detailed feasibility report3.3 pricing & marketing strategies 13 3.4 technological changes that...

DETAILED FEASIBILITY REPORT

Animal Feed Unit

in conformity with

The Royal Government of Bhutan’s Vision of Achieving

Economic Self-Reliance

June 2015

Ministry of Economic Affairs

Royal Government of Bhutan

DETAILED FEASIBILITY REPORT - Animal Feed Unit

2

CONTENT

Section Topic Page

Abbreviations and Definitions 4

1.0 Executive Summary 6

2.0 Justification of the project 8

2.1 The need for the project 8

2.2 Competition Analysis 11

3.0 Market Analysis 12

3.1 Structure of the industry 12

3.2 Demand vs. Supply 13

3.3 Pricing & Marketing Strategies 13

3.4 Technological changes that could impact costing 15

3.5 Competitiveness of the project 15

3.6 Special attributes desired by target customers 15

3.7Terms & conditions and product specifications desired by target customers

15

3.8 Packaging & Transportation 16

3.9 Assessment of Comparative Advantage 17

3.10 Potential for Marketing Collaboration 17

4.0 Resource 18

4.1 Sources of Inputs Including Water 18

4.2 Comparative Analysis of Critical Inputs 18

4.3 Sources of Raw Material 18

4.4 Availability of Manpower &Skills 22

4.5 Need for Skill Development 22

5.0 The Plant 23

5.1 Choice of Technology 23

5.2 Source 24

5.3 Rate of Consumption of Power, Fuel, Utilities &Consumables 26

5.4 Raw Material Consumption 26

5.5 Manpower Requirement and Organization Chart 27

5.6 Specification of Product and Byproduct 27

5.7 Extent of Technical Assistance NeededIncluding Training 28

6.0 Plant Location & Infrastructure 29

6.1 Raw Material Availability 29

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6.2 Availability of Electricity 29

6.3 Topography, Hydrology &Seismology Data Requirement 30

6.4 Availability of Land 31

6.5 Availability of Transportation Facilities 31

6.6 Availability of Ancillary Facilities 31

6.7 Availability of Housing, Schooling and Hospital Facilities 31

6.8 Communication Facilities 33

6.9 Presence of Approach Road 33

6.10 Factory layout plan 33

7.0 Environmental Aspects 34

8.0 Project Implementation Schedule 41

9.0 Cost Presentation 43

9.1 Capital Costs 44

9.2 Operating Costs 46

10.0 Financial Analysis 51

10.1 Profitability 51

10.2 Calculation of Interest on Term Loan 52

10.3 DSCR Calculation 52

10.4 Break Even Point 53

10.5 NPR & RI 54

10.6 Cash Flow Statement 54

Reference 56


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ABBREVIATIONS AND DEFINITIONS

BEP Break Even Point

BHU Basic Health Units

BTL Bhutan Telecom Limited

CP Crude Protein

CUSP Caltech-USGS Seismic Processing

DCP Digestible Crude Protein

DE Digestible Energy

DSCR Debt Service Coverage Ratio

EA Environment Assessment

EI Environmental Information

EMP Environment Management Plan

EPI Expanded Program on Immunization

ETP Effluent Treatment Plant

IMNCI Integrated Management of Neonatal and Childhood Illness

IRR Internal Rate of Return

ISPs Internet Service Providers

MT Metric Ton

NACP National HIV/AIDS & STIs Control Program

NEC National Environment Commission

NPV Net Present Value

NTCP National Tuberculosis Control Program

OHS Occupational Health & Safety

ORC Out Reach Clinics

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RH Reproductive Health

RPM Revolutions Per Minute

RWSS Rural Water Supply and Sanitation Program

SPM Suspended Particulate Matter

TICL Tashi Info Comm Limited

TSPM Total Suspended Particulate Matter

TSS Total Suspended Solids

VDCP Vector Borne Disease Control Program

VHW Village Health Workers Program

WFP World Food Program


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1.0 EXECUTIVE SUMMARYThis report is a detailed feasibility study on setting up an animal feed manufacturing unit in Bhutan conducted by

the Department of Industry under the Ministry of Economic Affairs, Royal Government of Bhutan.

It is proposed that the unit will have a capacity of processing 16,000 tons of animal feed per annum. With the

increased demand for livestock products primarily for domestic consumption, farmers realise the importance of

ensuring that their cattle stays healthy and productive during their life time. This has necessitated higher demand

for balanced feed.

The report presents in detail the justification of the project, market analysis of the service, resources required,

technology used in the plant, plant location, environmental aspects, implementation of the project, cost presenta-

tion and financial analysis.

(i) Justification of the Project: About 90 percent [Source: Investment Opportunity in Bhutan_2006] of

the rural households own livestock, which forms an integral part of the Bhutanese farming system.

Yet there is a drastic shortage of fodder during winter months and there is a demand for cattle feed

(ii) Market Analysis: Currently there is only one large animal feed manufacturing unit in Bhutan and it

is difficult for a single manufacturer to meet the total demand of cattle feed. So, there is a scope for

new entrants.

(iii) Resources required: Some of the raw materials like maize, wheat, limestone are readily available

within the country and the rest needs to be imported. Apart from this the unit requires electricity,

water and manpower which are also available in Bhutan.

(iv) Technology required: A mechanized plant using state of the art technology has been proposed for

this purpose. The plant has the capacity to process not only cattle feed but fish feed and poultry feed

as well.

(v) Plant Location: Considering the availability of raw materials and other infrastructure Phuentsholing

has been proposed as the ideal location for the plant.

(vi) Environmental Aspects: The production of animal feed may cause air and water pollution but this

may be reduced up to a great extent by by following the recommended measures.

(vii) Implementation of the Project: The implementation of the project will take more than 12 months

including pre-project activities.

(viii) Cost Presentation and Financial Analysis:

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Table 1: Project Summary

Plant Capacity: 50 Tons per day (16,000 Tons per annum)

No. of Shift: One ( 8 hours per shift ) per day

Working Days in Year: 320

D.S.C.R. : 1.97

B.E.P. : 19.18%

IRR : 22.97

NPV : Nu. 12.29 millions

Internal Rate of Return of the project is 22.97%, which is much higher than the bank rate of 13%.Hence the

project is financially viable. The NPV of the project is positive (Nu. 12.29 millions) at a discount factor of 13%

during the first 10 years of operation. This implies that the project is financially viable.


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2.0 JUSTIFICATION OF THE PROJECT2.1 The Need for the Project

General Scenario: About 90 percent[Source: Investment Opportunity in Bhutan_2006] of rural households in

Bhutan own livestock, which forms an integral part of the Bhutanese farming system, providing support to agri-

culture through draught power and the providing manure. Livestock also provides increasingly greater value by

generating cash incomes from butter, cheese and meat. Cattle, yak, buffalo, sheep & goats are the major livestock

owned and reared by farmers. Accordingly, the Royal Government is preparing a Livestock Breeding Policy in

every Dzongkhag. Projects have already been identified for Dairy Development.

In Bhutan, a major source of food for livestock is fodder. Main fodder resources in summer are:

Serial Number Fodder Resource for Large Ruminants

1 Forest Grazing

2 Grazing Crop Land/Fallow Land

3 Crop Residues

4 Improved Pasture

5 Native Pasture

6 Hay and Silage

7 Fodder Species grown on cropland

8 Fodder trees

Lack of animal feed during the winter months is an acute problem for almost all Bhutanese cattle farmers.

Cattle Population

The table below shows the cattle population in Bhutan as per figures released by Department of Livestock,

Ministry of Agriculture and Forests, Thimphu, Bhutan for 2013

Table 2: Cattle Population_2013

Dzongkhag Cattle

Bumthang 11,023

Chukha 21,633

Dagana 16,619

Gasa 804

Haa 97,02

Lhuentse 14,133

Mongar 25,316

Paro 13,052

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Pemagatshel 7,825

Punakha 11,042

Samdrup Jongkhar 18,139

Samtse 33,411

Sarpang 19,813

Thimpu 3,908

Trashigang 26,908

Trashiyangtse 10,422

Trongsa 11,093

Tsirang 10,912

Wangdue 25,534

Zhemgang 11,237

Total 302,526

Benefits of Commercially Manufactured Feed

The primary purpose of commercial feeds is to provide concentrated sources of necessary nutrients for livestock.

These nutrients include not only macro-nutrients of energy and protein but also important specific nutrients such

as amino acids, fatty acids, enzymes, vitamins, minerals and others.

With the increased demand for livestock products for domestic consumption as well as export, farmers realise

the importance of maintaining the health of their animals with proper feeding and management. The proportion

of crossbred animals increased over the years. This has necessitated higher demand for balanced feed. The feed

supply could not keep pace with the growth in various species of cattle.

To meet the growing demand of processed and complete feeds for different class of animals there is a good scope

for setting up feed processing plants of different capacities for production of various quality feeds in Bhutan.

