Project Appraisal Full N Final Report

PROJECT ARRPRAISAL : MILK INDUSTRY
PROJECT APPRAISAL TERM REPORT
MILK INDUSTRY
SUBMITTED TO: SIR SIDDIQ KHATRI
SUBMITTED BY: UROOJ FAYYAZ

NAEEM NOORALI TEJANI
M. OMAIR IQBAL
SUMBUL FATIMA
FAHAD MOHSIN
DATE OF SUBMISSION: 31TH AUGUST, 2008
INSTITUTE OF BUSINESS MANAGEMENT

LETTER OF TRANSMITTAL

DATE: 31st AUGUST, 2008
Mr. SIDDIQ KHATRI

KARACHI.
Respected Sir,
Following is the Term Report that you had given us as our final
project. The Report was to prepare a feasibility report for a specific
industry and the industry chosen by us was MILK INDUSTRY.
All financial data used is authentic and real as on. All issues that
were relevant to the topic have been covered in this report.
Yours’ sincerely,
UROOJ FAYYAZ (5542)
NAEEM NOORALI TEJANI (5622)
M. OMAIR IQBAL (5195)
SUMBUL FATIMA (5779)
FAHAD MOHSIN (5855)

LETTER OF ACKNOWLEDGMENT

DATE: 27TH AUGUST, 2008
This report is a comprehensive report covering all the topics given

in the report outline. This report has been prepared as a part of the
course requirement for Project Appraisal. The material compiled
and presented in this report is a result of exhaustive work.
This report has proved to be a great experience. We would like to

thank our course instructor “Sir Siddiq Khatri” for sharing his vast
knowledge and experience with us in this course and semester.
Yours’ sincerely;
UROOJ FAYYAZ (5542)
NAEEM NOORALI TEJANI (5622)
M. OMAIR IQBAL (5195)
SUMBUL FATIMA (5779)
FAHAD MOHSIN (5855)

TABLE OF CONTENTS

SERAIL TOPICS PAGE NUMBER

NUMBER
OVERVIEW OF THE
INTERNATIONAL SCENARIO,
1 8
FOCUSING ITS EFFECT ON
PAKISTAN
REVIEW OF PAKISTAN’S
2 23
ECONOMY
ASSESSMENT OF DAIRY
3 28
INDUSTRY IN PAKISTAN
DETAILED STUDY OF
4 49
PROJECT
COMPREHENSIVE FINANCIAL
5 80
STATEMENTS
CONCLUSION AND
6 106
RECOMMENDATION
7 APPENDIX 109

PART A
“OVERVIEW OF THE INTERNATIONAL

SCENARIO, FOCUSING ITS EFFECT ON
PAKISTAN”

FOREIGN RELATIONS OF PAKISTAN:
Pakistan is the second largest Muslim country in terms of population (behind Indonesia),
and its status as a declared nuclear power, being the only Islamic nation to have that
status, plays a part in its international role. Pakistan is also an important member of the
Organization of the Islamic Conference (OIC).
Pakistan is an active member of the United Nations. Historically, its foreign policy has
encompassed difficult relations with the Republic of India; especially on the core-issue of
Jammu and Kashmir, a desire for a stable Afghanistan, long-standing close relations with
China, extensive security and economic interests in the Persian Gulf and wide-ranging
bilateral relations with the United States and other Western countries.
Wary of Soviet expansion, Pakistan had strong relations with both the United States of
America and the People's Republic of China during much of the Cold War. It was a
member of the CENTO and SEATO military alliances. Its alliance with the United States
was especially close after the Soviets invaded the neighboring country of Afghanistan. In
1964, Pakistan signed the Regional Cooperation for Development (RCD) Pact with
Turkey and Iran, when all three countries were closely allied with the U.S., and as
neighbors of the Soviet Union, wary of perceived Soviet expansionism. To this day,
Pakistan has a close relationship with Turkey. RCD became defunct after the Iranian
Revolution, and a Pakistani-Turkish initiative led to the founding of the Economic
Cooperation Organization (ECO) in 1985. Pakistan's relations with India have improved
recently and this has opened up Pakistan's foreign policy to issues beyond security. This
development might completely change the complexion of Pakistan's foreign relations.
BILATERAL AND REGIONAL RELATIONS:
PEOPLE'S REPUBLIC OF CHINA:
In 1950, Pakistan was among the first countries to break relations with the Republic of
China or Taiwan and recognize the People's Republic of China. Following the Sino-
Indian hostilities of 1962, Pakistan’ relations with the PRC became stronger; since then,
the two countries have regularly exchanged high-level visits resulting in s a variety of
agreements. The PRC has provided economic, military, and technical assistance to
Pakistan. The alliance remains strong.
Favorable relations with China have been a pillar of Pakistan's foreign policy. China
strongly supported Pakistan's opposition to Soviet involvement in Afghanistan and was
perceived by Pakistan as a regional counterweight to India and the USSR. The PRC and
Pakistan also share a close military relation, with China supplying a range of modern
armaments to the Pakistani defence forces. Lately, military cooperation has deepened

with joint projects producing armaments ranging from fighter jets to guided missile
frigates. Chinese cooperation with Pakistan has reached high economic points with
substantial investment from China in Pakistani infrastructural expansion.
REPUBLIC OF INDIA:
Since independence, relations between Pakistan and India have been characterized by
rivalry and suspicion. Although many issues divide the two countries, the most sensitive
one since independence has been the status of Kashmir.
At the time of partition, the princely state of Kashmir, though ruled by a Hindu
Maharajah, had an overwhelmingly Muslim population. When the Maharajah hesitated in
acceding to either Pakistan or India in 1947, some of his Muslim subjects, aided by
tribesmen from Pakistan, revolted in favor of joining Pakistan. Hindustan has long
alleged that regular troops from Pakistan had participated in the partial occupation of
Kashmir from the Western front. In exchange for military assistance in containing the
revolt, the Kashmiri ruler offered his allegiance to India. Indian troops occupied the
central & eastern portion of Kashmir, including its capital, Srinagar, while the west-north
western part came under Pakistani occupation.
India addressed this dispute in the United Nations on January 1, 1948. One year later, the
UN arranged a cease-fire along a line dividing Kashmir, but leaving the northern end of
the line undemocratic and the vale of Kashmir (with the majority of the population) under
Indian control. India and Pakistan agreed with UN resolutions which called for a UN-
supervised plebiscite to determine the state's future.
Full-scale hostilities erupted in September 1965, when insurgents who were trained and
supplied by Pakistan were operating in Indian-controlled Kashmir. (See Operation
Gibraltar) Hostilities ceased three weeks later, following mediation efforts by the UN
and interested countries. In January 1966, Indian and Pakistani representatives met in
Tashkent, U.S.S.R., and agreed to attempt a peaceful settlement of Kashmir and their
other differences. (See Indo-Pakistani War of 1965)
Following Pakistan's defeat in the Indo-Pakistani War of 1971, Pakistan President

Zulfiqar Ali Bhutto and Indian Prime Minister Indira Gandhi met in the mountain town
of Shimla, India, in July 1972 for the Shimla Accords. They agreed to a line of control in
Kashmir resulting from the December 17, 1971 cease-fire, and endorsed the principle of
settlement of bilateral disputes through peaceful means. In 1974, Pakistan and India
agreed to resume postal and telecommunications linkages, and to enact measures to
facilitate travel. Trade and diplomatic relations were restored in 1976 after a hiatus of
five years.
India's nuclear test in 1974 generated great uncertainty in Pakistan and is generally
acknowledged to have been the impetus for Pakistan's nuclear weapons development

program. In 1983, the Pakistani and Indian governments accused each other of aiding
separatists in their respective countries, i.e., Sikhs in India's Punjab state and Sindhis in
Pakistan's Sindh province. In April 1984, tensions erupted after troops were deployed to
the Siachen Glacier, a high-altitude desolate area close to the China border left
undemocratic by the cease-fire agreement (Karachi Agreement) signed by Pakistan and
India in 1949.
Tensions diminished after Rajiv Gandhi became Prime Minister in November 1984 and
after a group of Sikh hijackers was brought to trial by Pakistan in March 1985. In
December 1985, President Zia and Prime Minister Rajiv Gandhi pledged not to attack
each other's nuclear facilities. (A formal "no attack" agreement was signed in January
1991.) In early 1986, the Indian and Pakistani governments began high-level talks to
resolve the Siachen Glacier border dispute and to improve trade.
Bilateral tensions increased in early 1990, when Kashmiri militants began a campaign of
violence against Indian Government authority in Indian-held Kashmir. Subsequent high-
level bilateral meetings relieved the tensions between the Republic of India and Pakistan,
but relations worsened again after the destruction of the Babri Mosque by Hindu
extremists in December 1992 and terrorist bombings in Bombay, now Mumbai, in March
1993. Talks between the Foreign Secretaries of both countries in January 1994 resulted in
deadlock.
In the late 1990s, the Indo-Pakistani relationship veered sharply between rapprochement
and conflict. After taking office in February 1997, Prime Minister Nawaz Sharif moved
to resume a official dialogue with India. A number of meetings at the foreign secretary
and Prime Ministerial level took place, with positive atmospherics but little concrete
progress. The relationship improved markedly when Indian Prime Minister Vajpayee
traveled to Lahore for a summit with Sharif in February 1999. There was considerable
hope that the meeting could lead to a breakthrough. Unfortunately, in spring 1999
infiltrators from Pakistan occupied positions on the Indian side of the Line of Control in
the remote, mountainous area of Kashmir near Kargil, thereby threatening the ability of
India to supply its forces on the Siachen Glacier. By early summer, serious fighting flared
in the Kargil sector. The fighting lasted about a month and Indian forces were able to
push back the infiltrators (India accused) A provided evidence, which is however,
disputed) that it was Pakistan's military which had occupied Indian posts in the region.
Indian Army left their posts in winter). The Pakistan Prime Minister Nawaz Sharif under
pressure from the US president Bill Clinton withdrew Pakistan's army from remaining
posts.
Relations between India and Pakistan continued to be strained when Pervez Musharraf
came to power on October 12, 1999 Pakistani coup d'état. India alleged that Pakistan
provided monetary and material support to Kashmiri terrorists, a charge which Pakistan
has always denied. India accused Pakistan of abetting cross-border terrorism from its
territory. Pakistan claimed to provide only moral support to the fighters and maintains
that the conflict is indigenous in nature. However, many of the terrorist outfits like
Lashkar-e-Taiba and others operating in Jammu and Kashmir have their offices in

