Pre-Feasibility Study

COLD STORAGE
(Fruit & Vegetable)

Small and Medium Enterprises Development Authority

Ministry of Industries & Production
Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
4th Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road,
Lahore
Tel: (92 42) 111 111 456, Fax: (92 42) 36304926-7
helpdesk@smeda.org.pk
REGIONAL OFFICE
PUNJAB

REGIONAL OFFICE
SINDH

REGIONAL OFFICE
KPK

REGIONAL OFFICE
BALOCHISTAN

3rd Floor, Building No. 3,

Aiwan-e-Iqbal Complex,
Egerton Road Lahore,
Tel: (042) 111-111-456
Fax: (042) 36304926-7
helpdesk.punjab@smeda.org.pk

5TH Floor, Bahria

Complex II, M.T. Khan Road,
Karachi.
Tel: (021) 111-111-456
Fax: (021) 5610572
helpdesk-khi@smeda.org.pk

Ground Floor
State Life Building
The Mall, Peshawar.
Tel: (091) 9213046-47
Fax: (091) 286908
helpdesk-pew@smeda.org.pk

Bungalow No. 15-A

Chaman Housing Scheme
Airport Road, Quetta.
Tel: (081) 831623, 831702
Fax: (081) 831922
helpdesk-qta@smeda.org.pk

February 2009

Pre feasibility Study

Cold Storage (Fruit & Vegetable)

TABLE OF CONTENT

INTRODUCTION TO SMEDA ......................................................................4

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

PROJECT PROFILE ......................................................................................4

3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
3.11
3.12
3.13

PROJECT BRIEF ............................................................................................4

STORAGE OF POTATO ...................................................................................5
OPPORTUNITY RATIONALE ...........................................................................6
MARKET ENTRY TIMINGS.............................................................................7
PROPOSED LOCATION ...................................................................................7
PROPOSED BUSINESS LEGAL STATUS ............................................................7
LEGAL BENEFIT ............................................................................................7
PROPOSED CAPACITY ...................................................................................8
PROJECT INVESTMENT ..................................................................................8
PROPOSED PRODUCT MIX ..........................................................................8
RECOMMENDED PROJECT PARAMETERS .....................................................8
KEY SUCCESS FACTORS/ PRACTICAL TIPS FOR SUCCESS.............................8
STRATEGIC RECOMMENDATIONS ...............................................................9

4 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR

INVESTMENT.......................................................................................................9
4.1 SWOT ANALYSIS ........................................................................................9
4.1.1 Strengths and Opportunities..................................................................9
4.1.2 Weaknesses and Threats .......................................................................9
5

SECTOR & INDUSTRIAL ANALYSIS.......................................................10

5.1
5.2

GLOBAL PERSPECTIVE ................................................................................10

LOCAL PRESPECTIVE ..................................................................................12

MARKET INFORMATION .........................................................................13

6.1
6.2

MARKET POTENTIAL...................................................................................13
TARGET CUSTOMER .................................................................................... 13

COLD STORAGE TYPES AND INFRASTRUCTURE.............................. 14

7.1
7.2

TRADITIONAL TYPE COLD STORAGE ...........................................................14

PRE-FABRICATED COLD STORAGE ..............................................................15

PRODUCT PROCESS FLOW......................................................................16

HUMAN RESOURCE REQUIREMENTS ..................................................16

10

MACHINERY/EQUIPMENT DETAILS..................................................17

11

LAND AND BUILDING ............................................................................17

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11.1
11.2
11.3
12

Cold Storage (Fruit & Vegetable)

LAND...................................................................................................... 17
INFRASTRUCTURE REQUIREMENTS ...........................................................18
BUILDING LAYOUT ................................................................................. 18

PROJECT ECONIMICS ........................................................................... 19

12.1
12.2

PROJECT COSTS ......................................................................................19

ESTIMATED TIME FRAME FOR PROJECT COMPLETION ................................19

13

FINANCIAL ANALYSIS........................................................................... 20

14

KEY ASSUMPTIONS................................................................................23

14.1
14.2
14.3

CAPACITY ...............................................................................................23
OPERATIONAL CAPACITY ........................................................................ 23
REVENUE RELATES ASSUMPTION ............................................................ 23

Pre feasibility Study

Cold Storage (Fruit & Vegetable)

1 INTRODUCTION TO SMEDA
The Small and Medium Enterprise Development Authority (SMEDA) was
established with the objective to provide fresh impetus to the economy through the
launch of an aggressive SME support program. Since its inception in October 1998,
SMEDA had adopted a sectoral SME development approach. A few priority sectors
were selected on the criterion of SME presence. In depth research was conducted
and comprehensive development plans were formulated after identification of
impediments and retardants. The all-encompassing sectoral development strategy
involved recommending changes in the regulatory environment by taking into
consideration other important aspects including financial aspects, niche marketing,
technology upgradation and human resource development.
SMEDA has so far successfully formulated strategies for sectors including, fruits
and vegetables, marble and granite, gems and jewelry, marine fisheries, leather and
footwear, textiles, surgical instruments, urban transport and dairy. Whereas the task
of SME development at a broader scale still requires more coverage and enhanced
reach in terms of SMEDAs areas of operation.
Along with the sectoral focus a broad spectrum of business development services is
also offered to the SMEs by SMEDA. These services include identification of viable
business opportunities for potential SME investors. In order to facilitate these
investors, SMEDA provides business guidance through its help desk services as well
as development of project specific documents. These documents consist of
information required to make well-researched investment decisions. Pre-feasibility
studies and business plan development are some of the services provided to enhance
the capacity of individual SMEs to exploit viable business opportunities in a better
way. This document is in the continuation of this effort to enable potential investors
to make well-informed investment decisions.

