report on oil industry

Report on GHEE & OIL INDUSTRY

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In the Name of Allah,

The Most Beneficent,

The Most Merciful.

Read:

In the Name of your Lord

Who Created, Created Man from a Clot.

Read:

And your Lord is the most Bounteous,

Who taught by the pen,

The man that which he did not Know

Al-

Quran

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“ALLAH DOES NOT LOOK AT

YOUR FORMS AND POSSESSIONS

BUT HE LOOKS AT YOUR

HEART AND DEEDS”

(MUSLIM)

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DEDICATED TO ALLAH

The Almighty

The Omniscient

The Omnipotent

The Omnipresent

The creator of creative mind.

PREFACE

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Report on GHEE & OIL INDUSTRYDepartment Of COMMERCE has always tried to make its students be familiar

with the different techniques in the field of Project Appraisal in order that they

can understand & present the concepts of Project Appraisal in the light of

present-day progress & development.

The importance of principal work almost exists in every professional field.

Practical knowledge makes man a technical person who enables to do every work

promptly regarding his profession. The very distinctive feature of the degree of

MASTER OF COMMERCE is that it stresses more on the practical aspects of

study. Our teachers have extremely realized this importance & they use all the

tact’s to expose us to the real field circumstances.

Project Appraisal has become a common phenomenon now-a-days. We have

also endeavored to consolidate in this assignment all the important features of

the topic. Every effort has been made to incorporate all the available means of

information to make this assignment exhaustive & comprehensive. We tried our

best to accomplish our work with honesty and diligence.

Mr. Ali Gulzar

Mr. Fahad Mehmood

Mr. Zubair Khan

Acknowledgement

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Special thanks to Almighty Allah, creator of the creative minds.

We pay abundant thanks to our encouraging teacher & instructor

Mr. JAWAD DILAWAR for enlightens our minds with the rich

information about the topic.

SPECIAL THANKS

MR. RAO EHSAN, Admin. Manager, HAFEEZ GHEE & OIL

INDUSTRIES (pvt ltd.) MULTAN

MR. AMJAD HUSSAIN, C.F.O MEHMOOD AGRO GROUP OF

INDUSTRIES (pvt ltd.)

Mr. Nadeem, PRODUCTION MANAGER MEHMOOD AGRO

GROUP OF INDUSTRIES (pvt ltd.)

Mr. kashif Accountant Hoor Banaspati and cooking oil

OIL PLANT

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Report on GHEE & OIL INDUSTRYTable OF Contents

Sr. No Particulars

1 Executive Summery

2

Introduction & Estimated Cost of the

Project

3Name of Machinery Supplier

4Implementation Schedule

5Introduction to Industry

6Market Analysis

7Raw Material

8Technical Analysis

9SWOT Analysis & Financial Ratios

10Manufacturing Process

11Economic Analysis

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EXECUTIVE SUMMERY

1. The projectThe project

The proposed project site enjoys the benefits of easy availability of raw material, quick

access to the markets of Pakistan as it is located on the main road, source of power and

electricity & transportation. The project will be equipped with most locally manufactured

plant and machinery and rest of equipment will be imported from China.

.

2. Product’s Range

A. Cooking OIL

B. Vegetable Ghee

C. Laundry Soap

D. Meal

Cooking will be in the packaging of 1 kg, 2.5 kg and 5 kg and Vegetable Ghee will be in the

packaging of ½ kg, 1 kg, 2.5 kg, 5 kg, 10 kg and 16 kg.

3. MarketMarket

Our site is centrally located in Pakistan from where we can easily get access to the markets

of the country. We have some competitors but its success and profitability is very much

related to its low cost and high quality. Oil and Ghee is basic ingredient of every meal so it

has high demand locally and nationally. Oil and ghee are also exported to Afghanistan and

Central Asian countries.

4. PlantPlant capacitycapacity

The 100% capacity of plant is 150 Tons per day, of which 50 Tons would be the production

of cooking oil and 100 Tons of Vegetable Ghee. The actual production will be 110 tons per

day, in which 80 tons will be for Ghee & 30 tons for Oil.