Average Nutritive Values of common feed ingredients (Dry Matter basis)

Table 3: Average Nutritive Values of Common Feed Ingredients

No. Botanical NameCommon

Name

CP

(%)

DCP

(%)

TDN

(%)

DE

MCal

ME

MCal

A Cereal Grains

1 Avena Sativa Oats, Jai 10 7.5 80 3.5 2.8

2 Eleusine coracana Finger millet 10 7.0 70 3.1 2.5

3 Hordeum vulgare Barley, Jav 11 7.7 85 3.7 3.1

4 Oryza sativaRice, Cha-

wal8 6.0 85 3.7 3.2

5 Panicum millaceum Proso millet 6 4.0 70 3.1 2.5


10

6Pennisetum ty-

phoidesPearl millet 12 6.0 65 2.8 2.3

7 Sorghum bicolorsorghum,

Jowar12 6.6 85 3.7 3.2

8 Triticum aestivum Wheat 13 9.0 87 3.8 3.4

9 Zea maysMaize, Makka

10 7.0 85 3.7 3.3

B Leguminous Seeds

1 Cajanus cajan Pigeonpea 20 14.5 75 3.3 2.7

2 Cicer arietinumChickpea,

Gram20 14.0 85 3.7 3.2

3Cyamopsis

tetragonoloboCluster bean 30 22.5 79 3.5 2.8

4 Dolichos lablabHyacinth

bean17 10.2 70 3.1 2.5

5 Gossypium spp. Cotton seed 18 12.5 88 3.8 3.3

6 Glycine max. Soyabean 40 37.0 90 4.0 3.4

7 Lathyrus sativus Khesari 29 22.0 85 3.7 3.2

8 Lens esculentaLentil, Masoor

25 20.0 80 3.5 2.9

9Phaseolus aconiti-

foliusMoth bean 27 22.0 82 3.6 2.9

10 Paureus Green gram 26 20.0 82 3.6 2.9

11 P.radiatus Black gram 19 14.0 78 3.4 2.9

12 P.calcaratus Rice bean 21 15.0 73 3.2 2.7

13 Vigna sinensisCowpea,

Lobia26 20.0 75 3.3 2

C Oil Seeds

1 Arachis hypohaeaGroundnut

seed30 23.0 130 5.8 5.0


Name

CP

(%)

DCP

(%)

TDN

(%)

DE

MCal

ME

MCal

3 Lunium usitatissiumLinseed,

Flex19 15.5 118 5.2 4.3

4 Sesamum indicum Sesame, Til 24 19.5 125 5.5 5.0

DNon Conventional

Seeds

1 Acacia niloticaBabul seed/

pod14 10.2 65 3.0 2.6

2 Cannabina Seeds 33 --- --- --- ---

3 Cassia tora Chakunda 18 12.5 88 3.9 3.2

4 Crotalaria juncea Sunhemp 36 31.0 70 3.1 2.5

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E Protein Supple-ment’s (Vegetable

Source)1 Arachis hypogaea Expeller 47 32.0 85 3.7 3.3

Solvent ext. 49 43.2 70 3.1 2.6

2 Brassica spp. Expeller 34 28.5 80 3.5 2.9

Solvent ext. 38 30.5 68 3.0 2.4

3 Carthamus tinctorius Expeller 42 32.0 69 3.0 2.5

4 Cocos nucifera Coconut 23 18.0 85 3.7 3.2

5 Glycine max. Expeller 41 35.7 86 3.7 3.3

Solvent ext. 46 41.4 80 3.5 3.0


Name

CP

(%)

DCP

(%)

TDN

(%)

DE

MCal

ME

MCal

6 Gossypium spp. Expeller 28 20.0 80 3.5 2.9

7 Linum Usitatissium Expeller 30 25.5 80 3.5 3.0

8 Sesamum inidcum Expeller 40 35.0 85 3.7 3.3

9 Zea mays cake 20 15.0 82 3.6 3.1

10 Helianthus spp Sunflower 26 22.0 70 3.1 2.7

11 Guizotia abyssinica Niger cake 45 25.5 55 2.4 2.0

Animal Protein Source

1 Blood Meal 87 62.0 90 4.0 3.4

2 Meat Meal 65 52.5 85 4.2 3.6

3 Fish Meal 50 45.0 70 3.4 2.7

[Source: http://www.keralaagriculture.gov.in/htmle/bankableagriprojects/ah/feed.htm]

CP: Crude Protein

DCP: Digestible Crude Protein

TDN: Total Digestible Nutrients

DE: Digestible Energy

ME: Metabolizable Energy

2.2 Competition Analysis

One of the leading manufacturers in Bhutan is Karma Feeds, Phuentsholing which provides similar products.

They have different agents located in east, west, south and central zones of Bhutan. Karma Feeds has an installed

capacity of about 16,000 tons per annum to produce all types of feeds (cattle, poultry, fish and pig).

Shab Feed is another known supplier of animal feed in Bhutan.

Per the Department of Livestock, the cattle population in 2013 in Bhutan was 302,526]. On a pessimistic count,

if one looks at an average consumption of 2kg per animal per day as a dietary supplement during the winter

months only, the market is estimated to be as big as 54,454 tons. Therefore, there is definitely viable space for

new entrants in this market.


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3.0 MARKET ANALYSIS3.1 Structure of the Industry

The Key Stakeholders

For Bhutan, the animal feed marketing systems can be said to comprise of following stakeholders

Manufacturers/Importers: Persons or firms that manufacture or import cattle feed.

Wholesalers: Intermediaries in the distribution channel that buy large quantity of animal feed from the manu-

facturers and resells it to retailers.

Retailers: Persons or entities who buy the feed from the wholesalers and sell it to the end users.

End Users: End users are those who buy the feed from retailers. They are cattle farmers.

MANUFACTURERS/

IMPORTERS

WHOLESALERS

RETAILERS

END USERS

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3.2 Demand vs. Supply

Livestock are raised as a source of milk, meat, manure, draught power and therefore they are reared as assets.

Dairy products, especially butter and cheese, form an important component of the Bhutanese diet. About six cattle

breeds are used for milk production in Bhutan. In Bhutan, a major source of animal feed is forest grazing, fodder

trees, native pasture and crop residues. But to improve the quality and quantity of milk, one has to overcome the

scarcity of animal feed in winter months. According to Department of Livestock, Ministry of Agriculture and

Forests, Thimphu, Bhutan for 2013 total cattle population of Bhutan was 302,526. It has been estimated that in

a day a cattle can have 2 kg of feed. So, for the 302,526 animals, average demand for feed will be 605,052 kg

per day or about 220,825 tons per year. To meet the above demand of composite animal feed adequate amount

of supply is required. Out of 220,825 tons required annually or about 18,402 tons/month, Karma feeds supplies

about 1,300 tons/month.

3.3 Pricing & Marketing Strategies

This marketing effort will call for a strategy based on segmenting, targeting & positioning.

Segmenting: Segmenting is the act of dividing the market into distinct groups of buyers who might require

separate offerings in terms of product attributes, pricing, promotion and distribution. Broadly speaking the

animal feed market in Bhutan is primarily a rural phenomenon. It can be classified in to 1. Individuals 2.

Institutional buyers

For animal feed individual consumers would be lower income group generally the farmers. In 2012, 90% of the

farmers in Bhutan owned an average of two to three cattle.

Institutional buyers can be split into following groups:

1. Dairy Farms

2. Cattle Farms

Targeting: This is the act of choosing some of the segments identified from considerations of commercial

attractiveness. The company will try to focus much in winters to serve the farmers as there will be scarcity

of natural feed during this period.

But for institutional side, the company has to focus meeting up the demand all throughout the year. Accord-

ingly, the Sales team should have clearly spelt out responsibilities for team members to address the above

segment with a properly devised sales plan.

Positioning: This is the act of providing a viable competitive positioning of the firm and its offer in each

target market. It should ideally communicate uniqueness that adds value.

Some viable positioning statements could be:

Nutritional value of the feed which would help to make the cattle healthy and increase their productivity

A quality product


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Affordably priced

Readily available round the year – even in winter

The marketing mix should accordingly be defined encompassing aspects like the product attributes includ-

ing quality and packaging, pricing strategy, promotion and distribution and logistics all carefully designed

to ensure a high level of consumer satisfaction.

Product: By ensuring proper quality of raw material and strict adherence to manufacturing process guide-

lines, the company can ensure that their products are better than prevalent standards in the market. The units

can then even thinking of branding their products through an appropriate logo that communicates value.

Price: To gain an entry in the market a competitive pricing strategy would be used. As there is only one large

manufacturer of animal feed the price will be compared with theirs and therefore the price cannot be very

different. Similarly there should be attractive margins for the trade – in keeping with or ahead of the market.

Promotion: The promotional strategy for individual buyers could be as follows. For individual consumers,

the company would target dealers, wholesalers and consumers to convey to them the benefits of the products

through proper media channels like radio, television and outdoors. There should be attractive performance

recognition schemes and contests for dealers – particularly for the first year of operation.

The promotional strategy could also induce trial through free sampling of the product. For institutional

buyers, the sales team would ensure that the segment is well covered by initiating cold calls and staging

product presentations to spread awareness and generate interest. For customers who already are in a higher

state of readiness and floating enquiries, the Sales team would respond to them by sending in quotations

followed by a discussion and negotiation leading to closures.

The table below shows the promotional activities that must be undertaken

Table 4: Promotional Activity

Serial Number Promotional Activity

01 The product must be launched with coverage on the radio, TV and newspaper.

02 Occasional TV and radio advertisements to make farmers aware about the benefits of

the product.

03 Distribution of leaflets, pamphlets, stickers wherever possible

04 Promotional & discounted sales campaigns to farmers and retailers

05 Regular liaisoning with Diary & cattle farms

Place: Superior Distribution & Logistics would be the key to success in a geographical area where rural

roads as well as transportation facilities are in a state of evolution so that the product can be easily trans-

ported. The right place for the sales offices would be rural areas. Company can hire local people who can

operate from their home offices.

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3.4 Technological Changes that could Impact Costing

One of the biggest technological changes that can impact the way the unit would conduct business in the future

would be the progress of information technology in shaping e-commerce and its adaption in the Bhutanese econ-

omy.

It may be used to find out the customers on line. Similarly it may be possible to generate and respond to custom-

er’s enquiries on line and transact business with those who stay outside the country.

It has been found that most of the raw materials are imported. So, if these things are produced within the country

it would make the product more cost effective.

The basic impact of all this would help to reduce the cost and therefore the price of the product.

3.5 Competitiveness of the Project

The project advocates setting up a manufacturing plant of cattle feed.

This would compete against some of the manufacturers of cattle feed and would reduce the import rate of

cattle feed.

The unit aspires to deliver quality products which would be beneficial for the health of the cattle and improve

their longevity and productivity.. It is expected that there would be a demand pull at the customer end which can

be further strengthened through innovative promotional strategies. The demand pull is estimated to be significant

thereby ensuring lowering of costs through economies of scale.

It is expected that some of the competition would eventually get eliminated.