2 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 various aspects of project concept development, startup, and production, finance and business management.

3 PROJECT PROFILE
3. 1

Project Brief

All fruits and vegetables require specialized post harvest treatment, appropriate
temperature and relative humidity for their storage. Establishment of cold storage
provides refrigerated storage and preservation facilities for several fruits, vegetables
& flowers. Because of technology advancements and logistic strategies, the cold
storage of perishable items has become an important stage in the distribution
between manufacturers/processors and retail locations. The cold storage will ensure
the increased availability and improved quality of high value perishable fruits and
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Cold Storage (Fruit & Vegetable)

vegetables for both export and local sale, which would otherwise perish or
deteriorate.
This project is designed for storing of potatoes and apples/ kinnu but it can be used
to store multiple products, stored in different compartments of the unit, where
relative temperatures for respective products can be maintained. The major clientele
of this business will be the export houses and the local trading and marketing units
of potato and apple/ kinnu. The project will further aim at storing fruits & vegetables
even during off-seasons. The project will ultimately assist the clientele in
maintaining market price equilibrium throughout the year for potatoes.
3. 2

Storage of Potato

The purpose of potato storage is to maintain tuber quality and provide a uniform
flow of tubers to fresh market and processing plants round the year. Good storage
should prevent excessive dehydration, decay and sprouting. It should also prevent
high sugar concentrations which result in dark colored fried products. Following are
the requisites for efficient potato storage:
Adequate insulation
Outside waterproofing
Inside vapor proofing
Ventilation
Air distribution
Adequate humidification
Properly designed controls for precisely maintaining the storage atmosphere.
Temperature, humidity, and air movement are the most important environmental
factors affecting storability. Temperature requirements are determined by the
intended use of the potatoes. Tubers should always be kept in the dark since very
small amounts of light will gradually cause greening. Lights should not be used more
than absolutely necessary. Surface greening is due to chlorophyll formation and is
harmless. However, its presence in potatoes is undesirable because of marketing
restrictions and the fact that at times an alkaloid called solanine increases with the
chlorophyll. Solanine and other glycoalkaloids cause potatoes to have a bitter,
undesirable flavor. Greening develops slowly in the light at 40F or below but
develops rapidly at 68F.
Potatoes are usually held in bulk piles 8 to 20 feet deep. Some are stored in pallet
boxes for short periods. Pressure bruise and internal black spot are substantially
lower with pallet storage but decay is often increased because of poor air circulation
within boxes/bags.
The proposed project contains racking system build up by using good quality steel
and wooden logs. These racks provide space for placing the potato bags & apple/
kinnu crates with sufficient intra spaces for air circulation.
Early harvested potatoes are usually stored only briefly if at all. Such tubers are quite
perishable and damage easily because of immature skins. Early potatoes free from
serious bruising and decay can sometimes be held 4 to 5 months at 40F for table use
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Cold Storage (Fruit & Vegetable)

if they are cured 4 or 5 days at 55 to 65F to heal wounds before storage. However,
early crops should usually be sold immediately because of poor storability and
typically high early season prices.
Most late potatoes are stored. Storage temperature depends on crop use. A relative
humidity of 90 to 95% is typically recommended regardless of temperature regimes.
3. 3

Opportunity Rationale

Securing an adequate food supply has been the fundamental concern of mankind and
so has been the preservation of food. The loss of food in the post-harvest system is
not new; it has always been a problem for man, even in the highly scientific and
technological world of today. Among all the major problems persistent in the world
regarding the fulfillment of the basic needs of people, food requirement stands at the
top, as without ensuring satisfactory diets, people cannot lead healthy and productive
lives.
In these present times of high population growth rates, food supply has become
diminutive. For filling this gap between demand and supply, there is a need to
conserve the food supply, in order to meet the growing and existing food
requirements, especially fruits and vegetables, as these are more perishable.
The problem related with food loss is more prevalent in the less developed world as
compared to the developed world. The developed countries have curbed the loss of
food to a great extent by adopting new technologies and ways of storing food. Some
examples of such measures are adoption and development of better harvesting
equipment; establishment of collection centers at strategic points in major crop
producing areas; remodeling of containers to add more protection to the produce;
and more importantly the development of commercial storage plants/cold storages.
As far as the scenario of food losses in Pakistan is concerned, Pakistan produces a
variety of fruits and vegetables like potato, apple, mangoes, dates, banana, cherries,
apricots, pomegranates, peas, carrots, etc. Pakistan's total annual production of fruits
amounts to nearly 6 million tons and that of vegetables to approximately 5.3 million
tons. However, it is estimated that in Pakistan 25% of fruits & vegetables produced
each year are lost because of poor harvest conditions. This loss if calculated
approximately amounts to 2.7 million metric tons and its estimated local market
value reaches somewhere near US $ 522 million. The major reasons for this loss are
careless harvesting, rough handling, inadequate transportation, and storage facilities.
If we only look at the losses due to lack of storage facilities, it alone reaches 1.24
million metric tons, which values to nearly US $ 239 million1.
Furthermore, the purpose of storage of vegetables and fruits is to preserve and
maintain the edible quality characteristics until they are consumed in the fresh state,
which the cold storage serves.