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5. MaterialMaterial andand inputinput

The raw materials required for the production of GHEE & OIL are as follows,\

Cotton seed oil (ghee)

Sunflower oil (ghee)

Palm oil (ghee)

Palm olien oil (ghee)

Soya been oil (cooking oil)

Canola oil (cooking oil)

The raw material required for producing cooking oil will be imported from Canada,

Australia and Palm Olean oil for ghee will be imported from Malaysia. Palm fatty will be

imported from Malaysia. Other inputs like Caustic Soda, Bleaching Earth, Common Salt,

Antioxidant, Citric Acid, and Nickel Catalyst are available in Pakistan.

6. ProjectProject EngineeringEngineering

The plant and machinery used for production consist of Storage Section, Pre-Refining

Section, Hydrogenation Section, Post-Refining Section, Ghee Filling Section, Refrigeration

Section, Steam Generation, Soap Section, Water Pump Section, Hydrogen Gas Generation &

Storage Section, Electric Section, Mechanical workshop.

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7. ImplementationImplementation : The total time period for the installation & execution of output is estimated to be 6 months

from the date of approval of finance.

8. EstimatedEstimated CostCost : Rs. (000)

Total fixed cost of project 327,602

+ Initial permanent working capital 790,091.18

Total cost of Project 1,117,693

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Machinery Suppliers

Universal engineering Faisalabad

Company Name: Universal Engineering

Street Address: P.O. Nishatabad Sheikhupura Road

City: Faislabad

Province/State: Punjab

Country/Region: Pakistan

Telephone: 0092-41-754481/ 754469

Fax: 0092-41-752135

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THE PROJECT INTRODUCTION

The proposed project contemplates to set up a new Oil & Ghee Mill Unit at Multan. The

annual rated production capacity of the plant is estimated about 150 ton of which 50 ton oil

and 100 ton ghee working 350 days a year and tripled shift per day of 8 hours each. The

project shall be equipped with latest locally manufacturing plant and Machinery.

Estimated Cost of the Project (Rs. 000)

Total Fixed Cost 327,602 Initial Fixed Working 790,091.18

Total 1,117,693

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Introduction to Industry

The manufacture of Vegetable Ghee/ Cooking Oil in the organized sector contributing

around Rs.30 billion annually to the government exchequer in the form of Custom

Duty, Federal Excise Duty and Income Tax etc. Ghee & Oil Units are not only catering

to the needs of Pakistan’s whole population, but also supplying this dietary item of

daily use to the people of neighboring countries. The export of the Vegetable Ghee to

Afghanistan and the Central Asian States via land route through Torkhum and

Chamman borders is a good source to earn precious foreign exchange for our country.

In addition of boosting trade relations with these countries that’s why the future of this

industry is bright in Pakistan.

Industry Background and HistoryIndustry Background and History

Ghee industry was introduced in the sub continent in mid thirties, and since then it has

grown tremendously in face of all environmental hazards. It has been subjected to

serious edible Oil shortages, government inconsistent policies and severe variations

between demand and supply in the domestic market.

There are about 150 units of edible oil and oil extraction in Pakistan, involved in

extraction and production of various types of cooking oil and ghee. However, the

number of ghee manufacturer's registered with PVMA at present are 95.

The country which was self sufficient in edible Oil production (0.154 million MT), till

1960, and paying not a single dollar against the import bill, is today importing well over

1.160 million MT against an import bill of no less that Rs.33000 million per year, being

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Report on GHEE & OIL INDUSTRYthe third largest edible Oil importing country of the world, after China and the European

Union. All these imports originated from Malaysia.

During the past 21 years of interrupted and partially half hearted efforts of successive

governments since 1979, the country has been able to procure only 0.5 million MT of edible

Oil from indigenous resources while the rest of the 1.1 million MT is procured from imports.

The share of ghee & cooking oil in large scale manufacturing is 7.4 percent. During the last

seven years (FY01-07) the average annual growth for ghee/edible oil production is about seven

percent

The structure of Ghee/Oil industry is just like all the other developing industries of Pakistan.

