Download - Bannu Sugar Mill
CHAPTER – 1
INTRODUCTION
As our country is basically an agricultural country, establishment of the development of
the country. This sector play key role in the economy of Pakistan. Other sector are also
equally important like industry etc, to achieve the target of economic development
according to the planning commission of second five years plan.
The sugar industry in Pakistan is the second largest agro based industry after textiles.
Pakistan is an important cane producing country and is ranked fifth is the world largest
producer of sugarcane terms of acreage and the 12th in sugar production.
The area under sugarcane cultivation is about 4% of the total cropped area in Pakistan.
Its share in value added of agriculture is 3.7% and GDP are 0.8% respectively. The
sugar sector constitute 4.2% of manufacturing. The sugar industry employs over 1.5
million people.
There are 88 sugar mills working in the country of which 46 are in Punjab, 34 in Sindh
and 8 in Khyber Pakhtunkhwa.
Without having industrial background are cannot achieve the desire growth. Industrial
development has itself a wide range and broad spectrum of development is its different
fields such as the economic uplift to sugar industry etc.
The objective for the establishment of these mills was to develop the area to provide
employment to the local people and to higher the living standard of the natives.
Background of Bannu Sugar Mill
The Bannu sugar mills Ltd. Is 20 Km away from the Bannu city on the Bannu D.I.
Khan road near Sarai Naurang on the west side on Khyber Pakhtunkhwa.
Bannu Sugar Mills was being sanction by Pakistan Industrial Development Corporation
(P.I.D.C.) in 1960. The construction work was started in 1962 and completed in the
beginning of 1965 at the capital cost of Rs.26.50 millions including the foreign
exchange component (Currency) of Rs.14.05 millions. Immediately, after its
completion, the first trial crushing was started.
The mill was running under PIDC management till 1984 and it remained for about 19
years under the control of PIDC.
At last on 2nd February 1984 the mills was purchased by honorable senator Sayyed Pir
Abbas Shah from the same period the mill was running under the control of the said
senator upto 1997. But due to its financial crises the mill as resold to Haji Kabir Khan
in 1997 who is its present owner. The existing management has well established the
mills and produced the highest production for the last 13 years.
Plant capacity
The current cane crushing capacity of the plant is 6000 metric tons. Normal crushing
season starts for 120 days.
CHAPTER – 2
OBJECTIVES OF THE PROJECT
1. The main and important objective of this project was to increase the sugar
production in the country.
2. To increase the employment opportunity in the concerned area (Bannu).
3. The third objective of this project was to improve the financial as well as the
economic condition of the farmer.
CHAPTER – 3
RESEARCH METHODOLOGY
Different ways and techniques are used to conduct this research. This research is based
on secondary data only. Secondary data is collected from balance sheet as well as from
different official fields of Bannu sugar mill. The relevant data is also collected from
books and teachers.
Research is a difficult job. It needs physical and mental strength. During research
process every individual have to face some problems, but it is necessary to work whole
heartedly. I tried my best to collect as much information as possible. I am thankful to
all the organization and other employees of the organization who help me in collection
of all the relevant data.
To analyze the data various statistical techniques such as percentage and benefit/cost
ratio and various computer programs are used.
I got the data personally from bannu sugar mill and my advisor help me throughout this
process.
CHAPTER – 4
COST AND BENEFIT ANALYSIS OF BANNU SUGAR MILL
The study of bannu sugar mills aim in reaching the fact that whether the mill is going in
profit and loss. The mill has incurred some fixed cost as well as variable cost, for
production purpose some of the raw material available locally and some is imported
from the other parts of the country. Maximum of the labor employed in the mill are
locals the marketing of the products is through the different commission agents in the
different cities of Pakistan.
We start with the discussion of the expenditure side of the mill first.
Expenditure
The expenditure include the cost on:
1. Building
2. Machinery and equipments
3. Raw material
4. Labor cost
5. Administrative cost
6. Transportation, selling and distribution expenses
7. Excise duty
8. Miscellaneous cost
1. Building
Land plays a very important role in determining the cost of production as a factor of
production. The mill occupied 850 kanal of land. A mill cannot be established of land
but requires a large area of land. This is the truth that the government provided land
freely for the establishment of the sugar mill, which reflect the interest free availability
of land effected the cost of production.
The different types of building for the mill were:
a. Factory
b. Building and roads
c. Residential building
d. Others
The cost of building and roads valued at 1st October, 2011 is original cost Rs. 40.8
million. Factory equipment valued as at 1st October, 2012 Rs. 13.9 million.
Depreciation cost for the building and roads has been calculated at the rate of 7% and
5% and for factory equipment of 15% and for other is 2%. By 1st October, 2012 the
valued cost of the factory building as are Rs. 40.8 million and depreciation for the year
is Rs. 1.2 million.
