1st Draft

Pre-Feasibility Study
FRUIT AND FOREST PLANT NURSERIES

PAKISTAN AGRICULTURE RESEARCH COUNCIL ISLAMABAD

MINISTRY OF NATIONAL FOOD SECURITY AND RESEARCH
Government of Pakistan
www.parc.gov.pk
January 2014

Contents
1

DISCLAIMER......................................................................................................... 4

PURPOSE OF THE DOCUMENT.............................................................................. 4

INTRODUCTION TO SCHEME.................................................................................5

EXECUTIVE SUMMARY.......................................................................................... 5

BRIEF DESCRIPTION OF PROJECT..........................................................................6

5.1

Tools & equipments........................................................................................ 7

5.2

Technical Feasibility....................................................................................... 7

5.3

Green Shed.................................................................................................... 7

5.4

Propagation.................................................................................................... 8

5.5

Irrigation........................................................................................................ 8

5.6

Cultivation...................................................................................................... 8

5.7

Environmental Aspects................................................................................10

5.8

Project Benefits............................................................................................ 10

5.9

Location....................................................................................................... 10

5.10 Market Analysis............................................................................................ 11

5.11 Risk analysis................................................................................................ 11
6

CRITICAL FACTORS............................................................................................. 12

INSTALLED AND OPERATIONAL CAPACITIES........................................................12

PRODUCTION PROCESS FLOW............................................................................ 12

PROJECT COST SUMMARY...................................................................................12

9.1

PROJECT ECONOMICS................................................................................... 13

9.2

PROJECT FINANCING.................................................................................... 13

9.3

PROJECT COST............................................................................................. 13

9.4

RAW MATERIAL REQUIREMENTS...................................................................14

9.5

HUMAN RESOURCE REQUIREMENT..............................................................14

9.6

REVENUE GENERATION................................................................................14

9.7

WORKING CAPITAL REQUIREMENTS.............................................................14

LIST OF TABLES
2

Table 1 Project Economics............................................................................................... 13

Table 2 Project Financing................................................................................................. 13
Table 3 Capital Investment for the Project............................................................................ 13
Table 4 Cost of Material............................................................................................ 14
Table 5 Human Resource Requirement................................................................................ 14
Table 6 Project Economics per year.................................................................................... 15
Table 7 Working Capital Requirement................................................................................. 15
Table 8 Key Assumption.................................................................................................. 15
Table 9 FINANCIAL STATEMENT in PKR.........................................................................17

DISCLAIMER

This information memorandum is to introduce the subject matter and provide a

general idea and information on the said subject. Although, the material included in
this document is based on data/information gathered from various reliable sources;
however, it is based upon certain assumptions which may differ from case to case.
The information has been provided on an as is where is basis without any
warranties or assertions as to the correctness or soundness thereof. Although, due
care and diligence has been taken to compile this document, the contained
information may vary due to any change in any of the concerned factors, and the
actual results may differ substantially from the presented information. SMEDA, its
employees or agents do not assume any liability for any financial or other loss
resulting from this memorandum in consequence of undertaking this activity. The
contained information does not preclude any further professional advice. The
prospective user of this memorandum is encouraged to carry out additional
diligence and gather any information which is necessary for making an informed
decision; including taking professional advice from a qualified consultant / technical
expert before taking any decision to act upon the information.

PURPOSE OF THE DOCUMENT

The objective of the pre-feasibility study is primarily to facilitate potential

entrepreneurs in project identification for investment. The project pre-feasibility
may form the basis of an important investment decision and in order to serve this
objective,

the

document/study

covers

various

aspects

of

project

concept

development, start-up, production, marketing, finance and business management.

The purpose of this document is to facilitate potential investors in Establishment of
Nurseries for Fruits and Forest Plants by providing them a holistic as well as a
micro view of the business with the hope that such information as provided herein
will help the potential investors in crucial investment decisions. The need to come
up with pre-feasibility reports for undocumented or minimally documented sectors
attains greater imminence as the research that precedes such reports reveal certain
thumbs of rules; best practices developed by existing enterprises by trial and error,
and certain industrial norms that become a guiding source regarding various
aspects of business set-up and its successful management.
4

Apart from carefully studying the whole document one must consider critical
aspects provided later on, which form basis of any Investment Decision.

INTRODUCTION TO SCHEME

Prime Ministers Youth Business Loan program , for young entrepreneurs, with an
allocated budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide
subsidised financing at 8% mark-up per annum for one hundred thousand (100,000)
beneficiaries, through designated financial institutions, initially by the National Bank
of Pakistan (NBP) and the First Women Bank Ltd. (FWBL).
Small business loans upto 2 million with tenure up to 8 years, inclusive of a 1 year
grace-period and a debt : equity of 90: 10 will be disbursed to SME beneficiaries
across Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwah, Balochistan, Gilgit
Baltistan, Azad Jammu & Kashmir and Federally Administered Tribal Areas (FATA).

