Rice Husking and Polishing Unit Pre-Feasibility

Pre-Feasibility Study
RICE HUSKING AND POLISHING UNIT
Small and Medium Enterprises Development Authority

Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
6th Floor LDA Plaza Egerton Road, Lahore
Tel (042)111 111 456,
Fax: (042) 36304926-7
helpdesk@smeda.org.pk
REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE

PUNJAB SINDH KHYBER PAKTUNKHWA BALOCHISTAN
8th Floor LDA Plaza, 5TH Floor, Bahria Complex II, Ground Floor
Bungalow No. 15-A Chamn
Egerton Road, M.T. Khan Road, State Life Building The Mall, Housing Scheme Airport Road,
Karachi. Quetta.
Lahore. Peshawar.
Tel: (021) 111-111-456 Tel: (081) 2831623, 2831702
Tel: (042) 111 111 456, Tel: (091)111 111 456, 9213046-7
Fax: (021) 5610572 Fax: (081) 2831922
Fax: (042) 36370474 Fax: (091) 286908
helpdesk.sindh@smeda.org.pk helpdesk.balochistan@smeda.org.pk
helpdesk.punjab@smeda.org.pk helpdesk.NWFP@smeda.org.pk
April, 2012
Pre-feasibility Study Rice Husking and Polishing Unit
TABLE OF CONTENT
1. EXECUTIVE SUMMARY ................................................................................ 5
2. INTRODUCTION TO SMEDA ........................................................................ 6
2 PURPOSE OF THE DOCUMENT ................................................................... 6
3 PROJECT PROFILE ......................................................................................... 7

3.1 OPPORTUNITY RATIONALE ...................................................................................... 7
3.2 PROJECT BRIEF ........................................................................................................ 7
3.3 PROPOSED BUSINESS LEGAL STATUS ...................................................................... 8
3.4 PROPOSED CAPACITY .............................................................................................. 8
4 CRUCIAL FACTORS & STEPS IN DECISION MAKING .......................... 8
4.1 STRENGTHS .............................................................................................................. 8
4.2 WEAKNESSES ........................................................................................................... 8
4.3 OPPORTUNITIES ....................................................................................................... 9
4.4 THREATS .................................................................................................................. 9
5 CURRENT INDUSTRY STRUCTURE ......................................................... 10
6 MARKET ANALYSIS ..................................................................................... 11

6.1 LOCAL MARKET .................................................................................................... 11
6.1.1 Size .................................................................................................................... 11
6.1.2 Market Segments ............................................................................................... 11

6.2 INTERNATIONAL MARKET ..................................................................................... 11
6.2.1 Major Exporters of Rice .................................................................................... 12
6.2.2 Major Importers of Rice .................................................................................... 12
6.2.3 Export Trends of Pakistan ................................................................................. 12

6.3 MAJOR PLAYERS.................................................................................................... 13
7 PRODUCTION PROCESS .............................................................................. 13
7.1 RAW MATERIAL..................................................................................................... 13
7.2 RICE HUSKING ....................................................................................................... 14
7.3 POLISHING UNIT .................................................................................................... 15
7.4 PRODUCT MIX........................................................................................................ 15
8 MANPOWER REQUIREMENTS .................................................................. 17
9 MACHINERY & EQUIPMENT ..................................................................... 17

9.1 DETAILS OF HUSKING MACHINES ......................................................................... 17
9.2 DETAILS OF RICE PROCESSING (POLISHING) MACHINES ...................................... 18
PREF-62/April, 2012/Rev 3
10 OFFICE EQUIPMENT AND FURNITURE ................................................. 20
11 VEHICLE .......................................................................................................... 20
12 LAND & BUILDING ........................................................................................ 21

12.1 LAND AND BUILDING REQUIREMENT .................................................................... 21
12.2 RECOMMENDED MODE FOR ACQUIRING LAND ..................................................... 21
12.3 SUITABLE LOCATIONS ........................................................................................... 21
12.4 INFRASTRUCTURE REQUIREMENT ......................................................................... 21
13 PROJECT ECONOMICS ................................................................................ 22
13.1 PROJECT COST ....................................................................................................... 23
13.2 CALCULATION BASIS ............................................................................................. 24
13.3 SALES PRICES AND SERVICES CHARGES PER TONNE ............................................. 25
13.4 REVENUE GENERATION ......................................................................................... 26
13.5 RAW MATERIAL CALCULATION ............................................................................ 26
13.6 INCOME STATEMENT ............................................................................................. 27
13.7 BALANCE SHEET .................................................................................................... 28
13.8 CASH FLOW STATEMENT ....................................................................................... 29
14 KEY ASSUMPTIONS ...................................................................................... 30
15 ANNEXURE ...................................................................................................... 33
15.1 MACHINERY SUPPLIERS......................................................................................... 33
15.2 TAX DEDUCTION INCOME SLABS ........................................................................... 33
DISCLAIMER
The purpose and scope of this information memorandum is to introduce the subject
matter and provide a general idea and information on the said area. All the material
included in this document is based on data/information gathered from various sources
and is based on certain assumptions. 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 does not assume any liability for any financial or
other loss resulting from this memorandum in consequence of undertaking this
activity. Therefore, the content of this memorandum should not be relied upon for
making any decision, investment or otherwise. The prospective user of this
memorandum is encouraged to carry out his/her own due diligence and gather any
information he/she considers necessary for making an informed decision.
The content of the information memorandum does not bind SMEDA in any legal or
other form.
DOCUMENT CONTROL
Document No. PREF-62

Revision 3
Prepared by SMEDA-Punjab
Issue Date November, 2002
Revision Date April, 2012

Issued by Library Officer
1. EXECUTIVE SUMMARY
Rice husking and polishing unit is a project of food sector, in which, rice paddy is
processed for conversion into polished rice. The project is proposed to be set up in
any major city of Pakistan. The unit would be de-husking rice paddy and polishing
rice grains to convert it into a value added, marketable product. The unit would be
providing husking and polishing services to rice producers along with husking and
polishing Basmati and Irri rice paddy purchased from the market.
Rice is grown on irrigated areas of all the four provinces of Pakistan. Rice crop is
sown in the months of June/July and harvested in September/October. The crop needs
fertile land and fertilizers for good yield. There are a number of different varieties of
rice produced in Pakistan, major varieties include the Basmati and IRRI of which the
world renowned Super Basmati is only produced in Pakistan. Rice Production in
Pakistan has increased greatly in the past 3-4 years. There is immense potential for
value addition in the rice sector in post harvest processing, such as quality polishing
and packaging. Branded rice is becoming popular in both domestic and international
markets. Basmati rice is renowned and has a huge market world over, due its taste,
aroma and nutritious value. This segment offers opportunities in rice processing and
marketing of branded rice.
The total initial cost for setting up the unit is estimated at Rs. 84.431 million. The
project is proposed to be financed through 50% debt and 50% equity. The project
NPV is projected around Rs. 152.326 million, with an IRR of 40% and a payback
period of 3.86 years. The legal business status of this project is proposed as ‘Sole
Proprietorship’.
The total capacity of the husking unit is 8,736 tonnes per year and the polishing unit
is proposed to have a capacity of 9,984 tonnes per year. The project would initially
run at 60% production capacity in year 1 and eventually reach 100% production
capacity in fifth year. The unit would operate for 16 hours per day at 100% capacity,
working in 2 shifts of 8 hours each.
2. INTRODUCTION TO SMEDA
The Small and Medium Enterprises Development Authority (SMEDA) was
established with an 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
finance, marketing, technology and human resource development.
SMEDA has so far successfully formulated strategies for industries such as
horticulture, including export of fruits and vegetables, marble and granite, gems and
jewellery, marine fisheries, leather and footwear, textiles, surgical instruments,
transport, dairy etc. Whereas the task of SME development at a broader scale still
requires more coverage and enhanced reach in terms of SMEDA’s 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 continuation of this effort to enable potential investors to make
well-informed investment decisions.
2 PURPOSE OF THE DOCUMENT