Similarly the valued cost of residential and others are 14.9 million and depreciation
cost for the year 2012 is 2.5 million.
2. Machinery and equipments
Machinery and plant effects the cost of production upto a great extent. The machinery
for bannu sugar mill has been imported from West Germany, Italy and England.
The total original cost of the machinery by 2011 and 2012 was Rs. 240.1 million and
244.5 million. The depreciation cost of the machinery has been calculation at the rate of
6.47% and 7.18%.
In values the depreciation cost for the year was Rs. 9.4 million. Beside the machinery
tools and equipment, some other requirements necessary for the mill were also
facilitated for example furniture, fixtures fitting, electrical fitting, official equipment
motor vehicles and cycles arms etc.
Furniture and fixture fitting cost 2.3 million. Depreciation for these items was
calculated at the rate of 10% and the total depreciation for the year in value was Rs.
0.06 million office equipment cost Rs. 2.5 million. Depreciation at the rate of 10% for
the year was Rs. 0.2 million.
3. Raw materials
The raw material consumed is provided locally. The important centers from which raw
materials is supplied to the Bannu sugar mill are:
1. Bannu
2. Dera Ismail Khan
The total cost upon raw material during 2011 was Rs. 281.2 and during 2012 was Rs.
253.5 million.
Table 1: Fixed assets (in million)
Particular As at 1.10.2011
Addition Adjustment As at 30.9.2012
Land 1.7 43810 0 1.7
Building & roads
40.8 0 0 40.8
Railway sidngs 0.7 0 0 0.7
Plant and machinery
240.1 4444611 0 244.55
Weight bridge 3.8 234565 0 4.1
Electric installation
2.6 0 0 2.6
Factory equipment
3.9 0 0 3.9
Furniture fixture
2.3 960 0 2.3
Office & other equipments
2.5 0 0 2.5
Water supply 1.7 0 0 1.7
Vehicles leased hold assets vehicles
4.7
0
0
14998500
0 4.7
15
Rupees 309.4 5771099 0 305.1
Source: BMS
LABOUR COST
Labour is second future of production and is very important in determining the cost of
production of labour is skilled, trained, educated. They will work efficiently and
honestly and thus cost of production will be minimized and vice versa.
Total labour employed in Bannu Sugar Mills are out of which 60 % are unskilled and
40 % are skilled 92 % of the total labour force is from Bannu and Lakki district.
Total cost from of salaries wages benefits was Rs 5488319 during 2002 and Rs. 4.7
million during 2003. Besides wages, salaries and benefits other expenditure are as
under see below:
Table 2: Cost of sales
Years 2012 2011
Raw Materil consumed 253.5 281.2
Packing material 2.62 3.3
Chemical consumed 2.9 2.6
Store and spares consumed 4.8 4.6
Power oil & lubricant consumed 8.4 3.6
Cane carriage 34.4 41.2
Salaries wages & benefits 15.1 16.2
Cane incidentals 3.1 3.8
Repair and maintenance 0.5 1.7
Insurance 0.82 0
Development cess 0.83 0.91
Deprecation 13.3 11.2
340.2 370.4
Work in process 1.5 2.3
Operning 0.4 1.5
Closing 2.5 0.81
Fininshed goods 13.6 5.9
Opening 142.6 13.6
Closing 129.1 7.7
208.6 363.5Source: BMS
ADMINISTRATIVE COST
Administrative cost is also a greater part of the cost of production.
The management has get greater importance in today world, as the division of labour
and specialization principle is applied in the production function. A large number of
labors are employed in mill. Their management is not a simple task.
Experienced people are employed in the factories and the mill to get advantage of their
services. The remuneration and other facilities to attract them. The administrative
expense of the Bannu sugar mill has given in following table.
Table -3:
Adminstative 2012 2011
Salaries wages & benefits 4.7 5.5
Electicity charges 0.5 0.8
Repairing & maintenance 0.2 0.9
Vehicle running & maintenance 1.6 1.7
Entertainment mess cahrges 0.85 0.71
Telephone postage & telegram 0.41 0.33
Rate & taxes 0.32 0.21
Insurance 0.32 0.26
Traveling & conveyance 0.11 0.13
Printing & stationary 0.15 0.15
Charity & donaiton 0.16 0.15
Audit fee 0.17 0.17
Legal & professional charges 0.34 0.11
Fee & subscription 0.075 0.071
Inauguration caremoney 0.001 0.006
Newspaper & periodical 0.0134 0.00882
Deffered revenue expenses 0 2.66
Fine & penalties 0 0.14
Depreciation 0.56 0.589
Sundries 0.29 0.24
10.71 14.9Source: BMS
Excise duty
Production of the different industries are subject to industries this duty is levied upon
the products when they are finally disposed off from the production center. The cost on
the products of the bannu sugar mills was Rs. 0.2 million for 2002 and Rs. 0.3 million
2003.