EXECUTIVE SUMMARY

The project of Nurseries Business will include the production and supply of new and
best available fruit varieties along with Forest collection. The proposed business will
start at an area of 8 kanal (160 Marla) that can further be increased with the
expansion of the business during later years.
It is proposed to be located at areas where climate, soil, temperature are favorable
along with better distribution network to the major markets and potential
consumers. Patoki in Punjab is the major hub for nursery business in the
country for all varieties and plants. For small scale level the nurseries can be
managed at every part of the country to meet the local requirements in different
localities. In urban areas mostly ornamental and fruit plants are demanded,
whereas, in rural areas the utilization of fruit, forest and vegetable is according to
the farmers interest. The proposed project will provide direct employment to 05
fulltime people along with required workforce during time to time as per
requirements and keeping in view the seasonal working.
Product(s) include Fruit, Forest, Ornamental Plants and vegetable nurseries.
1. Area Required approximately 8 kanal

2. Total Cost Estimate is

1.2 million

Rs. 2.27 million

with fixed investment

Rs.

and working capital of approx Rs. 1 million

Given the cost assumptions IRR and payback are 76% and 3.5 years respectively
the most critical considerations or factors for success of the project are;
1. Strong networking with other nursery growers
2. Best varieties of nursery plants

BRIEF DESCRIPTION OF PROJECT

Nursery Business will be used to meet the growing need of best varieties of fruit,
forest ornamental plants and vegetable seedlings. The nursery industry is a very
wonderful and exciting business. The production of plants for profit has the potential
of providing many personal and financial rewards. However, as with many other
farming enterprises that appear to be very simple on the surface, the nursery
business is very complex and requires a great deal of knowledge and skill not only
in production, but also in labor management and marketing.
The nursery industry is very diverse. It is a business, and like any other business,
the probability of success depends on imagination, determination, planning, and
good management of the five major resources.

Nursery producers utilize one or more of the following production systems:

field, container, and pot-in-pot.
I.

Field production involves planting of seeds and cutting directly in the

ground and then harvesting them either as bareroot or balled-and
burlapped (B&B) material and sold as bareroot material or transplanted

II.

and sold in containers.

Container production entails growing plants in containers filled with
soilless growing media and placed in established production areas on
the ground or on benches inside a greenhouse or similar protective

III.

structure.
Products will be grafted plants of tropical subtropical and deciduous
fruit plants

It is best to concentrate on only one aspect of production (propagation, container,

field, Pot-N- Pot) when first getting into the business consider buying liners until the
business is running smoothly and only then consider producing some of your own
liners, if thought to be advantageous. However, one could start a liner nursery and
concentrate on that aspect of the business and sell liners rather than landscape size
6

plants. Marketing is an extremely important part of the nursery business and should
be given equal status and attention to production. Marketing efforts should begin
as soon as the commitment has been made to start a nursery business. Producers
should begin to attend nursery meetings, trade shows, retail and landscape
contractor meetings, during the first year of production, if not before. Proximity to
other nurseries can be an advantage. Through cooperative buying, marketing,
shipping, and sharing of technology and equipment, costs can be reduced. A
common practice among nurseries that are close is to pool plants to make up
shortfalls in numbers, sizes or species to fill orders.
There are three major areas in which nursery producers compete: price, quality and
service (delivery). It is very difficult to compete with larger nurseries on production
costs. Therefore, new competition must strive to produce higher quality plants and
provide better service.
Another area in which smaller nurseries can compete is by doing something a little
different in marketing or in inventory. Smaller nurseries can fill a niche market by
producing specialty nursery crops. These are crops that are not in large enough
demand to warrant high volume production or plants that require special skills and
handling.

5.1 Tools & equipments

Simple tools & equipments are required to carry out the activity.
Pickaxe:

for breaking up hard and stony ground.

Hoe:

for loosening the soil.

Shovel:
soil.
Rake:

for moving earth, sieving soil, and mixing

for breaking up and levelling the soil.

Sieve (channi):

for sifting soil for the seedbeds and potting

Funnel:

for filling pots with soil mixture.

Scoop:

for filling and compacting soil in pots.

Watering can:

for watering seedlings.

Wheelbarrow:
seedlings, etc.

for transporting potting soil, filled pots, tools,

Pruners:

for pruning the roots that grow out of the pots.