The objective of this pre-feasibility study is primarily to facilitate potential
entrepreneurs in project identification for investment. This 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, and
production, marketing, finance and business management. The document also
provides sector information and international scenario, which have some bearing on
the project itself.
The purpose of this document is to facilitate potential investors of Rice Husking and
Polishing Unit by providing them a macro and micro view of the business with the
hope that the information provided herein will aid potential investors in crucial
investment decisions.
This report is based on the information obtained from industry sources as well as
discussions with businessmen. In the financial model, since forecast/projections relate
to the future periods, actual results are likely to differ because of events and
circumstances that do not occur as expected.
3 PROJECT PROFILE
3.1 Opportunity Rationale1
There are a number of different varieties of rice produced in Pakistan, major varieties
include the Basmati and IRRI of which the world renowned Super Basmati is only
produced in Pakistan. Rice Production in Pakistan has increased immensely in the
past 3-4 years from 4.7 million metric tons to over 6.9 million metric tons last year.
The advantage of rice over wheat is that, it is more than wheat a staple crop of the
majority of the world’s population. The Pakistani Rice sector is well suited to meet
the growing demand of rice from around the world as it is the third largest cultivated
crop in Pakistan after wheat and cotton.
Pakistan, however, has a very distinct differential advantage in the rice sector. It
produces the world’s best rice. The name Basmati comes from ‘Bas’ translates to
aroma and ‘Mati’ meaning soil. This breed of rice has widely been acclaimed as the
finest quality of rice found anywhere in the world. There have been many efforts to
replicate this unique variety but each has been unsuccessful. The rice is renowned
world over for its taste, aroma and nutritious value. The reasons for the repute have
been traced back to a certain set of condition that makes this rice possible only in this
area. They include quality of the soil, extremely still and humid ripening climate, slit
forming Deltas carrying high level of nutrients giving the Basmati rice its trademark
aroma and texture and an ideal Day/Night Temperature Variation. The differential
advantage of Punjab holds true in this regard.
The other major variety found in Pakistan is the IRRI rice, named so after the
collaboration between the International Rice Research Institute (IRRI) Philippines
and Pakistan Agriculture Research Council (PARC) for heat and salt tolerant rice
varieties which resulted in the creation of the variety. This rice variety offers yields as
high as 13,000 kg/hectare achieved through hybridization, compared to only 4-5 Tons
per hectare of traditional rice varieties. There is immense potential to produce more
rice and can easily double its export potential. Currently local demand is easily met
hence the export potential of rice is immense.
3.2 Project Brief

The Rice Husking and Polishing unit is a project of the food sector. The unit would
be providing husking and polishing services to rice producers. Additionally, the unit
would be purchasing Basmati and Irri rice paddy for de-husking and polishing the
rice to sell it into the market. The husking unit would operate 7 months in a year and
1
Punjab Board of Investment and Trade- Investment Guide Report (www.pbit.gop.pk)
polishing unit works all year round. The project is proposed to be set up in any big
city of Pakistan. The total capacity of the husking unit is 8,736 tonnes per year and
the polishing unit is proposed to have a capacity of 9,984 tonnes per year. The project
would initially run at 60% production capacity in year 1 and eventually reach 100%
production capacity over the years. The unit would operate for 16 hours per day at
100% capacity, working in 2 shifts of 8 hours each.
3.3 Proposed Business Legal Status

The business legal status of the proposed project can either be sole proprietorship or
partnership. Additionally, it can also be registered under the Companies Ordinance,
1984 with the Securities & Exchange Commission of Pakistan. The selection depends
upon the choice of the entrepreneur. This pre-feasibility assumes the legal status to be
Sole Proprietorship.
3.4 Proposed Capacity

The husking unit would have a processing capacity of 48 tons rice paddy per day,
operating 7 months a year. The rice-polishing unit would have a processing capacity
of 32 tons rice per day and would operate for 12 months in a year. The husking and
polishing units are assumed to operate on 60% capacity in the first year and reach
100% capacity by the 5th year.
4 CRUCIAL FACTORS & STEPS IN DECISION MAKING

Before making a decision, whether to invest in this project or not, one should
carefully analyze the associated risk factors. SWOT analysis can help in analyzing
these factors that play an important role in decision making.
4.1 Strengths
Easy availability of raw material i.e. rice paddy.
Easy availability of locally manufactured and imported machinery and spare
parts.
Easy availability of skilled labour force.
Simple management structure.
Good transportation facilities.
Strong domestic market
High export potential.
4.2 Weaknesses
Low level of education
Non availability of quality paddy
High prices of rice in domestic market
Rice paddy is only available in selected months of the year

High percentage of broken rice
Low milling yield.
Low level of modernization and up gradation technology
Weak market for by-products
High electricity consumption
4.3 Opportunities
Improvement in quality and high milling yield
Increasing demand of milled rice in world market
Large export potential
Brand positioning and enhancement of production of rice may widen national
and international market for the product
Organic rice produced with the use of bio-fertilizer, bio insecticides and
pesticides has a good domestic and international market
Efficient recovery of by-products and their utilization may improve
operational performance
Technical up gradation
4.4 Threats
Supply of mix-up varieties
Strong competition from other Asian countries in the international market.
Increasing regulatory pressures (e.g. Tax Regulation and various other
regulations from government departments)
5 CURRENT INDUSTRY STRUCTURE2

Rice is the second largest staple food crop in Pakistan and has been a major source of
export earnings in recent years. It accounts for 4.4 percent of value added in
agriculture and 0.9 percent in GDP. Pakistan grows high quality rice to meet both
domestic demand and exports. Area sown for rice is estimated at 2,365 thousand
hectares, 17.9 percent less than last year (2,883 thousand hectares). The production of
the crop is estimated at 4,823 thousand tons, 29.9 percent less than last year. This is
mainly attributed to devastating floods of July, 2010 coupled with breaches of
protective bunds of river Indus which badly affected the main paddy growing districts
and low market returns during last year. While decrease in production is due to
decrease in area, attack of pests and disease and logging of early sown crops. The
area, production and yield of rice for the last five years are given in Table 5-1 and Fig
5-1.
Table 5-1 Area, Production and Yield of Rice

Year Area Production Yield
(000 % (000 % (Kgs / %
Hectare) Change Tonnes) Change Hectare) Change
2006-07 2581 -1.5 5438 -2.0 2107 -0.4
2007-08 2515 -2.6 5563 2.3 2212 5.0
2008-09 2963 17.8 6952 25.0 2346 6.1
2009-10 2883 -2.7 6883 -1.0 2387 1.7
2010-11* 2365 -17.9 4823 -29.9 2039 -14.6
*Provisional (July – March)
(P)
Figure 5-1 Production of Rice in Pakistan
2
Economic Survey of Pakistan 2010-2011 (http://www.finance.gov.pk/survey/chapter_11/02-Agriculture.pdf)
10
6 MARKET ANALYSIS
6.1 Local Market
6.1.1 Size
Rice is the second largest food item consumed in Pakistani households after wheat
flour. During the last decade, the production of rice in Pakistan has been around 5
million tons per annum. Around 3-5 million tons of rice is consumed domestically in
Pakistan. The per capita availability of rice in Pakistan is 20.78 kg.
Pakistan has scattered population of rice consumers throughout the country. In most
of the urban and rural areas of the Punjab, people eat rice at least once a week. In
Azad Kashmir, almost all households consume rice in their daily meals. In Sindh
province, particularly Karachi, people eat rice 3-4 times a week.
6.1.2 Market Segments