3.6 Special Attributes Desired By Target Customers

In general customers would prefer :

1. High Quality Graded Feed

2. They would prefer an affordable price: some may prefer to have a credit period

3. Some would look forward to promotional offer

4. Timely delivery in good condition

However the customer needs and wants may vary from one customer segment onto the other. For example, the

requirements of feed type of Holstein Friesian cattle farmers would be different from requirements of feed type

of Beefalo cattle farmers.

3.7 Terms & Conditions and Product Specifications desired by target customers

Types of Cattle Feed

a) Calf Starter: Specially formulated feed for calves to be started from the 42nd day till 8 months.


16

b) Cattle Concentrate: Feed formulated for milking cows to maintain health, ensure milk production and

reproductive health.

c) Milk Ration: Milk ration is a high energy feed to ensure higher milk production and maintenance of the

cattle and is recommended for milking cow producing more than 10 liters of milk per day.

Nutrient Content of Cattle Feeds

The table below shows the nutrient content of different types of Cattle Feeds:

Table 5: Nutrient Content

Types of Feeds ME(kcal/g) Moisture% CP% Ca% P%

Calf Starter 3,000 13% 19% 0.6% 0.5%

Cattle Concentrate 2,500 13% 18% 0.8% 0.7%

Milk Ration 2,890 13% 18% 0.85% 0.75%

3.8 Packaging & Transportation

Large loads of premixed feed stuffs are packed into bulk bags. If the ingre-

dients have to travel greater distances Q bags are used to assist in stability

and maximize the load. All types of Polythene Sacks are used, depending

on the size of the business you could have Automated Form Fill and Seal

Machines and the market is filled with printed Open Mouth Bottom Weld,

Block Bottom and Valve Sacks printed to the individual requirements of

the product and company. Paper Sacks are used where dry foods stuffs

and powders are used within industry and through to the end user in over

the counter sales.

Woven Polypropylene Sacks have a significant role within this sec-

tor predominantly because of their inherent strength.

It needs to satisfy the following objectives:

1. Protects the quality of the product.

2. Provide information to buyers, such as variety, weight, specification of the product, quality grade,

producer’s name, country, area of origin, etc.

Figure 1: Q Bag

Figure 2: Polythene Sack

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3.9 Assessment of Comparative Advantage

a) Abundance of Hydroelectric Power

Bhutan is an energy surplus state. 97% of its energy is obtained from hydro power. During the summer months

Bhutan exports quite a bit of electricity to India. Total exports to India were Nu. 10,633.639 million for 2013 – 14.

The cost of electricity is lower than many power deficient economies.

b) Availability of Water

Bhutan is endowed with rich perennial water resources fed with permanent glaciers, glacier lakes and recurrent

monsoons. The per capita mean flow availability is as high as 109,000 m3. This compares very favourably with a

developing economy like India which has per capita mean flow availability as low as 1,588 m3.

c) Ready availability of Limestone, Maize, Bran of Cereals & Other Grains (Rice & Wheat)

Limestone, maize, bran of cereals and other grains (rice, wheat) are some of the raw materials that are used for

manufacturing of cattle feed and these raw materials are readily available in Bhutan.

3. 10 Potential for Marketing Collaboration

There is a tremendous potential for marketing collaborations at the customer end of the supply chain. The unit can

think of appointing independent sales agents or exclusive tie ups with certain stores or outlets.


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4.0 RESOURCE

4.1 Sources of Inputs

Utilities required by the plant consist of electricity, water and furnace oil.

Electricity is required to run the production machinery and to provide lighting for the plant. So except for very

remote areas availability of electricity is not a handicap.

Water is required for general purposes and for supplying to the boiler, where steam is produced to be supplied

to the molasses tank. Bhutan is drained by many rivers flowing south between these ranges and for the most part

ultimately emptying into the Brahmaputra River in India. The river basins are oriented north-south and are, from

west to east, the Jadalkha, Torsa, Raidak, Sankosh, Mao Khola/Aie, Manas and eastern river basins, this last basin

being composed of the Bada and Dhansiri rivers. Two wastewater treatment projects are being implemented in

the cities of Thimphu and Phuntsoling. More are expected to come up shortly. Bhutan with a population of only

7 lakhs is a water surplus country.

Furnace oil: Furnace oil is used to fire the boilers. Steam from the boiler is pumped into the molasses tank as a

part of the production process. This oil is not manufactured in Bhutan and would have to be imported.

4.2 Comparative Analysis of Critical Inputs

Electricity: It may be possible to set up one’s own generator set and produce electricity. Theoretically it may

also be possible to set up one’s own solar panels and be self sufficient on electricity. But it would certainly be

more cost effective to source power from the grid. Keeping a small generator as a part of redundancy may be

considered to take care of the lighting load.

Water: The most cost effective manner of catering to the requirements of water would be to locate the plant near

a river. This is because deep tube wells may not be feasible owing to the mountainous terrain and from the point

of view of cost. It is recommended however a hard water treatment plant be set up as the water is likely to be hard

and unsuitable for boiler operation.

Furnace oil: Would have to be imported from the neighboring countries namely India or China. In case of

inability to source importing from other countries can be explored. There need to be a means for checking the

quality of furnace oil as the high price often encourages intermediaries to pilfer and contaminate the oil.

4.3 Sources of Raw Materials for Cattle Feed

Major raw materials required for the manufacture of cattle feed are oil cake, bran of cereals, molasses, maize,

salt, limestone (ground), other grains (wheat, barley, etc), meal (bone or flesh or blood). The feed consists of

three major groups of substances: carbohydrates, oils and proteins together with smaller amounts of minerals and

vitamins.

Oil Cake: Oil-cake is the residue obtained after the greater part of the oil has been extracted from an oilseed. Oil-

cakes are rich in protein and are valuable for cattle feed. Oil-cakes are great source of fiber and energy.

Bran of Cereals: Different bran of cereals such as rice bran, wheat bran is used in the manufacturing process of

cattle feed. Bran is used widely as the energy portion. Bran contains fiber and protein.

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Molasses: Molasses is a source of quick energy and a rich source of minerals. Molasses in cattle feed increasE

milk solid production, improving milk let-down, promoting animal health, improving digestion of fiber, helping

to reduce heat related stress, helping in growth and development of young stock.

Maize: Maize is the most common grain used for cattle feed. The energy value of maize is commonly used as

a standard with which other energy sources are compared. Thus, if the relative energy value of maize is taken

as 100, the energy value of other grain sources is generally lower. The efficient utilization of the gross energy is

mainly due to the low fiber content of the maize kernel and the high digestibility of its starch. The crude protein

content of maize is relatively low, ranging from 8–11%.

Meat & Bone Meal: It is typically about 48–52% protein, 33–35% ash, 8–12% fat, and 4–7% moisture. It is

primarily used in the formulation of cattle feed to improve the amino acid profile.

Limestone (ground): Calcium plays essential roles in cattle nutrition. It is required for proper development of

bones and teeth, regulation of heartbeat and blood clotting, muscle contraction, nerve impulses, enzyme activa-

tion, hormone secretion and milk production.

Other Grains (wheat, barley, etc): Wheat is low in fiber and high in energy and compares favorably

with other grains in energy content. The protein content of wheat from the world collection was shown

to vary from 6 to 22% but the wheat most commonly used contains 13–15% crude protein. The protein

content of oats (Avena sativa L) is relatively high (11–14%) and the amino acid distribution is more

favorable than that of maize. Recent studies with cattle of different age groups indicate that steers and

non-lactating cows digest completely the starch of rolled oats and that steers digested more of the starch

of the whole grain than did cows. Barley has a feeding value of 91% that of maize.

From the view of ease of sourcing and cost of sourcing, it is recommended that the following category of products

be sourced from within Bhutan. In case it is not possible to source from within the country then import option

may be exercised.

1. Bran of Cereals – locally available

2. Maize – locally available

3. Limestone (ground) –locally available

4. Other Grains (wheat, barley) –locally available

The following items would necessarily have to be imported preferably from a neighboring country like India or

China to keep costs low. In case the requirement could not be met, options to import from other countries can

also be explored.

1. Oil Cake – to be imported

2. Molasses – to be imported

3. Meal (Bone/Flesh/Blood) – to be imported


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Suppliers of Imported Raw Materials

1. Oil Cake

Shree Ganpati Enterprises

No. 2647, 1st Floor Street

Raghunandan, Naya Bazar

New Delhi-110006, India

Contact Number: +91-9811077100, 011-43536445

Marudhar Foods Private Limited

B-108, Asthivinayak Complex

2nd Floor, Outside Dariiyapur Darwaja

Ahmedabad-380004

Gujarat, India

Contact Number: +91 7965437111

2. Molasses

Canny Overseas Private Limited

B-170, Priyadarshini Vihar

New Delhi - 110092

Delhi, India

Contact Number: 08045359140

Atlas

No.55, K.J.Building

34/A Khadak Street, Near Snow White Hotel

Masjid Bunder (W)

Mumbai: 400009

Maharastra, India


21


Shiva Transport

No.5, Manorath Complex, Behind Mother School, Gotri

Near Jalaram Nagar Bus Stand,

Vadodara-390021, Gujarat

India


3. Bone Meal

Global Enterprise

No. 10, Green Park Society, Opposite M.S. Public School, Near Pirkamal Masjid, Danilimada

Ahmedabad: 380028, Gujarat

India


Sri Sai Sagar Traders

No. 206, Ellora, Sant Muktabai Marg, Vile Parle East

Mumbai: 400057, Maharastra

India


Giriraj Chemicals

No. 201-A, IInd Floor, Sumedha Market Complex, RDC Raj Nagar

Ghaziabad: 201002, Uttar Pradesh

India



22

4.4 Availability of Manpower and Skills

The Labour Force Survey Report 2013 finds that the agriculture sector employs over 55 percent of total employed

persons, while 17 percent are employed in public administration & defense, education, electricity, gas & water

supply sectors, and the remaining 28% in real estate, construction, hotels & restaurants, and mining & quarrying

sectors.