Pakistan. The terrorist Maulana Masood Azhar, released from the Indian prison in 1999
in exchange of Indian nationals, who were on board in an Indian Airlines plane(IC-814),
which was going to New Delhi from Katmandu, Nepal. After release from an Indian
prison, Maulana Masood Azhar made a public appearance in Pakistan and formed
another terrorist outfit named Jaish-e-Mohammed. Hopes of peaceful resolution of issues
through dialogue have met a stalemate a number of times over the issue.
In 2001, following the 9/11 attacks, the United States formed an alliance with both India
and Pakistan in its War on Terror. Pakistanis themselves started to grow disillusioned
with jihadi militants, regardless of the causes they claimed to follow. Musharraf dropped
his insistence that no issues could be discussed until the Kashmir issue was fully solved.
Bilateral meetings between the two sides resulted in new people-to-people contacts. Air
services and cricket matches were restored. Trains started plying between Sindh and
Rajasthan. Bans on Indian movies and TV channels were eased in Pakistan. Transport
links across the Line of Control in Kashmir were re-opened. More importantly the
intelligence services and armies of the two countries started to cooperate in identifying
terrorists who threatened attacks. On June 20, 2004, both countries agreed to extend a
nuclear testing ban and to set up a hotline between their foreign secretaries aimed at
preventing misunderstandings that might lead to a nuclear war. [1] In 2007 the two
countries agreed to start flights between their capitals. Legal trade between the countries
reached 2 billion dollars per year.
SOVIET UNION/RUSSIAN FEDERATION:
Under military leader Ayub Khan, Pakistan sought to improve relations with the Soviet
Union; trade and cultural exchanges between the two countries increased between 1966
and 1971. However, Soviet criticism of Pakistan's position in the 1971 war with India
weakened bilateral relations, and many Pakistanis believed that the August 1971 Indo-
Soviet Treaty of Friendship, Peace and Cooperation encouraged Indian belligerency.
Subsequent Soviet arms sales to India, amounting to billions of dollars on concessional
terms, reinforced this argument.
During the 1980s, tensions increased between the Soviet Union and Pakistan because of
the latter's key role in helping to organize political and material support for the Afghan
rebel forces. The withdrawal of Soviet forces from Afghanistan and the collapse of the
former Soviet Union resulted in significantly improved bilateral relations, but Pakistan's
support for and recognition of the Taliban regime in neighboring Afghanistan remained
an ongoing source of tension. Later on, government of Pakistan changed its policy
towards Taliban when it joined US forces in helping to overthrow them following attacks
in the US on the 11th of September 2001.
In 2007, the relations between Pakistan and the Russian Federation were reactivated after
the 3-day official visit of Russian Prime Minister Mikhail Fradkov. He is the first Russian
prime minister to visit Pakistan in the post Soviet Union era in 38 years. He had "in-depth

discussions" with President Pervez Musharraf and Prime Minister Shaukat Aziz. The
major focus of the visit was to improve bilateral relations with particular emphasis on
ways and means to enhance economic cooperation between the two countries. During the
visit, two Memorandum of understanding were signed, under an MOU, the Russian
Federation will cooperate with Pakistan Railways for construction of new railway tracks,
supply of sleepers and signaling system, up-gradation of a railway workshops and setting
up of Metro Railways in major cities of Pakistan. Under another MOU, the two countries
will work for promoting cultural, educational and scientific changes.
UNITED STATES OF AMERICA:
Historically, no ally of the United States has faced as many sanctions from the US as
Pakistan. The United States established diplomatic relations with Pakistan in 1949;
reluctantly, at first. Since the Eisenhower administration, however, Pakistan and the US
began developing more cozy relations. The American agreement to provide economic
and military assistance to Pakistan and the latter's partnership in the Baghdad Pact,
CENTO and SEATO strengthened relations between the two nations. At the time, its
relationship with the U.S. was so close and friendly that it was called the United States'
"most-allied ally" in Asia [1]. Pakistanis felt betrayed and ill-compensated for the risks
incurred in supporting the U.S. - after the U-2 Crisis of 1960, Soviet leader Nikita
Khrushchev had threatened the nuclear annihilation of Pakistani cities. The U.S.
suspension of military assistance during the 1965 Indo-Pakistan war generated a
widespread feeling in Pakistan that the United States was not a reliable ally. Even though
the United States suspended military assistance to both countries involved in the conflict,
the suspension of aid affected Pakistan much more severely. Gradually, relations
improved and arms sales were renewed in 1975. Then, in April 1979, the United States
cut off economic assistance to Pakistan, except food assistance, as required under the
Symington Amendment to the U.S. Foreign Assistance Act of 1961, due to concerns
about Pakistan's nuclear program.
The Soviet invasion of Afghanistan in December 1979 highlighted the common interest
of Pakistan and the United States in peace and stability in South Asia. In 1981, the United
States and Pakistan agreed on a $3.2-billion military and economic assistance program
aimed at helping Pakistan deal with the heightened threat to security in the region and its
economic development needs. With U.S. assistance - in the largest covert operation in
history - Pakistan armed and supplied anti-Soviet fighters in Afghanistan, eventually
defeating the Soviets, who withdrew in 1988.
Recognizing national security concerns and accepting Pakistan's assurances that it did not
intend to construct a nuclear weapon, Congress waived restrictions (Symington
Amendment) on military assistance to Pakistan. In March 1986, the two countries agreed
on a second multi-year (FY 1988-93) $4-billion economic development and security
assistance program. On October 1, 1990, however, the United States suspended all
military assistance and new economic aid to Pakistan under the Pressler Amendment,

which required that the President certify annually that Pakistan "does not possess a
nuclear explosive device."
India's decision to conduct nuclear tests in May 1998 and Pakistan's matching response
set back U.S. relations in the region, which had seen renewed U.S. Government interest
during the second Clinton Administration. A presidential visit scheduled for the first
quarter of 1998 was postponed and, under the Glenn Amendment, sanctions restricted the
provision of credits, military sales, economic assistance, and loans to the government. An
intensive dialogue on nuclear nonproliferation and security issues between Deputy
Secretary Talbott and Foreign Secretary Shamshad Ahmad was initiated, with discussions
focusing on CTBT signature and ratification, FMCT negotiations, export controls, and a
nuclear restraint regime. The October 1999 overthrow of the democratically elected
Sharif government triggered an additional layer of sanctions under Section 508 of the
Foreign Appropriations Act which include restrictions on foreign military financing and
economic assistance. U.S. Government assistance to Pakistan was limited mainly to
refugee and counter-narcotics assistance.
Pakistan moved decisively to ally itself with the United States in its war against Osama
bin Laden and Al-Qaeda. It provided the U.S. a number of military airports and bases, for
its attack on Afghanistan. It has arrested over five hundred Al-Qaeda members and
handed them over to the United States; senior U.S. officers have been lavish in their
praise of Pakistani efforts. Since this strategic re-alignment towards U.S. policy,
economic and military assistance has been flowing from the U.S. to Pakistan and
sanctions have been lifted. In the three years before the attacks of September 11, Pakistan
received approximately $9 million in American military aid. In the three years after, the
number increased to $4.2 billion[2].
In June 2004, President Bush designated Pakistan as a major non-NATO ally, making it
eligible, among other things, to purchase advanced American military technology. In
May, 2006, The Bush administration announced a major sale of missiles to Pakistan,
valued at $370 Million USD.

INTRODUCTION:
Fiscal year 2007-08 has been a difficult year for Pakistan’s economy. Several political
and economic events, both on domestic and external front, occurred unexpectedly. These
events include: disturbed political conditions; an unstable law and order situation; supply
shocks; soaring oil, food and other commodity prices; softening of external demand; and
turmoil in the international financial market. All these events have adversely affected the
key macroeconomic fundamentals of Pakistan during the fiscal year 2007-08.
IMPACT ON ECONOMY AFTER THE ASSASSINATION OF BENAZIR

BHUTTO:
The country may not be able to achieve the economic targets set for the current fiscal
year as it has faced around Rs. 50 billion revenue losses due to marred economic
activities after the assassination of former Prime Minister Benazir Bhutto and during the
Eid holidays, a senior official told Daily Times.
Besides long Eid holidays, the government departments have been closed from December
28-30 Sunday (today) as official holidays. This would decrease the overall revenue
collection in terms of different taxes including income tax, federal excise duty and sales
tax during the last ten days of December causing a loss of around Rs 50 billion, an
official said. Official in Federal Board of Revenue (FBR) said that during the last 10 days
including Eid holidays and after the assassination of former Prime Minister Benazir
Bhutto the country has faced around Rs 50 billion losses and FBR would need Rs 2.739
billion additional receipts per day in the coming days to meet the Rs 1.025 trillion
revenue target set for the current fiscal year.
One of the new company informed that heart of Pakistan, Karachi lost almost Rs. 20
billion in just 3 days of strikes. And no governmental authority prevent the traders and
businesses from the big loss.
CAUSES OF INTERNATIONAL TERRORISM:
The USA, together with international community, has launched 'Operation Enduring
Freedom’, as a result of what happened on 11th September, 2001, in New York and
Washington. A system based on most sophisticated technology was beaten by low-level
technology i.e. small knives, human muscle power and converting a commercial plane
into a bomb of nuclear dimensions.
The silos of all nuclear weapons and sophisticated missile technology failed to prevent
the catastrophe. Therefore it would be safe to conclude that the tenor and thrust of the

'Operation Enduring Freedom' must necessarily be different than the present military
wisdom.
There are many contributory factors to terrorism and the most critical is, the 'injustice
galore' -being caused on a global basis. Hence the 'Operation' seems very timely. In the
main, three streams serve as the spawning grounds for terrorism. The first and foremost is
economic. Unfettered capitalism, globalization, wrong policy prescriptions, misdirected
bilateral and multilateral lending, debt traps and the increasing burden on have-nots are
some of its manifestations. The second is 'double standard' in formulation and application
of foreign policy, in several cases, by US and its allies. The third is the gradual building-
up of prejudices, bias and clichés in the West by media and pseudo-intellectuals raising
the bogey of fundamentalism, etc.
Globalization: a sugar-coated mantra like "One World Government," "World harmony"

and "International Peace and Cordiality." The deep core of this mantra contains nothing
but exploitation of the weak economies of the world. In fact, it is nothing but neo-
colonialism.
The 'Operation Enduring Freedom' cannot succeed unless global disparity is removed,
economic resources shared and removal of economic injustice becomes an integral part of
this operation. As Wily Brandt eloquently emphasized 'while hunger rules, peace can not
prevail". Any one who wants to ban war must also ban poverty'.
Here a 6-point program outlining a strategy to achieve this goal is suggested:
(I) A restructuring of world economic order following a global Summit;
(II) A restructuring of the role of the IMF, the World Bank, the ADB, the WTO and
strengthening the role of the UN in various economic fields;
(III) An adequate representation of the developing countries in the UN and multi-lateral

organizations including the IMF, the World Bank and the ADB;
(IV) An effective supervision of the major financial markets including hedge funds,
currency traders and hot money operations.
(V) A well-coordinated strategy for global debt reduction, together with the efforts about
global poverty alleviation;
(VI) Adoption and implementation of people-oriented public policies, mainly in the

developing world to ensure heavy investment in health, education and social security

LONDON ATTACKS AND THEIR AFFECTS ON PAKISTAN:
In the wake of recent bombings in London, the spotlight and blame for the acts has once
again been pointed at Pakistan and Pakistanis. Once again, the Western and Indian media
has moved quickly to disgrace this nation and its inhabitants. Once again, the government
of Pakistan is forced to defend itself against unjust accusations.
Terrorist attacks have an immediate negative impact on the local businesses and in
particular the travel and tourism industry. A terrorist attack affects the livelihoods of
everyone in one-way or another. The trauma caused by such an attack increases ethnic
and racial tensions while increasing religious intolerance. As has been repeatedly seen
several times since the world trade center attacks, a terrorist attack makes it easier for
governments to pass laws restricting individual liberties and violating individual privacy
in the name of security.
A terrorist attack clearly has a detrimental effect on the local population. However, the
largest victims are the community from which the attacker has originated, since they will
be subject to discrimination for a long time. In the case of London bombings, this
represents the Pakistani community and Muslims in general.
Muslims living in United States often mention the various uncomfortable events they had
to suffer through. Events such as being singled out and led away by security guards at the
airport for "questioning" while hearing the whole crowd at the terminal whispering and
looking at you. Events such as losing a flight to satisfy the suspicions of someone or
having police show up at your doorstep because the neighbor was suspicious about the
two large boxes the person was carrying into his own house. Many Muslims moved to
different countries. There was a large exodus of Muslims from USA to Canada.
The effects of attacks such as the London bombings are more far reaching than Britain
itself. Pakistan is a developing country with a huge population. To develop our country,
we desperately need foreign educated and foreign qualified individuals. Just look around
at high-level posts in any major company in Pakistan. You will find Pakistanis educated
overseas, or Pakistanis with previous foreign work experience. Since the world trade
center bombings, the number of Pakistanis being able to go to the US for education or
work has declined significantly and this would certainly have a negative impact on our
economy in the future. The events in London have already started a debate on
immigration policies in Britain. This will surely have an affect on the opportunities
available for Pakistanis in the rest of Europe as well.
We depend on the industrialized nations for their expertise, defense equipment, finance
(in the form of loans and direct investment), and we also benefit from the foreign
exchange sent by hardworking Pakistanis living in these countries. Overseas Pakistanis
have changed the demographics of Pakistan. A poor uneducated man can go overseas and
earn enough money to fulfill the financial needs of his family, send his children to school,
and guarantee financial security of his entire family. In villages, such financial strength
enables a family to move up the social classes.