Transportation, selling and distribution expenses
Transportation, selling and distribution expenses, when the product are finally made
ready for use or consumption it again requires costs to be incurred they are transported
from the production units to the markets.
Again these commodities are not only consumed locally, but they are consumed at
other places also, for example the different items produced at Karachi not only
consumed by the people of Karachi, but they are used and demanded by people
throughout Pakistan not only they are marketed locally but they are exported abroad
also, this the selling of the final goods requires different cost to be borne, for example
payments to the commission agents cost on transpiration free samples publicity etc.
The commission agents are at all over the world. Besides the expenditures upon there
commission agents cost are also incurred on travelling, outward flight changes free
samples, Discount on cash sales publicity and miscellaneous. The detail of
transportation selling and distribution expenses has been given in table.
MISCELLANOUS EXPENDITURE
Miscellaneous expenditure includes the cost incurred on minor things, which has not
given separate heading. Miscellaneous expenditures under administrative expenses are
given in the below table
Miscellaneous expenditure
Selling & distribution 2012 (Ruppes) 2011 (Ruppes)
Salaries & wages 0.23 0.21
Loading & unloading 0.21 0.65
0.44 0.86
Sales
The income from the sales of sugar and molasses during 2002 and 2003 all as in the
below table.
Sales
Sugar 209.5 400.4
Molasses 4.4 26.6
213.8 427.1
Less sales tax 325.3 64.5
181.4 362.5
Source: BMS
Income from sugar during 2011 was Rs. 400.4 and during 2012 was Rs. 209.5, and
income from molasses during 2011 was Rs. 26.6 an during 2012 4.4 million.
OVER ALL PROFET AND LOSS
The important principle governing the mind of entrepreneur is earning of maximum
profit uphill none we have discussed in detail the various items of expenditures like
fixed cost operating costs variable costs, marketing cost etc. Similarly we have
explained the various products of the sugar mill like molasses and sugar etc. Which all
the source of income to the mill the given balance sheet table no shows the profit and
loss account of the sugar mill for the year 2011 and 2012
Net sales during 2011 and 2012 were Rs 362.5 and Rs 363.5 and Rs 208.6 during 2011
and 2013 respectively.
During 2011 the administrative costs were Rs 14.9 and during 2012 the administrative
costs were Rs 10.7 respectively.
Selling and distribution costs during the year 2011 and 2012 were Rs 0.86 and 0.43 in
2011 Rs 6.9 financial expenses in 2011 Rs 6.9 in 2012 Rs. 10.7.
ENOCOMIC IMPACTS OF THE BANNU SUGAR ON DISTRICT LAKKI AND
BANNU
Bannu Sugar Mill was established in 1964. This was the first industrial plant in Bannu
district the underlying objective of the mills was to develop for this distant and
backward area of N.W.F.P. The important economic effects of the mill upon district
Bannu and Lakki are as follow.
1. INDUSTRIAL
The first and most important effect of the mill upon the locality near that lime the
people of this area were completely unknown to industry by establishing this mill the
inhabitants of this area became families with expect of industry and they felt the
necessity of there types of mills in the locality. This •t was the effect that originally this
mill was established by “Pakistan industrial Development Corporation” but seen after it
completion it was given to private limited company.
2. ECONOMIC DEVELOPMENT OF THE AREA
The role of this mill is also very important in the economic development of the
districts. As a result when it develop these particular districts economically, it will help
in overall development of the country the capital invested in this mill being profit to the
invested in this mill being profit to the investors that is again used for investment
purpose and hence aggregate investment increases this was the result of the Bannu
Sugar Mill.
A fixed proportion of the excise duty from the mill is used for the building and roads in
the area.
3. EMPLOYMENT ARGUMENTS
This mill has employed majority of the people slugging to district Bannu and Lakki
Marwat. This mill net provides employment to the people who are directly employed in
the mill as labour, but also provide indirect employment to the people. The raw
material used some portion of that is produced locally the people who produce this item
material they have also got indirect employment in this mill.
4. STANDERED OF LIVING
The southern district of the N.W.F.P were relatively more backward as compared to the
other districts and still it is so the standard of living of the people was too much how
about 900 labour have got employment in this mill 95 % of there labour are from
Bannu and Lakki districts. They get purchasing power and use the articles of their
needs.
Besides these effects on districts this mill produce molasses, sugar etc. It has provided
their items to the local market. IT also brings balance between the demand and supply
of the above product in the country.
CHAPTER – 5
SUGGESTION AND CONCLUSION
According to my research (An economic analysis of Bannu Sugar Mill) there are few
reasons in the way of high productivity of this mill, which are discussed previously.
