per capita consumption which has risen to 10kg from 6.5kg in the last decade would continue to rise since it was below the global level of 17 to 18kg. The current annual requirement is estimated to be around 125 lac tonnes of oil, out of this about 50 lac tonnes is likely to be imported as domestic production of oil seeds is not increasing.thus about 40% requirement is met through imports. The following table gives the indication of trend of oil consumption in India 2

3 3 According to the Solvent Extractors Association (SEA), import of vegetable oils in India in September 2014 jumped by 21% to 1,047,620 tonnes compared with 863,917 tonnes in September The import consisted of 1,018,767 tonnes of edible oils and 28,853 tonnes of non edible oils. Import of crude palm oil is continuously on the uptrend, the SEA was reported to have said. RAW MATERIAL AND ITS AVAILABILITY The raw material required is edible grade crude oil. Besides this, some quantity of chemicals shall also be required. The main source of raw material is the captive production of crude oil through own solvent extraction Plant. In case of non availability of in house oil for any reason, the one can always use imported soya oil or source it locally from other plants. Edible oil is available in sufficient quantity from imports and local oil mills/solvent Extraction plants and no problem is anticipated in getting the requisite quantity of oil. Other raw materials or chemicals in the refining process are caustic soda, filler s earth/activated carbon (bleaching agent) phosphoric acid and citric acid. These materials are easily and regularly available in the market. The domestic production of oil seed is stagnant and the gap between demand and supply is increasing. On the other hand, there is a glut in the international oil market. The global prices are much cheaper than the domestic ones. With a view to make available edible oil at reasonable rates, the Government has opened up oil imports by putting it on the OGL list. The liberalisation of oil imports has flooded Indian market wilh all types of oils like Soya, Sunflower, and Palm etc. Therefore, the availability of oil is no longer a constraint. There are a number of traders in India who import the oil in bulk and sell it to the refiners in smaller lots. In other words, it is not necessary to directly import oil but it can be sourced from the importing agents. The only saving grace is that the Govt. has structured import duty in such a way that it is economical to import crude oil than the refined oil. This ensures the survival of local refining units in India. In view of the above discussions, it can be concluded that raw material procurement is not a problem for the proposed unit. The Company has estimated its raw material requirement at various capacity utilization levels. In quantitative terms as well as in monetary terms. Current prevailing prices have been considered for purchase cost. The working has been provided in statement of requirement of raw material consumption. 3

4 4 PROCESS OF MANUFACTURE Crude oil contains inpurities in the form of non glycerides such as suspended solids, free fatty acids, phosphatides, moisture etc, Crude Oils also contain colour pigments, odoriferous matters. Removal of these impurities is done with the help of refining process. The conversion of crude oils into refined edible grade oil involves discreet stages of operations. Each stage of the processing is well developed in terms of technology. The major stages are as under : I. Degumming De gumming process is the removal of phosphatides and other slimy or other mucilaginous materials from oil prior to neutralisation. Phosphatides if not removed, leads to high oil loss while neutralising. The process consists of hydrating the gums by addition of either water or suitable acids(usually phosphoric) to the oil, to make them oil insoluble for subsequent removal by centrifugal separation. The oil so obtained is then sent for neutralisation. II. Neutralising The Crude oil as it is obtained from Expellers or Solvent Extraction Plant contains foreign impurities such as mucilage, gums and unfiltered proteinous matter from call the need. It also contains fatty acids in the free form called free fatty acids(ffa) which tend to split the oil further into fatty acids, and glycerine on storage, thus making it unfit for edible purposes. Therefore, the first stage of refining is to separate these free fatty acids and other impurities by treatment with chemicals and caustic soda and is called Neutralisation Process. This process is either batch or continuous. It is carried out in a cylindrical tank with conical bottom and stirrer. The crude oil is first pumped into this tank (called Neutraliser ) and heated to about 90 C and washed with a weak solution of phosphoric acid or other suitable degumming agent. The gums, mucilage and proteinous matter flocculates and separate from the oil and settles at the bottom as Gums. The gums are drained from below. The oil is then given a wash with calculated amount of caustic soda solution, which reacts with free fatty acids forming soap. This soap settles at the bottom of the Neutraliser and is called soap stock. The caustic soda also reacts with pigments, pareteneids and colouring matter in the oil and these are eliminated to a large extent in the Neutralising Process and go with soap. The soap settled at the bottom also contains small quantities of Neutral Oil entrapped in it which is lost with soap stock. The efficiency of Neutralising operation is determined by the least possible loss of Neutral Oil in soap stock. As such, in this operation the quantity of original oil is reduced by its free fatty acid content plus quantity of Natural Oil in soap stock plus impurities. The constitutes refining loss or neutralising loss and is generally two to two and half times the free fatty acid content of the oil. After draining of the soap stock the oil which is now free from fatty acids and impurities is washed repeatedly with hot water to free it from any caustic soda and soap. These dissolve in the wash water, which is drained from the bottom after settling. Neutralisation also removes bulk of the colour of the Crude Oil and makes it lighter. In continuous neutralisation process, soap stock is separated from neutral oil by using the principal of Centrifugal Force and separation occur in centrifuges running at high rpm. This centrifugal separation is any time better than separation by recantation method as adopted in batch process. However, the continuous process has disadvantage of very high initial investment, resulting into higher processing cost due to larger interest and depreciation on initial investment. Also the soap stock available from continuous neutralising plant fetches much lesser price due to high water content. Normally continuous plant is recommended for capacities higher than 25 TPD or when FFA of oil is more than 3%. 4