There are certain well-established companies working with good brand names, serving the

nation as a whole. Along with them there are certain units, which are working in limited areas,

meeting the requirements of these niche markets. Some of the vegetable Ghee mills are

working under the control of government and other are held privately.

The raw material required for the production of Ghee/Oil is imported from different countries

and this is the biggest imported item in food category. The prices of Ghee/Oil are very much

influenced by the duties on these imports and the international price fluctuations of these

items.

In early 1990’s there had been a serious crisis in the Ghee industry, and the main reason for

this was that production of Ghee was greater than the demand. In this period due to the heavy

looses on account of these units government privatize so many Ghee producing units.

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Report on GHEE & OIL INDUSTRYVegetable Ghee is the commercial term for vegetable Oil hardened by the process of

hydrogenation. Cottonseed, soybean Oil, Sun Flower Oil, corn Oil, is being mainly used in

Pakistan for the manufacturing of Oil/Ghee. Pakistan is importing Palm Oil and Soya bean Oil

from America, Indonesia and Malaysia. During 1999-2000 Pakistan imports of soya bean Oil

and palm Oil has drastically decreased both in quantity and value. Pakistan imported soya bean

Oil worth $75.8 million and Palm Oil $267.8 million in year 1999-2000.

Market AnalysisMarket AnalysisPakistan is the third largest importer of edible oil as only around 27.0 percent of its

requirement is met through domestic production. Pakistan: Per Kg Consumption of Vegetable

Ghee Per Annum Is Lower Than EU, USA and Russia But Is Above India and Bangladesh

(18.86 Kg per Annum per Person)

The remaining needs are met from imports of various edible oils. The ghee and cooking oil are

the basic food items of human diet all over the world. With the passage of time the overall

production as well as consumption of ghee & cooking oil has significantly increased in

Pakistan.

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CompetitorsCompetitors

In Pakistan ghee industry is flourished over the years. Today there are many Locals and

National companies as well as international companies engage in the production of ghee and

oil working in Pakistan.

Among multinational companies includes Lever Brothers (Pvt.) Ltd. They manufacture

DALDA and PLANTA cooking oil and ghee. Some other companies are as follows.

1) Al Hilal Vegetable Ghee Mills engages in the production of Sultan Banaspati Ghee. It is

situated in Multan.

2) Shahbaz Ghee Mills is engage in the production of Shahbaz Banaspati. It is situated in

Rahim Yar Khan.

3) Wazeer Ali Industries Ltd. engages in the production of Tallo Banaspati ghee and cooking

oil. It is situated in Hyderabad.

4) Fatima Enterprises Ltd.

5) Rafhan Maize Product Company involved in the production of Rafhan Corn Oil and it is

situated in Faislabad.

6) Ahmad Food Industries manufactures Ahmad Soya bean Oil.

7) Ghee Corporation of Pakistan (G.C.P) under which 26 units engaged in the production of

ghee is working all over the country.

8) Hafiz ghee & oil industries pvt ltd multan

Apart from these combines there are many other firms manufacturing ghee. Now Brothers

ghee and Oil Mill is entering in the market.

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Raw material:

The basic raw material required for producing cooking oil and vegetable ghee is Canola oil,

Palm oil and Palm alien. These raw materials are not locally available; they would be imported

from Canada and Malaysia. There are some other input materials which are necessary for

production but they are available in Pakistan. List of raw materials and their prices are listed

below.

Cooking Oil

Raw Material

Quantity Price Rs (000)

Canola Oil (Tons) 17500 86000/Ton

Caustic Soda (Kg) 102000 25/kg

Fuller Earth (Kg) 204000 30/kg

Common Salt (Kg) 26000 3/kg

Antioxidants (Kg) 3400 160/kg

Vegetable Ghee

Raw Material

Quantity Price Rs (000)

RBD Palm Olein Oil (Tons) 32,000 75000/ton

Caustic Soda (Kg) 75,000 25/kg

Fuller Earth (Kg) 67,000 30/kg

Common Salt (Kg) 50,000 3/kg

Citric Acid (Kg) 7000 120/kg

Nickel Catalyst (Kg) 5000 1400/kg

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Project demand, Products and product mix:

The main products of the company are cooking oil and vegetable ghee and by-products will be

laundry soap and carbon dioxide gas. At 100% capacity, annual production of cooking oil will

be 17500 Tons, vegetable ghee 32000 Tons and Laundry soap 1050 Tons.