Their problems are really very alarming, which must be cured in time in proper way.
Following measures should be taken to solve these problems.
1. We can increase our production by gaining them incentives, it means more and
more loan facilitated the result would be increase in production.
2. To increase our productivity we must try to use the best quality of fertilizers,
which improve the quantity, and quality of race materials.
3. Complication system should be introduces so those main dealers of raw
materials it means due to their competition production will increase.
4. Research and development station should be established so that with the help of
their station we can increase our sugar production.
5. Leveling of the land is useful factor for the greater production.
6. In every zone mode demonstration from should be introduced in order too
familiar the farmers with modern scientific techniques.
7. The management of the mill should restart the scheme of pesticides loan to the
farmer in order to control the disease of sugar cane in time.
8. Train workers should be appointed in order is improve the work standard.
9. The management should provide proper transportation and housing facilities.
10. The foreman and supervisor should delegate their authority to press the workers
to perform their duties.
11. Modem and new instrument should be provided to the laboratory.
The government should also take the following steps in order to overcome these
problems.
1. The price of sugar is very low as compare to other crops and this is the basic
reason due to which the formers are not ready to grow the sugar cane. To
encourage the formers the government may fix a reasonable rate of sugar cane.
2. There is no proper transpiration means due to which the transpiration cost is
often high so the government should introduce a good transportation system by
making new roads in order to over come this problem.
3. The government must introduce the modern method of agriculture.
4. There should be proper arrangements to control the disease in time by providing
pesticides and insecticides with the cooperation of agriculture department.
PROBLEM OF THE BANNU SUGER MILL
I visited the Bannu Sugar mill personally and during my visit I found many problems
which are discuss as below.
The Bannu Sugar mill has facing the following problems.
1. The testing materials, which are used in the industries, are not easily and
cheaply available.
2. The research laboratory of the mill is not modern and not covers the need of the
mill.
3. The administrative authority of the mill cannot cooperate with the worker,
which super the productivity of the mill.
4. The foreman and supervisor are not delegating their authority properly to
process the worker to perform their duties regularly and properly.
5. The short supply of sugar cane because of the following reasons.
6. Cultivation of improper sugar can visit.
7. The fertilizer which are used is not of good quality.
8. Improper planning of land.
9. Non availability of drugs to material to the mill is low and they not cover the
need of the mill.
10. Non availability of drugs to control the various types of diseases.
11. The availability of raw material to the mill is low and they not cover the needs
of the mill.
12. There is no proper system of providing loan to the farmers.
13. The improper and heavy transportation cost.
14. High excise duty and export taxes on the imports of technology.
15. Low rates offered by Bannu Sugar mill as the compared to other mill.
16. No training facility is available for employees of the project.
17. The condition of the working place is bed, which effect the efficiency of labour.
18. Due to the lack of market expansion it also effect the productivity of the mill.
19. Another most important problem, which is facing by this Bannu sugar mill, is
unskilled labour force.
The above problems which we are discussed are the more serious problems which are
facing that Bannu Sugar Mill and there problems arc the obstacle in the way low
productivity and these problems needs due to attention by the concerned authorities.
CONCLUSION
Conclusion of the research on “An economic analysis of Bannu Sugar mill is that the
industry of and kind play a vital role in the development of a area and it has very
positive effect on the social and economic life of the area.
Thus it is concluded from our study that without the development of this sector
development of the area of locality is impossible the sugar mill is basically agro based
industry and it plays very important role in the economic development the Bannu Sugar
Mill also providing loan facilities in cash form or in kind from the kind form loan
facilities are the provision of fertilizers, seeds ansectiades and pesticides.
Low yield or production of cane and sugar is great challenge to fast growing population
of Pakistan.
The Bannu Sugar Mill employed round 2000 employers when they get job. There will
be increase in national income than automatically their consumption pattern will also
change they will use better cloth, food and necessities of life. It will improve the
economic development of the area.
The production capacity of Bannu sugar mill is 3 lack begs annually and each begs
contains 50 Kilogram.
It is hoped that the administration of the Bannu Sugar Mill will expand the plant in near
future.
BIBLIOGRAPHY
1. Ahmad Jamil (1974) Nature Of Pakistan Economy.An approach to economic
problems of Pakistan.(Kiffayat Academy Karachi,page 111)
2. Khan Ali Asghar (1972) Pakistan Agriculture Economics. National book
Foundation.
3. Government of Pakistan (1998) planning Commission, Finance division,
Islamabad.
4. J.P. Thi Jsee (Nov. 1987) Report on Sugar Crops in Pakistan.
5. M. Asghar Qureshi (1984) Sugar CANE & sugar Industry in Pakistan.
6. National Commission On Agriculture the July 16,1987. Documents Provided by
the CBA of Bannu Sugar Mill (2002-03).