According to buying power of the rice consumers, the market for rice can be broadly
categorized into three major groups.
Lower income group: The majority of this segment is looking for purchasing cheap
rice. This segment is the major market of broken rice and Irri rice. The price of
broken rice is almost equivalent to wheat prices.
Middle income group: This segment includes middle and upper income households
in the urban areas. This segment purchases good quality rice (polished rice as well as
semi-polished rice).
Upper income group includes the upper income segment of the society; they prefer
to buy high quality branded rice. The hotels and restaurants also purchase polished
and semi polished rice for their different dishes.
6.2 International Market3

Rice is Pakistan’s third biggest crop after wheat and cotton, and accounts for about
eight per cent of Pakistani exports. It contributes about 1.6 per cent to the country’s
gross domestic product. Pakistani basmati goes mainly to the Middle East, Europe
and the United States. Non-basmati is sold all over the world. In 2010-11, Pakistan
sold about 2.6 million tonnes of non-basmati rice and 1.1 million tonnes of basmati,
according to REAP’s (Rice Export Association of Pakistan) provisional data.4
3
UN comtrade (www.comtrade.un.org)
4
The Nation (http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/business/15-Jul-
2011/Pakistan-to-export-45-MT-of-rice-in-FY1112)
11
6.2.1 Major Exporters of Rice

Table 6-1 shows the major exporters of rice in the year 2010. Thailand has the largest
share in rice exports, followed by USA, India and Pakistan. Pakistan has the fourth
largest share in rice export with approximately 2.27 billion USD export value.
Table 6-1 Top Exporters of 2010

Reporter Title Trade Value (USD)
Thailand 5,341,082,404
USA 2,354,057,490
India 2,295,812,635
Pakistan 2,277,123,924
Italy 648,257,048
Other reporters 3,687,671,839
Total Export 16,604,005,340
6.2.2 Major Importers of Rice

Table 6-2 shows the list of major importers of rice and the import value for each in
the year 2010. Philippines is the largest importer of rice followed by UAE and Saudi
Arabia.
Table 6-2 Top Importers of 2010

Reporter Title Trade Value (USD)
Philippines 1,652,523,617
United Arab Emirates 1,337,672,336
Saudi Arabia 1,310,477,638
Iran 942,002,921
USA 628,646,746
Other reporters 11,281,671,635
Total Imports 17,152,994,893
6.2.3 Export Trends of Pakistan

Pakistan is the fourth largest exporter of rice. Table 6-3 shows the export value in
USD from year 2006-2010. The exports of rice have been fluctuating during the last
three years due to price fluctuation in the international market. Table 6-4 shows top
export partners of Pakistan.
12
Table 6-3 Total Rice Export Value - Pakistan

Period Trade Value (USD)
2010 2,277,123,924
2009 1,774,459,668
2008 2,439,561,771
2007 1,145,676,864
2006 1,151,879,986
Table 6-4 Top Export of Rice from Pakistan Partners in 2010

Partner Title Trade Value (USD)
United Arab Emirates 314,791,262
Saudi Arabia 137,870,956
Iran 124,768,224
Oman 100,156,051
Bangladesh 97,420,068
Other partners 1,502,117,363
Total Exports 2,277,123,924
6.3 Major Players

Major players in the rice processing industry are located in Lahore, Gujranwala and
Hafizabad districts. The cluster of rice processing mills is present in major rice
producing belts in Punjab. Most of the mills are located in Lahore, Gujranwala,
Hafizabad and Sialkot districts.
With the development of the rice processing industry, the export and local market is
progressing towards branded rice. A large number of major players in the industry are
selling branded rice like Guard Rice, Flora Rice, Roberts Rice, etc.
7 PRODUCTION PROCESS
7.1 Raw Material
The raw material of the husking unit is paddy, obtained from rice harvesting. The
paddy can be purchased from the local grain market (Mandi) as well as directly from
the farmers on cash basis. The paddy-harvesting season starts in mid September and
ends in December. The rice paddy is available only during this time period, therefore
all the raw material stock for the year is bought during these two – three months.
Paddy husking is a seasonal process and is limited to only seven months after the
harvesting of rice crop. The husking operations start in November and end in May.
It is assumed that the husking unit would process 15% of its own rice paddy
purchased from the market and the remaining capacity of the machines would be
13
utilised to provide husking services to other rice producers. The purchased batched
after husking would then be polished and the remaining processing capacity of the
polishing machine would be used to provide polishing services to rice producers who
outsource polishing services.
Figure 7-1 Production Process Flow
Paddy
De-Stoning
(Cleaning Stones from Paddy)
Hulling
(Separate Husk from the Rice)
Separated By-Products
1) Broken Rice
2) Powder
3) Husk
4) Waste (Dust)
Head Rice
(Full Length)
NF 14
(Grinds the Rice for Refining)
Water Polisher
(Further Polishing of Rice)
Grader
(Grading of Rice into Different Categories
on the basis of their quality)
Packaging
7.2 Rice Husking

Rice husking unit would use paddy as raw material. Husking is the process of
separating the rice from the husk. Rubber roll and hullers are used to shatter the
paddy to produce rice. The husking of paddy produces different products, which
include 53% head rice, 10% broken rice, 2.5% powder rice, 33.5% husk and 1%
waste and dust particles. Different processes are used for separation of head rice,
14
broken rice, rice powder, dust and bran. The husking unit operates seven months in a
year.
7.3 Polishing Unit

It is assumed that the polishing plant would work throughout the year. The polishing
unit would polish (process) in-house rice obtained from the husking process and the
remaining capacity would be used to provide rice polishing services to other rice
suppliers.
Rice polishing unit uses brown rice (head/broken rice) for cleaning and polishing.
Various types of cleaners/polishers are used to give shine and silkiness to rice.
The rice polishing unit processes the head rice (brown rice) to produce different value
added rice products such as silky and non-silky rice.
In the current industrial practice, both the husking and polishing units are not
operated at the same time due to certain reasons. After the husking operation, the
brown rice requires a time of six to ten weeks for drying and conditioning. So, the
brown rice is stored for a period of at least two months before taking it to the
polishing process.
For the purpose of this report major portion of head rice (brown rice) would be
polished for rice companies requiring polishing services while rest would be supplied
from in-house husking unit. The processed rice (both brown rice and polished rice)
would be stored during the first few months of harvesting season, as the prices are
generally lower due to oversupply of rice in the market.
7.4 Product Mix

The proposed project would mainly provide husking and polishing services to rice
producers who do not own a husking and polishing unit.
It is proposed that 85% of the husking machinery capacity may be utilised in
providing husking services, the remaining 15% of the capacity would be used to
process raw material bought by the entrepreneur himself.
Table 7-1 Husking operations

Product Mix Percentage
Services to external rice producers 85%
De-husking of purchased paddy 15%
The polishing unit is assumed to provide polishing services to other rice companies.
The remaining capacity of the polishing machine would be utilised to process the rice
obtained from husking of the purchased rice paddy, which is only 7% of the total
polishing unit capacity.
15
Table 7-2 Polishing operations

Services to external rice producers 93%
Polishing of rice from purchased paddy 7%
Two varieties of rice paddy, namely Basmati and Irri, would be bought for husking
and polishing. The percentage of each is given in the table below.
Table 7-3 Raw material product mix

Basmati 80%
Irri 20%
The products produced from the husking unit include: Head Rice, Broken Rice,
Powder and Husk. The head rice would be processed further by the polishing unit and
the broken rice, powder and husk are sold into the market. The percentage of each
product is given in the table below.
Table 7-4 Products of Husking process

Rice for polishing 53%
Broken rice 10%
Powder 2.5%
Husk 33.5%
Trash 1%
Total 100%
The head rice obtained through the husking process is further processed in the
polishing unit. The products produced from the polishing unit and their percentages
are given in the table below.
Table 7-5 Products of Polishing process