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Report on GHEE & OIL INDUSTRYTECHNICAL ANALYSIS

Location of the Project

The project is proposed to set up at MULTAN. The site enjoys the following advantages:-

- Easy availability of raw material

- Access to the main road, Sources of Power, water, fuel etc.

- Availability of transport & communication like telephone, Internet etc.

- Availability of skilled and Un-Skilled manpower

- Free from other environmental hazards like water logging, floods, salinity etc.

Utilities

Main utilities required for project are gas, electricity, water, and transportation and disposal

arrangement.

Gas

Gas is very important for our project because our production process needs steam. And

hydrogen gas. So you will have to get commercial connection of gas from Sui northern gas

pipelines limited, main line of gas is 1.5 km away from the proposed site

Electricity

Machinery can not work without power, so power is like blood for project; you will have to

get connection of power from MEPCO.

Water

Water is needed during the process we will get water through water pumps.

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SWOT ANALYSISStrength:

Raw material is easily available

Access to customers

Well technology is used

Demand is very high

Profit earning is high

Weakness:

Recourses are going to be end

Security problem

Government restriction

Load shedding of sui gas & electricity

Opportunities

High demand

Payback period can be minimum.

ThreatThe proposed project will be facing the following threat:

Market saturation over a longer period of time due to a large number of entrants Threat of increase in the import duty by the government

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Gross Profit Ratio 39% 34% 33%

Operating Profit Ratio 39% 34% 33%

Net Profit Ratio 17% 15% 15%

Ratios 1 2 3 4Current Ratio 1.43 2.23 2.79 3.34Quick Ratio 1.24 1.95 2.50 3.03Debt Ratio 84% 58% 44% 35%Total Assets Turnover 0 25% 25% 20%Return on Equity 52% 37% 30%Return on Assets 4% 4% 3%

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Manufacturing Process

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In our proposed project we will produce three elements

1. Cooking Oil

2. Vegetable Ghee

3. Laundry Soap

Process has following stages:

A) Decantation

Decantation is a process of unloading of unprocessed oil from carriage into decanting tanks.

You will have to get a 50 ton decanting tank.

B) Oil Storage

The next step is storage. Oil from decanting tanks is transformed from decanting to storage

tanks with the help of powerful pumps. Two storage tanks of 500 tons capacity are needed.

C) Refining

The oil in refined to remove free from acids and phosphatides and the gaining material and to

improve its color. The oil is refined with strong Caustic Soda. This result in two products one

is the refined oil and the other is it’s by product namely mud which is being used for

manufacturing soap but the firm sells the mud it does not manufacture soap. We will produce

soap.

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After Refining Process is divided in to three independent processes

OIL REFINING PLANT

MANUFACTURING PROCESS OF COOKING OIL

0.Neutralizing

The Crude Oil temporarily stored in Crude Oil Tank is pumped into neutralizing tank by Oil Pump.

The oil is mixed with alkali lye in Mixer and neutralized in Neutralizing Tank, free fatty acid has been

neutralized or saponified to be Soap stock.

1. Bleaching

In this step we decolorize the oil by using Fuller Earth, Caustic Soda and Activated Carbon at

high temperature.

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2. Filtration

In this step we remove impurities (Fuller Earth) from oil through filtration medium. All

impurities that become part of oil in Bleaching process are removed in this step.

3. Deodorization

It is a process of purify the oil. Its odor is removed by using vacuum vessels. All those

impurities that are reason of odor in oil are removed in this section. The temperature of oil is

very much increase in this process.

4. Cooling

In the Deodorization Process temperature of oil much rises so it needs to cool again. In

Cooling Section oil is cooled to normal temperature by using coolers.

5. Filtration

To remove the impurities, oil is re filter through filtration process.

6. DE-Waxing

It is a complex process that is used to remove Wax from oil. It is necessary to remove wax for

further processing. For this purpose some organic compounds are used in chemical reaction.