Pakistan, like any other developing country, benefits from our citizens living abroad or
returning home after having lived abroad. Therefore, we must ensure that our young
generation continues to have the opportunity to go overseas for work or for study.
Terrorist events only serve to close doors of opportunities and expose us to
discrimination. Whenever there is a terrorist event in which a Pakistani or Muslim can be
somehow linked, we as nation, suffer.
The international media should stop blaming entire nations or a religion for the actions of
a few. Media has enormous influence over public opinion and with this power comes a
responsibility: The responsibility to work towards a better and more tolerant and more
peaceful world, for us all. Inciting hatred against a community, nation, or religion is very
irresponsible. It hurts both the nation fallen victim to an attack and the nation blamed for
such events.
GLOBAL ECONOMIC ENVIRONMENT:
While unsettled domestic political conditions and a heightened security environment have
adversely impacted the performance of Pakistan’s economy, the external developments
have equally played an important role in accentuating Pakistan’s macroeconomic
imbalances. The year 2007-08 has been a turbulent year for the world economy as well.
This year has seen soaring energy prices, an unprecedented surge in food inflation and a
financial market crisis to match the Great Depression. These developments have had
adverse consequences of differing degrees for economies in different parts of the world.
The global economy is in the midst of one of the biggest oil shocks in history.
THE RISES AND FALLS OF OPEC:
Failure by the Organization of Petroleum Exporting Countries (OPEC) to cut production

at its meeting in November 1998 prompted prices to collapse to a 12-year low of $10.35 a
barrel in New York the following month. A combination of excess production, rising
inventories and poor demand for winter heating fuels pushed prices down. In March
1999, oil prices climbed 17%, going higher as oil-producing countries, unified by low
prices, succeed in cutting output. Oil prices began making a sharp recovery in the late
winter of 1999, rising from the low teens at the beginning of the year to more than $22 a
barrel by the early autumn, and crossed $30 a barrel in mid-February 2000. A major
cause was production cuts settled upon in March 1999 by OPEC and other major oil-
exporting nations.
Today, with oil at around $48, annualized growth rate for M2 in April 2005 (relative to
April 2004) was 4.139%, a fall by more than half of the 1999 growth rate of 8.6%. If the
Fed is really concerned with fighting inflation, $48 oil and a 3% FFR target simply do not
mix, even with a lowered money-supply growth rate. There is strong evidence that

instead of worrying about inflation, the Fed is really more worried about the debt bubble,
which stealth inflation through asset appreciation can help to deflate with less or no pain.
Oil is not included in the World Trade Organization (WTO) regime because it is not a
commodity that can be produced at will by any nation, regardless of efficiency. Oil
producers are members of a natural monopoly devoid of open competition. Yet OPEC is
a cartel. As such, it will eventually conflict with the competition policy thrust of the
WTO. Under WTO rules, oil-producing nations cannot be charged with price-fixing if
they intervene to affect market prices. OPEC, the International Monetary Fund (IMF) and
the WTO are among the most visible international economic organizations. The WTO
regime imposes draconian free-market rules on trade except for oil and currencies, while
OPEC blatantly practices intergovernmental manipulation of oil prices and the IMF acts
as the world's policeman in defense of dollar hegemony. Neo-liberal economists do not
see OPEC and the IMF as trade-restricting monopolies, arguing that their separate
domains of oil and currencies are not part of the concern of the WTO regime. Concerted
government intervention against market forces in the price of oil and currencies are
tolerated in the name of needing to correct market failures.
A major key to understanding the operation of OPEC is the internal battle for market
share within OPEC by its members, causing aggregate OPEC production to be higher
than what serves even the cartel's overall interest. Discontinuities in the production of
Iraq and Iran were caused by the Iraq-Iran conflicts between 1980 and 1988. A second
discontinuity in 1990 was caused by Iraq's invasion of Kuwait and the ensuing Gulf War.
A third discontinuity occurred when the US invaded Iraq in 2003. A fourth discontinuity
is pending over Iran's march toward nuclear-power status. As a major oil producer, Iran
needs nuclear power for civilian use as much as coal-producing Newcastle needs oil.
Obviously, other agendas are at work. OPEC was formed in 1960 with five founding
members: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. By the end of 1971, six other
nations had joined the group: Qatar, Indonesia, Libya, the United Arab Emirates, Algeria
and Nigeria. Of these, only Venezuela is non-Islamic. OPEC emerged as an effective
cartel only after the Arab oil embargo that started on October 19, 1973, and ended on
March 18, 1974. During that period, the price for benchmark Saudi Light increased from
$2.59 in September 1973 to $11.65 six months later in March 1974. Since then, OPEC
has been setting bottom benchmark prices for its various kinds of crude oil in the world
market.
OPEC, or any other cartel, faces a problem of optimization in its attempts to control
prices. The problem is to determine the level of production that meets its collective goals
of highest prices with the biggest volume over the longest sustainable period. For OPEC,
this means maintaining production levels that ensure the highest oil prices possible
without encouraging competitive production outside OPEC or significant conservation
measures on the part of consumers everywhere.
Fifty-dollar oil is not an economic disaster but it is a political problem. Fifty-dollar oil
need not be damaging to the global economy, but it nevertheless forces a restructuring of
the global economy that has political reverberations. To begin with, $50 oil will in the

long run stimulate more exploration and production, and reactivate idle wells that are
uneconomic at $10 per barrel. Also the global economy is growing more energy-efficient
with new technology and the effect of oil price on the economy is much less than in the
1970s. And $50 oil will prevent a return to the era of abusive waste of energy caused by
excessively low oil prices.
The only trouble is that $50 oil takes money from the pocket of consumers and delivers it
to the oil producers (not just Arabs), who then reinvest it in Wall Street. The net result is
a transfer of wealth from the "working families" of the world to the capitalists the world
over. Consumer demand will shift, with more money spent on fuel and utilities and less
for other types of consumption that improve the standard of living, but equity prices will
rise because there will be more dollars chasing the same number of shares.
WTO IMPACTS:
Barely five years into the 21st century, with a globalized neo-liberal trade regime firmly
in place in a world where market economy has become the norm, trade protectionism
appears to be fast re-emerging and developing into a new global trade war of complex
dimensions. The irony is that this new trade war is being launched not by the poor
economies that have been receiving the short end of the trade stick, but by the US, which
has been winning more than it has been losing on all counts from globalized neo-liberal
trade, with the European Union following suit in lockstep. Japan, of course, has never let
up on protectionism and never taken competition policy seriously. The rich nations need
to recognize that their efforts to squeeze every last drop of advantage out of already
unfair trade will only plunge the world into deep depression. History has shown that
while the poor suffer more in economic depressions, the rich, even as they are financially
cushioned by their wealth, are hurt by political repercussions in the form of either war or
revolution, or both.
EFFECTS OF WTO ON THE DEVELOPING WORLD ESPECIALLY

PAKISTAN:
WTO is too powerful; it can compel sovereign states to change their laws if it feels that
the laws do not comply with the agreements made. It is run by the rich for the rich; it
does not give significant weight to the problems of the developing countries, in practice,
if not in theory. It is indifferent to the negative fallout of free trade; its commercial
interests take priority over everything— from child labor to workers’ rights and
environment to health. It lacks democratic accountability. Its trade dispute hearings are
closed to the public and the media, while free trade presupposes open debates and
transparency.

To govern the international trade, WTO was set up in 1995. The WTO has clauses to
protect the environment, but they contain no ‘minimum standards’ to protect the
environment, labor rights, social programs or cultural diversity. What makes it so
powerful is that it can intervene in the everyday administration, of any member country,
and force it to change its laws if the WTO feels that they are detrimental to free trade and
are against WTO agreements.
The member states themselves have given both legislative and judicial authority to WTO
to challenge laws, policies and programs of countries which do not conform to its rules.
Once a case is decided, in secret by a panel, world wide conformity is required. The
country affected, must bring its laws in conformity with the decision or face retaliation in
the form of sanctions.
Services, is one of the fastest growing sector of the world. It accounts for about 60 per
cent of global output, 30 per cent of global employment and 20 per cent of global trade.
For developing countries, this is one of the most important sectors, due to abundance of
population and shortage of jobs. By comparative advantage, the abundance of cheap labor
can help poor countries to specialize in trade in services. With the free flow of goods,
developed countries – are required to recognize the need for free, cross border, mobility
of labor.
Despite the recent agreement of August 2004, recognizing the need of free trade in
services, the emphasis on free trade in goods is quite prominent while cross border
mobility of labor is a distant dream.
Sectors favoring developed countries that is in which they have comparative advantage,
such as manufactured goods, are a priority while sectors like agriculture and services are
out of focus. Without balanced liberalization can the developing countries really benefit
from WTO? Unless simultaneous liberalization of cross border mobility of labor with
free trade in goods is ensured, the poor countries will face more widespread
unemployment and poverty.
As the global quota regime in the textile sector would fall apart, that event could
transform the dynamics of international trade. There is sure to be a reallocation of
resources and markets. Until now a hostage to the quota regime, the textile industry could
score new successes and, under the new circumstances, bring glad tidings for Pakistan -
primarily a cotton and textile-based economy. How best we can use this opportunity
depends on a host of factors. Textile tycoons are all set to seize the opportunities. But for
people in general, it may not necessarily be a benefit.
GAS PIPELINE ISSUE- INDIA- PAK – U.S RELATIONS:
Despite US reservations on the issue and the threat of sanctions, India and Pakistan are
pushing ahead with their plans for a 1,600-mile Iran-Pakistan-India gas pipeline. The US

recently warned its traditional ally Pakistan of sanctions if it went ahead with the project.
Washington would rather see the South Asian countries obtain resources from countries
closer to its sphere of interest, and isolate Iran, which it suspects of developing nuclear
weapons. The US has issued similar warnings to India. Both Delhi and Islamabad have
been trying to persuade the US to change its mind, but without success.
There is a lot at stake for Iran, Pakistan and India in this pipeline. Negotiations on the
mega pipeline began in 1994, but no headway has been made until last year because of
tensions between Pakistan and India, and the project's massive cost. The warming of ties
between the two South Asian rivals has now resulted in a renewed focus on building the
pipeline. For Iran, which holds the world's largest gas reserves after Russia, India is as
important as the European market, which it hopes to access through a pipeline across
Turkey. India, which imports nearly 70% of its annual energy needs, has been using ships
to ferry LNG.

