turmeric processing

7/30/2019 TURMERIC Processing

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295. PROFILE ON PROCESSING OF TURMERIC


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TABLE OF CONTENTS

PAGE

I. SUMMARY 295 - 3

II. PRODUCT DESCRIPTION & APPLICATION 295 - 3

III. MARKET STUDY AND PLANT CAPACITY 295 - 3

A. MARKET STUDY 295 - 3

B. PLANT CAPACITY & PRODUCTION PROGRAMME 295 - 6

IV. RAW MATERIALS AND INPUTS 295 - 7

A. RAW & AUXILIARY MATERIALS 295 - 7

B. UTILITIES 295 - 7

V. TECHNOLOGY & ENGINEERING 295 - 8

A. TECHNOLOGY 295 - 8

B. ENGINEERING 295 - 8

VI. MANPOWER & TRAINING REQUIREMENT 295 - 9

A. MANPOWER REQUIREMENT 295 - 9

B. TRAINING REQUIREMENT 295 - 9

VII. FINANCIAL ANLYSIS 295 - 10

A. TOTAL INITIAL INVESTMENT COST 295 - 11

B. PRODUCTION COST 295 - 12

C. FINANCIAL EVALUATION 295 - 13

D. ECONOMIC BENEFITS 295 - 13


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I. SUMMARY

This profile envisages the establishment of a plant for the processing of turmeric

with a capacity of 150 tonnes per annum.

The present demand for the proposed product is estimated at 460 tonnes per annum. The

demand is expected to reach at 828 tonnes by the year 2022.

The plant will create employment opportunities for 19 persons.

The total investment requirement is estimated at about Birr 2.86 million, out of which Birr1.1 million is required for plant and machinery.

The project is financially viable with an internal rate of return (IRR) of 21 % and a net

present value (NPV) of Birr 1.41 million discounted at 8.5%.

II. PRODUCT DESCRIPTION AND APPLICATION

Turmeric is an East Indian perennial herb "Curcuma longa" with a large aromatic deep

yellow rhizome. Processed turmeric is the cleaned, boiled, sun-dried, and usually pulveized

rhizome of the turmeric plant used as a colouring agent, a condiment (as in pickling and in

curry powder), or a stimulant.

III. MARKET STUDY AND PLANT CAPACITY

A. MARKET STUDY

1. Past Supply and Present Demand

The country's requirement for turmeric is essentially met through domestic production.

However, data on domestic production of the product is not readily available. Therefore, the


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Revised Report on the 1995/96 Household Income, Consumption and Expenditure Survey is

analyzed in estimating the demand for turmeric. Table 3.1 depicts the average amount of

turmeric consumed by different expenditure groups in urban and rural areas according to the

survey finding.

Table 3.1

DOMESTIC CONSUMPTION OF TURMERIC

Number of Average Total

Income Individuals Annual Annual

Group in the Consumption Consumption

Group (gram) (kg)

< 600 17,253 - -

600 - 999 125,904 10 1,259

1000-1399 432,547 7 3,028

1400-1999 580,104 18 10,442

2000-2599 4,217,465 21 88,567

2600-3399 649,8555 17 110,475

3400-4199 784,4772 25 196,1194200-5399 1,088 ,5614 26 283,026

5400-6599 800,7978 32 256,255

6600-8999 881,7091 41 361,501

9000-12599 511,4961 44 225,058

12600-16199 1,765,555 47 82,981

16200-19999 673,706 68 45,812

> 20000 972,722 57 55,445

Total 55,954,227 1719,969

Source: CSA, Revised Report on the 1995/96 Household Income Consumption and

Expenditure Survey, 2001.


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As can be seen from Table 3.1, the total consumption requirement of households for turmeric

is 1,719,969 kg per annum. Given a total population of 55,954,227 at the time the survey was

conducted, the per capita consumption of turmeric is computed to be 0.03 kg. Assuming the

regional market constitutes the viable market for the product, the present demand of

households for turmeric is estimated at 460 tons using the total population of the region for

2007.