Germination tray:

for germinating small quantities of seed.

Pointed sticks:

5.2

for weeding seedbeds and potted stock.

Tools for pricking:

for lifting germinated seedlings into pots

Water pipe:

for irrigation

Technical Feasibility

Technical feasibility takes into account whether the required technology is available
or not and whether the required resources are available in terms of manpower and
equipment.
A successful nursery producer needs knowledge of plants, soils, fertilizers,
pesticides, irrigation, Tools, pruning, harvesting methods, overwintering techniques,
packing practices, etc. It is not just casting seed to the wind and watching the trees
and profits grow.

5.3 Green Shed

A green shed is usually an outdoor open structure with primary purpose of providing
shade. It is used to modify the environment from protecting from hot, reducing the
intensity of sunlight through lowering temperature and maintaining the humidity. It
is also used for protection against the cold during winter season by covering it with
a plastic sheet. Therefore the location of this green shed should be selected
accordingly. Factors such as amount of sunlight, nearby buildings and tree, and the
direction of wind should be consider at the time of construction of green shed
facility. The size of green shed depends upon the requirements. No specific width
and length matter. The height of the green shed will depend upon the length and
width. Structure of the green shed can be made with wood (bamboo etc), Metal
(steel, Iron and Aluminium) and PVC and G.I Pipes. The most common structures in
Pakistan are made with steel pipes of with G.I pipes or a mix of G.I and Iron.
Low, medium and high tunnel are used in nursery business. Low tunnels (approx
1meter high) are used, while medium sized (approx 2 meter) and high tunnel
(approx 3meter) are used mainly for propagation and storage of plants and
protection from heat and frost.

5.4 Propagation
The shed will be used to propagate seedlings. Seedlings also will be grown in
seedling bags in the shade covered area and the open nursery.
Propagation of fruit tree crops, hard woods and forestry species will involve field
investigations to identify and select good sources of plant seeds for collection and
propagation in seedling bags in the open nursery. Propagation of fruit tree crops
also will involve grafting techniques to produce seedlings with desired qualities.
Planting media will include commercial potting mixes for vegetable seedlings and
suckers.

5.5 Irrigation
The open nursery will be irrigated by a ground sprinkler system while the shade
covered area will be irrigated by elevated sprinklers attached overhead to the shade
structure. A misting propagator will be installed in the screen house. The irrigation
system will be gravity-fed at a pressure of approximately 40 psi from a spring at 200
feet above the site.

5.6 Cultivation
The green shed will provide an environment which is free from insects and other
vectors. Weed control in the shade house and open nursery will be affected by use
of polypropylene ground cover plastic. Fertilizer will be applied through mixing in
the medium. Insecticides will be applied according to manufacturers specifications
and the growing conditions.
Plants typically will be ready for sale at the appropriate age and height for
transplanting depending on the specific crop, and will be sold either as rooted plugs
or in seedling bags. .

5.7 Environmental Aspects

The environmental aspects of the plant nursery will be of priority importance in the
development of the project. All steps will be taken to ensure that the land clearing
and construction work takes place in

5.8 Project Benefits

The benefits of the proposed plant nursery will include the following:
1. Introduction of improved varieties of selected plants with higher yield,
resistance to disease and lower mortality rates
2. Reduced time and resources spent by farmers in self-propagation of planting
material
3. Establishment of efficient and modern plant propagation centre
4. Availability of high-quality planting material on consistent and predictable
basis allowing farmers to plan production

5.9 Location
The proposed business can be done in all over the country where fruits, forest are
grown. However, the location should be selected on the basis of nursery size and
keeping in view the minimum risks associated with infrastructure development to
production level and from production level to marketing and distribution
10

mechanism. Site selection and layout are very important in the early stages of the
planning process. Your choices will directly affect your success in growing and
selling plants. When purchasing/ leasing on rent, you should come prepared with
questions. Prioritize your list of requirements based on what site characteristics are
the most difficult and costly to repair after you have purchased the land. Do not
purchase land or take on lease, blindly because that will lead to greater cost,
reduced plant quality, increased product losses, and reduced profit. For small level
business in which some plants are procured from outside and some are grown at
own capacity. The location should be near the main highways, city area and already
existing nursery market.
Location of your nursery may be predetermined based on availability of property or
for personal reasons. Alternatively, you may be free to choose a location that best
suits your needs and goals. In either case, your location choice will directly affect
your decisions on marketing, employee hiring, and future expansion.
In selecting a location you should consider proximity to other nurseries, to major
cities, and to highways. Other factors to consider include availability of
transportation facilities, distance to market, competition, availability of reliable
labor (full-time, part-time, and seasonal), and availability of inexpensive land for
future expansion. (You should know that locating near other nurseries may be
mutually beneficial for small operators by providing markets for specialty items,
sharing transportation services, and increasing the frequency of buyer visits.) Yet
another consideration in choosing a location is the present and future regulatory
status of the area (e.g., zoning, taxation, labor relations, environmental issues, and
product inspections).