PART B
“REVIEW OF PAKISTAN’S ECONOMY”

INTRODUCTION:
Pakistan is a nation with a diverse economy that include textiles, chemicals, food
processing, agriculture and other industries. It is the 25th largest economy in the world.
Pakistan’s economy continues to gain traction as it experiences the longest spell of its
strongest growth in years. The outcomes of the recently concluded fiscal year indicate
that Pakistan’s upbeat economic momentum remains on track. Economic growth
accelerates to 7.0% in 2006-07 at the back of robust growth in agriculture, manufacturing
and services. Economic growth has been notably stable and resilient. With economic
growth at 7.0% in 2006-07, Pakistan’s real GDP has grown at an average rate of 7.0% per
annum during the last five years (2003-07) and over 7.5% in the last four years (2004-07)
in running. Compared with other emerging economies in Asia, this puts Pakistan as one
of the fastest growing economies in the region along with China, India and Vietnam. The
good performance has resulted from a combination of generally sound economic policies,
on-going structural reforms and a benign international economic environment. Based on
the performance of half-a-decade of strong, stable, resilient and broad-based economic
growth it appears that Pakistan’s economy will continue to be a high mean, low variance
economy over the medium-term.
Pakistan is in the midst of its strongest economic expansion phase and its growth
momentum is broad-based.
Economic outlook/forecast for the current fiscal year 2007-08 on the basis of healthy
macro-economic indicators remains extremely favorable. Building on the same positive
trajectory as last year, real GDP growth is expected to increase to 7.2% in 2007-08 ably
supported by agriculture (4.8%) and large scale manufacturing (10.5%). Last year over
all CPI based inflation averaged 7.8%, however inflation for this year has been targeted at
6.5%. Investment has also been forecasted to increase to 23.5% of GDP as compared to
last fiscal year’s figure of 23.0% of GDP. On the external side of the accounts, current
account was enumerated at 4.9% of GDP in 2006-07, this year it has been projected to
decline to 4.7% of GDP. Fiscal deficit on the other hand has been targeted to decline to
4.0% of GDP in the ongoing financial year as against 4.3% in 2006-07. As regards
financing of budget deficit is concerned, the Government is expecting Rs. 29 billion as
grants. Therefore, total financing requirements will be Rs. 370 billion, of which Rs.220
billion will come from external sources. Within external financing Rs. 113 billion is
expected as privatization proceeds. However, remaining Rs. 147 billion will come from
domestic sources.
SALIENT FEATURES OF PAKISTAN’S ECONOMY:
• GDP grew by 5.8% in 2007-08 as against 6.8% last year and growth target of
7.2%. The economy has shown great resilience against internal and external
shocks of extraordinary nature during the out going fiscal year. Pakistan’s

economy has grown at an average rate of almost 6.6% per annum during the last
five years.
• AGRICULTURE SECTOR showed dismal performance and grew by 1.5% as
against 3.7% last year and target of 4.8%.
• Overall Manufacturing, accounting for 18.9% of GDP registered a modest
growth of 5.4% against 8.2% last year.
• Pakistan’s per capita real GDP has risen at a faster pace in real terms during the
last six years (4.5% per annum on average in rupee terms). The per capita income
in dollar term has grown at an average rate of 13.5% per annum during the last six
years rising from $586 in 2002-03 to $1085 in 2007-08.
• The main factor responsible for the sharp rise in per capita income include four
fold increase in the inflows of workers’ remittances, acceleration in real GDP
growth, and stable exchange rate.
• Fixed investment has declined to 20.0% of GDP from 21.3% last year.
• Overall Foreign Investment during the first ten months (July-April) of the
current fiscal year has declined by 32.2% and stood at $3.6 billion as against $5.3
billion in the comparable period of last year.
• The agriculture growth this year is estimated at 1.5% as compared with 3.7%
during 2006-07.
• The main contributors to manufacturing sector, the 4.8% growth during July-
March 2007-08 were beverages (30.5%), sugar (34.0%), upper leather (13.5%),
cement (17.9%), refrigerators (10.7%), electric fans (18.3%), TV sets (19.3%),
diesel engines (46.0%), buses (32.1%), motor cycles (28.1%0 and LCV’S
(60.5%).
• Total revenues collected during the current year stood at Rs. 1545.5 billion,
higher than the targeted level of Rs. 1476 billion. However, there are expectations
that the FBR may fall short of its targeted level, and the year is most likely to end
with total tax collections amounting to Rs. 1.0 trillion—Rs. 25 billion less than
the original target.
• Total expenditure for 2007-08 was budgeted at Rs. 1875 billion. According to
revised estimates this figure stood at Rs. 2228.9 billion. Two factors had a
significant impact on the budgetary outlook. Firstly oil prices continued to rise at
a greater pace, reaching as high as $115 per barrel in May 2008—an increase of
over 116% during the fiscal year. Secondly, the high international price of oil was
not passed on to the domestic consumers. Consequently, the oil subsidy is
projected to rise to Rs. 175 billion—over shooting the targeted level by Rs. 160
billion. Wheat shortage forced the government to import 1.7 million tons of wheat
at all time high process.
• By end-June 2007 total domestic debt stood at Rs. 2610.2 billion which was
estimated at 30% of GDP. The outstanding stock of domestic debt rose by Rs.
409.9 billion and stood at Rs. 3020.1 billion by end-March 2008 or 30.0% of
GDP. The domestic debt has increased by 15.7% by end-March 2008 over end-
June 2007.
• Inflation Rate stood at 10.3% during the first ten months (July-April) of the
current fiscal year, 2007-08, as against 7.9% in the comparable period of last year.

The food inflation is estimated at 15.0% and non-food 6.8%, against 10.2% and
6.2% in the corresponding period of last year.
• Exports were targeted at $19.2 billion or 12.9% higher than last year. Exports
during the first ten months (July-April) of the current fiscal year are up by 10.2%
-- rising from $13847.3 million to $15255.5 million in the same period last year.
• Pakistan’s export performance has been impressive in recent years (2002-03 to
2005-06) with exports registering an average growth of 16% per annum.
Pakistan’s export performance was dismal in 2006-07 as it witnessed abrupt and
sharp deceleration to less than 4%. However, when viewed in the back of last
year’s performance, exports managed to recover somewhat this year but its
performance has remained far short of the average growth of 16% achieved
during 2002-03 to 2005-06.
• Imports were targeted to increase by 5.9% in 2007-08 to $32.3 billion from last
year’s level of $30.5 billion. Imports are up by 28.3% during July-April 2007-08
– rising from $25.0 billion to $32.0 billion, showing an increase of almost $7.0
billion. The growth in imports increased substantially owing to unprecedented rise
in oil and food prices.
• Major contributions to import bill have come from petroleum groups (40%),
raw material (21%) and food groups (16.3%). Almost three-fourth contribution
came from three categories (petroleum, raw material and food group) to this
year’s rise in imports. Interestingly, consumer durables’ contribution was negative
(-0.4%) mainly on account of a decline in the import of road motor vehicles
which registered a decline of 8.6%.
• Workers’ remittances totaled $5.31 billion in the first ten months (July-April) of
the fiscal year as against $45.5 billion in the same period last year, depicting an
increase of 19.5%. if this trend is maintained workers’ remittances are likely to
touch $5.8 billion for the year – the highest ever in country’s history.
• Pakistan’s current account deficit further widened to $11.6 billion (6.8% of
GDP) in the first ten months (July-April) of the current fiscal year from 6.6 billion
(4.6% of GDP) in the same period last year. The deterioration in current account
deficit mainly emanated from the sharply widening trade deficit.
• Pakistan’s total foreign exchange reserves stood at $12,344 million at the end of
April 2008. however, October 2007 onward, draining of investment and rise in the
current account deficit led to a sharp decline in foreign exchange reserves of
country.
• Pakistan rupee after remaining stable for more than 4 years, lost significant
value against the US dollar, depreciating by 6.4% during July – April 2008.
• External debt at the end of March 2008 was US$ 45.9 billion.
• Male literacy rate increased from 58% in 2001 to 67% in 2006-07 while it
increased from 32 to 42% for females during the same period.
• There are currently 231,289 educational institutions in the country. Their overall
enrolment is recorded at 34.84 millions with teaching staff of 1.37 million.
• To promote research and development (R&D) activities, Higher Education
Commission (HEC) has awarded 5,837 PhD scholarships (3,237 indigenous,
2,600 foreign) over the past three years.

• At present there are 945 hospitals, 4755 dispensaries, 5349 basic health units &
sub health centers and 903 maternity and child health centers in Pakistan.
• With the existing number of 127,859 doctors, 8195 dentists, 62651 nurses and
103,285 hospitals beds, the population and health facilities ratio turns out to be
1225 persons per doctor, 19121 person per dentist, 2501 per nurse and 1517
persons per bed.
• Eighty thousand (80,000) Lady Health Workers (LHWs) have been trained and
deployed mostly in the rural areas.
• Some 7.35 million children have been immunized and 22 million packets of ORS
distributed.
• Various health programs with a special focus on major public health problems
have been carried out. These include the national programs for the prevention of
tuberculosis, malaria, HIV/AIDS, hepatitis, blindness and program on mother
child health.
• The total outlay of health sector budget is Rs. 60 billion which is equivalent to
0.6% of GNP.
• Pakistan’s current population is 160.9 million with a growth rate of 1.80%. the
overall vision of the population policy is to achieve population stabilization by
2020.
• The life expectancy in Pakistan for males is 64 years and for females is 66 years.
• About 2.6 million workers are estimated as un-employed in 2006-07 and
unemployment rate is 5.3%.
• Agriculture remains the dominant source of employment in Pakistan. The share
of agriculture in employment has increased from 43% in 200304 to 43.61% by the
year 2006-07, with manufacturing (13.54%) and trade (14.43%) & services
(14.41%) absorbing a growing share of the work force.
• The total road network is about 260,000 km of which around 60% is paved.
• Telecom sector continued to show a stellar growth in last few years. Today total
subscriber base stands at 82.5 million (Mar 2008) whereas it was 34.5 million in
2006.
• Currently there are about 3.5 million internet subscribers in Pakistan where total
users crossed 17 million marks. Currently around 3,008 cities are connected to
internet cities.
• Production of crude oil per day has increased to 70,166 barrels during July-
March 2007-08.
• Production of natural gas per day stood at 3,966 million cubic feet during July-
March, 2007-08. the overall production of gas has increased to 1,090,620 million
cubic feet during July-March 2007-08 as compared to 1,062,124 million cubic
feet in the same period last year, showing an increase of 2.7%.
• The totaled installed Electricity generation capacity has increased to 19,566 MW
during July-March 2007-08 from 19,440 MW during the same period last year,
showing a marginal increase (0.65%).
• The number of villages electrified increased to 126,296 by March 2007 from
113,605 up to 2005-06, showing an increase of 11.2%.