5 BLEACHING The neutralised washed oil is than taken for second step in refining, i.e. Bleaching. In this operation, the oil is taken in Cylindrical vessel provided with agitator called Bleacher and kept under vacuum and heated upto 90 C with steam. The moisture from oil is thus evaporated and oil becomes dry. Then dry oil is treated with Bleaching earth (fuller s earth) and Carbon. These absorb most of the residual colour remaining after Neutralisation. The mixture of oil and bleaching agents is filtered through a standard plate and frame press for separation. The clear oil obtained is bleached oil and is very much lighter in colour than the neutralised oil DEODORISATION The oil after bleaching is practically pure, but contains minute quantities of original odoriferous matter. Also the chemicals used during neutralisation and bleaching impart their odours to the oil. Those odoriferous materials are removed by the steam distillation process in a cylindrical vessel called Deodoriser. The Deodoriser is kept under very high temperature 200 C with high pressure steam and open steam is passed through the oil. Under high vacuum and temperature the open steam leaves the deodoriser. This oil is then cooled and clarified through a filter press to get sparkling oil. The filtered oil is then packed into standard size tins and sealed. The vitamins A and D are added to this filtered oil if necessary before packing. PRODUCTION CAPACITY AND PLANNING 5.1. PRODUCTION CAPACITY At the Planning stage,it is essential to conceive a capacity that would make the economy of production effective in all respects. The general concept is that any capacity above the minimum economic size for any product would be a feasible capacity. The economic capacity should be so chosen that the cost of the product must be conducive to the growth of the product in the local market as well as be reasonably competitive with prices in the international market. There are several units with installed capacity around 100 TPD. Besides these factors there is another important factor generally considered for evaluation of the plant capacity viz, supply and demand. In the view of present demand of edible oils and protein in the country, as well as in other countries, it is expected that there would be no dearth in demand of finished goods proposed to be manufactured viz, edible oil. 5.2 INSTALLED CAPACITY AND CAPACITY UTILISATION/TARGETED PRODUCTION Based on above, capacity of 100 TPD is considered to be viable. However inherent technological and attendent limitations, it is unlikely for any plant in India to achieve 100% capacity utilisation from the first year of production. In view of this following capacity utilisation has been assumed for the proposed unit. Processing (Qty /MT) Oil Capacity Utilization First year % (Annulised) Second year % Third Year % 5

6 6 PRODUCT MIX: It is envisaged that the unit can process various types of oils like Soyabean and Sarson are the main oils which are likely to processed. The actual quantam of the particular type of oil will depend upon the prevailing market prices. LOCATIONAL ADVANTAGES AND LAYOUT LOCATIONAL ADVANTAGES There are many factors that have to be considered for selecting a site for manufacturing operations. Some of these are as following: Availability of raw materials Availability of utility facilities Marketing proximity Availability of land Availability of labour Transportation facilities Availability of infra structural facilities and incentives. LAYOUT The layout of a unit is an important factor and a good layout results in saving initial investment as well as production cost. The streamlined flow of materials should be assumed while the layout of the unit is designed. Some of the advantages of a good layout have been enumerated below: Provide definite line for travel of work. Reduce the quantity and cost of material. Cuts down over all time of work in progress. Brings about more efficient utilization of labour and equipment s CAPITAL INVESTMENT CAPITAL The purpose of this chapter is to assess the capital requirement of the Unit. The capital requirements includes the fixed capital component. Fixed capital includes investment in land, buildings, plant and machinery and certain expenses including before commencement of commercial production. The estimates of the same are given in statement of Cost of Project. 1. LAND: 2. SITE DEVELOPMENT: 2.1 LAND LEVELING/ GATE 2.2 FENCING / BOUNDRY WALL: 2.3 INTERNAL ROADS: 6