Product mix Percentage
Polished silky rice 40%
Polished non silky rice 40%
Polished broken rice 10%
Bran 10%
Total 100%
16
8 MANPOWER REQUIREMENTS
During husking season, the skilled labour is required for drying the paddy, loading
and unloading of paddy bags. For a husking plant with processing capacity of 3 tons
per hour, a maximum of 60 workers are required for seven months of operations.
During the polishing season, maximum of 8 un-skilled workers would be required for
weighing, packing and stacking of rice bags.
The table below shows Human Resource requirement and the proposed annual salary
for administrative and operational needs of the project during the first year, when both
Husking and Polishing machines are operating at 60% capacity.
The production staff, working in shifts would be added according to capacity utilization
growth each year.
Table 8-1 Human Resource Requirement – Year 1

Description No of Monthly Annual Salary in
Staff Salary (Rs) (Rs)
Administrative Staff
CEO 1 75,000 900,000
Admin and Finance Manager 1 50,000 600,000
Accounts Officer 1 12,000 144,000
Marketing and Sales Manager 1 50,000 600,000
Sales Officer 1 15,000 180,000
Office Boys 2 8,000 192,000
Security Guards 2 9,000 216,000
Total Admin salaries 2,832,000
Production Staff
Foreman 1 14,000 201,600
Helper 1 8,000 115,200
Unskilled workers 5 8,000 460,800
Seasonal Paddy workers 36 8,000 2,016,000
Total Direct Salaries 2,793,600
Total Salaries 5,625,600
9 MACHINERY & EQUIPMENT

9.1 Details of Husking Machines
Majority of the machinery required for husking and polishing unit is manufactured
locally apart from few items like SM and NF machine, which are used for refining the
rice. Machinery can also be imported from China at cheaper rates compared to those
from Japan or Korea. The major machinery components of the rice husking mill are
manufactured in the local market of Daska, Jallalpur Bhattian, Gujranwala and
Lahore. Amongst the foreign suppliers, China is considered to be more competitive
17
than other countries. It is best to purchase S.M.18 and NF 14 machines from China
and other from local market. The local market manufacturers are supplying the China
made S.M. 18 and NF 14 along with other machinery components. List of machinery
and equipment proposed is given in table below:
Table 9-1 Husking Machinery Details

Husking Plant Machines Quantity Cost/Unit Total Cost (Rs)
(Rs.)
Pre cleaner PH 40 type 5'x10' 2 175,000 350,000
Paddy Husker (pneumatic) 2 300,000 600,000
Husk Cleaner 1 150,000 150,000
Husk Blower 7’ 1 45,000 45,000
Pre cleaner half portion 5’x 10’ 1 85,000 85,000
Paddy Separator 90comp 1 450,000 450,000
Polisher SM-18 (China made) 2 185,000 370,000
Polisher NF-14(China made) 2 185,000 370,000
Rice grader 3 stage 5’ x 10’ 1 150,000 150,000
Length grader 2 130,000 260,000
Width grader 1 15,000 15,000
Elevator 10"x 30' comp 1 87,500 87,500
Elevator 10"x 25' comp 13 73,000 949,000
Pipe Line 18, 22 gauge 1 175,000 175,000
Steel structure with wooden platform 1 174,000 174,000
Dust blower with ducting 1 70,000 70,000
Cyclone 3.5' dia 1 35,000 35,000
Blower for bran 25" impeller 1 35,000 35,000
Total 4,370,500
Fitting charges 200,000
Total Cost of the Husking Plant 4,570,500
9.2 Details of Rice Processing (Polishing) Machines

Major machinery required for rice polishing is also manufactured locally. It is being
manufactured in cities such as Daska, Jalalpur Bhatian, Gujranwala and Lahore.
Modern machinery can also be imported from China, Japan, Germany and Korea. It is
recommended for the proposed project to use NF-14, S.M. 18 and Paddy separator
imported from China and other machinery components from local market.
18
Table 9-2 Rice Polishing Machinery Details

Rice Polishing Machines Qty Cost/Unit Total Cost
(Rs.) (Rs.)
Combi cleaner with blower 1 200,000 200,000
Paddy Separator (China made) 2 190,000 380,000
Width grader 2 15,000 30,000
De-Stoner (satake type, with blower) 1 200,000 200,000
Polisher SM-18 (China made) 2 185,000 370,000
Polisher NF-14 (China made) 2 185,000 370,000
Water polisher (with Auto sensor & blower) 2 470,000 940,000
Rice grader 3 stage 5'x10' 1 150,000 150,000
Length grader (28"x 100") 6 130,000 780,000
Elevator 10"x36" 20 100,000 2,000,000
Pipe Line 18, 22 gauge 1 175,000 175,000
Steel structure with platform 1 200,000 200,000
Dust blower 25" with pipe line 1 50,000 50,000
Blower for polishers bran 25" 1 35,000 35,000
Blower with aspiration screen (for colour 1 40,000 40,000
sorter)
Holding Bin 10' x 10' 3 185,000 555,000
Feeding Tank for colour sorter 1 15,000 15,000
Feeding Tank 11 45,000 495,000
Cyclone 2.5' 4 30,000 120,000
Cyclone 3' 4 35,000 140,000
Fitting charges 200,000
Total Cost of Polishing Plant 7,445,000
Table 9-3 Total Machinery Cost of the Unit

Total Machinery Cost Rs.
Husking Machine 4,570,500
Polishing Machine 7,445,000
Sales Tax (16%) 1,922,480
SED (2.5%) 300,388
Generator for Husking (80 kVA) 500,000
Generator for Polishing (120 kVA) 600,000
Total 15,338,368
19
10 OFFICE EQUIPMENT AND FURNITURE

Following tables present the office equipment and furniture/fixtures proposed for the
unit:
Table 10-1 Office Equipment

Description Qty Cost/Unit Total Cost (Rs.)
(Rs.)
Computers 3 30,000 90,000
UPS 3 8,000 24,000
Computer printer (s) 2 20,000 40,000
Scanner 1 10,000 10,000
Fax machines 1 15,000 15,000
Telephone set 6 1,500 9,000
Copier 1 100,000 100,000
Air-conditioner (1.5 tonne) 3 45,000 135,000
UPS (7 KVA) for admin 1 90,000 90,000
Total Office Equipment 513,000
Table 10-2 Office Furniture and Fixtures

Description Qty Cost/Unit Total Cost
(Rs.) (Rs.)
Desk/Workstations 5 12,000 60,000
Office chair 5 5,000 25,000
Visitor Chairs 10 4,000 40,000
Small cabinet 7 7,500 52,500
Stool 5 1,500 7,500
Bench 5 3,000 15,000
Misc. 10,000
Total 210,000
11 VEHICLE
Vehicle requirement for the project is given in the table below:
Table 11-1 Office Vehicle

Description Qty Cost/Unit Total Cost
(Rs.) (Rs.)
Mazda Truck 1 1,454,000 1,454,000
Registration fee (2%) 29,080
Total 1,483,080
20
12 LAND & BUILDING

12.1 Land and Building requirement
Most suitable location for opening a rice husking and polishing unit can be suburban
and rural areas around major cities such as Lahore, Gujranwala, Hafizabad and
Sialkot. The most important factor for setting up a rice unit is accessibility to raw
material. Therefore, the unit should preferably be set up in areas, where rice is grown.
The total area required would be 31,300 square feet. The detail of land and building
construction cost is given in the table below.
Table 12-1 Land and Building Area and Cost

Description Sq ft Construction Total (Rs.)
cost/Sq. ft (Rs.)
Management building 1,000 1,250 1,250,000
Paddy Storage 1 6,500 1,000 6,500,000
Paddy Storage 2 4,500 1,000 4,500,000
Brown Rice hall 5,000 1,000 5,000,000
Processing hall 3,000 1,000 3,000,000
Processed brown rice godown 4,500 1,000 4,500,000
Weighing & Packing Area 1,000 1,000 1,000,000
Packed rice godown 4,800 1,000 4,800,000
Boundary wall 1,660 900 1,494,000
Design and Consultancy charges 5% of construction cost 1,602,200
Total Construction Cost 33,646,200
Free space 1,000
Total Cost of Land 2,782,222
Total Cost 32,960 36,428,422
12.2 Recommended Mode for Acquiring Land