5.10

Market Analysis

Orchard growers, small, medium and large scale farmers along with huge local
markets in Karachi, Lahore and Islamabad for ornamental plants are the targeted
markets for the nursery business. Nursery owner must analyze and organize his or
her own marketing channels, develop a sales program, prepare the product for
distribution, extend credit, and make collections. There are many resources
available through bookstores and libraries which provide tips on marketing and
business management techniques. Five possible approaches to defining your market
and customers are:
1. Define the types of customers within your target market (average salary,
average number per household) based on census and local Chamber of
Commerce data;
2. Determine customer preferences for products and services through
questionnaires and by investigating the local competition;
3. Use local and national industry association data and commercial publications
to determine market trends;
4. Anticipate future preferences on the types and number of plants to grow; and
11

5. Promote plants which you or other colleagues consider outstanding

5.11 Risk analysis

Compared to many agricultural crops, greenhouse or nursery crops offer the
opportunity to produce a fair amount of income on small acreage. With this income
potential, however, come sizable risks. Risk results from the inability to predict the
future accurately. Sources of risks that may affect the growers income are
production, marketing, financial, legal, environmental, and human resource risks.
Production risk concerns variation in output arising from many uncontrollable
events such as weather (wind, rain, hail, etc.) insects and pests, technical
challenges, diseases, input quality and availability. Fire, theft, and other casualties
are also sources of production risk.
Marketing risk
concerns price risk and the availability of markets. Price risk is
related to the variability of the price of commodities or the price of inputs, and to
unanticipated forces that lead to dramatic changes in retail and wholesale prices.
Financial risk has three basic components: interest rate risk, liquidity, and
solvency. Interest rate risk concerns the cost of short-term, intermediate, and longterm debts. Liquidity concerns the ability of a business to pay its cash obligations in
a timely fashion.
Legal and environmental risk results from changes in policies and regulations
that affect greenhouse and nursery business. For example, changes in government
rules regarding the use of pesticides, tax, trade, environmental, or credit policy may
alter the cost of production.
Human resources risks may result from events associated with greenhouse
operators and their families, professional consultants, and employees (e.g., theft,
accidents, death, divorce, injury, seasonal labor needs, or poor health of key
personnel).

CRITICAL FACTORS

Individuals considering entering the nursery business need to carefully consider the
following factors:
1. Networking with other growers and farmers from all over the country would
be necessary to meet any excess requirement or shortfall
2. Consistent quality of plants with complete knowledge of plant variety
3. Availability of skilled manpower

12

INSTALLED AND OPERATIONAL CAPACITIES

For this project it is assumed that the production will start from the very first year
for the products like pots, plants grown through cuttings, varieties along with
purchases from other whole salers and propagators.

PRODUCTION PROCESS FLOW

Basis Infrastructure
Plant and Variety Selection

Development and Growth

Distribution

Fruit Plants Nursery Plants

Forest Plants Nursery Plants
9

PROJECT COST SUMMARY

A detailed financial model has been developed to analyze the commercial viability
of Nursery Project under the Prime Ministers Youth Business Loan program.
Various cost and revenue related assumptions along with results of the analysis are
outlined in this section.

9.1 PROJECT ECONOMICS

All the figures in this financial model have been calculated for Nursery Production
annual production of around 20,000 Plants.
The following table shows internal rate of return and payback period.
Returns on the scheme and its profitability are highly dependent on quality of plants
and selection of varieties, suitable location, good farming practices and availability
of trained staff.

The project will not be able to cover the potential demand of

13

consumers and recover payments, if these factors are not efficiently managed and
will also lead to increased operating cost.
Table 1 Project Economics

Description
Net Present Value (NPV)
Benefits Cost Ratio (BCR)
Internal Rate of Return (IRR)
Payback Period (years)

Details
Rs. 3,128,750
1.81
40%
3.41

9.2 PROJECT FINANCING

Following table provides details of the equity required and variables related to bank
loan;
Table 2 Project Financing

Description
Total Equity (10%)
Bank loan (90%)
Mark up to borrower (per
annum)
Tenure of Loan (Years)
Grace Period (years)