These reaction are much complex in nature. Samples are taken and laboratory tests are applied.

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Report on GHEE & OIL INDUSTRY7. Filtration & Vitamin Addition

De-waxed oil is passed through further filtration. Move over some essential Vitamins (A&D)

are added in this section. Nickel catalyst (Ni) is used in this process.

8. Storage

After final filtration and Vitamins addition oil is stored in storage tanks. In these tanks oil is

store at moderate temperature.

9. Packing

In packing section oil is packed in deferent weights plastic bags. These bags properly sealed

and again weigh before forward to store rooms.

10. Godown

After packing oil bags are forward to Godown. Ammonia section is there to control

temperature of Godown.

MANUFACTURING PROCESS OF VEGETABLE GHEE

0. Neutralizing

The Crude Oil temporarily stored in Crude Oil Tank is pumped into neutralizing tank by Oil Pump.

The oil is mixed with alkali lye in Mixer and neutralized in Neutralizing Tank, free fatty acid has been

neutralized or saponified to be Soap stock.

1. Bleaching

In this step we decolorize the oil by using Fuller Earth, Caustic Soda and Activated Carbon at

high temperature.

2. Filtration

In this step we remove impurities (Fuller Earth) from oil through filtration medium. All

impurities that become part of oil in Bleaching process are removed in this step.

3. Hydrogenation

Hydrogenation is process of addition of hydrogen gas in oil. It is a complex organic process in

which unsaturated hydrocarbon are convert into saturated hydrocarbons. It is main process of

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Report on GHEE & OIL INDUSTRYconverting oil into ghee. At high temperature hydrogen gas is passed into the oil, chemical

reaction occurs in presence of Nickel (Ni) catalysts.

4. Filtration

In this step we remove impurities (Fuller Earth) from ghee through filtration medium. All

impurities that become part of oil in Bleaching process and Hydrogenation process are

removed in this step.

5. post Refining

After hydrogenation oil is once again refined by using caustic soda in order to remove the

entire harmful chemicals that become part of oil during process.

6. Post Bleaching

After refining, once again bleaching is done in order to decrease the color of oil.

7. Filtration

To remove the impurities, ghee is re filter through filtration medium.

8. Deodorization

It is a process of purify the ghee. Its odor is removed by using vacuum vessels. All those

impurities that are reason of odor in ghee are removed in this section. The temperature of ghee

is very much increase in this process.

9. Cooling

In the Deodorization Process temperature of ghee much rises so it needs to cool again. In

Cooling Section ghee is cool down by using coolers.

10. Filtration & Vitamin Addition

For further filtration ghee must re heated. Move over some essential Vitamins (A&D) and

ghee flavors are added in this section.

11. Storage

After final filtration and Vitamins addition ghee is stored in storage tanks. In these tanks ghee

is store at high temperature.

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12. Packing

In packing section ghee is packed in deferent weights plastic bags. These bags properly sealed

and again weigh before forward to store rooms. 0.5kg, 1kg, 2kg, 2.5kh, 5kg, 10kg, 16kg

packing is available. Plastic bags and steel teens are used for packing.

13. Chilling

Packed ghee is in melted form and hot. It is passed through chiller to decrease its temperature.

14. Godown

After packing ghee bags and teen packs are forward to Godown. Ammonia section is there to

control temperature of Godown.

MANUFACTURING PROCESS OF LAUNDRY SOAP

1. Soap Stock

In the process of refining, dirt is separated and sent to soap section for making laundry soap.

2. Saopnification Cooking

This is process of making soap from soap stock. Soap stock is heated and treated by using

some techniques.

3. Setting

Liquid is treated and soap in liquid form is made

4. Filling in Frames

Liquid is filled in frames to makes blocks of soap

5. Cutting into Cakes

Solid soap blocks are divided in small cubes.

6. Packing

Soap is packed in packets and cartons

7. Godown

Finished soap is sent to Godown and from Godown it is delivered to market.

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GHEE COOKING OIL SOAP

Neutralization Neutralization

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DECANTATION

OIL STORAGE

REFINING

Bleaching

Filtration

Hydrogenation

Filtration

Post Refining

Post Bleaching

Deodorization

Bleaching

Filtration

Cooling

Filtration

De- Waxing

Filtration & Vitamin Add.