The survey finds that a total of 335,870 individuals were employed and 9,916 were found to be unemployed out

of a total projected population of 745,939 in 2013, making unemployment rate at the national level by 2.9%.

Chart 1: Unemployment Rate in Bhutan (2009-13)

(Source: Statistical Yearbook of Bhutan 2014)

The Labour Force Survey Report 2012 indicates that by 2020 there will be 267,000 students seeking jobs. A

variety of skills are available from the various training institutions to support any service enterprise. However,

higher technical courses for engineering & technology, international law and finance are required to meet the

requirements of the imminent future.

4.5 Need for Skill Development

As the workforce is mostly unskilled, there is a need to develop their skills according to the need of the industry.

Workshops or on-site short term trainings may be organized by the suppliers of machineries on how to control the

temperature, operate machineries etc. The training should be a combination of theory sessions, on the job coach-

ing sessions and on the job supervision. For people joining with no relevant experience training in their respective

functional area would be mandatory. There should be a periodic skill assessment done by the management on the

basis of observation of on the job performance. Based on the findings, a training calendar needs to be drawn up.

.

23


5.0 THE PLANT

5.1 Choice of Technology for Cattle Feed Manufacturing Process

The major operations involved in the production of animal feed are: raw materials preparation, primary

crushing, assorting and measuring, molasses mixing, fine crushing, pellet making, and packaging. Raw

and auxiliary materials are first charged into silos and tanks where they are made ready for further pro-

cessing. They are then processed by primary crusher. Crushed materials are further separated by means

of a sifter, and then stored in the assorting tanks according to the kind of raw materials. In assorting and

measuring operation, small amounts of additives are charged into the bins containing different assort-

ments of raw materials. The raw materials stored in the assorting tanks are used in accordance with the

desired proportion.

The raw materials are then mixed by means of a mixer. In this process, fatty ingredients are added to the

materials in order to raise the nutritional value of the feed. The feed obtained from the mixer is blended

with molasses. After the feed is blended with molasses, it is further crushed by means of the second

crusher. Assorted animal feed that is crushed into fine particles is further formed into pellets. The pellets,

which are cylindrical type and size, 6mm in diameter and 2cm in length, are then dried. The product is

next stored in the product tanks, weighed and packaged in jute bags.

Manufacturing Process Diagram of Animal Feed

Figure 3: Manufacturing Process


24

Machinery & Equipment Required By Cattle Feed Producing Plant

The table below shows the machinery required by Cattle Feed Producing Plant. While the project is about man-

ufacturing animal feed, the manufacturing system proposed would have the capacity to process fish feed and

poultry feed as well.

Table 6: Machinery Requirement

S. No. Description Quantity

1 Tank & Silos for raw and auxiliary materials storage 5

2 Metal Screen & Shaker 1

3 Hammer Mill 2

4 Blender 1

5 Weighing Scale (5 tons) 4

6 Bagging Machine 1

7 Dust Collector 2

8 Product Tank 2

9 Pellet Producing Machine 1

10 Tanks for oil cakes and molasses 2

11 Boiler 1

5.2 Source

Grain Storage Silos

Capacity: 10 tons

Dimension: 3.6m*3.6m*3.19m

Weight: 1.7 ton

Volume: 14 cubic meters

Material: Steel

Brand Name: TSE

Model Number: TCZK03601

Supplier’s Details: Shelly Engineering Company Limited, China

Hammer Mill

Capacity (ton/hour): 2-220

Power: 11-220 KW

Brand Name: Hongii

25


Model Number: PC Series, PCH Series

Supplier’s Details: Henan Hongii Mine Machinery Company Limited, China

Fully Automatic Bagging Machine

Voltage: 220V

Power (W): 3 KW

Dimension (L*W*H): 2.5*1.5*1.8m

Model Number: Namdhari FABM

Supplier’s Details: Namdhari Industrial Works, D-26 Focal Point,

Khanna-141401,Punjab, India

Pellet Machine

Brand Name: GOYUM

Model Number: 142

Voltage:220V

Supplier’s Details: Goyum Screw Press, India

Dust Collector

Brand Name: Casen/Hexie

Model Number: BLMB Series

Minimum Particle Size: 3-15g/cubic meters

Dimension (L*W*H): 1350*960*1320

Supplier’s Details: Xinxiang Casen Industrial Commerce Corporation, China

Weighing Machine

Brand Name: Hualitai

Model Number: hlt-208

Battery: 4V or 6V

Power Supply: AC/DC

Voltage: 220 V

Features: Rechargeable Battery, overload and low voltage indication, automatic standby mode


26

Boiler

Brand Name: YANO

Model Number: LSS

Dimension (L*W*H): 1480*1480*3100mm

Weight: 1500kg

Capacity: 1000kg/hr

Supplier’s Details: Shangai YANO Boiler,China

Product Tank

Brand Name: Huabo

Model Number: HBS

Capacity: 2.9 tons to 27 tons

Supplier’s Details: Huabo Technology Company Limited, China

5.3 Rate of Consumption of power, fuel, utilities & consumables

A plant with annual capacity of 16,000 tones is envisaged considering the market study and minimum economies

of scale. The plant will operate a single shift of 8 hours a day, and 320 days a year.

The table below shows the annual requirement of utilities:

Table 7: Annual Requirement of Utilities

Sl. No. Item Annual Requirement1 Electricity 175 kw

2 Water 10,000 cubic meter

3 Fuel Oil 50,000 liter

5.4 Raw Material Consumption

The table below shows the annual requirement of raw materials:

Table 8: Annual Requirement of Raw Materials

Sl. No. Description Quantity (Tons)

1 Oil Cake 3,450

2 Bran of Cereals 3,705

3 Molasses 750

4 Maize 6,000

27


5 Salt 21

6 Limestone (ground) 24

7 Other grains (wheat, barley, etc) 450

8 Meal (bone/flesh/blood) 600

5.5 Manpower Requirement & Organization Chart

The table below shows the manpower requirement:

Table 9: Manpower Requirement

Serial Number Job Title Required No.

1 Plant Manager 1

2 Secretary 1

3 Accountant 1

4 Personnel Officer 1

5 Salesperson/purchaser 1

6 Cashier 1

7 Clerks 2

8 Store Keeper 2

9 Production Supervisor 1

10 Maintenance Engineer 1

11 Technician Operators 6

12 Laborers 6

13 Cleaner 2

14 Driver 2

15 Guard 4

5.6 Specification of Product & Byproduct

Types of Cattle Feed

a) Calf Starter: Specially formulated feed for

calves to be started from the 42nd day till 8

months.

Figure 4: Calf Starter


28

b) Cattle Concentrate: Feed formulated for milking cows to

maintain health, ensure milk production and reproductive hea

lth.

c) Milk Ration: Milk ration is a high energy feed which ensures

higher milk production and maintenance of the cattle and is

recommended for milking cow producing more than 10 liters

of milk per day.

Nutrient Content of Cattle Feeds

Table 10: Nutrient Content

Types of Feeds ME(kcal/g) Moisture% CP% Ca% P%

Calf Starter 3,000 13% 19% 0.6% 0.5%

Cattle Concentrate 2,500 13% 18% 0.8% 0.7%

Milk Ration 2,890 13% 18% 0.85% 0.75%

5.7 Extent of Technical Assistance Needed Including Training

As the workforce is not so much skilled there is a need to develop their skills according to the need of the industry.

Workshops or on-site short term trainings may be organized by the suppliers of machineries on how to control

the temperature, operate machineries etc. The training should be a combination of theory sessions, on the job

coaching sessions and after that on the job supervision. The duration of training will be of 2 weeks, 1 week for

the theory and on the job training and 1 week for the supervision at a pre-fixed rate. The duration of training may

be extended later on if required.

Figure 5: Cattle Concentrate

29


6.0 PLANT LOCATION & INFRASTRUCTUREThe location of a plant is determined on the basis of proximity to raw materials, availability of infrastructure and

distance to market outlets. It is proposed that this plant be located in Phuentsholing so that access to raw materials

is easy. Plus, Phuentsholing is a major commercial hub making the logistics of sale and distribution easy. The

other possible location is Samtse which provides easy access to the Indian border and has a rich source of home-

grown raw materials and a demand for the end product thanks to its large cattle population. Maize & wheat are the

major raw materials for the production of animal feed. Samtse, which is 81.4 km from Phuentsholing produced

13,647.15 metric tons and 167

metric tons of maize and wheat re-

spectively in 2005 [Source: Invest-

ment Opportunity Study-2006,

Bhutan]. In addition, Samtse’s

cattle population of 33,411 is the

highest in the region [Source: De-

partment of Livestock, Ministry of

Agriculture and Forests, Thimphu,

Bhutan].

Phuentsholing, under Chhukha

Dzongkhag, is the main gateway

to Bhutan and as a result, it has

become the biggest commercial

and industrial hub of the country.

6.1 Raw Material Availability

Maize & wheat are the major raw materials for the production of animal feed. Limestone, another raw material

required for production of animal feed is readily available in Chhukha Dzongkhag. Import of other raw materials

from India would be easy as Phuentsholing has close proximity to the Indian towns of Siliguri and Jaigaon.

6.2 Availability of Electricity

As of 2013, Bhutan has 5,021.27 km & 104.41 km of over-

head and underground high tension lines respectively [Source:

Statistical Yearbook of Bhutan, 2014]. This dzongkhag has

Chhukha Hydropower Plant which is the major source of elec-

tricity. Construction of three new mega hydroelectricity proj-

ects viz. 180 MW Bunakha Hydroelectric project, 540 MW

Ammochhu Hydroelectric project, and 570 MW Wangchu Hy-

droelectric project have been proposed.

Figure 6: Map of Bhutan

Figure 7: Chhukha Hydropower Plant


30

6.3 Topography, Hydrology & Seismology Data Requirement

Topography, Hydrology & Seismology of the location must be checked before setting up the manufacturing plant.

Topography: Topography is a detailed map of the surface features of the land. It represents a particular area in

detail, including everything natural and manmade - hills, valleys, roads or lakes.