9.3

Details
Rs. 244,970
Rs.1,982,030
8%
8%
1

PROJECT COST

Following requirements have been identified for operations of the proposed

business.
Table 3 Capital Investment for the Project
Required Capital
Amount
2 Green houses 3000 SFT each
500,000
Water Storage Tank
10,000
Pots
45,000
Equipments
20,000
Water Bore
125,000
Peter Pump
100,000
Office and Equipments
150,000
Misc. Expenses
30,000
Total Capital Cost
980,000

9.4 RAW MATERIAL REQUIREMENTS

Table 4 Cost of Material

Item

Unit

Qty

Rate
(Rs)

Amount

14

Land (Leased /
Rental
basis)
50,000
Plants
Manure
Special Soil

No
Trolley
Trolley

Polythene
Bags/Trays/Pots
Total

20000
15
5

20
2000
2000

No

50000
400,000
30,000
10,000
100,000
590,000

9.5 HUMAN RESOURCE REQUIREMENT

Table 5 Human Resource Requirement

Descriptio
n

Nos.

Expert
1
Skilled
Labour
2
Total
per
month
Total
per
year

Salary/employee/
month
25,000
20,000
35,000
420,000

9.6 REVENUE GENERATION

Sale of fruit and forest plant will mostly be during mid January to end of March and
in august during monsoon period in some parts of the country. Vegetable nursery
plants will be sold during rabi and kharif period while ornamental plants can
continue throughout the year.

9.7 WORKING CAPITAL REQUIREMENTS

It is estimated that an additional amount of approximately Rs. 298,662 will be
required as cash in hand to meet the initial working capital requirements during
operations. The requirement is based on the utilities, salaries, raw material
inventories and miscellaneous expense for at least three months. The following
table gives the break up.

15

Table 6 Project Economics per year

Products

Unit
15,00
0

Fruit Plants (4 kanal)

Forest plants (4 kanal)
1.

Saplings

2.

Cuttings

Sales
Price
(Rs./Unit)

80,00
0
20,00
0

Total Sale in second

with full capacity

50

Amoun
t (Rs)
750,00
0

15

1,200,0
00

40,000

year

1,990,
000
995,00
0

Table 7 Working Capital Requirement

Mont
hs

Items
Utilities
Salaries
Miscellaneous
Expense
Total

Monthly
Charges
(Rs.)

6
6

12,000
210,000

15,000
237,000

Table 8 Key Assumption

Particulars
Sales Price Growth Rate
Increase in cost of raw material
Increase in utilities
Debt/Equity Ratio
Loan Period
Grace Period
Loan Installments
Financial charges (interest rate)

Assumption
4% per year
5% per year
5% per year
90:10
8 years
1 year
Monthly
8%

16

Lay out plan for 8 kanal Land Area

50,000 polythene
bags per kanal

3000 Medium
Pots Per kanal
Fruit plants

1500-2000
average large
Pots per kanal

Propagation Area

Larger Plants

Water Storage

Raw material and

Store Room

I Kanal = 20 X
273= 5460 Sq.ft
Two
Gouses

Office and Front

Sitting area

Green
Display

Display

One green house

can
accommodate
3000 plants

17

Table 9 FINANCIAL STATEMENT in PKR

Ye
ar
0

Capit
al
Cost

Infrastruct
ure Oper.
and Maint.

12170
00

Plants
& Raw
Materi
al

Human
Resour
ce

59000
0

42000
0

590000

420000

25000

619500

441000

26250

650475

463050

27563

682999

486203

28941

717149

510513

30388

753006

536038

31907

790656

562840

33502

830189

590982

Total
Cost
22270
00
10100
00
10855
00
11397
75
11967
64
12566
02
13194
32
13854
04
14546
74

Gross
Benefit
0
199000
0
199000
0
206960
0
215238
4
223847
9
232801
9
242113
9
251798
5

Cash
flow
22270
00
98000
0
90450
0
92982
5
95562
0
98187
7
10085
87
10357
36
10633
11

Interes
t

Income
after
Interes
t
Payme
nt

131076

848924

306447

598053

101000
0
100509
3

306447

623378

977173

306447

649173

950030

306447

675430

923640

306447

702140

897983

306447

729289

873039

306447

756864

848788

PV
Cost

PV
Benefit

199000
0
184259
3
177434
8
170863
2
164534
9
158441
0
152572
8
146922
0

Technical Resource Persons

Dr. Khalid Mahmood Qureshi 051-8443751

0300-5241628

kmq_2008@hotmail.co.uk

Dr. Hafeez-ur-Rahman

0301-5462535

askhafeez594@yahoo.co.uk

051-8443760

18

Dr. Imtiaz Ahmad Qamar

051-8443668

0303-5091922

iaqamar@gmail.com

19