Source: FBS and FAO

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Pre feasibility Study

3. 4

Cold Storage (Fruit & Vegetable)

Market Entry Timings2

The harvest season for potato is from December to February and of apple is from
July to November so the best time to enter in the cold storage business is December.
3. 5

Proposed Location

For retail sales, location of the cold storage must be near a major road, and the area
must have adequate parking space. Proposed locations for cold storage could be
from Kasur to Depalpur as potatoes are grown on this belt, apples are brought from
Quetta & Kinnus are brought from Sargodha. Location of the cold storage should be
done by keeping in view the following factors:

A cold storage facility must be in a well-drained area. It requires drains to

remove water from condensation, and cleaning and sanitation operations.
Providing good drainage is essential.
Availability of water
Availability of Electricity
Three phase of electricity is necessary when more than 10 tons of refrigeration is
needed.
Wastewater disposal facility
Appropriate sewage collection and disposal system must be considered.

If any of above facility is not available the arrangement for the same must be done
prior to construction of cold store.3
3. 6

Proposed Business Legal Status

It is recommended that this project should be started as sole proprietorship or

partnership. Moreover, less complications and costs are involved informing,
administering and running the sole proprietorship or partnership business. The tax
rate applicable for sole proprietorship is lower than private or public limited. Most of
the cold storages in the country are operating as sole proprietorship or partnership
basis.
3. 7

Legal benefit4

A scheme is launched by Trade Development Authority of Pakistan, it is called,

Cool Chain and Cold Storage for horticulture Products will come into operation
with immediate effect. Business concerns selected for financial assistance under this
scheme will be allowed following incentives.
Mark-up cost of loans obtained by business concerns for establishment of cool chain
infra-structure will be picked-up by the Trade Development Authority of Pakistan
through the Export Development Fund (EDF) up to a maximum of 8% or 50%
(whichever is less).

Pakistan horticulture and export board, harvest calendar

Pakistan horticulture and export board
4
Trade Development Authority of Pakistan
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Pre feasibility Study

3. 8

Cold Storage (Fruit & Vegetable)

Proposed Capacity

The proposed cold storage facility has a maximum storage capacity of storing 60,000
bags of potato or 180,000 crates of apple at any given time. It will be operational for
potato storing period from February to July and will be available for apple/ kinnu
storage in December & January. It is also proposed that owner should maintain a
stock of 7,200 bags of potato (15% of total capacity and keep on increasing the
capacity by 5% uptil 30%) of his own that will earn extra profits in peak season and
remaining 85% capacity will be utilized on rental basis.
3. 9

Project Investment

The proposed project of potato cold storage needs a capital investment of about Rs.
75,214,920, which includes Building (civil work), machinery, Insulation of
Expanded Polystyrene (EPS or Thermopore) with Plaster layer, Racking and preoperational expenses of Rs. 2,908,000. Rs. 7,136,000 would be required as working
capital and cash requirement for purchase of 7,200 potato bags. The total project cost
amounts to Rs. 82,350,920.
3. 10

Proposed Product Mix

In the proposed cold storage there would be a capacity to store 60,000 bags of potato
from February to July and 180,000 apple/kinnu crates would be stored in December
& January.
3. 11

Recommended Project Parameters

Capacity
60,000 potato bags /
180,000 apple/ kinnu
crates
Project cost
Rs. 82,350,920
3. 12

Human Resource
10
IRR
26.49%

Technology/ machinery
Ammonia Gas Cold Store

NPV
54,529,922

Pay back period

4.69

Key Success Factors/ Practical Tips for Success

Following are some of the major factors, which contribute towards the success of the
potato cold storage.
Better insulation technology and compartmentalization of cold storage as
compared to the rest of the cold storages in Pakistan.
Energy efficient construction hence low operating/fuel costs due to efficient
insulation.
Compartmentalization i.e. compartments has the provision of storing different
commodities at their respective temperatures.

Pre feasibility Study

3. 13

Cold Storage (Fruit & Vegetable)

Strategic Recommendations
It is recommended to develop a chain of dealers who put potato bags and
apple/ kinnu crates on regular basis. The dealer deposits a guarantee in the
shape of cash security, keeping in view the number of bags/ crates taken out
from cold storage on agreed terms. In case the dealer is unable to pick the
agreed number of bags/ crates on a particular day, the amount is deducted
from his security.
For earning higher profits it is recommended to the seller that he should send
fruit & vegetable to Karachi, Lahore & Islamabad for sale.

CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR

INVESTMENT
SWOT Analysis

4. 1

A SWOT Analysis is a strategic planning tool used to evaluate the Strengths,

Weaknesses, Opportunities, and Threats involved in a project or business venture.
Strengths and weaknesses are internal to the company whereas the opportunities and
threats originate from the external environment. A SWOT analysis is usually
performed early in the project development process, and helps organizations
evaluate the environmental factors and internal situation facing a project.
4.1.1

4.1.2

Strengths and Opportunities

Fairly good price.
Use of machinary that is durable and fesible.
Low operational cost because of energy efficient construction.
Compartmentalization provide opportunity to store diferent commodities at
their respective temperatures.
Extend product range.
By using effective marketing strategies cold storage business can attract more
growers and traders.
The establishment of wholesale market and cold storage facilities would
enhance the pace and volumes of business by providing market place for
commercial transactions for the domestic and international trade.
Sufficient quality control and reduction of waste will directly enhance
availability of the produce. Further, the cold storage facilities would result in
supplies during off-season which otherwise may not be possible.
Timely placement of products in the cold storage will help preserve their
quality and improve shelf life. It will also avoid food contamination caused
by microbial activity thus assuring availability of quality food products.
Weaknesses and Threats
Irregular government policies e.g., abnormal tax increase.
Fluctuation or unexpected increase in electricity tariff.
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Cold Storage (Fruit & Vegetable)

Failure of potato crops due to natural calamity.

Ruthless competition by other business adversaries.

5 SECTOR & INDUSTRIAL ANALYSIS

5. 1

Global Perspective

Worldwide average food grain losses have been put at 5 percent. In the developed
countries, losses have been generally at 1 percent while 10 to 30 percent losses have
been reported for developing countries5. Increase need for potato cold storages is
because of increase in the demand of potatoes through out the world. It is caused by
following factors:
Increase in purchasing power
Increase in population.
Mishandling and wastage of fruits & vegetables.
The world potato sector is undergoing major changes. Until the early 1990s, most
potatoes were grown and consumed in Europe, North America and countries of the
former Soviet Union. Since then, there has been a dramatic increase in potato
production and demand in Asia, Africa and Latin America, where output rose from
less than 30 million tonnes in the early 1960s to more than 165 million tonnes in
2007. FAO data show that in 2005, for the first time, the developing world's potato
production exceeded that of the developed world. China is now the biggest potato
producer, and almost a third of all potatoes is harvested in China and India.
Table 5-1: World potato production 1999-20076
1999

2001

2003
2005
Million tonnes

Countries
Developed
Developing
World

165.93
135.15
301.08

166.93
145.92
312.85

160.97
152.11
313.08

159.97
160.01
319.98

2007
159.89
165.41
325.30

Table 5-2: Top potato producers, 20077

QUANTITIES (Tonnes)
72,040,000
36,784,200
26,280,000
20,373,267

China
Russian fed.
India
United state
5

Trade Development Authority of Pakistan

FAOSTAT
7
FAOSTAT
6

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Cold Storage (Fruit & Vegetable)

Ukraine
Poland
Germany
Belarus
Netherlands
France

19,102,300
11,791,072
11,643,769
8,743,976
7,200,000
6,271,000

Table 5-3: Potato production by region, 20078

Africa
Asia / Oceania
Europe
Latin America
North America
World

Harvested area
hecters
1,541,498
8,732,961
7,473,628
963,766
615,878
19,327,731

Quantity
tonnes
16,706,573
137,343,664
130,223,960
15,682,943
25,345,305
325,382,445

Yeild
Tonnes/hecters
10.8
15.7
17.4
16.3
41.2
16.8

Asia and Europe are the world's major potato producing regions, accounting for
more than 80 percent of world production in 2007. While harvests in Africa and
Latin America were far smaller, production was at or near record levels. North
America was the clear leader in yields, at more than 40 tonnes per hectare.
Table 5-4: Potato consumption by region, 20059
Population
Africa
Asia / Oceania
Europe
Latin America
North America
World

Consumption
Total food (t)
Kg per capita
12,571,000
13.9
94,038,000
23.9
64,902,000
87.8
11,639,000
20.7
19,824,000
60.0
282,974,000
31.3

904,388,000
3,934,644,000
739,203,000
562,270,000
330,400,000
6,484,792,000

Asia consumes almost half of the world's potato supply, but its huge population
means that consumption per person was a modest 24 kg in 2005. The heartiest potato
eaters are Europeans. Per capita consumption is lowest, but increasing, in Africa and
Latin America.
Asia and Oceania includes the world's potato giant, China, which accounts for more
than 20 percent of both the global potato-growing area and the world potato harvest.
Several other Asian countries - Bangladesh, India, the Islamic Republic of Iran,
Japan and Turkey - also figure in the world's top 20 potato producing countries.
8
9

FAOSTAT
FAOSTAT

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Cold Storage (Fruit & Vegetable)

Some of the world's best yields are recorded in New Zealand - on average, around 50
tonnes per hectare. Total harvested area is 8 732 961 ha, total quantity produced is
137 343 664 t, yield 15.7 t/ha.
Table 5-5: Asias top potato producers10
Sr.no.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
5. 2

Countries
China
India
Islamic Rep. of Iran
Bangladesh
Turkey
Japan
Pakistan
Kazakhistan
Nepal
Korea DPR