PART C
“ASSESSMENT OF
DAIRY INDUSTRY IN PAKISTAN”

BUSINESS/INDUSTRY ANALYSIS:
In spite of having a large population of LIVESTOCK, the country is spending some $40
million annually on the import of formula milk only, which is the highest amount spent
by any country in the world on this particular commodity.
Currently, there are some 160 varieties of infant formula milk available in the markets.
LIVESTOCK is an important sector of agriculture in Pakistan. It accounts for 39 percent
of agricultural value added and about 9.4 percent of the GDP. Its net foreign exchange
earnings, in 2001-02, were its 51.5 billion, which was 12.3 percent of the overall export
earnings of the country.
The role of LIVESTOCK can be judged from the fact that about 35 million people are
engaged in raising 2 to 3 cattle/buffaloes and 5 to 6 sheep’s/goats in their backyards and
are deriving 20 to 25 percent income from it.
The LIVESTOCK include cattle, buffaloes, sheep, goats, camels, horses, asses and
mules. During the last five years, the combined population of cattle, buffalo, sheep and
goat increased from 113 million, 1998-99, to 125 million, 2002-03, depicting a total
increase of 12 million or 24 lac heads per annum.
The per capita availability of milk was 150 liter and meat 19kg per annum in 2000-01,
which comes to 0.41 liter milk per day.
To meet the domestic demand of milk, the rate of growth must be at least 5 to 7 percent
per annum.
IMPORTANCE OF MILK INDUSTRY AS COMPARE TO MAJOR CROP:
Dairy farming is an agro-based activity, buffaloes and cows can be raised for milk
production in an organized manner for commercial purpose.
For this project, animals can be purchased from the animal markets or breeders in
Sahiwal, Sheikhupura, Faisalabad.
More than 70 percent farmers hold less than 5 acres of land. Dairy farming may prove a
profitable business for small landholders.
They can also grow fodder on their land to feed dairy animals, without disturbing the
main crop.
Dairy farming is one of the best projects if professionally done on small land holdings.
The return of the land used for feeding animals is higher as compared to land used for
traditional cropping.
The economical size of the herd is 50 animals, which will grow into 180 animals within a
few years. Cows are also proposed in the herd, as they are high yields and efficient

converters of feed into milk.
This herd would consist of 75 percent buffaloes and 25 percent cows. A cow, on average,
yields 14 litres milk a day over a lactation period of 305 days whereas the buffalo, on an
average, yields 10 litres a day over a lactation period of 280 days.
The lactation period is the period during which the animals provide milk. These animals
are called wet animals. Generally the lactation days of cows are 305 days and that of
buffaloes is 280 days.
For calculation, 77 percent of the total number of cows has been taken as wet cows and
67 percent of the total number of buffaloes as wet buffaloes.
The calving interval in a buffalo is about 18 to 20 months, while a cow has 15 to 16
months.
On an average, cows are productive for 7 to 8 years, while buffaloes are productive for 8
to 9 years. Male calves will be sold at the end of year or can also be reared separately for
beef production.
Pakistan's tremendous potential to increase its milk production has so far remained
unexplored due to the inactivity of the government and the related bodies which were
created with much of fanfare. This neglect appears criminal in view of the fact that milk
production despite its lowest yield, is even today far ahead of the major cash crops such
as wheat, cotton, rice and sugarcane as is indicated from the following table:
Importance of Milk VS Major crops

Sector Production Price: Ton Value
Milk 21-b Lits Rs. 10,000 Rs. 210-b
Cotton 10-b Bales Rs. Rs. 150-b
12,000/bale
Wheat 19-m Tons Rs. 7,500 Rs. 140-b
Sugarcane 44-m Tons Rs. 1,250 Rs. 55-b
Rice 4-m Tons Rs. 8,500 Rs. 34-b
PAKISTAN
PRODUCING CAPACITY:
Pakistan is the fifth largest milk producer in the world in 2001, which currently at seventh
rank. Milk production is 28 million tones from 125 million heads. Milk is used for
drinking, tea, desi ghee, yogurt and butter making.
Milk is also used to make Khoya and different types of sweets. Milk processing
companies use milk as a raw material to formulate different types of milk i.e. pasteurized

milk, UHT milk, condensed milk, skimmed milk, milk powder, etc Different value added
products like yogurt, ice cream, butter and cheese are also produced from the raw milk.
The daily consumption of milk in Lahore is 2 to 3 million liters and that of Karachi is 4
million litres.The demands for processed milk has increased its share in quality conscious
consumers. During the last two decades, processed milk has achieved 4 percent share in
the milk market of Lahore, which is growing to about 4.5 percent per annum. Therefore,
metropolitan cities are the major markets for the sale of milk.
COST INVOLVED:
There is no fixed fodder requirement for the animals but a rule of thumb says that an
animal needs daily fodder equal to 9 to 10 percent of its body weight. According to
estimates, buffalo consumes 40-55 kg fodder daily while cow consumes about 30-40 kg.
For a high yield the animals would be fed on a high protein diet concentrate.
For this dairy project, manpower requirement is 7 for performing different activities like
feeding, milking, etc, which may cost about Rs 240,000.
Animals are prone to some sort of disease, at any stage of their life. Disease like foot and
mouth, diarrhea and digestive disorders are very common in animals, which affect the
productivity of the LIVESTOCK.
SUPPLY AND DEMAND:
Pakistan is surplus in milk production; but due to lack of proper planning, collection and
distribution facilities, a major portion of the total production is consumed, per force, by
the producers in the far-flung areas. As against this we are importing 25000 tonnes of
powder milk annually to meet the demand of the urban areas at a cost of above 300
million dollar.
Pakistan ranks 7th among milk producing countries, with an estimated 21 billion liters of
milk produced annually. Although this level of milk production is more than adequate on
a per capita basis for today's population, lack of processing and poor distribution system
in a long hot weather (milk has a shelf life of only four hours under moderate
temperatures) keeps it from reaching consumers in areas that are either deficient in milk
production, particularly the urban centers, or those that are difficult to access.
Presently in Pakistan only about 22 per cent of milk production is processed, about 57.5
per cent is supplied to urban areas in raw form in most unhygienic conditions causing real
health hazards. Rest is consumed by the farmers, mostly per force, specially in the far-
flung areas for lack of proper facilities to take it to deficient areas. About 75 per cent of
the total production of raw milk is produced in Punjab, 14 per cent in Sindh 10 per cent in

NWFP and only 1 per cent in Balochistan. In Punjab we have more buffalos than cowl in
about 60-40 ratio, in Sindh it is 50-50, in NWFP dead 20 per cent buffalos and 80 per
cent cows. In Balochistan there are mostly cows.
NESTLE: LEADING INDUDTRY IN PAKISTAN:
Nestle Milk Pak. Ltd., a joint venture with the reputed multinational Nestle of
Switzerland operating in over 80 countries around the globe, has done the pioneer work
in the field of milk collection UHT processing on most modern and state of art machines
and quality packing. Nestle has almost the monopoly of UHT processed milk in Pakistan.
It is a household name in our affluent families. Poor and lower middle class cannot afford
the price and for them it is still a luxury which they can enjoy only once a while.
The price of Rs. 28 per cent for Nestle UHT processed and packed milk appears high, but
if you consider the cost of infrastructure manpower and middle men involved in the
whole process the selling price is justified. Nestle is concentrating only in Punjab and has
developed a remarkable set up to collect milk from areas stretching about 80,000 KMs,
and keeping the collected milk chilled in the most hygienic conditions until it reaches the
processing factory which may take 8 to 12 hours. They have set up over 2500 milk
collection centers from where it is transported to the 520 chilling centers within less than
3/4 hours. Chilled milk is then transferred to the two factories at Sheikhupura near
Lahore and Kabirwala near Multan in special trucks with freezing arrangements. It
sounds unbelievable but it is a fact that all this organizational structure for collection of
milk has been set up by a Swiss expert who arrived in Pakistan only seven years back.
TURNOVER OF MILK:
Livestock is the largest of the various agriculture sub sectors. Net foreign exchange
earnings from livestock products and by products like meat, skins, hides etc were more
than Rs. 53 billion in 2003-04 (Source: FAO-Economic & Social Department Reports)
that is about 11 percent of the overall export earnings of the country.
Livestock accounts for 46.8 percent of agricultural value added and about 10.8 percent of
the GDP. Milk is the largest commodity from the livestock sector accounting for 51
percent of the total value of the sector. The farm gate value of milk is estimated to be
more than Rs. 390 billion.
Total production of 28 billion liter of milk a year, whose value is more than that of the
combined value of wheat and cotton, from a total herd size of 27 million milch animals
(buffaloes and cows).
There is a consensus among the stakeholders and the development experts that Pakistan’s
Dairy Sector has immense potential for growth. The same has not been realized due to
various gaps. The vital missing link being lack of shared vision and strategy for the

development and lack of effective collaboration among the stakeholders including

support institutions and the government agencies to implement the agreed strategy.
MARKET STRUCTURE:
Application segments Processed milk Loose milk
End user Consumers Milk processors/consumers
Influencer Primarily, fear appeal Traditional
through media.
STRATEGY FOR THE MAJOR INFLUENCER OF PROCESSED MILK:
By and large the strategy used to influence the purchase of milk has been the “Fear
Appeal”. This is evident because by looking at the combined television campaign by all
the leading processed milk producers against the loose milk producers and the gawala
network in which they revealed all the loop holes in the form of mixing of water with the
milk, storing and delivering under unhygienic conditions. This TV campaign was highly
successful because a lot of people and of course who had the purchasing power to pay the
price differential got the awareness about the health hazards of using the loose milk
actually switched to packaged milk. However there has been a lack of such consistent
effort to bombard the media with such awareness generation campaigns. Individual
advertising is being done in a scattered manner by a few players but that effort is too
small considering the fact that 96% market share belongs to the un-organized sector and
with such strong Gawala network, this effort is too little too small.

SIZE AND GROWTH PATTERN OF THE INDUSTRY AND ITS MAJOR

SEGMENTS:
This is to determine the growth rate of the industry for future prediction;
Industry turn In terms of Percentage of % of growth **% of growth

over per year, tonnage/volume total volume in local milk of industry per
segment vise (million tons) production year
2001 25 million tons 4% 4.5%

Processed milk .5 1.5-1.75%
Loose milk 24.5 98%
2002 26 4% 4.5%
Processed milk 0.52 2%
Loose milk 25.48 98%
2003 27.04 4% 4.5%
Processed milk .95 3.5%
Loose milk 26.09 96.5%
2004 28.12 4% 4.5%
Processed milk 1.12 4%
Loose milk 27 96%
2005* 29.12 4% 4.5%
Processed milk 1.37 4.72%
Loose milk 27.7 95.28%
2006* 30.40 4% 4.5%
Processed milk 1.73 5.7%
Loose milk 29 94.3%
* means predicted/forecasted sales volume (highly dependent upon the availability of

milk)
** milk industry is growing at 4.5% but local milk production is increasing at 4%,
remaining 0.5% milk requirement is being fulfilled by imported milk powder etc.
ANALYSIS:
The packaged milk industry has been growing at a rate of about 18% internally. However
the forecasted growth depends upon the availability of milk. At present, the industry is
facing shortages of milk, especially in peak summer season from May till October. That
is why its market share doesn’t grow over 3.5 to 4%.
PRODUCT/INDUSTRY LIFE CYCLE:

Product Brands Pre- Introduct Growth Maturity Decline

category intro ion
Nestlé xxx
Liquid Haleeb xxx
Processed Every Day x xx
milk UHT
Candia xxx
Nurpur xxx
Halla Not
sure
ANALYSIS:
A self explanatory table showing that Nestle and Haleeb are in the growth stage and there
is a further room for growth, since there is remaining 96% if the market share available,
which is currently with the unorganized sector. However, recently Nestle Every day has
introduced its UHT treated liquid milk for tea making purpose that is directly positioned
against Haleeb and has taken 8% of Haleeb’s market share, so in this way Nestlé’s ‘Every
Day’ liquid UHT milk is in the growth stage as well. Candia and Nurpur are in
introductory stage as they have been just recently launched.
DISTRIBUTION STRUCTURE:
The distribution structure of the milk industry is here under;
Whole seller Retailers
Company distributor
Retailer about 85% which is
direct distribution
SWOT ANALYSIS OF THE PROCESSED MILK INDUSTRY:

STRENGTHS:
Standardized milk
Possibility of many variants
Extended shelf life due to world class packaging technology
Hygienic Milk
Quality control
Established and trusted brand names
WEAKNESSES:
Distribution network not as wide as the Gawallas
Lack of effort in creating hygiene and milk consumption awareness
Do not have there own milk producing facility
Dependent upon the unorganized sector, so unable to control the yield
Very high price differential
Loose milk is sold on credit for 30 days, where as, it is sold on cash.
Taste of processed milk not a preference of most of the people
Cow and buffalo’s milk is mixed that is why people are skeptical about it
Perception that chemicals and preservatives are used to keep it fresh that affects its taste
as well.
Has never achieved a market share of 4% in more than 2 decades.
Distribution network is not stretched to sub urban and rural areas
OPPORTUNITIES:

96% of the market share is with the loose milk industry, which means that market share
can be expanded by creating more awareness about its health and hygiene factors.
Also, if processed milk uses a simultaneous pull and push strategy, then not only the
consumers’ interest but also the trade channel’s interest will increase in processed milk.
The Afghanistan market is in the development phase and already there is availability of
Nestle and Haleeb there. There is still a vast market to be exploited.
With the increasing awareness and literacy rate, there is every chance that the demand in
processed milk will increase. So the need is to target the present and upcoming educated
class.
THREATS:
Major threat comes from the gawala network, since they ensure the availability of milk at
all times.
Consumer’s perception of fresh milk versus stored/processed milk, which is delivered

after many days of milking process.
If the unorganized sector unites and starts propaganda against the fact that the processed
milk is a mixture of cow and buffalo milk and it is firstly delivered by gawala before
being processed, then it may just hurt the claim of the processed milk industry that it is
processed under hygienic conditions.
ANALYSIS ON GEO POLITICAL AND ECONOMICAL ASPECT:
POLITICAL:
Every countries has some positives and some negatives, right now the political scenario is
not favoring any business to open up or encourage any investor to open business in the
territory of Pakistan. Where as legal scenario is concern, no restriction is made to open up
new businesses and the plus point, as the milk is an agricultural product so there is no tax
on the production of milk, but the conditions presently are not too good for legal structure
as well. We can’t see any certainty in the Pakistan right now. There is no political
stability but if investor thinks positive and be optimistic then we can analysis the foreign
direct investment went down but not fully stopped. Lot of industries are opening up, lots
of profit can be made in any business especially in food and education business. And the
government is very enthusiastic about industrialization in the country and wants the
foreign sector and private sector to take part in it. So any move towards industrialization

and standardization is being encouraged, which should ideally suit the existing as well as
new comers in the packaged goods industry.
ECONOMIC:
After the Ayub era, when the economy was growing at 10%, now this era since 2001 is
proving to be the best era where our economy is growing by more than 6.5% and is
expected to grow at even higher rate ensures the prosperity a head. At the same time the
current Per Capita income is about $600 and Prime minister pointed out that it we want it
to be at $1500 by 2015 so it also gives an indication that purchasing power is growing
and will continue to grow, which will in turn benefit the packaged milk industry to grow
as well because with the growing per capita income, more people will be able to afford
the high price differential between the loose milk and packaged milk.
However the ground realities are a bit different since all the wealth is being concentrated
in the hands of few and middle class is not emerging as fast as it is emerging in other
Asian economies. Another fact is that inflation is increased to highest ever in Pakistans
economy which is almost touching 12%. As milk is the necessities of item, milk industry
will face difficulties in pricing the milk for the loose milk market or for the branded milk
market.
In the present scenario, the banks are in immense pressure because of the increase in the
liquidity ratio increased by SBP, and now banks are not lending money as before, and
now lending rates are also increased, as the discount rate is increase by 1.5 % by SBP. So
the monetary policy is contracting and industry will face difficulties.
SOCIAL:
POSITIVE FACTORS:
Literacy rate is improving
Due to call s\centre and other IT related sector, new middle class may be created
Awareness amongst the literate segment of the society is increasing
Those who are informed and getting aware if the health hazards of the loose milk are
making a move towards the packaged/processed milk.
Demand is always there for the inelastic items.
NEGATIVE FACTORS:

Less literacy, lack of awareness about hygiene and health factors
Increase in the milk prices and increase in the inflation, although increase in the basic
salary in the present budget but that income not translating anything benefits to middle or
lower class people.
Perception of chemicals and preservatives
Prefer loose milk because of Credit as well as it is perceived fresh
Perception that after boiling all the germs are killed
Currency is depreciating, negative point for the local investor.
TECHNOLOGICAL:
Though technologically speaking, loose milk and Pd milk industry had its own milk
producing facility, then with the total automation it could have become very easy to
convince people about the real difference between the loose milk and processed milk.
INTEGRATED APPROACH TO DAIRY SECTOR DEVELOPMENT:


AGRICULTURE IN ECONOMY AND CURRENT MILK QUANTITIES

AVAILABLE IN PAKISTAN:
PACKAGING RECOMMENDED FOR TAX EXEMPTION:


DAIRY FARMING IN THE WORLD:
In the United States, the top four dairy states are, in order by total milk production,
California, Wisconsin, New York, and Pennsylvania.[citation needed] Dairy farming is also an
important industry in Florida, Minnesota, Ohio and Vermont.
In Pennsylvania, the dairy industry is the number one industry in the state. Pennsylvania
is home to 8,500 farms and 555,000 dairy cows. Milk produced in Pennsylvania yields
about US$1.5 million in farm income every year, and is sold to various states up and
down the east coast.
The world's largest exporter of dairy products is New Zealand , Japan is the world's
largest importer of dairy products.
There follows two lists of countries by milk production (MT = million tonnes).
Table 1: World production not including countries in the European Union.
Rank Country Production (MT/yr)[a]

1 India 96.1
2 United States 67.2
3 Russia 32.8
4 Brazil 23.3
5 China 16.8
6 New Zealand 14.6
7 Australia 10.6
8 Mexico 9.8
9 Turkey 9.5
10 Japan 8.4
11 Canada 8.0
12 Argentina 8.0
13 Switzerland 3.9
14 South Africa 2.6
15 South Korea 2.4
16 Norway 1.6
The EU is the largest milk producer in the world, with 143.7 million tonnes in 2003. This
data, encompassing the present 25 member countries, can be further broken down into the

production of the original 15 member countries, with 122 million tonnes, and the new 10
mainly former Eastern European countries with 21.7 million tonnes.
Table 1: Milk production data for EU countries.
Rank Country Production (MT/yr)

1 Germany 28.5
2 France 24.6
3 United Kingdom 15.0
4 Poland 11.9
5 Netherlands 11.0
6 Italy 10.8
7 Spain 6.6
8 Ireland 5.4
9 Denmark 4.7
10 Sweden 3.2
11 Austria 3.2
12 Belgium 3.1
13 Czech Republic 2.7
14 Finland 2.5
15 Hungary 1.9

16 Portugal 1.9
17 Lithuania 1.8
DAIRY COMPETITION:
Most milk-consuming countries have a local dairy farming industry, and most producing
countries maintain significant subsidies and trade barriers to protect domestic producers
from foreign competition[citation needed]. In large countries, dairy farming tends to be
geographically clustered in regions with abundant natural water supplies (both for feed
crops and for cattle)[citation needed] and relatively inexpensive land (even under the most
generous subsidy regimes, dairy farms have poor return on capital). New Zealand, the
fourth largest dairy producing country, does not apply any subsidies to dairy production[
The milking of cows was traditionally a labor-intensive operation and still is in less
developed countries. Small farms need several people to milk and care for only a few
dozen cows, though for many farms these employees have traditionally been the children
of the farm family, giving rise to the term "family farm".
Advances in technology have mostly led to the radical redefinition of "family farms" in
industrialized countries such as the United States. With farms of hundreds of cows
producing large volumes of milk, the larger and more efficient dairy farms are more able
to weather severe changes in milk price and operate profitably, while "traditional" very
small farms generally do not have the equity or cashflow to do so. The common public
perception of large corporate farms supplanting smaller ones is generally a
misconception, as many small family farms expand to take advantage of economies of
scale, and incorporate the business to limit the legal liabilities of the owners and simplify
such things as tax management.
Before large scale mechanization arrived in the 1950s, keeping a dozen milk cows for the
sale of milk was profitable[citation needed]. Now most dairies must have more than one hundred
cows being milked at a time in order to be profitable, with other cows and heifers waiting
to be "freshened" to join the milking herd[citation needed]. In New Zealand the average herd
size, depending on the region, is about 350 cows.
Herd size in the US varies between 1,200 on the West Coast and Southwest, where large
farms are commonplace, to roughly 50 in the Northeast, where land-base is a significant
limiting factor to herd size.[dubious – discuss] The average herd size in the U.S. is about one
hundred cows per farm.

MODERN PRODUCTION:
Top Ten Milk Producers — 2005

(1000 tonnes)
India 91,940
United States 80,264
China 32,179
Russia 31,144
Pakistan 29,672
Germany 28,487
France 26,133
Brazil 23,455
United Kingdom 14,577
New Zealand 14,500
World Total 372,353
Source: UN Food & Agriculture Organisation
In the Western world today, cow milk is produced on an industrial scale. It is by far the
most commonly consumed form of milk in the western world. Commercial dairy farming
using automated milking equipment produces the vast majority of milk in developed
countries. Types of cattle such as the Holstein have been specially bred for increased
milk production. According to McGee, 90% of the dairy cows in the United States and
85% in Great Britain are Holsteins (McGee 12). Other milk cows in the United States
include Ayrshire, Brown Swiss, Guernsey, Jersey, and Milking Shorthorn. The largest
producers of dairy products and milk today are India followed by the United States[12] and
China. In India, Amul, a cooperative owned jointly by 2.6 million small farmers was the
engine behind the success of Operation Flood.
PRICE:
It was reported in 2007 that with increased world-wide prosperity and the competition of
biofuel production for feedstocks, both the demand for and the price of milk had
substantially increased world wide. Particularly notable was the rapid increase of
consumption of milk in China and the rise of the price of milk in the United States above
the government subsidized price

NUTRITION AND HEALTH(STANDARDS):
The composition of milk differs widely between species. Factors such as the type of
protein; the proportion of protein, fat, and sugar; the levels of various vitamins and
minerals; and the size of the butterfat globules and the strength of the curd are among
those than can vary. For example:
Human milk contains, on average, 1.1% protein, 4.2% fat, 7.0% lactose (a sugar), and
supplies 72 kcal of energy per 100 grams.
Cow milk contains, on average, 3.4% protein, 3.6% fat, and 4.6% lactose, and supplies 66
kcal of energy per 100 grams. See also Nutritional benefits further on.
Aquatic mammals, such as seals and whales, produce milk that is very rich in fats and
other solid nutrients when compared with land mammals' milk.
NUTRITIONAL VALUE:
Cow milk (whole)

Nutritional value per 100 g (3.5 oz)
Energy 60 kcal 250 kJ
Carbohydrates 5.2 g
- Sugars 5.2 g
- Lactose 5.2 g

Fat 3.25 g
- saturated 1.9 g
- monounsaturated 0.8 g
- polyunsaturated 0.2 g
Protein 3.2 g
Water 88 g
Vitamin A equiv. 28 μg 3%
Thiamin (Vit. B1) 0.04 mg 3%
Riboflavin (Vit. B2) 0.18 mg
12%
Vitamin B12 0.44 μg 18%
Vitamin D 40 IU 20%
Calcium 113 mg 11%
Magnesium 10 mg 3%
Potassium 143 mg 3%
100 ml corresponds to 103 g.
Percentages are relative to US

recommendations for adults.
Processed milk began containing differing amounts of fat during the 1950s. A serving (1
cup or 250 ml) of 2%-fat milk contains 285 mg of calcium, which represents 22% to 29%
of the daily recommended intake (DRI) of calcium for an adult. Depending on the age, 8
grams of protein, and a number of other nutrients (either naturally or through
fortification):
Vitamins D and K are essential for bone health.
Iodine is a mineral essential for thyroid function.
Vitamin B12 and riboflavin are necessary for cardiovascular health and energy
production.
Biotin and pantothenic acid are B vitamins important for energy production.
Vitamin A is critical for immune function.
Potassium and magnesium are for cardiovascular health.
Selenium is a cancer-preventive trace mineral.
Thiamine is a B-vitamin important for cognitive function, especially memory.
The amount of calcium from milk that is absorbed by the human body is disputed.[19][20]
Calcium from dairy products has a greater bioavailability than calcium from certain
vegetables, such a spinach, that contain high levels of calcium-chelating agents,] but a

similar or lesser bioavailability than calcium from low-oxalate vegetables such as kale,
broccoli, or other vegetables in the Brassica genus.