In this particular pre-feasibility, it has been assumed that the land area of 31,300
square feet (approximately 7 kanals) would be purchased. It is recommended to
purchase land for setting up this project as the investment required for infrastructure
and other costs is high and it is not advisable to invest a huge amount on leased or
rented area.
12.3 Suitable Locations

The proposed project is assumed to be set up in areas near G.T. road, Muridke.
12.4 Infrastructure Requirement

It is recommended that the unit should be located in areas where basic utilities are
available like: electricity, water, gas, telephone, etc.
21
13 PROJECT ECONOMICS
The total project cost is estimated around Rs. 84.431 million. The capital cost is
estimated around Rs. 56.959 million and working capital of Rs. 27.471 million. The
total cost, project returns and financial plan are given in the tables below:
Table 13-1 Total Project Cost

Account Head Total Cost (Rs.)
Capital Cost 56,959,917
Working Capital Cost 27,471,455
Total Project Cost 84,431,372
Table 13-2 Project Returns

NPV (Rs.) 152,326,480
IRR 40%
Payback Period (Years) 3.86
Table 13-3 Financing Plan

Financing Ratio Rs.
Equity 50% 42,215,686
Debt 50% 42,215,686
22
13.1 Project Cost
Initial Investment
Capital Investment Rs. in actuals
Land 2,782,222
Building/Infrastructure 33,646,200
Machinery & equipment 15,338,368
Furniture & fixtures 210,000
Office vehicles 1,483,080
Office equipment 513,000
Pre-operating costs 2,937,048
Training costs 50,000
Total Capital Costs 56,959,917
Working Capital Rs. in actuals
Equipment spare part inventory 127,820
Raw material inventory 25,474,176
Cash 1,869,459
Total Working Capital 27,471,455
Total Investment 84,431,372
Initial Financing Rs. in actuals
Debt 42,215,686
Equity 42,215,686
Project Returns
EQUITY PROJECT
Net Present Value (Rs.) 103,331,056 152,326,480
Internal Rate of Return 51% 40%
Payback Period (Yrs) 3.65 3.86
23
13.2 Calculation Basis

Rice Husking
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Max husking machinery capacity (tonnes) 8,736 8,736 8,736 8,736 8,736 8,736 8,736 8,736 8,736 8,736
Husking machinery capacity utilization 60% 60% 60% 60% 60% 60% 60% 60% 60% 60%
Husking machinery capacity growth rate 10% 10% 10% 10% 10% 10% 10% 10% 10%
Annual husking machinery capacity 60% 70% 80% 90% 100% 100% 100% 100% 100% 100%
Annual Husking capacity (tonnes) 5,242 6,115 6,989 7,862 8,736 8,736 8,736 8,736 8,736 8,736
Own production capacity utilization 15% 15% 15% 15% 15% 15% 15% 15% 15% 15%
Own production capacity utilization growth rate 0% 0% 0% 0% 0% 0% 0% 0% 0%
Own maximum capacity utilization 15% 15% 15% 15% 15% 15% 15% 15% 15% 15%
Rice paddy bought for husking (tonnes) 786 917 1,048 1,179 1,310 1,310 1,310 1,310 1,310 1,310
Rice paddy for husking service(tonnes) 4,455 5,198 5,940 6,683 7,426 7,426 7,426 7,426 7,426 7,426
Rice for polishing 53% 417 486 556 625 695 695 695 695 695 695
Broken rice 10% 79 92 105 118 131 131 131 131 131 131
Powder 2.5% 20 23 26 29 33 33 33 33 33 33
Husk 33.5% 263 307 351 395 439 439 439 439 439 439
Waste 1.0% 8 9 10 12 13 13 13 13 13 13
Rice Polishing
Max polishing machinery capacity (tonnes) 9,984 9,984 9,984 9,984 9,984 9,984 9,984 9,984 9,984 9,984
Polishing machinery capacity utilization 60% 60% 60% 60% 60% 60% 60% 60% 60% 60%
Polishing machinery capacity growth rate 10% 10% 10% 10% 10% 10% 10% 10% 10%
Annual polishing machinery capacity 60% 70% 80% 90% 100% 100% 100% 100% 100% 100%
Annual Polishing capacity (tonnes) 5,990 6,989 7,987 8,986 9,984 9,984 9,984 9,984 9,984 9,984
Own rice received from husking (tonnes) 417 486 556 625 695 695 695 695 695 695
Rice polish service (tonnes) 5,574 6,503 7,432 8,361 9,289 9,289 9,289 9,289 9,289 9,289
POLISHED SILKY RICE 40% 167 194 222 250 278 278 278 278 278 278
Basmati 80% 133 156 178 200 222 222 222 222 222 222
Irri 20% 33 39 44 50 56 56 56 56 56 56
POLISHED NON-SILKY RICE 40% 167 194 222 250 278 278 278 278 278 278
Basmati 80% 133 156 178 200 222 222 222 222 222 222
Irri 20% 33 39 44 50 56 56 56 56 56 56
POLISHED BROKEN RICE 10% 42 49 56 63 69 69 69 69 69 69

Basmati 80% 33 39 44 50 56 56 56 56 56 56
Irri 20% 8 10 11 13 14 14 14 14 14 14
BRAN 10% 42 49 56 63 69 69 69 69 69 69
24
13.3 Sales Prices and Services Charges per tonne

Sales Prices and Service Charges per tonne
HUSKING UNIT PRODUCTS
Broken Rice 30,000 33,600 37,632 42,148 47,206 52,870 59,215 66,320 74,279 83,192
Powder 10,500 11,760 13,171 14,752 16,522 18,505 20,725 23,212 25,998 29,117
Husk 3,000 3,360 3,763 4,215 4,721 5,287 5,921 6,632 7,428 8,319
RICE HUSKING SERVICES CHARGES 4,000 4,480 5,018 5,620 6,294 7,049 7,895 8,843 9,904 11,092
POLISHING UNIT PRODUCTS

POLISHED SILKY RICE
Basmati 75,000 84,000 94,080 105,370 118,014 132,176 148,037 165,801 185,697 207,981
Irri 48,000 53,760 60,211 67,437 75,529 84,592 94,743 106,113 118,846 133,108
POLISHED NON-SILKY RICE

Basmati 70,000 78,400 87,808 98,345 110,146 123,364 138,168 154,748 173,317 194,116
Irri 45,000 50,400 56,448 63,222 70,808 79,305 88,822 99,481 111,418 124,789
POLISHED BROKEN RICE

Basmati 43,000 48,160 53,939 60,412 67,661 75,781 84,874 95,059 106,466 119,242
Irri 29,000 32,480 36,378 40,743 45,632 51,108 57,241 64,110 71,803 80,419
BRAN 1,250 1,400 1,568 1,756 1,967 2,203 2,467 2,763 3,095 3,466
RICE POLISH SERVICE CHARGES 3,500 3,920 4,390 4,917 5,507 6,168 6,908 7,737 8,666 9,706
25
13.4 Revenue Generation

Revenue Generation
HUSKING UNIT
Broken Rice 2,358,720 3,082,061 3,945,038 4,970,748 6,185,819 6,928,118 7,759,492 8,690,631 9,733,506 10,901,527
Powder 206,388 269,680 345,191 434,940 541,259 606,210 678,956 760,430 851,682 953,884
Husk 790,171 1,032,490 1,321,588 1,665,200 2,072,249 2,320,919 2,599,430 2,911,361 3,260,725 3,652,012
RICE HUSKING SERVICE REVENUE 17,821,440 23,286,682 29,806,952 37,556,760 46,737,301 52,345,778 58,627,271 65,662,543 73,542,049 82,367,094
POLISHING UNIT
POLISHED SILKY RICE
Basmati 10,000,973 13,067,938 16,726,960 21,075,970 26,227,874 29,375,219 32,900,245 36,848,274 41,270,067 46,222,475
Irri 1,600,156 2,090,870 2,676,314 3,372,155 4,196,460 4,700,035 5,264,039 5,895,724 6,603,211 7,395,596
POLISHED NON-SILKY RICE