Local prespective

Although potato was grown on the Indian subcontinent from the late 16th or early
17th centuries, at Pakistan's foundation in 1947 cultivation was restricted to a few
thousand hectares and total annual output was less than 30,000 tonnes.
In the decades since independence, the aalu has become the country's fastest
growing staple food crop. Thanks to strong gains in cultivated area and average
yields - both made possible mainly by irrigation - output rose between 1995 and
2007 from one million to a record of more than 2.6 million tonnes. The lion's share
of potato production comes from the Punjab, where spring and autumn crops account
for 85 percent of the national harvest.
Apart from some subsistence growers in the north, most Pakistani farmers produce
for urban markets rather than household consumption, and the potato has become a
significant source of rural income (worth some $300 million in 2005). At present,
annual intake is around 11 kg per capita.
In year 2007, Pakistan total harvested area is 131,900 ha, quantity produced is 2,622
300 t, yeild is 19.9 t/ha11. Approximately 12 percent of the 13.67 million tons of
annual production of fruits and vegetables in the country is lost due to primitive and
poor techniques of handling between farms and the end-consumers In Pakistan, out
of 13.674 million tones of fruits and vegetables produced annually, it is estimated
that about 35 to 40 percent are wasted. This wastage creates the demand for proper
handling through cold storages12.
10

FAOSTAT
FAOSTAT
12
Trade Development Authority of Pakistan
11

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Cold Storage (Fruit & Vegetable)

There are total 533 cold storages in Pakistan which have installed capacity of
892,000 tons13 out of which 104 units of cold storage/ ice factory having installed
capacity of 1,905,907 bags/ crates, 25,208 blocks/ day are in proposed location
Okara.14
Table 5-6: cold storages in different provinces of Pakistan15
Provinces

No. of cold storages

503
16
12
2
533

Punjab
NWFP
Sindh
Balochistan
Total

6 MARKET INFORMATION
6. 1

Market potential

Most of the existing local Cold Storages are constructed on locally developed
methods, which maintain a uniform temperature for all commodities stored. The
goods are not stored at their recommended relative storage temperatures and life, and
because of this the quality of stored commodity is badly affected. Potatoes require
specialized post harvest treatment, appropriate temperature and relative humidity
control for their proper & optimum storage, which most of the existing local cold
stores lack.
6. 2

Target customer

Following are the potential customers of cold storage:

Growers
Traders
Table 6-1: Major players of Lahore & surroundings16
Name
Iqra cold storage
Kisan cold storage
Malik combine cold storage (Pvt) ltd.

Address
Chun Group of Industries,Crol
Ghaati,Bund Road,Lahore
Plot No.07,Phalia Road , Mandi
Bahauddin
Near Mehmood Booti Chungi, Bund road,
Lahore

13

Dr. Khalid, Chairman of marketing & agri business, University of agriculture, FSD
pre- investment study on Okara district 2006, directorate of industries Punjab, Lahore
15
Pakistan horticulture development & export beaurue
16
www.jamals.com , www.lcci.com.pk
14

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Cold Storage (Fruit & Vegetable)

Rafiq cold storage

Saudagar thermopole industries
Roshan Rameeez cold storage
Bao Mohammad Rafique cold storage
The premier cold storage & general
mills limited
Zamindar cold storage
Sarwar cold storage
Tahir ice & cold storage Pvt Ltd.
Haq cold storage (Pvt) ltd.

Fareed town, Sahiwal

49-A, Palace market,3-Cooper road,
Lahore
New fruit market, link Ravi road, Lahore
Bogiwal road, Karool Ghati, near Bano
road, Lahore
213-RB,Susan Road, Faisalabad
Pasrur road, daska
8 Depalpur road, Bahadur pura, Kasur
Badami bagh, Lahore
7-G, Fruit market, Ravi road, Lahore

Table 6-2: Major suppliers of machinery17

Name of Suppliers

Contact Person

Pakistan Air Conditioning

Engineering Co. (Pvt) ltd.

M. Younas Qureshi
(chief executive)

Dastgir engineering
company

Mr. Taqi Raza

Address of Suppliers
Gardee trust building,
Naiper road, Lahore
Factory: Bund road, Lahore
Tel:7226261-7358497
12-A, Lahore road, near
Jamia Manzoor ul Islamia,
Saddar, Cantt, Lahore
Tel: 6665140, 6665202

7 COLD STORAGE TYPES AND INFRASTRUCTURE

There are two types of cold storages being used in Pakistan
1. Traditional type cold storage (Insulated brick walls)
2. Pre-fabricated cold storage (Walk in type)
Traditional Type Cold Storage

7. 1

This type of cold storage is being used in many areas of Pakistan. The construction
include following components:

17

Civil work
Two types of building may be constructed depending on the external
environmental temperature and product type. It might be double wall having
4-6 inch gap between two walls or single wall having 9 inch thickness.

www.jamals.com , www.lcci.com.pk

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Insulation
The insulating material that is traditionally used is Expanded Poly-Styrene
(Thermopore) having a thickness of 4-6 inches. A recent development in
insulating material is Poly-Urethane. The later is 4-6 times efficient than the
former.

Refrigeration system
Two types of refrigeration systems are used depending on product type and
cold storage area.
a. Ammonia Based System
This type of system is manufactured locally. After sale services and spare
parts are readily available. This also contributes low capital investment.
No need of highly skilled operators.
b. Freeon Based System
This system normally utilizes imported compressors. High initial cost and
require highly skilled operator for smooth operation.