PART D
“DETAILED STUDY OF PROJECT”
(D-1) INTRODUCTION OF SPONSORS AND PROMOTERS OF THE

PROJECT:
We the NUFSO MILK LTD are been approached by a foreign company well established
in New Zealand. The company has shown interest in setting up a plant in Pakistan.
Following are the ways the company plans to establish itself here in Pakistan, in the dairy
industry.

The Establishment of Milk Processing Plants in District Layyah, Sialkot and

Punjab.
Establishment of Milk Processing Plants in District Layyah and

Name of the Project
Sialkot, Punjab
Agency responsible for:
I. Sponsorship Livestock and Dairy Dev. Department
ii. Execution Director General (Extension), L&DD Deptt.

Cost of the Project
Rs. 1152.815 million.
Project Duration(Months) 60 months
Approval Status (Date of approval 24.7.2006
Overall objectives of the project are to increase the quantity and

quality of milk and meat production for local consumption and
Brief Description
possibility for export as well, thereby increasing the income of
farmers and improving the national economy.
• Farmers’ organizations in 1000 villages
• 14 milk centers in the project areas.
• 100 milk chilling sub centers in the milk
catchments area of the project.
Objectives
• Establishment of Powder milk plants in the
district Layyah and pasteurized milk plant in
Sialkot.
Up to December: 2007, an amount of Rs. 263.998 million has
Achievements
been utilized.
Feasibility Study for Milk Marketing and Processing
Before one decides to invest in the business of milk marketing and/or processing one
should carry out a feasibility study to establish the economic viability of the planned
business. This should include a realistic business plan.
The essential elements of a feasibility study should include:

Establish the amount of milk produced, both in the morning and evening, at the proposed
site, throughout the year
Identify the current market outlets available for milk products in the area
Determine the average fresh milk and various milk products prices being charged by
local producers.
Test various product samples for taste to determine acceptable products being produced
in the proposed area
Locate sources of energy (fuel-wood, charcoal, electricity, etc. and water)
Determine the capital investment required (be sure to include land, building, equipment
and power).
Draw up a clear business plan that will establish the viability of the proposed milk
marketing or processing enterprise.
Requirement of a proper infrastructure for procuring raw materials for milk, processing,
transport and marketing inclusive of advertisement and consumers education through
advertisement, personal contract and arranging dealers and retail out let owners to enable
us to reach consumers of purchase of the milk and milk product
For this we first need to:
• Overcome the handicap of manpower requirement.
• Start co-ordination with the Ministry of Agriculture and Livestock to arrange for
the Milk producers through the concerned agriculture livestock officers and their
colleagues
• Educate the milk producers of their participation in the development of dairy and
meat industry for their advantage providing ready assured remunerative market
round the year for the milk produced by their animals.
• Procurement of all consumable items like packaging material, chemicals oil,

stationers, raw materials like SMP, butter oil etc
• This also would include the animal livestock and Agriculture input delivery
system under the department to reach them in time such as treatment of such
animals’ vaccination, breeding facilities, extension, cattle feed, agriculture
fertilizer, seeds, pasticcios etc.
• They would also be explained about the advantage of organizing themselves in

formal or informal groups. These groups can be the main contact source for us but

also for livestock department officials for their own programs to reach them to
achieve results for increasing milk and livestock production.
Guidelines for business plan preparation
In planning your business, you must examine four major areas:
Description of the business.
• What type of business are you planning?

• What product will you sell?
• What type of opportunity is it (new, expansion, seasonal, year round?)
• What are the opportunities for growth?
Marketing plan.
• Who are your potential customers/

• How will you attract and hold your share of the market?
• Who are your competitors? How are their businesses prospering?
• How will you promote your sales/
• Who will be your suppliers?
• Where will the business be located?
Organization plan
• Who will manage the business?

• What qualifications will you look for in a manager?
• How many employees will you need/
• How will you manage finances?
• How will you keep records?
• What legal form of ownership will you choose and why?
• What licenses and permits will you need?
• What regulations will affect your business?
Financial plan
• What is your estimated business income for the first year?

• What will it cost you to open the business?
• What will be your monthly cash flow during the first year?

• What sales volume will you need in order to make a profit during the first
year?
• What will be your break even level of production?
• What will be the capital value of your equipment/
• What will be the total financial needs?
• What will be the potential funding sources?
• How will you secure loans?
THE NUFSO MILK is developing a grassroots network to promote profitable dairy

farms and quality communities in Pakistan. The project engages local stakeholders to
develop a vision for the project area and specific commitments and programs that foster
economic growth, environmental gain and community participation.
The Challenge
Environmental sustainability: Agricultural runoff, especially from animal waste, may

pose Pakistan's greatest unmet challenge to water quality. Contamination of drinking
water is already a problem in some parts of Pakistan. Odors and air emissions are
looming as agricultural issues. Future supplies of water for drinking, agriculture, and
industrial use are all threatened and aquatic habitat is in jeopardy. Major improvements
by dairy agriculture, local communities, and other parties are both possible and necessary
if Pakistan's natural resources are to be sustained for future generations.
Pakistan's dairies are struggling to compete with larger dairy farms in other states. Cheese
producers are also moving out of state as they see declining milk production in Pakistan
and increasing production elsewhere. Many dairy farmers in Pakistan believe their
economic survival depends on expanding and modernizing.
Project Outline
In general terms, the NUFSO MILK COMPANY'S vision is to unite communities

around ideas and specific actions that support a strong dairy industry while at the same
time protecting and improving our water resources and quality of life. An outline of how
this might work is offered below.
• The project sponsors will identify a network of people in Pakistan with diverse
interests and backgrounds that share the Dairy Gateway vision and are willing to
work toward its realization. These people need to be ready and willing to
cooperate in developing sustainable responses and specific actions to meet the
challenge. The group could be created as a new entity or as an offshoot of an
existing entity. The network ideally will include farmers, cheese producers,
environmentalists, local government leaders, and others.
The action plan:

• The group will identify a framework of processes that will create the opportunity
to develop goals and priority actions that all participants can support. Some
existing entities have already created their own lists of most pressing issues
impacting natural resources, which could be very useful starting points.
• The project sponsors will empower this network of people to take actions that
benefit all parties. The sponsors can bring legitimacy, credibility, and recognition
to these efforts potentially going all the way up to the Governor's office. There is
also the potential of providing official standing and sanction for these efforts
under state law, especially if the Environmental Results Act is enacted. The
network could be chartered under that Act to enter into binding contracts with
DNR to deliver environmental results.
• The project sponsors will provide participants with world-class consultants and
other resources to help them accomplish their goals. We are prepared to offer
participants the advice and services of mediation professionals, contract law and
public policy experts, and agricultural and environmental researchers...
• The project sponsors will assist the participants with carefully and objectively
documenting progress toward their goals, noting what does and does not work,
and sharing the lessons learned across the state and beyond.
Some of the initial efforts undertaken by participating NUFSO farms include:
• Participating in proactive meetings with their neighbors. The objective of these

meetings is to build neighborhoods capable of generating "terms and conditions"
under which farmers and their neighbors can support one another.
• Helping DNR figure out how to apply the charter concept in the new Green Tier
law (Act 276) to get better environmental results at lower costs for agriculture and
the food processing industries.
• Providing locally-generated inspiration and ideas that will inform a statewide
consensus-based policymaking effort.
• Developing projects to prevent pollution and conserve natural resources. These
projects will address and minimize water quality and other environmental threats
posed by agriculture and turn them into opportunities.
• Collecting and sharing environmental, economic, and social information that
helps DNR characterize problems and opportunities and track progress over time.
• Supporting research to develop farming methods that are better for the farm
business and for the environment.
The above strategic planned organization envisages that it would achieve all-round
improvement in milk procurement, liquid milk and product marketing and positive cash
flow.
To achieve the target/result the company has chalked out an action plan for each of the
following:

The Joyce Foundation has generously provided funding to make the NUFSO project
possible. The lessons we learn will be applied as soon as possible in other geographic
areas and in other agricultural and non-agricultural settings
Long term measures:
We have planned the outcome of the short term programs, the organization will attain a
stabilization stage and subsequently the action program will result in consolidation of
various activities simultaneously by production and introduction of new products to
further increase in the business level.
Estimating Bargaining Power in the Supply Chain
Explores the relationship between supermarkets, processors, and suppliers. A theoretical

model is presented, asked on assumptions that come from the interviews undertaken in
the project. In the model of processor-supermarket bargaining the processors are in
competition to supply milk to supermarkets who are themselves in competition. The
competition between processors creates uncertainty for any individual processor as to its
final output. The negotiated price lies naturally between an upper and a lower bound. The
upper bound is the price that the supermarket could obtain by going abroad for its milk;
the lower bound is the marginal production cost of the milk. The exact point between
these bounds that the two sides will negotiate depends on the number of processors and
the bargaining power of the supermarkets. The more processors there are the more
options the supermarkets have and lower the price the processors negotiate. We fit this
model of bargaining to data on prices and costs from the milk industry.
A model of negotiation between farmer cooperatives and processors is also developed.
Following discussions with the industry we consider this best modeled using a bilateral
monopoly in which cooperatives and processors split the gains from trade according
toothier bargaining power. The farmers are assumed to have an inside option given by the
commodity market prices that are available. (This captures the cost and opportunity cost
to the farmers of supplying milk for drinking). We use price data to estimate the
bargaining power of the processors in the processor-cooperative negotiations. The prices
obtained by direct farmers are determined as a mark-up to the prices obtained byte farmer
cooperatives.
Overall the model explains:
(I) the prices negotiated between processors and supermarkets; and (ii) the prices
obtained by coops and direct farmers.
Milk Prices in Retail Competition
Explores retail pricing behavior by supermarkets. Unlike previous studies of milk

demand we are able to estimate
Elasticizes of demand for milk at the level of the retailer rather than at the level of the
product. This allows us to analyze the pricing incentives of supermarkets. We develop

amide of consumer choice in which consumers choose their supermarket based on the
retail prices of a basket of products. Milk is an important component of most shoppers'
Baskets. Supermarkets are assumed to set their retail prices to maximize profits over
Marginal costs. Alternative models of supermarket pricing include cooperative and no
cooperative
Pricing. The retail mark-up that is obtained depends on;
• the price sensitivity of consumers and
• Whether or not supermarkets cooperate with each other in their setting of milk
prices. To estimate the model we use consumer data from the TNS survey as
provided by the MDC. We find that the estimated price elasticizes of consumers
imply non-cooperative mark-ups that are close to the actual mark-ups. Thus, the
model suggests that the market power enjoyed by supermarkets (i.e. their ability
to increase prices above marginal cost) derives from the price sensitivity of
consumers rather than from any attempt by supermarkets to coordinate prices.
Plant Management
• Control and monitoring of FAT and SNF losses

• Control spillage of milk
• Proper maintenance of heat exchange to reduce losses of milk solids during
processing
• Come as above while flushing of the plate heat exchanges
• Collection of flushing of cram tank
• Accuracy of measuring of milk and milk products during weighting.
• Introducing electronic balances for controlling packaging allowances to a
minimum level.
• Greater precision to lab tasting
• More automation of all sections gradually
• Monitoring product standards with permissible limits
• Reduction of stock losses
• Minimum packaging losses of retail dairy products
• To introduces optimal operating measures
Marketing
• More thrust on liquid milk marketing