An objective of topography is to determine the position of any feature or more generally any point in terms of

both a horizontal coordinate system such as latitude, longitude, and altitude. Identifying (naming) features and

recognizing typical landform patterns are also part of the field. A topographic study may be made for detailed

information about terrain (vertical & horizontal dimension of land surface) and surface features is essential for

the planning and construction of any major civil engineering, public works, or reclamation projects.

Hydrology: Hydrology is the scientific study of the movement, distribution and quality of water on Earth includ-

ing the hydrologic science, water resources and environmental watershed sustainability. Hydrology is subdivided

into surface water hydrology, groundwater hydrology (hydrogeology), and marine hydrology.

Application of Hydrology

Determining the water balance of a region.

Determining the agricultural water balance.

Mitigating and predicting flood, landslide and drought risk.

Real-time flood forecasting and flood warning.

Assessing the impacts of natural and anthropogenic environmental change on water resources.

Assessing contaminant transport risk and establishing environmental policy guidelines.

Seismology: Seismology is the scientific study of earthquakes and the propagation of elastic waves through the

Earth or through other planet-like bodies. The field also includes studies of earthquake environmental effects,

such as tsunamis as well as diverse seismic sources such as volcanic, tectonic, oceanic, atmospheric, and artificial

processes (such as explosions).Seismic waves are elastic waves that propagate in solid or fluid materials.

They can be divided into body waves that travel through the interior of the materials; surface waves that travel

along surfaces or interfaces between materials; and normal modes, a form of standing wave.

Seismological instruments can generate large amounts of data. Systems for processing such data include:

• CUSP (Caltech-USGS Seismic Processing)

• RadExPro seismic software

• SeisCom

31


6.4 Availability of Land

There are two industrial estates in Phuentsholing. The Phuentsholing Industrial Estate has an area of 61 acres,

including one acre near Doti khola, and houses more than 15 industrial sheds. The Pasakha Industrial Estate is

located 16 km east of Phuentsholing in an area of 267 acres [Source: Eleventh Five Year Plan].

6.5 Availability of Transportation Facilities

Apart from national highways, the Dzongkhag have good network of roads and bridges:

Table11: Types of Road

S. No. Road Type Km

1 National Highway 272.00

2 Dzongkhag Road 58.6

3 Urban Road 28.6

4 Farm Road 334.6

5Access Road (Forest Road & Power

Tiller Road)231.5

(Source: Statistical Yearbook of Bhutan 2014)

6.6 Availability of Ancillary Facilities

An industrial unit which manufactures parts or intermediaries, or provides services is ancillary unit. A large

chunk of its production or services is used by another industrial taking. An ancillary unit is typically small -

whose investment in fixed assets in plant and machinery, does not exceed Nu. 7.5 million. So a farmer’s cooper-

ative growing maize could be an ancillary unit for animal feed.

6.7 Availability of Housing, Schooling and Hospital Facilities

Housing

The amount of land suitable and available for urban development is extremely constrained on the Bhutanese side

of the border in Phuentsholing.

The administration is seeking to extend

the municipal area beyond the present ju-

risdiction of the City Corporation. Parcels

of land available in surrounding vicini-

ty have been analyzed for incorporation

into new development area –known as the

Phuentsholing Urban Area (PUA).

Housing in Phuentsholing has received a Figure 8: Housing of Phuentsholing


32

major boost by the delineation of the PUA. It is important to recognize that private developments are coming up

in these surrounding areas and the city is expanding. The PUA delineated for urban use is 1968.0 ha. (19.68 sq.

kms.).

The City Corporation area comprises of multi-storeyed (newly built G+4, mainly private buildings), low rise and

detached housing units. The multi-storeyed

structures (60%-90% ground coverage)

have increased in number.

Schooling

There are four renowned schools in Phuent-

sholing. These are:

1. Tenzin School

2. Phuentsholing Higher Secondary

School

3. Phuentsholing Lower Secondary

School

4. Reldri Higher Secondary School

The table given below shows the number and type of schools in Chhukha Dzongkhag as of 2013:

S. No. Type of School Number of School

1 Extended Classroom 8

2 Primary School 26

3 Lower Secondary School 3

4 Middle Secondary School 6

5 Higher Secondary School 2

(Source: Statistical Yearbook of Bhutan, 2014)

Hospital Facilities

There are healthcare facilities in Chhukha dzongkhag

in general and Phuentsholing in particular.

While a general hospital already exists, residents of

Phuentsholing also have easy access to India where

private medical institutes offer a range of health

care solutions.

In all, Chhukha dzongkhag has three hospitals and

Table 12: Number & Type of Schools

Figure 9: District Hospital at Phuentsholing

33


other healthcare facilities.

Table 13: Number & Type of Hospitals

S. No. Type of Hospital Number of Hospitals

1 Hospital 3

2 Basic Health Units 19

3 Out Reach Clinics with shed 24

4 Out Reach Clinics without shed 15

Total 61

(Source: Statistical Yearbook of Bhutan, 2014)

6.8 Communication Facilities

Bhutan Telecom Limited, Tashi InfoComm Limited, Samden Tech and Drukcom are the four Internet Service

Providers (ISPs) in the country. Bhutan Telecom Limited is the sole provider of fixed-line telecommunication

services while cellular mobile services are provided by Bhutan Telecom Limited and Tashi InfoComm Limited.

With the exception of Bhutan Telecom, all other ISPs are private sector ventures.

Road connections and quality of roads are reasonably good.

With a series of new road constructions and widening along

the Thimphu-Phuentsholing highway, travel time to the

capital is expected to be shortened to less than five hours.

6.9 Presence of Approach Road

Presence of approach road from and to the plant must be

taken into consideration before zeroing down on the plot.

6.10 Factory layout plan

Figure 10: Road Connectivity from

Phuentsholing to other Dzongkhags


34

7.0 ENVIRONMENTAL ASPECTSThe following environmental aspects need to be considered.

Air Quality

Animal feeding operations produce several types

of air emissions, including gaseous and particulate

substances, and concentrated animal feeding oper-

ations (CAFOs) produce even more emissions due

to their size. The primary cause of gaseous emis-

sions is the decomposition of animal manure, while

particulate substances are caused by the movement

of animals.

The most typical pollutants found in air surround-

ing CAFOs are ammonia, hydrogen sulfide, meth-

ane, and particulate matter, all of which have varying human health risks. Most manure produced by CAFOs is

applied to land eventually and this land application can result in air emissions.

Odors

One of the most common complaints associated with CAFOs are the odors produced. The odors that CAFOs emit

are a complex mixture of ammonia, hydrogen sulfide, and carbon dioxide, as well as volatile and semi-volatile

organic compounds (Heederik et al., 2007). These odors are worse than smells formerly associated with smaller

livestock farms. The anaerobic reaction that occurs when manure is stored in pits or lagoons for long amounts of

time is the primary cause of the smells. Odors from waste are carried away from farm areas on dust and other air

particles.

Insect Vectors

CAFOs and their waste can be breeding grounds for insect vectors. Houseflies, stable flies, and mosquitoes are

the most common insects associated with CAFOs. Houseflies breed in manure, while stable and other flies breed

in decaying organic material, such as livestock bedding. Mosquitoes breed in standing water, and water on the

edges of manure lagoons can cause mosquito infestations to rise. Flies can change from eggs to adults in only 10

days, which means that substances in which flies breed need to be cleaned up regularly.

Antibiotics

Antibiotics are commonly administered in animal feed in the United States. Antibiotics are included at low levels

in animal feed to reduce the chance for infection and to eliminate the need for animals to expand energy fighting

off bacteria, with the assumption that saved energy will be translated into growth. The main purposes of using

non-therapeutic doses of antimicrobials in animal feed is so that animals will grow faster, produce more meat,

and avoid illnesses. Supporters of antibiotic use say that it allows animals to digest their food more efficiently,

get the most benefit from it, and grow into strong and healthy animals. The trend of using antibiotics in feed has

increased with the greater numbers of animals held in confinement. The more animals that are kept in close quar-

ters, the more likely it is that infection or bacteria can spread among the animals. Seventy percent of all antibiotics

35


and related drugs used in the U.S. each year are given to beef cattle, hogs, and chickens as feed additives. Nearly

half of the antibiotics used are nearly identical to ones given to humans (Kaufman, 2000). There is strong evi-

dence that the use of antibiotics in animal feed is contributing to an increase in antibiotic-resistant microbes and

causing antibiotics to be less effective for humans (Kaufman, 2000). Resistant strains of pathogenic bacteria in

animals, which can be transferred to humans thought the handling or eating of meat, have increased recently. This

is a serious threat to human health because fewer options exist to help people overcome disease when infected

with antibiotic-resistant pathogens. The antibiotics often are not fully metabolized by animals, and can be present

in their manure. If manure pollutes a water supply, antibiotics can also leech into groundwater or surface water.

Other Effects – Property Values

Most landowners fear that when CAFOs move into their community their property values will drop significant-

ly. There is evidence that CAFOs do affect property values. The reasons for this are many: the fear of loss of

amenities, the risk of air or water pollution, and the increased possibility of nuisances related to odors or insects.

CAFOs are typically viewed as a negative externality that can’t be solved or cured. There may be stigma that is

attached to living by a CAFO. The most certain fact regarding CAFOs and property values are that the closer a

property is to a CAFO, the more likely it will be that the value of the property will drop. The exact impact of CA-

FOs fluctuates depending on location and local specifics. Studies have found differing results of rates of property

value decrease. One study shows that property value declines can range from a decrease of 6.6% within a 3-mile

radius of a CAFO to an 88% decrease within 1/10 of a mile from a CAFO (Dakota Rural Action, 2006). Another

study found that property value decreases are negligible beyond 2 miles away from a CAFO (Purdue Extension,

2008). A third study found that negative effects are largest for properties that are downwind and closest to live-

stock (Herriges, Secchi, & Babcock, 2005). The size and type of the feeding operation can affect property value

as well. Decreases in property values can also cause property tax rates to drop, which can place stress on local

government budgets.