Basmati 9,334,241 12,196,742 15,611,830 19,670,905 24,479,349 27,416,871 30,706,895 34,391,723 38,518,729 43,140,977
Irri 1,500,146 1,960,191 2,509,044 3,161,396 3,934,181 4,406,283 4,935,037 5,527,241 6,190,510 6,933,371
POLISHED BROKEN RICE

Basmati 1,433,473 1,873,071 2,397,531 3,020,889 3,759,329 4,210,448 4,715,702 5,281,586 5,915,376 6,625,221
Irri 241,690 315,808 404,235 509,336 633,840 709,901 795,089 890,500 997,360 1,117,043
BRAN 52,088 68,062 87,120 109,771 136,604 152,996 171,355 191,918 214,948 240,742
RICE POLISH SERVICE REVENUE 19,507,925 25,490,355 32,627,654 41,110,845 51,160,162 57,299,382 64,175,308 71,876,344 80,501,506 90,161,686
TOTAL REVENUE 64,847,411 84,733,950 108,459,456 136,658,915 170,064,428 190,472,159 213,328,818 238,928,276 267,599,669 299,711,630
13.5 Raw Material Calculation

Raw material Calculation
Raw material required (tonnes) 786 917 1,048 1,179 1,310 1,310 1,310 1,310 1,310 1,310
Basmati Paddy 80% 629 734 839 943 1,048 1,048 1,048 1,048 1,048 1,048
Irri Paddy 20% 157 183 210 236 262 262 262 262 262 262
Raw material Rate (Rs. / Ton)

Basmati Paddy 35,000 38,500 42,350 46,585 51,244 56,368 62,005 68,205 75,026 82,528
Irri Paddy 22,000 24,200 26,620 29,282 32,210 35,431 38,974 42,872 47,159 51,875
57,000 62,700 68,970 75,867 83,454 91,799 100,979 111,077 122,185 134,403
Raw material Total Price

Basmati Paddy 22,014,720 28,252,224 35,517,082 43,952,388 53,719,586 59,091,545 65,000,699 71,500,769 78,650,846 86,515,930
Irri Paddy 3,459,456 4,439,635 5,581,256 6,906,804 8,441,649 9,285,814 10,214,396 11,235,835 12,359,419 13,595,360
Total Raw Material Cost 25,474,176 32,691,859 41,098,337 50,859,192 62,161,235 68,377,359 75,215,095 82,736,604 91,010,264 100,111,291
26
13.6 Income Statement

Income Statement
Revenue 64,847,411 84,733,950 108,459,456 136,658,915 170,064,428 190,472,159 213,328,818 238,928,276 267,599,669 299,711,630
Cost of sales
Irri and basmati paddy 25,474,176 32,691,859 41,098,337 50,859,192 62,161,235 68,377,359 75,215,095 82,736,604 91,010,264 100,111,291
Raw material transportation expense 393,120 504,504 634,234 784,864 959,278 1,055,206 1,160,727 1,276,799 1,404,479 1,544,927
Operation costs 1 (direct labor) 2,793,600 3,576,520 4,485,412 5,537,383 6,751,678 7,409,031 8,130,384 8,921,970 9,790,626 10,743,855
Operating costs 2 (machinery maintenance) 766,918 805,264 845,528 887,804 932,194 978,804 1,027,744 1,079,131 1,133,088 1,189,742
Operating costs 3 (direct electricity) 3,144,960 4,036,032 5,073,869 6,278,913 7,674,227 8,441,649 9,285,814 10,214,396 11,235,835 12,359,419
Generator diesel expense 1,703,520 2,186,184 2,748,346 3,401,078 4,156,873 4,572,560 5,029,816 5,532,798 6,086,077 6,694,685
Total cost of sales 34,276,294 43,800,364 54,885,725 67,749,233 82,635,485 90,834,609 99,849,580 109,761,698 120,660,370 132,643,919
Gross Profit 30,571,117 40,933,587 53,573,732 68,909,682 87,428,943 99,637,551 113,479,238 129,166,578 146,939,300 167,067,711
General administration & selling expenses

Administration salaries 2,832,000 3,107,728 3,410,300 3,742,332 4,106,691 4,506,524 4,945,285 5,426,765 5,955,123 6,534,922
Electricity expense 201,240 221,364 243,500 267,850 294,635 324,099 356,509 392,160 431,376 474,513
Water expense 60,000 66,000 72,600 79,860 87,846 96,631 106,294 116,923 128,615 141,477
Gas expense 60,000 66,000 72,600 79,860 87,846 96,631 106,294 116,923 128,615 141,477
Travelling expense 141,600 155,386 170,515 187,117 205,335 225,326 247,264 271,338 297,756 326,746
Communications expense (phone, fax, mail, internet, etc.) 141,600 155,386 170,515 187,117 205,335 225,326 247,264 271,338 297,756 326,746
Office vehicles repair and maintenance 120,000 132,000 145,200 159,720 175,692 193,261 212,587 233,846 257,231 282,954
Office expenses (stationary, entertainment, janitorial services, etc.) 141,600 155,386 170,515 187,117 205,335 225,326 247,264 271,338 297,756 326,746
Promotional expense 32,424 42,367 54,230 68,329 85,032 95,236 106,664 119,464 133,800 149,856
Depreciation expense 3,704,763 3,704,763 3,704,763 3,731,717 3,731,717 3,912,804 3,944,006 3,944,006 3,944,006 3,980,127
Amortization of pre-operating costs 587,410 587,410 587,410 587,410 587,410 - - - - -
Amortization of legal, licensing, and training costs 10,000 10,000 10,000 10,000 10,000 - - - - -
Subtotal 8,032,636 8,403,790 8,812,148 9,288,428 9,782,872 9,901,164 10,519,432 11,164,102 11,872,034 12,685,564
Operating Income 22,538,481 32,529,797 44,761,584 59,621,254 77,646,071 89,736,387 102,959,806 118,002,476 135,067,265 154,382,147
Other income (interest on cash) 93,473 148,481 1,262,821 3,761,601 7,780,181 13,854,666 21,848,165 31,536,931 43,111,192 62,621,777
Gain / (loss) on sale of office equipment - - 307,800 - - 510,217 - - 667,590
Gain / (loss) on sale of office vehicles - - - - 593,232 - - - -
Earnings Before Interest & Taxes 22,631,954 32,678,278 46,332,205 63,382,855 86,019,484 104,101,270 124,807,971 149,539,407 178,846,047 217,003,924
Interest on short term debt 770,629 770,629 - - - - - - - -

Interest expense on long term debt (Project Loan) 4,841,593 4,151,357 3,343,780 2,398,916 1,293,425 - - - - -
Interest expense on long term debt (Working Capital Loan) 1,297,436 - - - - - - - - -
Subtotal 6,909,658 4,921,986 3,343,780 2,398,916 1,293,425 - - - - -
Earnings Before Tax 15,722,296 27,756,292 42,988,425 60,983,939 84,726,059 104,101,270 124,807,971 149,539,407 178,846,047 217,003,924
Tax 3,930,574 6,939,073 10,747,106 15,245,985 21,181,515 26,025,317 31,201,993 37,384,852 44,711,512 54,250,981
NET PROFIT/(LOSS) AFTER TAX 11,791,722 20,817,219 32,241,319 45,737,954 63,544,544 78,075,952 93,605,979 112,154,556 134,134,536 162,752,943
27
13.7 Balance Sheet