2. Projected Demand

The consumption of processed turmeric is mainly associated with the urban population.

Accordingly, a growth rate of 4% that corresponds to the rate of urbanization in the country

is considered in projecting the demand for turmeric. The projected demand for the product isshown in Table 3.2.

Table 3.2

PROJECTED DEMAND FOR TURMERIC (TONNES)

Year Projected

Demand

2007 460.00

2008 478.402009 497.54

2010 517.44

2011 538.13

2012 559.66

2013 582.05

2014 605.33

2015 629.54

2016 654.72

2017 680.91

2018 708.152019 736.47

2020 765.93

2021 796.57

2022 828.43


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3. Pricing and Distribution

The retail price of turmeric is Birr 25 per kg. Allowing margin for wholesale and retail a

price of Birr 20 per kg is recommended for the product of the envisaged plant.

The product can get its market outlet through the existing wholesale and retail network,

which includes department stores, merchandise shops and supermarkets.

B. PLANT CAPACITY AND PRODUCTION PROGRAM

1. Plant Capacity

The annual production capacity of the project is 150 tonnes of processed turmeric based on

300 working days and single shift ( 8 hours) per day.

2. Production Program

The production program is indicated in Table 3.2. At the initial stages of production, the

project may require some years to penetrate the market. Therefore, in the first and second

year of production, the capacity utilization rate will be 70 and 90%, respectively. In the third

year and thereafter, full capacity production shall be attained.

Table 1

PRODUCTION PROGRAM

Description Production Year

1 2 3-10

1 Clove powder (ton) 105 135 150

2 Capacity utilization rate (%) 70 90 100


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IV. RAW MATERIAL AND INPUTS

A. RAW AND AUXILIARY MATERIALS

The annual raw and auxiliary materials requirement and cost are indicated in Table 4.1.

Table 4.1

RAW AND AUXILIARY MATERIAL REQUIREMENT & COST

S.No Material Unit Qty Cost (000 Birr)

1 Turmeric Ton 165 3,300

2 Packing material kg 4500 112.5Total 3,412.5

B. UTILITY

Water and electricity are the utilities of the project. The annual utility requirement and its

cost are shown in Table 3.

Table 3

ANNUAL UTILITY REQUIREMENT & COST

S.No Utility Unit Qty Cost (000 Birr)

1 Electricity kWh 120,000 56.88

2 Water M3

1,000 10

Total 66.88


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V. TECHNOLOGY AND ENGINEERING

A. TECHNOLOGY

1. Process Description

Turmeric seeds will first be cleaned and washed manually and then sun dried. Solar drying

is the cheapest and popular mode of drying agricultural products.

The dry turmeric seeds enters to the milling unit in which milling and pulverization

operations are carried out.

The power is then sifted and tested according to standard procedures depending on the target

market. It is then packed for sales.

2. Source of Technology

Turmeric processing plant can be acquired from different suppliers. The following company

could be requested for the offer.

Food and Biotech Engineers

Khwaja, Faridabad, Haryana-121003, India

Phone +91-129-2510924

B. ENGINEERING

1. Machinery & Equipment

The list of machinery and equipment required for the project is indicated in Table 5.1. The

total cost of machinery and equipment is estimated at Birr 1,100,000 of which Birr 916,700 is

in foreign currency.


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Table 5.1

LIST OF MACHINERY & EQUIPMENT

S.No Description Qty

1 Chamber solar drier 1

2 Vibratory screen 1

3 Disintegrator 1

4 Micropulverizer 1

5 Sifting machine 1

6 Weighing and packing unit 1 unit

7 Miscellaneous equipments like

handling bins, storage vessels, Etc.

Lump

sum

2. Land, Building and Civil work

The total land requirement of the project is estimated at 1000 m2

of which the built-up area is

300 m2. Therefore, the cost of building is Birr 450,000. The lease value of land is about Birr

80,000 at a rate of 1 Birr per m2

per annum for 80 years.

3. Location and Site

Yadeta town is the best location for the proposed project for its proximity to major raw

material sources.