Environmental aspects are of high importance during setting up any plant. These aspects play a vital role in the

ecological balance.This chapter covers the environment management aspects for the project. The degree of detail

is based on the Reference Document, Environment Assessment Act, 2000 and the Regulation for the Environ-

mental Clearance of Projects, 2002. Reference has also been made to the Procedures for Project Review in the

NEC guidelines, rules and regulations for establishment and operation of Industrial and commercial ventures

in Bhutan, 1995. In accordance to these, for this project an Environment Assessment (EA) document including

Environment Management Plan (EMP) and a monitoring plan shall be required. Since the impacts of the project

are known, an Initial Environmental Evaluation is not required.

This report includes characterization of environmental consequences due to various project activities,

both during the construction phase as well as the operational phase and measures to mitigate them. The

elaboration of these features shall meet the requirements of EA document. The environmental elements

considered for this purpose are shown in the following table.


36

Table 14: Elements considered for environmental impacts

Element Element Element1 Land Use 2 Soil 3 Ecology

4 Subsidence and Landslide 5Noise Quality and Ground Vibration

6 Vehicular Movement

7 Water Resources 8 Hydrology 9 Water Quality 10 Air Quality 11 Solid Waste 12 Human Settlement

13S o c i o - e c o n o m i c Conditions

14 Aesthetics 15Site of Cultural Heritage and Scenic Importance

Mitigation measures based on the systems & practices foreseen in plant design, for addressing each

environmental component has been described.

It is to be understood that this report meets the requirements of initial Environmental Information (EI),

as per the prevalent norms in Bhutan.

Environmental Impacts

The environmental impacts that are likely to arise out of the proposed project, during their construction

and operation phases, are summarized in the sub-sections that follow.

During Construction Phase

Table15: Environmental impacts during construction phase

S. No

Attributes Problem Impacts due to Plant

1 Land UseDegradation in land values due to construction waste & construction silt runoff.

2 SoilLoss of soil due to clearing, excavation, soil removal, road construction, etc.

3 Ecology Encroachment in ecology; loss of flora and fauna.

4 Water Resources Depletion of ground water resources, if used.

5 Water Quality A sewage treatment plant will be installed

6 Air Quality Fugitive emission and dust impair air quality.

7 Noise QualityIncrease in noise levels.

8 Vehicular MovementTraffic congestion/accidents and adverse effects on air

quality & noise levels.

9 Solid wasteIncreased excavated soil, debris, garbage, etc., at the

construction site.

10 Aesthetics Aesthetics marred by project structures.

11Site of Cultural, Historical and Sce-

nic Importance

Impact on the site of Cultural, Historical and Scenic

Importance, if available

37


During Operation Phase

Table16: Environmental impacts during operation phase

S. No


1 Land Use Area is industrial/agricultural land.

2 Soil Positive impact due to horticulture and plantation.

3 EcologyNo major impact due to vegetation and plantation in

the surrounding area.

4 Subsidence and Landslide Problems No impact.

5 Water ResourcesDepletion of water resources due to water

withdrawal.

6 Water QualityDischarge of sewage and storm water run-off may

cause deterioration of water quality.

7 Air QualityIncrease in TSPM and RPM levels and impairment of

ambient air quality.

8 Noise Quality Increase in noise level in the surrounding area.

9 Vehicular MovementTraffic congestion/accidents in conjunction with loss

in air quality.

10 Solid WasteInappropriate disposal of garbage/ sewage could be

hazardous.

11 Aesthetics Loss in environ-aesthetics to some extent.

12Site of Cultural, Historical and

Scenic ImportanceImpact on the site of Cultural, Historical and Scenic

Importance, if available

13 Human SettlementNo impact as no relocation/resettlement required if

industrial area.

14 Socio-Economic conditionIncreased economic activities in the region resulting

in new jobs and better quality of life of people.


38

Environmental Management

The mitigation measures including prevention and control for each environmental component have

been delineated in the sub-sections that follow.

During Construction Phase

Table 17: Mitigation measures during construction phase

S. No


1 Land Use Plantation and green belt development shall commence.

2 Ecology Plantation and vegetation shall commence

3 Water Resources Controlled use of water resources

4 Water QualityDebris shall be isolated from waste water and disposed off sepa-

rately. All waste shall be treated in septic tanks and ETP.

5 Air QualityRegular water sprinkling at the construction site. Construction ma-

terials shall be totally covered during transportation.

6 Noise Quality

Use of silencers, noise isolators etc. in machines. Use of equip-

ment, which keep noise levels within limits prescribed by regula-

tory agencies.

7 Solid WasteSewage treatment plant will be installed in the colony as well as

at the plant.

8 Vehicular Movement Proper metallic access road will be constructed upto the site.

9 AestheticsConstruction activities commensurate with landscaping in the area.

During Operation Phase

Table18: Mitigation measures during operation phase

S. No Attributes Problem Impacts due to Plant

1 Land Use Development of green belt in and around the plant.

2 Soil Tree plantation all around the plant.

3 Ecology Development of green belt in and around the plant.

39


4 Water Resources

There shall be a perpetual demand on water resources. The water

requirement in the plant will have no adverse effect on the water

source and the water required at the plant can be adequately met

from the current allocation to the plant from the community.

5 HydrologyThe plant shall take into consideration the local geological, geomor-

phological and hydro-geological settings.

6 Water Quality

There will be substantive generation of waste water at the plant

premises besides the use at the staff quarters for sanitation purpos-

es. This waste water will be collected in septic tanks.

7Air Quality

Provision of suitable bag filters for dust control. Provision of leak

proof and properly covered transport equipment to prevent dust

from being airborne. Adequate dust suppression and extraction

facilities at material handling and transfer points. Provision of green

belt around the plant. Provision of a well-equipped workshop for

regular maintenance of vehicles in order to control emissions

8Noise Quality and

Ground Vibration

Noise abatement at source by choosing machinery and equipment

suitably. Proper mounting of equipment and ventilation systems.

Provision of noise insulating enclosures or padding, wherever

possible. Provision of personal protective equipment for workers.

Dense belt of trees to act as acoustic barriers.

9 Vehicular Movement

Provision of wide tar/concrete road. Provision of a well-equipped

workshop for regular maintenance of vehicles in order to control

emissions.

10 Solid Waste

No solid waste will be generated besides from the staff quarters.

Proper disposal of the waste based on terrain, landscaping, drainage

& aeration. Septic tanks will be constructed at the staff quarters.

11 Aesthetics Landscaping and use of vegetation.

12 Human Settlement Not applicable.

13Socio-Economic

Conditions

Maintaining good communication with local communities before,

during and after construction. Training of local personnel for specif-

ic (skilled) positions. Welfare measures for local populace.


40

Solutions Adopted in the Technical Concept

The guidelines for various industrial units, stipulate “limiting values” for water quality, air quality and

noise quality.

For the project, adequate pollution control equipment has to be considered. The general requirement and

measures to be considered for arresting the pollutants is tabulated in the following table.

Table 19: Estimated release of pollutants

S.No. General Requirement Measure Considered1 Water Quality

a

For plantTreated Effluent discharges should have a pH

in the range of 6-9.

Sewage treatment plant of adequate capac-

ity to control the pH and TSS. 2 Air Quality

a

For Plant The air quality should conform to the limiting

values of SPM.

Bag Filters & modern burner with precise

fuel dosing system should be considered

for the air quality.3 Noise Quality

a

For Plant A maximum increase in background levels of

3 dB (A) or the following levels:

The plant should be designed not to gen-

erate more than 60 dB (A) maximum. All

high noise emitting machinery such as the

roller mills will be enclosed in a housing

(lined with a 2 inch glass wool) so as to

minimize sound emissions outside the

plant. The walls of the structure housing

the machinery will be made of mud bricks

to absorb the sound

Residential 55/45 dB (A) Industrial 75/70 dB (A) Commercial 65/55 dB (A)

Occupational Health and Safety

All workers in the plant, crusher and mine locations will be provided with and shall be mandated to use protective

gear and equipment to ensure their personal safety. Safety boots, gloves, eye goggles, helmets, nose masks

(wherever necessary), ear plugs, reflective jackets and other protective equipment will be provided by the

company. Trainings on safety for all new recruits as well as refresher courses on safety for the regular staff will

be conducted regularly from time to time in order to ensure that safety procedures are followed at all times.

A safety inspector shall be appointed (plant manager) and an OHS committee comprising of employees shall be

formed to monitor and ensure compliance to safety norms and procedures.

41


8.0 PROJECT IMPLEMENTATION & SCHEDULEThe key factors that would facilitate successful and timely project implementation are:

• Proper choice of technology and machinery suppliers.

• Adequate diligence in formulating the technical concept and system design.

• Proper choice of contractors for civil construction and erection of equipment.

• Formulation of an effective project team led by an experienced Project Manager.

• Establishment of an efficient system for project planning & monitoring including reporting procedures

for progress review & co-ordination.

Implementation Strategy

Typically any project has four core dimensions which are as follows –

• Engineering: this directly impacts the smooth operations of the plant over its entire life.

• Procurement: is critical on account of the impact that it has on investment and performance benchmarks

and also in ensuring the choice of appropriate technology.

• Construction: is critical in terms of its impact on completion quality and the duration of the project phase.

• Project Management: other than its obvious impact on project timeliness it also contributes to risk

minimization for the promoter.

Implementation Schedule

It is suggested that the project implementation will not take more than 12 months out of which six months will be

allotted for pre project activities. And the rest should be done within the next six months from the date the project

is approved by the Ministry of Economic Affairs.