7. 2

Racking
This includes combination of steel racks and wood logs etc. for storing of
potato or any other products.
Pre-Fabricated Cold Storage

This type of cold storage is being used for delicate products that are mainly focused
for export purposes. Polyurethane injected panels are manufactured at factory and
are fixed together at project site using panel locking system. This type of clod
storage requires less civil work (only roof for low heights). The initial cost is higher
than the traditional cold storage (more than double). This cold storage provides
better hygienic environment for delicate food products and have easy future
expansion feature. The cold storage building consists of Pre-fabricated refrigerated
(Walk-in type) structure. This type of structure is highly superior to any form of
refrigerated storage construction previously available in Pakistan due to its better
technology and energy efficiency. Polyurethane insulated panels are used to erect the
building because these panels are metal clad and can be easily dismantled for
relocating the cold storage site. The cold storage building has a roof of insulated
corrugated sheet of galvanized mild steel to protect it from direct sun and rain. The
floor has a surface of polyurethane insulated galvanized steel material. The floor is
strong enough to withstand the distributed load. An automatic monitoring system is
installed in the storage compartments for maintaining relative humidity and
temperature and to eliminate any chances of human error during the refrigeration
period.

15

Pre feasibility Study

Cold Storage (Fruit & Vegetable)

8 PRODUCT PROCESS FLOW

The working of the Cold Storage will be as follows:
Potato Bags received
from the customer

Receiving/
Conditioning
Chamber

Commodities placed
in storage
compartments

Commodities
Transported

Distribution/
Conditioning Chamber

9 HUMAN RESOURCE REQUIREMENTS

The project would require following Human Resources/Staff:
Table 9-1: Human Resource Requirement
Designation
Store Manager
Shift In charge
Plant Operator
Accountant
Security Guards
Sweepers
Total

No. of
Employees
1
1
3
1
2
2
10

16

Monthly
Salary (Rs.)
35,000
20,000
12,000
18,000
8,000
7,000

Annual Salary
(Rs.)
420,000
240,000
432,000
216,000
192,000
168,000
1,668,000

Pre feasibility Study

Cold Storage (Fruit & Vegetable)

10 MACHINERY/EQUIPMENT DETAILS
The type of equipment needed for the cold storage is as under:
Table 10-1: Machinery & Equipment Required
1. Machinery (Ammonia
Refrigeration System)
Origin
Power
Cost
2. Steel Racks
Steel (tons)
Rate/ton
Cost Rs.
Wooden Ballay
Labor Cost
Sub Total
3. Insulation
Area (Sq. ft)
Insulation Rate
Cost
Mesh and Plaster rate
Cost
Sub Total

Option 1

Option 2

PAECO (Local)
200 HP
13,000,000

Grasso (Holland)
200 HP
20,000,000

180
70,000
12,600,000
6,500,000
1,000,000
20,100,000

180
70,000
12,600,000
5,100,000
1,000,000
18,700,000

Option 1 (Thermopore)
61,884
75
4,641,300
50
3,094,200
7,735,500

Option 2 (Polyurethane)
61,884
300
18,565,200
Not Required
Not Required
18,565,200

3,000,000
43,835,500

3,000,000
60,265,200

4. Generator
Total Plant &
Machinery

Keeping in view the requirement and project cost option 1 has been selected for
potato cold storage. The further calculations have been done accordingly.

11 L A N D A N D B U I L D I N G
11. 1

Land

It is recommended that the new storage facility site be located as close to the fields
as possible, minimizing handling, preserving product quality and limiting transport
costs. The site for proposed business place could be on Kasur to Depalpur belt.
Approximately 1 Acre of land would be required for this cold storage.
17

Pre feasibility Study

11. 2

Cold Storage (Fruit & Vegetable)

Infrastructure requirements

The project will have the following infrastructure components:

Table 11-1: Infrastructure Details
Building

Area

Cold Storage
Parking/Open Area
Other construction (Boundary wall, Sub
station, OH water tank, Generator Room,
WAPDA meter room etc.
Total
Design & Consultancy Charges @ 3%
Total Infrastructure Cost
11. 3

19,095
5,000

Rs. /
Sq.ft.
1,200
200

1,000,000
24,095

Building Layout

The tentative lay out of the proposed building is as follows:

18

Total Cost
(Rs.)
22,914,000
1,000,000

24,914,000
747,420
25,661,420

Pre feasibility Study

Cold Storage (Fruit & Vegetable)

12 PROJECT ECONIMICS
12. 1

Project Costs

The cost of the project will be as follows:

Table 12-1: Project Cost
Head
Land
Building
Plant & Machinery
Office Equipment
Furniture & Fixture
Pre operational expenses, Utilities Charges, & contingencies
Total Assets
Working Capital
Working capital required for Salaries & other expenses
Stock & Inventory
Total Project Cost

Cost (Rs.)
2,650,000
25,661,420
43,835,500
100,000
60,000
2,908,000
75,214,920
656,000
6,480,000
82,350,920

Table 12-2: Project Returns

IRR
NPV
Pay Back Period
12. 2

%
Yrs

26.49
54,529,922
4.69

Estimated time frame for project Completion

The estimated time frame for the completion of the project is eight months.