Soap Stock

Saopnification Cooking

Setting

Filling in Frames

Cutting into cakes

Packing


ECONOMIC ANALYSIS

Economic evaluation is considered prominent yardstick to measure the viability of a project.

This analysis is directed towards determining whether the project is likely to contribute

significantly to the development of the economy as a whole and the contribution of the project

would be great enough to justify the use of available resources. This aspect is reviewed under

the following:-

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Filtration

Deodorization

Cooling

Filtration & Vitamin Add.

Storage

Packing

Storage

Packing

Godown

Dispatch

Godown

Dispatch


INITIAL IMPACT

In order to pursue a theory of balanced growth of the economy the current government is

putting an emphasis on industrialization of our inherently agrarian economy. Industrialization

of substantial dynamic benefits is important for changing the traditional structure of our less

developed economy, while providing employment for a rapidly increasing labor force, and

saving scarce foreign exchange by import substitution and creating export potentials.

A capital expenditure creates incomes for people engaged in the fabrication of capital goods,

who in turns spend their incomes on consumer goods. An initial original capital investment

creates a wave of income and spending which has multiplied effect on the national income,

increasing it by several times, the original investment. The initial original capital investment of

Rs. (000) 1,117,693.25 in local currencies would have a healthy impact on the GNP of the

country, the extent of which depends on the degree of multiplied effect.

EMPLOYMENT OPPORTUNITIES

The project would create employment opportunities for the following staff:

Detail Total Nos.

Skilled Labor 40

Semi-Skilled Labor 60

Unskilled Labor 35

Administrative Staff 20

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OIL & GHEE MILLS

Estimated Cost of Plant & Machinery

S.NO. DESCRIPTION Rs.

(000)

1 STORAGE SECTION 13,550

2 PRE-REFINING SECTION 6,110

3 HYDROGENATION SECTION 8,690

4 POST-REFINING SECTION 9,805

5 GHEE FILLING SECTION 8,650

6 REFRIGERATION SECTION 4,500

7 STEAM GENERATION 5,650

8 SOAP SECTION 1,595

9 WATER PUMP SECTION 1,150

10 HYDROGEN GAS GENERATION & STORAGE SECTION 9,950

11 CO2 GAS SECTION 2,800

12 ELECTRIC SECTION 10,700

13 MACHANICAL WORKSHOP 900

COST OF MACHINERY 84,050

14 ERECTION & INSTALLATION:15 % of machinery 15% 12,608

15 TRANSPORTATION (10% of Machinery) 10% 8,405

16 INSURANCE (5% of Machinery) 5% 4,203

17 Contingencies 2% of Building & Machinery 2% 1,681

TOTAL COST OF PLANT & MACHINERY 194,996

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OIL AND GHEE MILLS Estimated Cost of the Project

Cost of the Project Local Foreign Total (Rs.000) (Rs.000) (Rs.000)

Project Land and it's Development 12,800 - 12,800 Building and Civil Works 61,753.35 - 61,753.35 Plant & Machinery 58,499 136,497 194,996 Furniture and Fixture 100 - 100 Utilities & Office Equipment 3,000 - 3,000 Vehicles 1,500 - 1,500 Markup during Construction 51,192 - 51,192 Pre Production Expenses 1,780 - 1,780 Contigencies 481 - 481

Total Fixed Cost 191,105 136,497.20 327,602

Initial Net Working Capital 790,091.18 - 790,091.18

Total Cost of the Project 981,196 136,497.20 1,117,693

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OIL AND GHEE MILLS .

PRODUCTION AT 100%

COOKING OIL

Output% Quantiy (Tons)Production of oil 97%

16975Wastage 1%

175Soap Stock dirt 2%

350

Total 100 17500

VEGETABLE GHEE

Ghee 95%30400

Wastage 5%1600

Soap Stock dirt 3%960

Total 100 32000

LAUNDY SOAP

Soap 75%1050

Wastage 25%350

Total 100

1400

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report on oil industry

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