Pre-project Activities Include:

1. Hydrological investigations for ensuring the availability of the requisite quantum of water.

2. Receipt of requisite clearances from competent authorities with respect to :

• Environmental clearance

• Sanction and supply of power

• Sanction and supply of water

• Tying up sources of funds for the project to achieve financial closure

• Procurement of land

• Topographic & Seismologic survey for plant area

• Floating tender inquiries and evaluation of order


42

3. Site Preparation & Levelling of land.

The table given below shows the project schedule:

Table20: Project Schedule

Sl.No. ActivityMonths

1 2 3 4 5 6 7 8 9 10 11 12

1 Site Preparation & Levelling of Land

2Construction of factory shed & Civil Infrastructure

3 Hiring of People (Phase 1)

4 Installation of Machineries

5 Hiring of people (Phase 2)

6 Training & Commissioning of People

7 Trial Production Runs

Table 21: Colour Coding

Colour Coding

Site Preparation

Construction & Civil Infrastructure

Manpower Hiring (Phase 1)

Installation of Machineries

Manpower Hiring (Phase 2)

Training & Commissioning

Trial Production Runs

43


9.0 COST PRESENTATIONProject cost/ Total Investment

Summary:

Table 22: Project Summary

Plant Capacity: 50 tons per day, 16000 tons per annum

No. of Shift: One ( 8 hours per shift ) per day

Working Days in Year: 320

D.S.C.R. : 1.97

B.E.P. : 19.18%

IRR : 22.97

NPV : Nu. 12.29 millions

Cost of Project:

The total cost of the project is estimated at Nu. 33.24 millions as per the particulars given in the following table

Table 23: Project Cost

S. No. ParticularsValue

(Nu. In Millions)

1 Land 1,000 sq. meters (On lease)

2 Building & Civil Construction 7.8

3 Plant and Machinery 9.05

4 Misc. Fixed Assets 5

5 Preliminary Expenses 0.1

6 Pre Operative Expenses 4.85

7 Margin Money for Working Capital 4.25

8 Contingencies 10% of Fixed Assets 2.19

Total 33.24

Means of Finance

The table given below shows the means of finance:

Table 24: Means of Finance

S. No. Particulars Value (Nu. In Millions)

1 Promoters’ Equity 13.30

2 Term loan from FIs 19.94

Total 33.24


44

The term loan has been arrived based on the breakup of individual investment item and bank’s financing pattern

as given in table.

9.1 Capital Costs

Land, Building & Civil Works

The total land area of the plant including the open space for future expansion is 1,000 square meters. The built-up

area required by the plant is estimated at 600 square meters. The cost for Building & Civil Works for a covered

area of 600 square meter is estimated at Nu. 7.8 millions taking construction cost per square meter to be Nu.

13,000.

Machinery

The table given below shows the cost of machinery:

Table 26: Cost of Machinery

S. No. Description QuantityTotal Cost

(Nu. In Millions)

1Tank & Silos for raw and auxiliary ma-

terials storage5 1.00

2 Metal Screen & Shaker 1 0.50

3 Hammer Mill 2 1.00

4 Blender 1 0.25

5 Weighing Scale (5 tons) 4 .08

6 Bagging Machine 1 0.7

7 Dust Collector 2 0.3

8 Product Tank 2 0.2

9 Pellet Producing Machine 1 3

10 Tanks for oil cakes and molasses 2 0.2

11 Boiler 1 1.00

12Installation & commissioning charges

(10%)1 0.82

Total Cost 9.05

45


Other Fixed Assets

The table given below shows the cost of other fixed assets:

Table 27: Cost of other fixed assets

S. No. Particulars Qty. (Nos)Rate (Nu. In Mil-

lions)

Amount

(Nu. In Millions)

1 Office Equipment - 0.1

2 Furniture and Fixture 0.5

3 Electrical Accessories 0.5

4Electrical cabling, ducting &

earthing1.00

5 Computer System 1.00

6Water Treatment Plant – 5,000

liters per hour0.25

7 Fire Fighting 10 0.005 0.05

8 Utility Vehicles 02 0.8 1.6

Total 5.00

Pre Operating Expenses

Preliminary Expenses

The table given shows the preliminary expenses:

Table 28: Preliminary Expenses

S. No. Particulars Estimated Amount ( Nu. in millions)

1 Company Formation Expenses, Legal & Liaisoning 0.1

Total 0.1

Preoperative Expenses

Expenses incurred prior to commencement of commercial production are covered under this head that total Nu.

4.85 millions

Pre-operative expenses include establishment cost, rent, taxes, traveling expenses, interest during construction

insurance during construction and other miscellaneous expenses. Based on the financing pattern envisaged,

interest during construction has been estimated considering the phasing of in the cash requirements and the

norms prevalent for various sources of funds. It has been assumed that the funds from various sources shall be

available, as required.

Based on the project implementation schedule, the expected completion dates of various activities and the


46

estimated phasing of cash requirements, interest during construction has been computed. Other expenses, under

this head have been estimated on a block basis, based on information available for similar projects.

Table 29: Preoperative Expenses

S. No. ParticularsEstimation

(Nu. In millions)

Amount

(Nu. In millions)

1 Interest up to Production @ 13% on term loan for 1 year on term

loan2.59

2 Insurance during Construction Period0.25% of fixed

assets0.05

3Electricity Charges during Construction Peri-

od(estimated)0.1

4 Marketing Launch Expenses 0.3

5 Technology Know-how and Consultancy Fees 0.8

6 Training Expenses 0.5

7 Traveling Expenses 0.5

Total 4.85

9.2 Operating Cost

Cost of Raw Materials

The table given below shows the costing of raw materials:

Table 30: Cost of Raw Materials

S. No. Description Quantity (Tones) Unit PriceTotal Cost (Nu. in

millions)

1 Oil Cake 3,450 15823.5 54.59

2 Bran of Cereals 3,705 16008.3 59.31

3 Molasses 750 9114 6.84

4 Maize 6,000 13700.4 82.20

5 Salt 21 12583.2 0.26

6 Limestone (ground) 24 2604 0.06

7Other grains (wheat, barley,

etc)450 173686 78.16

8 Meal (bone/flesh/blood) 600 22870.1 13.72

Grand

Total295.15

Note: The cost for packing material (sack) is excluded from the annual cost of raw materials. It is included in distribution expenses

47


Land Lease Charge

Land Lease Rate: The land having an area of 1,000 square meters (10,758 square feet) has been considered on

lease @ Nu.4.00 per sq. ft. per annum for first three years and @ Nu. 6.00 per sq feet for the fourth year and

subsequently @ 3% increase every year.

The table given below shows the rate of land lease:

Table 31: Land Lease Charges

S. No. YearLease Rate

Per Sq. Ft Per Year (Nu.)

Lease Charges

Per Annum

(Nu. In Millions)

1 1st Year 4.00 0.043

2 2nd Year 4.00 0.043

3 3rd Year 4.00 0.043

4 4th Year 6.00 0.065

5 5th Year 6.20 0.067

6 6th Year 6.40 0.069

7 7th Year 6.60 0.071

8 8th Year 6.80 0.073

9 9th Year 7.00 0.075

10 10th Year 7.21 0.078

Cost of Utilities

The table below shows the costing of utilities:

Table 32: Cost of Utilities

S. No. Item Annual Requirement Unit CostCost

(Nu. in Millions)

1 Electricity 450,000 kilo watt hour1.81

Nu./kWh0.82

2 Water 10,000 cubic meter3.49 Nu./cubic

meter0.04

3 Furnace Oil 50,000 liters 1.49

Grand

Total2.35


48

Manpower Costing

The table below shows the costing of manpower:

Table 33: Manpower Costing

S.No. Job Title Required No. Annual Salary (Nu. In Millions)

1 Plant Manager 1 0.25

2 Secretary 1 0.20

3 Accountant 1 0.14

4 Personnel Officer 1 0.25

5 Salesperson/purchaser 1 0.14

6 Cashier 1 0.08

7 Clerks 2 0.18

8 Store Keeper 2 0.12

9 Production Supervisor 1 0.15

10 Maintenance Engineer 1 0.2

11 Technician Operators 6 0.72

12 Laborers 6 0.43

13 Cleaner 2 0.11

14 Driver 2 0.18

15 Guard 4 0.24

Total 3.39

Sales Realization

It is assumed that 60% capacity utilization will be achieved during first year of operation, 70% in the second

year and 80% from the third year onwards. The average selling price is calculated on the basis of the retail prices

prevalent in Bhutan at the time of making this report. This has worked out to 450 USD per ton = Nu. 28.35 per kg.

The price realizable by the company after allowing for transportation and dealer margin (totally 15%) is 24.10.

Accordingly the revenues are:

Table 34: Sales Realisation

Nu. in Millions

Total sales realization at 100% 385.56

First year 60% 231.34

Second Year 70 % 269.89

Third Year 80% 308.45

Term Loan Requirement from Financial Institutions

49


The table below shows the term loan requirement:

Table 35: Term Loan Requirement

S. No. ParticularsAmount (Nu.

In millions)

Promoters

Contribution

(Nu. In

millions)

Bank Loan

(Nu. In mil-

lions)

1 Land 1,000 sq meters 0.00

2 Building & Civil Construction 7.8

3 Plant & Machinery 9.05

4 Other Fixed assets 5

5 Preliminary Expenses 0.1

6 Pre-operative Expenses 4.85

7Margin Money for Working

Capital4.25

8 Contingencies 2.19

Total 34.24 13.30 19.94

Working Capital Requirement

The table below shows the working capital requirement:

Table 36: Working Capital Requirement

S. No.

Particulars Period Margin Amount (Nu. In Mil-

lions)

Promoters Contribution

(Nu. In Millions)

Bank Loan (Nu. In

Millions)

1 Raw Material 15 days 25% 7.38 1.84 5.53

2 Receivables 15 days 25% 9.64 2.41 7.23

Total 17.02 4.25 12.76

Estimated Cost of Production & Profitability

The profitability projections have been worked out for 10 years; at 60% capacity utilization during first year of

operation, 70% in second year and 80% from third year onwards and following assumptions and basis as relevant

and applicable to Bhutan have been considered while preparing the profitability.

• Repairs & maintenance have been taken as @4% p.a. on fixed assets.

• Bank interest rate has been calculated @13% p.a. on term loan & working capital loan.

• Insurance charges @0.25% on all assets in first year, then @5% decrease every year.