19

Pre feasibility Study

Cold Storage (Fruit & Vegetable)

13 FINANCIAL ANALYSIS
Table 13-1: Income Statement
PROJECTED INCOME STATEMENT
Year 1
Revenue from Cold Storage Charges
9,792,000
Revenue from Sale of Potatos
12,960,000
Revenue from Apple / Kinnu
11,520,000
Total Sales
34,272,000
Cost of Goods Sold
Cost of Potatos Purchased
6,480,000
Direct Labor
528,000
Utility Charges-Electricity Cost for
3,378,000
Total
10,386,000
Gross Profit
23,886,000
Operating Expenses
Payroll Administration
1,668,000
Misc. (Maintenance, Telephone, Stationary300,000
etc.)
Amortization pre Ops. Exp.
581,600
Promotional Expenses
68,544
Depreciation
6,988,692
Total
9,606,836
Operating Profit
14,279,164
Non Operating Expenses
Financial Charges
7,041,004
Profit before Tax
7,238,160
Tax
1,809,540
Profit after Tax
5,428,620

Year 2
11,151,360
20,908,800
13,939,200
45,999,360

Year 3
12,414,600
31,036,500
16,552,800
60,003,900

Year 4
12,745,656
40,968,180
18,208,080
71,921,916

Year 5
14,020,222
45,064,998
20,028,888
79,114,108

Year 6
15,422,244
49,571,498
22,031,777
87,025,518

Year 7
16,964,468
54,528,648
24,234,954
95,728,070

Year 8
18,660,915
59,981,512
26,658,450
105,300,877

Year 9
20,527,006
65,979,664
29,324,295
115,830,965

Year 10
22,579,707
72,577,630
32,256,724
127,414,061

9,979,200
638,880
3,715,800
14,333,880
31,665,480

14,139,563
758,670
4,080,630
18,978,863
41,025,038

17,815,849
834,537
4,453,068
23,103,454
48,818,462

18,706,641
917,991
4,862,750
24,487,382
54,626,726

19,641,973
1,009,790
5,313,400
25,965,163
61,060,356

20,624,072
1,110,769
5,809,115
27,543,955
68,184,115

21,655,276
1,221,846
6,354,401
29,231,522
76,069,355

22,738,039
1,344,030
6,954,216
31,036,286
84,794,679

23,874,941
1,478,433
7,614,013
32,967,387
94,446,674

1,834,800
330,000
581,600
51,408
6,282,233
9,080,041
22,585,439

2,018,280
356,250
581,600
41,126
5,648,924
8,646,181
32,378,857

2,220,108
356,250
581,600
32,901
5,080,625
8,271,484
40,546,978

2,442,119
356,250
581,600
26,321
4,570,279
7,976,569
46,650,157

2,686,331
356,250

2,954,964
356,250

3,250,460
356,250

3,575,506
356,250

3,933,057
356,250

21,057
4,111,722
7,175,359
53,884,996

16,845
3,699,525
7,027,584
61,156,531

13,476
3,328,886
6,949,072
69,120,282

10,781
2,995,537
6,938,075
77,856,605

8,625
2,695,675
6,993,607
87,453,067

5,558,687
17,026,752
4,256,688
12,770,064

4,076,371
28,302,486
7,075,622
21,226,865

2,594,054
37,952,925
9,488,231
28,464,693

1,111,737
45,538,419
11,384,605
34,153,815

53,884,996
13,471,249
40,413,747

61,156,531
15,289,133
45,867,398

69,120,282
17,280,071
51,840,212

77,856,605
19,464,151
58,392,453

87,453,067
21,863,267
65,589,800

20

Pre feasibility Study

Cold Storage (Fruit & Vegetable)

Table 13-2: Balance Sheet

Year 0
Current Assets
Cash Balance
Working capital required for Salaries & other expenses
656,000
Stock & Inventory
6,480,000
Receivable
Total
7,136,000
Gross Fixed Assets
Net Fixed Assets
72,306,920
Intangible Assets
Pre-operational Expenses
2,908,000
Total
2,908,000
Total Assets
82,350,920
long term loan
41,175,460
Current Liabilities
current portion of long term liability
Accounts Payable
Total
41,175,460
Equity
Paid -up Capital
41,175,460
Retained Earnings
Total
41,175,460
Total Liabilities And Equity
82,350,920