7 7 2.4 WATER ARRANGEMENT: 3. BUILDINGS: A minimum number of buildings is proposed to take care of the area of operation. The layout is as planning that future expansion and diversification could be undertaken without much difficulty. 4. PLANT & MACHINERY The selection of Plant & Machinery is to be considered according to the manufacturing process and the size of the unit. The bottleneck if any should removed by installing the balancing machineries. At times, perfect balancing of all the equipments required for such types of plant may not be possible but while laying down the specifications of the Plant and machinery it has been tried to optimise utilisation of capacity of the plant and machinery. The selection of the plant and machinery should be made after considering the following : Economic consideration. Financing possibilities. Ease of maintenance. Availability of the spare parts. Possibility of further expansion. Flexibility to manufacture. As could be seen from the list of plant & machinery. The selection of the required machinery has been made keeping in mind. The necessity to minimise initial capital expenditure and to achieve the envisaged production to meet the requirements of the customers and to maintain acceptable quality of the product. The total cost of the plant and machinery including utilities is estimated at Rs lacs as per the list attached with this Chapter. 5. ELECTRICAL INSTALLATION The total contracted load is estimated at 600 KVA. To take care of this load. A step down transformer of 750 KVA capacity will be provided. Transformer substation along with HT switch gear, L T panels, power distribution. Sub station boards, power cables, earthing, power capacitors, yard/ shop/ office lighting etc. will be provided. DG set having a matching capacity is to be installed as a stand by arrangement 6. OTHER INFRASTRUCTURE: The other infrastructure is basically to support the manufacturing operation. It is part of the plant and machinery but different from the main processing plant. It includes Weigh bridge, Laboratory Equipments, Work shop, Oil Storage Tanks, Boilers, Pipe lines etc. 7. CONTIINGENCIES In order to provide for unforeseen expenses and escalation, a provision of Rs lacs has been made in the budget. It covers Plant and machinery and civil work. The value is arrived at by 5% of the cost of the civil work and plant & machinery. 7

8 8 8.COST OF PROJECT: COST OF THE PROJECT SOURCES OF FINANCE A) LAND Owned A) Paid Up Capital B) BUILDING B) Subsidy C) PLANT/MACHINERY C) Unsecured Loans D) Furniture / Fixtures D) Term Loans E) Electrification 7.00 E) T/L from Us Building F) Other Fixed / Misc. Assets 3.50 F) T/L for Machinery G) Erection / Installation G) T/L / CC H) Pre Operative Expenses H) D/L CC I) Contingencies I) J) J) Total K) Total Amount of advance and purpose Rs. 300 lakh (MARGIN MONEY FOR WORKING CAPITAL: NA only Term loan) 8.1 GENERAL The total long term fund requirement of this scheme is estimated to be Rs. 400 lacs. This is proposed to be financed as under. Term Loan Share Capital Total PROMOTERS CONTRIBUTION The Promoters contribution excluding subsidy component in the project is envisaged at Rs. 100 lacs by way of Share Capital. The promoter s contribution works out to be 25 % of the Project Cost. 8.3 DEBT The proposed unit is being set up under Food Processing Sector in an industrially backward area of Neemuch District. Considering debt equity norms and 75% of eligible assets, the unit will require term loan facilities of Rs. 300 lacs from Bank. DEBT EQUITY RATIO The debt equity ratio of 1:3 banks. is permissible and acceptable to the financial Institutions /funding 8

9 9 PROFITABILITY 9.1. GENERAL The profitability has been estimated based on certain assumptions. These assumptions are made to arrive at the cost of production and sales realisation as accurately as possible. If at the time of going into production any of these assumptions change, the cost of production and sales realisation would be correspondingly modified. The assumptions are as follows: 9.2. SALES REALISATION Considering envisaged product mix, the average ex factory average selling price of refined oil estimated at Rs per MT. The ex work prices is before transportation charges, taxes etc. Based on this statement of production and sales have been prepared for the first six years of operation as indicated in statement of Estimate of Sales Realisation at Different Capacity Utilisation Rs60000 per MT soy oil price_syorefidr 9.3 RAW MATERIALS As percentage of the total cost of production, the raw material and consumable form the major components, it also has tremendous bearing on the product quality. Therefore, selection, inspection ordering, segregation and storage of those materials assume great importance. Statement of Requirement of Raw Material Consumption shows the details of the Raw material requirement and calculation of its cost POWER The consumption of power has been estimated at 4 units per MT of oil refined. For calculation of manufacturing cost electricity cost has been considered at the average rate of Rs. 5 per unit. The supply point would be the nearest pole of M.T. Electricity Board supply network.. DG set of matching capacity will also be installed Rs 6/ per unit MANPOWER The technical and administrative personnel will have to be recruited before the completion of the installation of the machineries so that apart from assisting speedy implementation of the unit. These people will be ready to take over the unit as soon as it is commissioned. The number of personnel to be employed is fixed by considering the following points: a) The number of supervisory level persons required b) The area and scope of operation and responsibility of each individual. c) A working week of 48 hours is proposed which is normal in India. d) The production would take place in three shift, each of eight hours duration. The working Manager will be in charge of production, quality control, safety, maintenance etc. The total Salary & Wages cost is estimated to be Rs. 50 / per MT of oil processed. 9