Balance Sheet
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Assets
Current assets
Cash & Bank 1,869,459 - 2,969,624 22,286,799 52,945,219 102,658,405 174,434,914 262,528,393 368,210,234 494,013,607 758,421,939
Accounts receivable 7,994,886 9,220,769 11,909,183 15,110,037 18,907,603 22,224,858 24,891,841 27,878,862 31,224,325 34,971,244
Equipment spare part inventory 127,820 134,211 140,921 147,967 155,366 163,134 171,291 179,855 188,848 198,290 -
Raw material inventory 25,474,176 32,691,859 41,098,337 50,859,192 62,161,235 68,377,359 75,215,095 82,736,604 91,010,264 100,111,291 -
Total Current Assets 27,471,455 40,820,956 53,429,651 85,203,142 130,371,856 190,106,501 272,046,157 370,336,694 487,288,209 625,547,514 793,393,184
Fixed assets
Land 2,782,222 2,782,222 2,782,222 2,782,222 2,782,222 2,782,222 2,782,222 2,782,222 2,782,222 2,782,222 2,782,222
Building/Infrastructure 33,646,200 31,963,890 30,281,580 28,599,270 26,916,960 25,234,650 23,552,340 21,870,030 20,187,720 18,505,410 16,823,100
Machinery & equipment 15,338,368 13,804,531 12,270,694 10,736,857 9,203,021 7,669,184 6,135,347 4,601,510 3,067,674 1,533,837 -
Furniture & fixtures 210,000 189,000 168,000 147,000 126,000 105,000 84,000 63,000 42,000 21,000 -
Office vehicles 1,483,080 1,186,464 889,848 593,232 296,616 2,388,515 1,910,812 1,433,109 955,406 477,703 -
Office equipment 513,000 342,000 171,000 593,862 395,908 197,954 687,469 458,313 229,156 795,831 530,554
Total Fixed Assets 53,972,869 50,268,107 46,563,344 43,452,443 39,720,726 38,377,525 35,152,190 31,208,184 27,264,178 24,116,003 20,135,876
Intangible assets
Pre-operation costs 2,937,048 2,349,638 1,762,229 1,174,819 587,410 - - - - - -
Legal, licensing, & training costs 50,000 40,000 30,000 20,000 10,000 - - - - - -
Total Intangible Assets 2,987,048 2,389,638 1,792,229 1,194,819 597,410 - - - - - -
TOTAL ASSETS 84,431,372 93,478,701 101,785,224 129,850,404 170,689,992 228,484,025 307,198,347 401,544,878 514,552,387 649,663,517 813,529,060
Liabilities & Shareholders' Equity

Current liabilities
Accounts payable 4,187,536 5,374,004 6,755,891 8,360,415 10,218,285 11,240,114 12,364,125 13,600,538 14,960,591 16,456,651
Short term debt - 8,946,716 - - - - - - - - -
Total Current Liabilities - 13,134,252 5,374,004 6,755,891 8,360,415 10,218,285 11,240,114 12,364,125 13,600,538 14,960,591 16,456,651
Other liabilities
Deferred tax 1,917,296 1,917,296 1,917,296 1,917,296 1,917,296 1,533,837 1,150,378 766,918 383,459 0
Long term debt (Project Loan) 28,479,959 24,419,746 19,669,297 14,111,271 7,608,381 - - - - - -
Long term debt (Working Capital Loan) 13,735,727 - - - - - - - - - -
Total Long Term Liabilities 42,215,686 26,337,042 21,586,592 16,028,567 9,525,677 1,917,296 1,533,837 1,150,378 766,918 383,459 0
Shareholders' equity
Paid-up capital 42,215,686 42,215,686 42,215,686 42,215,686 42,215,686 42,215,686 42,215,686 42,215,686 42,215,686 42,215,686 42,215,686
Retained earnings 11,791,722 32,608,941 64,850,259 110,588,213 174,132,758 252,208,710 345,814,689 457,969,244 592,103,780 754,856,723
Total Equity 42,215,686 54,007,408 74,824,627 107,065,946 152,803,900 216,348,444 294,424,396 388,030,375 500,184,931 634,319,466 797,072,409
TOTAL CAPITAL AND LIABILITIES 84,431,372 93,478,701 101,785,224 129,850,404 170,689,992 228,484,025 307,198,347 401,544,878 514,552,387 649,663,517 813,529,060
28
13.8 Cash Flow Statement

Cash Flow Statement
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Operating activities
Net profit 11,791,722 20,817,219 32,241,319 45,737,954 63,544,544 78,075,952 93,605,979 112,154,556 134,134,536 162,752,943
Add: depreciation expense 3,704,763 3,704,763 3,704,763 3,731,717 3,731,717 3,912,804 3,944,006 3,944,006 3,944,006 3,980,127
amortization of pre-operating costs 587,410 587,410 587,410 587,410 587,410 - - - - -
amortization of training costs 10,000 10,000 10,000 10,000 10,000 - - - - -
Deferred income tax 1,917,296 - - - - (383,459) (383,459) (383,459) (383,459) (383,459)
Accounts receivable (7,994,886) (1,225,883) (2,688,414) (3,200,854) (3,797,567) (3,317,255) (2,666,983) (2,987,021) (3,345,463) (3,746,919)
Finished goods inventory - - - - - - - - - -
Equipment inventory (127,820) (6,391) (6,711) (7,046) (7,398) (7,768) (8,157) (8,565) (8,993) (9,442) 198,290
Raw material inventory (25,474,176) (7,217,683) (8,406,478) (9,760,855) (11,302,043) (6,216,124) (6,837,736) (7,521,509) (8,273,660) (9,101,026) 100,111,291
Accounts payable 4,187,536 1,186,468 1,381,887 1,604,524 1,857,870 1,021,829 1,124,011 1,236,413 1,360,054 1,496,059
Cash provided by operations (25,601,996) 6,979,765 16,666,789 25,469,063 37,161,309 59,710,082 72,463,978 88,093,480 105,681,841 126,599,204 264,408,332
Financing activities
Project Loan - principal repayment (4,060,213) (4,750,449) (5,558,026) (6,502,890) (7,608,381) - - - - -
Working Capital Loan - principal repayment (13,735,727) - - - - - - - - -
Short term debt principal repayment - (8,946,716) - - - - - - - -
Additions to Project Loan 28,479,959 - - - - - - - - - -
Additions to Working Capital Loan 13,735,727 - - - - - - - - - -
Issuance of shares 42,215,686 - - - - - - - - - -
Cash provided by / (used for) financing activities 84,431,372 (17,795,940) (13,697,165) (5,558,026) (6,502,890) (7,608,381) - - - - -
Investing activities
Capital expenditure (56,959,917) - - (593,862) - (2,388,515) (687,469) - - (795,831) -
Acquisitions
Cash (used for) / provided by investing activities (56,959,917) - - (593,862) - (2,388,515) (687,469) - - (795,831) -
NET CASH 1,869,459 (10,816,175) 2,969,624 19,317,176 30,658,419 49,713,186 71,776,509 88,093,480 105,681,841 125,803,373 264,408,332
29
14 KEY ASSUMPTIONS
Table 14-1: COGS/Revenue Calculation basis

HUSKING UNIT
Machinery capacity utilization – year 1 60%
Machinery capacity growth rate 10%
Maximum machinery capacity utilization 100%
Processing capacity at 100% (tonnes) 8,736
Processing capacity at 60% in year 1(tonnes) 5,242
Capacity utilized for rice paddy purchased (year 1 – 10) 15%
Rice paddy purchased at 60% capacity (tonnes) 786
Rice paddy purchased at 100% capacity (tonnes) 1,310
Capacity utilized for husking services (year 1 – 10) 85%
Rice paddy serviced at 60% capacity (tonnes) 4,455
Rice paddy serviced at 100% capacity (tonnes) 7,426
Product Mix through Husking process
Head rice 53%
Broken rice 10%
Powder 2.5%
Husk 33.5%
Trash 1%
POLISHING UNIT
Machinery capacity utilization – year 1 60%
Machinery capacity growth rate 10%
Maximum machinery capacity utilization 100%
Processing capacity at 100% (tonnes) 9,984
Processing capacity at 60% in year 1 (tonnes) 5,990
In-house rice polished at 60% capacity (tonnes) 417
In-house rice polished at 100% capacity (tonnes) 695
External rice polished at 60% capacity (tonnes) 5,574
External rice polished at 100% capacity (tonnes) 9,289
Product Mix through Polishing process
Polished silky rice 40%
Polished non silky rice 40%
Polished broken rice 10%
Bran 10%
30
Table 14-2: Revenue Assumptions