Year 1

Year 2

Year 3

4,530,220
721,600
6,804,000
816,000
12,871,820

15,930,515
791,510
7,144,200
929,280
24,795,505

35,247,110
858,786
7,501,410
1,034,550
44,641,856

65,318,228

59,035,995

2,326,400
2,326,400
80,516,448
24,705,276

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

61,213,717
932,790
7,876,481
1,062,138
71,085,125

91,836,496
1,014,194
8,270,305
1,168,352
102,289,346

135,882,371
1,103,738
8,683,820
1,285,187
146,955,115

184,935,400
1,202,237
9,118,011
1,413,706
196,669,353

239,553,558
1,310,585
9,573,911
1,555,076
251,993,131

300,350,577
1,429,769
10,052,607
1,710,584
313,543,537

369,562,668
10,555,237
1,881,642
381,999,548

53,387,071

48,306,446

43,736,167

39,624,445

35,924,920

32,596,034

29,600,497

26,904,821

1,744,800
1,744,800
85,576,300
16,470,184

1,163,200
1,163,200
99,192,127
8,235,092

581,600
581,600
119,973,172
-

146,025,513

186,579,560

232,594,273

284,589,165

343,144,033

408,904,369

8,235,092
972,000
33,912,368

8,235,092
1,496,880
26,202,156

8,235,092
2,120,934
18,591,118

8,235,092
2,672,377
10,907,469

2,805,996
2,805,996

2,946,296
2,946,296

3,093,611
3,093,611

3,248,291
3,248,291

3,410,706
3,410,706

3,581,241
3,581,241

41,175,460
5,428,620
46,604,080
80,516,448

41,175,460
18,198,684
59,374,144
85,576,300

41,175,460
39,425,549
80,601,009
99,192,127

41,175,460
67,890,242
109,065,702
119,973,172

41,175,460
102,044,057
143,219,517
146,025,513

41,175,460
142,457,804
183,633,264
186,579,560

41,175,460
188,325,202
229,500,662
232,594,273

41,175,460
240,165,414
281,340,874
284,589,165

41,175,460
298,557,867
339,733,327
343,144,033

41,175,460
364,147,668
405,323,128
408,904,369

21

Pre feasibility Study

Cold Storage (Fruit & Vegetable)

Table 13-3: Cash Flow Statement

Year 0
Operating Activities
Profit before tax
Amortization of Preoperational Expenses
(2,908,000)
Working capital required for Salaries & other expenses (656,000)
Depreciation
Stock & Inventory
(6,480,000)
Account Receivable
Account Payable
Income tax paid
Cash provided by operations
(10,044,000)
Financing Activities
Share capital
41,175,460
Long term Loans
41,175,460
Cash Provided/Used for Financing Activities
82,350,920
Investing Activities
Capital Expenditure
(72,306,920)
Cash Used Provided by Investing Activities
(72,306,920)
Net Cash inflow/(outflow)
-

Year 1

Year 2

Year 3

Year 4

Year 5

7,238,160
581,600
(65,600)
6,988,692
(324,000)
(816,000)
972,000
(1,809,540)
12,765,312

17,026,752
581,600
(69,910)
6,282,233
(340,200)
(113,280)
524,880
(4,256,688)
19,635,387

28,302,486
581,600
(67,276)
5,648,924
(357,210)
(105,270)
624,054
(7,075,622)
27,551,687

37,952,925
581,600
(74,004)
5,080,625
(375,071)
(27,588)
551,443
(9,488,231)
34,201,699

45,538,419
581,600
(81,404)
4,570,279
(393,824)
(106,214)
133,619
(11,384,605)
38,857,871

(8,235,092)
(8,235,092)

(8,235,092)
(8,235,092)

(8,235,092)
(8,235,092)

(8,235,092)
(8,235,092)

(8,235,092)
(8,235,092)

4,530,220

11,400,295

19,316,595

25,966,607

30,622,779

22

Year 6
53,884,996
(89,544)
4,111,722
(413,515)
(116,835)
140,300
(13,471,249)
44,045,874
44,045,874

Year 7
61,156,531
(98,499)
3,699,525
(434,191)
(128,519)
147,315
(15,289,133)
49,053,029
49,053,029

Year 8
69,120,282
(108,349)
3,328,886
(455,901)
(141,371)
154,681
(17,280,071)
54,618,159
54,618,159

Year 9
77,856,605
(119,184)
2,995,537
(478,696)
(155,508)
162,415
(19,464,151)
60,797,019
60,797,019

Year 10
87,453,067
1,429,769
2,695,675
(502,630)
(171,058)
170,535
(21,863,267)
69,212,091
69,212,091

Pre feasibility Study

Cold Storage (Fruit & Vegetable)

14 KEY ASSUMPTIONS
14. 1

Capacity
Bags
Bags
Bags
% age
% age
% age
% age

Store's Capacity
Capacity available on rental basis
Stock of own purchased potatoes
First Year Capacity for Potatoes (Rental)
Percentage of own Potato Bags
Annual Growth rate
Maximum Capacity
14. 2

Operational Capacity
Year-1

Operational
Capacity (% age)
Charges/Bag
Operational
Capacity (Rental
Bags)
Operational
Capacity (Owned
Bags)
Operational
Capacity (Crates)

14. 3

60,000
40,800
7,200
85.00%
15.00%
10.00%
95.00%

Year-2

Year-3

Year-4

Year-5

Year-6

Year-7

Year-8

Year-9

Year-10

88%

95%

95%

95%

95%

95%

95%

95%

95%

240
264
290
319
351
386
425
467
514
40,800 42,240 42,750 39,900 39,900 39,900 39,900 39,900 39,900

565
39,900

7,200 10,560 14,250 17,100 17,100 17,100 17,100 17,100 17,100

17,100

80%

144,000 158,400 171,000 171,000 171,000 171,000 171,000 171,000 171,000 171,000

Revenue Relates Assumption

Service Charges Per Bag

Sale Price Growth Rate
Sale Price of own Bag (120 kg)

Rs. 240
10%
Rs.1,800

23