10 FACTORY OVERHEADS Rent and taxes, Laboratory Expenses, miscellaneous expenses etc. have been considered on best judgment basis. As adequate provision has been made in the profitability calculations under the head of other manufacturing of Rs. 10 per MT REPAIRS & MAINTENANCE The repairs and maintenance of the capital assets has been taken at Rs. 30/ per MT 9.8. INSURANCE: This has been adequately provided and has been considered on the best judgment basis. It as been taken 0.75 % and 0.5 % on value of plant and building respectively, which comes to Rs lacs for each year. 9.9 STORES AND CONSUMABLE AND PACKING MATERIAL: This covers the cost of stores / spares & packing material etc. This has been estimated at Rs. 10 per MT ADMINISTRATIVE OVERHEADS This has been adequately provided and estimated at Rs. 2.5 lacs per annum in the first year of operation SELLING OVERHEADS This has to provided to take care of sales promotion expenses like advertisement, traveling etc. selling overhead have been estimated at Rs. 25 / per MT INTEREST Interest on term loan and bank borrowing for working capital has been worked %. The repayment of term loan will be start from third quarter after starting the production. 14% 9.14 COAL AND FUEL: The requirement of coal has been considered at 75 KG per MT of oil processed. The purchase price of coal is estimated to be Rs. 500 per MT. at the prevailing price of Rs. 5 / per KG.[ (G17) coal, with Gross Calorific Value (GCV) between 2,200 Kilocalories per Kilogram (Kcal per Kg) and 2,500 Kcal per Kg, by 11.1% from existing Rs 360 per tonne to Rs 400 per tonne.] standard.com/.../coal india hikes low grade coal prices b 9.15 DEPRECIATION The depreciation costs have been worked out as per statement of Depreciation Calculation on Straight Line Method. Assets Reducing Fixed Installment Balance 1. Buildings and site Development 10% 3.34% 2. Plant & Machinery including electrical 25% 4.75% and other utilities 3. Other Assets 25% 4.75% The depreciation on straight line method is considered in profitability estimates 10

11 INCOME TAX While computing tax liabilities the benefits under section depreciation on written down value method has been considered as per Statement on Calculation of Income tax liabilities showing the details of calculation of the tax liabilities. FINANCIAL PROJECTIONS PROBABLE PROFITABILITY The Statement showing probable profitability of the Unit for the six years after the implementation of the project has been furnished statement in Projected Profitability based on various assumptions as given in Chapter. CASH FLOW STATEMENT The cash flow is an essential concept in financial budgeting. The cash flow estimates for the first five years after implementation of the project have been given in statement of Cash Flow Statement. This statement indicating the liquidity position of the company and its ability to pay interest regularly and return the principal sum. The statement prepared to analysis the cash flow is an important tool of the financial planning. It gives a clear picture of the cause of changes in the company s working capital position or cash position. It reflects the financial and investing policies followed by the company. BREAK EVEN ANALYSIS Break even point is an important factor that has to be established before a project could be undertaken for execution. The break even point for a unit is defined as the minimum production required at which the unit will show no profit and no loss. The break even point depends upon fixed and variable cost of the unit. The break even point has been worked out with the help of data given in statement of Break Even Point Calculation in which the fixed cost, variable cost, sales realisation are given. The break even point at maximum capacity utilisation comes to % of sales which appears to be satisfactory. This ratio comes to % at the installed capacity DEBT SERVICE COVERAGE RATIO The average Debt Service Coverage Ratio comes to 1.84 which appears to be satisfactory and the same is within permissible norms. The detailed calculations has been provided in the Statement of Debt Service Coverage Ratio PROJECTED BALANCE SHEET It gives the possibilities of seeing from it at a glance, the change in solvency. It is a summary table showing the changes in fixed and current assets, indicating increase or decrease in net worth and current liabilities. Statement of Projected Balance Sheet gives the projected balance sheet for six years of operating years. 11

12 DEBT EQUITY RATIO The working of Debt equity ratio has been given in the Statement of Debt Equity Ratio The debt component will get reduced over years due to repayment of loan. While Term Loan has been considered as Debt, the equity part includes Share capital and accumulated profits. The ratio in the beginning of the project is 1: 3. (Note : Project financials are not reproduced here. It is subject to variables such as Size and capacity of plant, plant and machinery and civil estimates, financial need of the entrepreneur, selling and buying rates of finished product and raw materials etc The financial viability report may be prepared on need based basis.) 12