Sales price of Husking Products (Rs./tonne)
Husking service charges 4,000
Broken Rice 30,000
Powder 10,500
Husk 3,000
Sales price of Polished Products (Rs./tonne) Basmati Irri

Polishing service charges 3,500
Polished Silky rice 75,000 48,000
Polished Non-silky rice 70,000 45,000
Polished Broken rice 43,000 29,000
Bran 1,250
Sales price growth rate 12%

Table 14-3: Raw Material Assumptions
Raw material required at 60% capacity Tonnes
Total Rice Paddy 786
Basmati Rice paddy (80%) 629
Irri Rice Paddy (20%) 157
Raw material required at 100% capacity Tonnes

Total Rice Paddy 1,310
Basmati Rice paddy (80%) 1,048
Irri Rice Paddy (20%) 262
Raw material cost Rs./Tonne

Basmati Rice paddy (80%) 35,000
Irri Rice Paddy (20%) 22,000
Raw material price growth rate 10%

Raw material transportation cost (Rs./tonne) 500
Table 14-4 Expense Assumptions
COGS growth rate 10%
Machinery maintenance 5% % of machinery cost
Machinery maintenance growth rate 5%
Water expense Rs. 60,000 per annum
Gas expense Rs. 60,000 per annum
31
Operating costs growth rate 5.0%

Travelling expense 5% % of admin expense
Communication expense 5% % of admin expense
Office vehicles repair and maintenance Rs. 120,000 per annum
Office expenses 5% % of admin expense
Promotional expense growth rate 0.05% % of revenue
Building depreciation rate 5% % of building cost
Machinery and Equipment depreciation 10% % of machinery & equip. cost
rate
Office Equipment depreciation rate 33% % of office equipment cost
Furniture & Fixtures depreciation rate 10% % of furniture & fixture cost
Office vehicle depreciation rate 20% % of vehicle cost
Table 14-5 Economy Related Assumptions
Inflation rate 10%
Electricity growth rate 10%
Water price growth rate 10%
Gas price growth rate 10%
Wage growth rate 10%
Office equipment price growth rate 5%
Office vehicles price growth rate 10%
Table 14-6: Cash Flow Assumptions
Accounts receivable in days 45
Accounts payable in days 60
Equipment spare part inventory (months) 2
Raw material inventory (months) 7
Hours operational per day for admin 8
Hours operational per day for plant (100% capacity) 16
Months per year for husking 7
Months per year for polishing 12
Days operational per year for admin 312
Days operational per year for husking 182
Days operational per year for polishing 312
Table 14-7 Financial Assumptions
Project life (Years) 10
Debt 50%
Equity 50%
Interest rate on long-term debt (KIBOR + 5%) 17%
Interest rate on short-term debt 16%
32
Interest on cash in bank 10%

Debt tenure (Years) 5
Debt payments per year 1
15 ANNEXURE
15.1 Machinery Suppliers
Company Name: Junaid Agro Engineering
Address: Gakkhar Mandi, 5 KM Aujla Pull. GT Road
City: Gujranwala
Tel: 0300-6460595, 055-3885595
Email: junaidagropk@gmail.com
Company Name: Shoaib Industry
Address: Nawab Chowk, G.T. Road
City: Gujranwala
Tel: 055-3292941, 0300-8640841
Company Name: Muhafiz Industries
Address: Maqbara Mor, Old G.T.Road, Shahdara
City: Lahore
Tel: 042-37923558-9
Fax: 042-35881129
Email: mahafiz@brain.net.pk
Company Name: Lasani Engineers
Address: Plot # 1, St. 6, Sultan Park , Masoom Shah Railway Gate
City: Muridke
Tel: 0300-6488200, 0332-6488200
Email: lasaniengineers@gmail.com
Company Name: New Allied Industries
Address: Saeed Park , Behind Sahil Cinema, Shahdara More
City: Lahore
Tel: 042-37933559, 37920577, 37910576
Fax: 042-379630577
Email: allied1@hotmail.com
Web: www.alliedind.com.pk
15.2 Tax deduction income slabs
Income Slabs Tax Rate
0.00%
100,000 – 110,000 0.50%
110,000 – 125,000 1.00%
125,000 – 150,000 2.00%
150,000 – 175,000 3.00%
175,000 – 200,000 4.00%
200,000 – 300,000 5.00%
33
300,000 – 400,000 7.50%

400,000 – 500,000 10.00%
500,000 – 600,000 12.50%
600,000 – 800,000 15.00%
800,000 – 1,000,000 17.50%
1,000,000 – 1,300,000 21.00%
1,300,000 and above 25.00%
34

Rice Husking and Polishing Unit Pre-Feasibility

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Pre-Feasibility Study

RICE HUSKING AND POLISHING UNIT

Small and Medium Enterprises Development Authority

REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE

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

2. INTRODUCTION TO SMEDA ........................................................................ 6

2 PURPOSE OF THE DOCUMENT ................................................................... 6

3 PROJECT PROFILE ......................................................................................... 7

6 MARKET ANALYSIS ..................................................................................... 11

6.1.2 Market Segments ............................................................................................... 11

6.2.2 Major Importers of Rice .................................................................................... 12

6.2.3 Export Trends of Pakistan ................................................................................. 12

9 MACHINERY & EQUIPMENT ..................................................................... 17

10 OFFICE EQUIPMENT AND FURNITURE ................................................. 20

12 LAND & BUILDING ........................................................................................ 21

Document No. PREF-62

Revision Date April, 2012

2 PURPOSE OF THE DOCUMENT

3.2 Project Brief

3.3 Proposed Business Legal Status

3.4 Proposed Capacity

4 CRUCIAL FACTORS & STEPS IN DECISION MAKING

Rice paddy is only available in selected months of the year

5 CURRENT INDUSTRY STRUCTURE2

Table 5-1 Area, Production and Yield of Rice

Figure 5-1 Production of Rice in Pakistan

6.1.2 Market Segments

6.2 International Market3

6.2.1 Major Exporters of Rice

Table 6-1 Top Exporters of 2010

6.2.2 Major Importers of Rice

Table 6-2 Top Importers of 2010

6.2.3 Export Trends of Pakistan

Table 6-3 Total Rice Export Value - Pakistan

Table 6-4 Top Export of Rice from Pakistan Partners in 2010

6.3 Major Players

Figure 7-1 Production Process Flow

7.2 Rice Husking

7.3 Polishing Unit

7.4 Product Mix

Table 7-1 Husking operations

Table 7-2 Polishing operations

Table 7-3 Raw material product mix

Table 7-4 Products of Husking process

Table 7-5 Products of Polishing process

Table 8-1 Human Resource Requirement – Year 1

9 MACHINERY & EQUIPMENT

Table 9-1 Husking Machinery Details

9.2 Details of Rice Processing (Polishing) Machines

Table 9-2 Rice Polishing Machinery Details

Table 9-3 Total Machinery Cost of the Unit

10 OFFICE EQUIPMENT AND FURNITURE

Table 10-1 Office Equipment

Table 10-2 Office Furniture and Fixtures

Table 11-1 Office Vehicle

12 LAND & BUILDING

Table 12-1 Land and Building Area and Cost

12.2 Recommended Mode for Acquiring Land

12.3 Suitable Locations

12.4 Infrastructure Requirement

Table 13-1 Total Project Cost

Table 13-2 Project Returns

Table 13-3 Financing Plan