VI. MANPOWER AND TRAINING REQUIREMENT

A. MANPOWER

Table 6.1 shows the list and cost of manpower. The total annual labour cost is estimated at

Birr 201,000.


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Table 6.1

MANPOWER REQUIREMENT & COST

S.No Manpower No. Monthly

Salary (Birr)

Annual Salary

(Birr)

1 General manager 1 3,000 36,000

2 Secretary 1 700 8,400

3 Production head 1 2,000 24,000

4 Accountant 1 2,000 24,000

5 Operator 3 2,100 25,200

6 Labourers 10 3,000 36,000

7 Guards 2 600 7,200

Sub total 19 13,400 160,800

Benefit

(25% Basic salary)

3,350 40,200

Total 16,750 201,000

B. TRAINING

On-the-job training shall be carried out by the experts of machinery suppliers and its cost is

estimated at Birr 15,000.

VII. FINANCIAL ANALYSIS

The financial analysis of the turmeric processing project is based on the data presented in

the previous chapters and the following assumptions:-

Construction period 1 year

Source of finance 30 % equity

70 % loan

Tax holidays 3 years

Bank interest 8%


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Discount cash flow 8.5%

Accounts receivable 30 days

Raw material local 30days

Work in progress 2 days

Finished products 30 days

Cash in hand 5 days

Accounts payable 30 days

A. TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at Birr 2.86

million, of which 53 per cent will be required in foreign currency.

The major breakdown of the total initial investment cost is shown in Table 7.1.

Table 7.1

INITIAL INVESTMENT COST

Sr. Total Cost

No. Cost Items (000 Birr)

1 Land lease value 80.0

2 Building and Civil Work 450.0

3 Plant Machinery and Equipment 1,100.0

4 Office Furniture and Equipment 100.0

5 Vehicle 200.0

6 Pre-production Expenditure* 290.4

7 Working Capital 644.9

Total Investment cost 2,865.3Foreign Share 53

* N.B Pre-production expenditure includes interest during construction ( Birr 140.37 thousand )

training (Birr 15 thousand ) and Birr 135 thousand costs of registration, licensing and formation

of the company including legal fees, commissioning expenses, etc.


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B. PRODUCTION COST

The annual production cost at full operation capacity is estimated at Birr 4.07 million (see

Table 7.2). The material and utility cost accounts for 85.45 per cent, while repair and

maintenance take 1.84 per cent of the production cost.

Table 7.2

ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)

Items Cost %

Raw Material and Inputs 3,412.50 83.81

Utilities 66.8 1.64

Maintenance and repair 75 1.84

Labour direct 96.48 2.37

Factory overheads 32.16 0.79

Administration Costs 64.32 1.58

Total Operating Costs 3,747.26 92.03

Depreciation 212.5 5.22

Cost of Finance 111.98 2.75Total Production Cost 4,071.74 100

C. FINANCIAL EVALUATION

1. Profitability

According to the projected income statement, the project will start generating profit in the

first year of operation. Important ratios such as profit to total sales, net profit to equity

(Return on equity) and net profit plus interest on total investment (return on total

investment) show an increasing trend during the life-time of the project.

The income statement and the other indicators of profitability show that the project is viable.


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2. Break-even Analysis

The break-even point of the project including cost of finance when it starts to operate at full

capacity ( year 3) is estimated by using income statement projection.

BE = Fixed Cost = 36 %

Sales Variable Cost

3. Pay Back Period

The investment cost and income statement projection are used to project the pay-back period.The projects initial investment will be fully recovered within 5 years.

4. Internal Rate of Return and Net Present Value

Based on the cash flow statement, the calculated IRR of the project is 21 % and the net

present value at 8.5% discount rate is Birr 1.41 million.

D. ECONOMIC BENEFITS

The project can create employment for 19 persons. In addition to supply of the domestic

needs, the project will generate Birr 1.12 million in terms of tax revenue. The establishment

of such factory will have a foreign exchange saving effect to the country by substituting the

current imports.

turmeric processing

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