• Power & water charges are increased @5% every year.

• Administrative expenses have been increased @5% every year.

• Debt equity ratio has been taken to be 60:40 for term loan.


50

• Margin money on bank loan has been considered @ 25% on working capital

• Bank loan has been considered for repayment in 8 years with one year moratorium

• Preliminary exp. will be written off @10% every year in next 10 years.

• Pre operative exp. will be written off from II year @10% every year in next 10 years.

• Straight Line Depreciation has been charged taking useful life for buildings to be 30 years with a residual

value of 10%; 7 years on other fixed assets and 6 years on machinery with no residual value.

• Insurance, lease rent & interest has been taken as fixed cost for calculating B.E.P.

• Income tax has been charged @30% every year as per Bhutan’s tax rates.

51


10.0 FINANCIAL ANALYSIS10.1 ProfitabilityThe table below shows the profitability:

Table 37: Profitability

Heads Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

RM 177.08 206.60 236.11 236.11 236.11 236.11 236.11 236.11 236.11 236.11

Utilities 2.35 2.47 2.59 2.72 2.86 3.00 3.15 3.31 3.47 3.65

Salary 3.39 3.56 3.74 3.92 4.12 4.33 4.54 4.77 5.01 5.26

Fringe benefits

0.51 0.53 0.56 0.59 0.62 0.65 0.68 0.72 0.75 0.79

Insurance 0.05 0.05 0.05 0.05 0.04 0.04 0.04 0.04 0.04 0.03

Repair & maintenance

0.87 0.92 0.96 1.01 1.06 1.12 1.17 1.23 1.29 1.36

Land Lease Rate

0.04 0.04 0.04 0.06 0.06 0.06 0.07 0.07 0.07 0.07

Other Admin expenses

0.14 0.14 0.15 0.16 0.16 0.17 0.18 0.19 0.20 0.21

Production Cost

184.44 214.31 244.20 244.62 245.04 245.48 245.94 246.43 246.94 247.48

Sales 231.34 269.89 308.45 308.45 308.45 308.45 308.45 308.45 308.45 308.45

S&D Cost 34.70 40.48 46.27 46.27 46.27 46.27 46.27 46.27 46.27 46.27

Cost of Sales 219.14 254.79 290.47 290.89 291.31 291.75 292.21 292.70 293.21 293.74

PBIDT 12.20 15.10 17.98 17.56 17.14 16.70 16.24 15.75 15.24 14.70

Interest on TL

2.59 2.43 2.11 1.78 1.46 1.13 0.81 0.49 0.16 0

Interest on Loan for

WC1.66 1.66 1.66 1.66 1.66 1.66 1.66 1.66 1.66 1.66

Total Interest 4.25 4.09 3.76 3.44 3.12 2.79 2.47 2.14 1.82 1.66

Deprecia-

tion2.36 2.36 2.36 2.36 2.36 2.36 1.53 0.23 0.23 0.23

PAD 5.59 8.65 11.85 11.76 11.66 11.55 12.24 13.37 13.18 12.81

Write off POE

0 0.48 0.48 0.48 0.48 0.48 0.48 0.48 0.48 0.48

Write off PE 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10


52

PBT 5.49 8.06 11.27 11.17 11.08 10.96 11.66 12.79 12.60 12.23

Tax @ 30% 1.65 2.42 3.38 3.35 3.32 3.29 3.50 3.84 3.78 3.67

PAT 3.84 5.64 7.89 7.82 7.76 7.67 8.16 8.95 8.82 8.56

Accumulated Profit

3.84 9.49 17.37 25.20 32.95 40.63 48.79 57.74 66.56 75.12

NPR 1.66 2.09 2.56 2.54 2.51 2.49 2.65 2.90 2.86 2.77

ROI 2.40 3.75 5.24 5.20 5.16 5.10 5.42 5.95 5.86 5.69

10.2 Calculation of Interest on Term Loan The table below table shows the interest on term loan:

Table 38: Interest on Term Loan (Figures in Nu. millions)

Year Opening Balance Repayment Closing Balance Interest

1 19.94 0.00 19.94 2.59

2 19.94 2.49 17.45 2.43

3 17.45 2.49 14.96 2.11

4 14.96 2.49 12.46 1.78

5 12.46 2.49 9.97 1.46

6 9.97 2.49 7.48 1.13

7 7.48 2.49 4.99 0.81

8 4.99 2.49 2.49 0.49

9 2.49 2.49 0.00 0.16

10.3 DSCR Calculation

The table below shows the computation of Net Operating Income:

Table 39: Net Operating Income

Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10

PAT 3.84 5.64 7.89 7.82 7.76 7.67 8.16 8.95 8.82 8.56

Dep. 2.36 2.36 2.36 2.36 2.36 2.36 1.53 0.23 0.23 0.23

Int 4.25 4.09 3.76 3.44 3.12 2.79 2.47 2.14 1.82 1.66

NOI 10.45 12.09 14.01 13.62 13.23 12.83 12.16 11.33 10.88 10.45

53


The table below shows the computation of Debt Services:

Table 40: Debt Services


Repayment 0.00 2.49 2.49 2.49 2.49 2.49 2.49 2.49 2.49

Lease 0.04 0.04 0.04 0.06 0.06 0.06 0.07 0.07 0.07 0.07

Int 4.25 4.09 3.76 3.44 3.12 2.79 2.47 2.14 1.82 1.66

DS 4.29 6.62 6.29 5.99 5.67 5.35 5.02 4.70 17.76 13.23

The table below shows the computation of DSCR (Net Operating Income/Debt Services):

Table 41: DSCR


DSCR 2.44 1.83 2.23 2.27 2.33 2.40 2.42 2.41 0.61 0.79

10.4 Break Even Point

The table below shows the calculation of Break Even Point:

Table 42: Break Even Point

Calculation of B.E.P 1st Year 2nd Year 3rd Year

Sales 231.34 269.89 308.45

Variable Cost 219.04 254.70 290.38

Fixed Cost 4.35 4.18 3.85

Break Even Point

(B.E.P)21.21% 19.27% 17.07%

Average B.E.P 19.18%

Note on unit Costing & Pricing

Table 39: Unit Costing and Pricing

Heads Average %

Raw Material Costs 76.55

Sales & Distribution Costs 15.00

Overheads 6.08

Margin 2.37

Total 100.00


54

10.5 NPR and RI

The table below shows the Net Profit Ratio & Return on Investment:

Table 43: NPR and RI

Ratio 1st Year2nd

Year

3rd

Year

4th

Year

5th

Year

6th

Year

7th

Year

8th

Year

9th

Year

10th

YearNet Profit

Ratio1.66 2.09 2.56 2.54 2.51 2.49 2.65 2.90 2.86 2.77

Return on

Investment2.40 3.75 5.24 5.20 5.16 5.10 5.42 5.95 5.86 5.69

10.6 Cash Flow Statement (Nu. In Millions)

The table below shows the cash flow statement:

Table 44: Cash Flow

S.

No.Years 0 1 2 3 4 5 6 7 8 9 10

1 Inflows

1.1Net Profit

After Tax0.00 3.84 5.64 7.89 7.82 7.76 7.67 8.16 8.95 8.82 8.56

1.2 Depreciation 0 2.36 2.36 2.36 2.36 2.36 2.36 1.53 0.23 0.23 0.23

1.3

Preliminary

Expenses

Write Off

0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

1.4

Pre Operative

Expenses

Write off

0 0 0.95 0.95 0.95 0.95 0.95 0.95 0.95 0.95 0.95

1.5Total Cash

Inflows0 6.30 9.05 11.30 11.23 11.16 11.08 10.74 10.23 10.10 9.84

2 Outflows

2.1Investment in

Fixed Assets21.85

2.2

Investment

in Working

Capital

1.63

2.3

Interest on

Term Loan

and WC

4.25 4.09 3.76 3.44 3.12 2.79 2.47 2.14 1.82 1.66

55


2.4Total Out-

flows23.48 4.25 4.09 3.76 3.44 3.12 2.79 2.47 2.14 1.82 1.66

3 Net Cashflow -23.48 2.05 4.96 7.53 7.79 8.05 8.29 8.27 8.09 8.28 8.18

4Net Present

Value-23.48 1.81 3.89 5.22 4.78 4.37 3.98 3.51 3.04 2.76 2.41

Internal Rate of Return (IRR) 22.97%

Net Present Value (NPV) at 13% Nu.12.29 Millions

Project Viability: The Internal Rate of Return of the project is 22.97%, which is significantly higher than the

bank return rate of 13%.Hence, the project is financially viable. The NPV of the project is positive (Nu. 12.29

millions) at a discount factor of 13% during the first 10 years of operation considered. This implies that the project

generates sufficient funds to cover all its cost, including loan repayments and interest payments during the period.


56

REFERENCE

Bhutan Trade Statistics 2014, Department of Revenue and Customs, Ministry of Finance, Royal Government of

Bhutan (2014)

Dzongkhag-wise Inventory of Resources, Ministry of Economic Affairs, Royal Government of Bhutan (2005)

Environmental Assessment Act, 2000, National Environment Commission, Royal Government of Bhutan

(2000)

Investment Opportunity Study, Department of Industry, Ministry of Trade & Industry, Royal Government of

Bhutan – Volume I (2006)

Investment Opportunity Study, Department of Industry, Ministry of Trade & Industry, Royal Government of

Bhutan – Volume II (2006)

Labour Force Survey Report 2012, Department of Employment, Ministry of Labour and Human Resources,

Royal Government of Bhutan (2012)

Labour Force Survey Report 2013, Department of Employment, Ministry of Labour and Human Resources,

Royal Government of Bhutan (2013)

Livestock Statistics 2013, Department of Livestock, Ministry of Agriculture and Forests, Royal Government of

Bhutan (2013)

Regulation for the Environmental Clearance of Projects, 2002, National Environment Commission, Royal

Government of Bhutan (2002)

Statistical Yearbook of Bhutan, National Statistics Bureau, Royal Government of Bhutan (2014)

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