• Efforts to build up consumers confidence
• Use of important steps for sales proportion viz.
• Door to door campaigns
• Advertisement through newspaper, handbills, hoarding, panels on buses and other
traffic sources.
• Consumer awareness and education programs

• Personal contacts through sales team

• Rationalization of sales commission and incentive
Processing cost control
• To achieve rated capacity of equipment by under taking repairs and modification

on continuous basis.
• Reduction of operational cost through introduction of proper instrumentation.
• Better control of Hot water batteries
• CIP system to minimize use of chemicals, detergent and other utilities.
• Proper keep up of insulation of steam and refrigeration lines
• To maintain strict quality control
Milk packaging cost
• Reduction in film thickness

• Introduction of new films
• Reduction of packaging hours through speed of packaging
• Controlling weight allowances by introducing electronic balances
• Will introduce optimal operating parameters
Production enhancement program to increase milk production
• To liaison/co-ordinate with government Agriculture and livestock department at

different levels.
• Role of NGO and organization to be defined
• Sourcing of funds from national, international funding agencies for the benefit of
producers
• Also introduction performance staff and organization
• To discuss with Government concerned Ministry officials to bring new
changes/policies for providing better environment to increase milk production
within the country. These will be discussed and a note will be submitted once the
plant is commissioned and start operations and market the products.
• Action Planned for superior financial performance
“Organizations that achieves superior financial performance consistently are best

performing organizations.”
Our experience of running our own co-operative societies has given us experience and
our finding is based on details organization analysis, industry research/finding and CE
experience. This includes our directors on the Board also.
We plan to run this Dairy plant with the similar common traits, as practical in our
presently owned other organization/companies, in corporate management practice.

We shall give more attention and prior on following important items. We plant and
propose to use the similar principle for operating this dairy under reference of this
proposed tender for acquiring/purchasing with our majority share/equity participation,
these are:
• organization structure
• strategic planning
• leadership
• vision and values
• staff development and appointment of competent professionals
• focus in business
• new products introduction in the market
• productivity
• organization structure
- As done in our present societies we would work with the following in mind while
operating the acquired dairy plant having our organization structure:
- Financial restructuring
- Strategic business unit
- Processed based structure
- Flattening of hierarchies
• To enable us success in restructuring we would focus on:
- Involvement of all people concerned

- Defining key business processes
- Using external resources/consultant/professionals
- Defining of all key stake holders
- Keep in mind the experience and lessons from the past (this very plant) of the above
involvement is a key enabler.
Corporate staff strength figures and their usage are more important. Optimal strength
with maximum output is most important criteria to get better performance of the
organization.
• Organization structure planned will be almost evenly distributed amongst the

following three types
- Business unit type

- Functional
- Matrix

Strategic planning:
- Strategic description as a market leader with core competency focus and

aggressively seeking national solution keeping in mind global scenario
- Service and technology will be top focus areas
- Top management team-measures and assistant managers
- Secondary accountability –management service staff
- Line management and assistance managers
• Time to be spent by CEO strategies and policies issues:
- CEO will lead the strategic initiative and devote equal time on policy
issues.
• Major benefit of the process of S. Planning process will be:-
- Enhancement sales turn over.

- Enhancement earning per share.
- Planned and planning.
- Resource planning.
- Synergy through “Group parenting.”
- Risk minimization.
- Quickly capitalizing on market opportunities.
- A strategy of expanding and modernizing our production facilities during
recession when it is found is the key factor for our success.
• Leadership
Important issues which our organization plans to focus on this item are
Continuity of management yielding management stability
CEO will be visible through out the organization stability
CEO may keep in his plan strategy point ventures also whenever the Dairy
plant/organization achieves its role, name and present felt in the market as well as
with the milk producers and Government.
• Corporate Vision & Values
This is an important criterion, which will be followed by our organization to conduct

business and run the plant efficiently with proper output in the form of milk, products
and finance. The main features are:
Top priority will be given for employee involvement wall defined vision/and mission
statements.
Extensive communication programs to communicate and reinforce organization
values down the line in the hierarchy as well as with milk supplying producers and
their formal or informal groups

The themes which are more specific while talking about employees involvement,
customer as well as producers focus, following are essential aspects, the organization
will focus:
Quality of employees for their roles performance
Quality of products going to consumers
Employee involvement/team work
Customers focus
Responsibility to share/equity holders
Product focus
Innovations
Business Development
Focus on education of milk producing milk production and reducing cost of
production by adapting scientific A.H. practices.
To communicate and reinforce the mission and value statement our organization will
undertake extensive internal communication programs, which include:
Milk producers and Government field officers/workers and our concerned managerial
and down the line employee, responsible for milk procurement form the villages.
Customer focus employee meetings i.e. of officials of marketing division/section,
Department specific communication meetings
Focus on employee involvement
In hours journals
Planned induction
Focus in business
Organization will try deriving more than half or more revenues from our largest and
best business segment are percentage of total revenue.
Over all strategy plans are designed for making investment by us, for the Dairy plant
under reference.
Internal rate of return is used financial measures while deciding to make investment
decision this dairying plant.
We have decided and classified our five top management Goals:
Cost minimization
Market share maximization
ROI(return on investment) maximization
Share holder value maximization
Revenue maximization
While making decision to acquire this plant we have kept 4 important criteria in our
mind:
Return on investment

Over all strategies plan

Sustaining Growth
Core competence congruence
(ROT is foremost criteria)
Top 4 financial measures used to make our investment decisions are:
IRO
Pay Back Period
Net present value
Cash flows
• New product introduction in market
We have planned under this heading following:
• To increase number of new products in our product mix in a systematic planned

manner depending up on the performance during the firm 2 years of operations
Significant revenues from new products will be also calculated.

Research efforts focused on product enhancement from the beginning only.
• We have kept mind to deploy R & D expenses mainly depending up on the

experience and results of the first 2 years operations. These are on:
Process technology
Development Research
Product enhancement and modification
Govt. regulatory
Basic
For this our organization will remain continuously in touch for the advice and support
from our Indian constancy service company.
This will be implementation through process of NPD team managing business

opportunity.
Better training promotions and financial incentives
Higher studies of the concerned staff
• Productivity
• Main focus will be given to:
Declining staff cost

Increase in asset utilization efficiency
Major up graduation
Employee cost as percent of sales to be declined

Increase in value output, which influence by increase in asset utilization efficiency.
• Organization will give more emphasis and monitor for:
Increase plant capacity in future

New manufacturing facilities
Major investment in Technology
Inclusion of High value adding processing
If found good progress the new plants
Our organization, which has experience of managing industries, help, advice and
assistance from the experienced professional consultant through ASHISH technical
services private Ltd. N. Delhi India has full confidence of achieving target and
managing this Dairy plant most efficiency to create a Model for other regions of the
country for replication.
Our organization is grateful to the Secretary Livestock Department Sindh Province

and his colleagues, Deputy Registrar Co-operative Department Karachi District,
Colleagues, Secretary Livestock and his colleagues and providing moral support as
well as details and data required for preparing this project report. We are confident of
getting continuous support in future for the success of this project.
Government may create proper infrastructure for the benefits of trained agriculture
and livestock professionals to get orientation, training and all sorts of inputs for
increasing agriculture and livestock-meat and milk production.
We are confident that government will continue to provide those support and further
strengthen the entire input delivery system, covering better breeding, feeding, animals
health control, management, extension and also keep provision for supply of better
fertilizer, pesticide, seed, implement, breeding of animals, cattle feed supply,
veterinary services, vaccination etc. it may also arrange lab to Land programs through
our organization, which gradually would organize milk procurement from the
villages( milk producers with either directly or through their formal or informal
group/co-operative society) our professional staff would co-ordinate with department
officials and would arrange carry messages, literature, posters and also help
organization of demonstration plots/units by selecting progressive farmers producer
to convey the new scientific knowledge, techniques, idea to other farmer producers in
the main village to spread the message to adjoining villages.
For above, the government may show happiness to strengthen their program
mentioned below, in the areas covered by our organization and give priority to get
better result.
Government may take policy decision in the interest of not milk and meat producers,
the same can be applicable to other crops like edible oil seed, food grains, fruits and
vegetable etc,

If the government agree with the approach of organization of formal or informal

group of milk producers co-operative society, our organization will be too happy to
provide model bye-laws to enable the government to declare the policy for adopting
these to enable those groups to operate independently with autonomy and control.
From the foregoing paragraph and other details provided in this document, concerned
officials who would finally decide for approving our report may agree that our
approach and intention is to create gradually on permanent basis a daily income
generation activity to individual rural milk producing families.
It will also bring social awareness among participants, create better and variety of
services by the government department. Like animal husbandry and health, input
programs and self employment in the form of village trained youth.
The NUFSO MILK LTD was approached by a foreign company which is well
established in New Zealand. The NUFSO MILK Company's project cost is 92
Million and when calculated the packaging cost turned out to be 20 Million which is
21.73% of the total cost. Thus it would not be a wise decision to do the packaging on
our own, for this we have signed a contract with the Joyce Foundation which is a
New Zealand based Company.
The Joyce Foundation with its expertise is able to do it in much cheaper cost. This
foundation is using a HTSC Machine i.e. High Temperature Short Time Machine. As
the name already explains that is a high tech. machine, and works on most of the
packaging material. As the life of the milk is not more than 3 hours thus the HTSC
Machine boils the milk and cools it down, keeping it fresh for a linger time period.
CAPACITY AND PRODUCT MIX:

The installed capacity of the project is 50,000 liters per day. Two types of vitamins
enriched will be prepared for pasteurization and sterilized. Ghee will be obtained as a
by-product. Yoghurt as well as fruit flavored drinks would also be supplied.
MILK AVAILABILITY:
It is proposed to buy milk from our own co-operative members earning about 7500
buffaloes because they provide the best quality of milk available with them as they
have more than 50,000 liters. Therefore, there is no problem of milk availability for
the project.

LOCATION:
The plant is proposed to be located at the industrial area in North Karachi. This place
is around 25Kms from the central Karachi City. It is well connected by road from all
directions. It is 4 Kms from the main Karachi-Hyderabad Super express on the Filter
Plant road. It is also 10 Kms from the sheds where the buffaloes of our members are
housed. Hence, it will be very easy to transport raw milk to the plant as well as milk
and milk products from the dairy plant to the consuming point i.e. Karachi City.
Hence, the location of the plant is ideal, since it is very near to Milk producing as
well as consuming centers.
GOVERNMENT POLICY REGULATORY ENVIRONMENT IN THE DAIRY

PROCESSING SUPLLY:
There is no restriction from the Government for putting up this project. Hence, no
approvals are required for establishing this project

(D-2) MARKETING ASPECT:
Pakistan is the fith largest milk producer in the world. About a third of the total milk
produced by the rural families flows out to urban consumers and processing industries. In
urban areas milk is available to common consumers in two ways: loose / unprocessed milk
and packed / processed milk. Dairy companies such as Nestle and Haleeb are the main part of
milk marketing structure.
Only partial amount of the total production of milk in Pakistan is packaged and large
quantity of milk is sold still openly, there is a huge gap between demand and supply of
the packages milk and milk products. The country is looking forward for mechanization
and industrial up-gradation in this industry sector.
Marketing Through Rural Milk Traders
Traditionally, the most important middlemen are the numerous rural milk traders, commonly
called katcha dodhis. Equipped with a bicycle or horse cart, or in some cases now attaching
two to four milk cans with a motorbike, they make daily visits on average to 15–20 small
milk producers, collecting some 75–90 liters of raw milk. This may take three hours and the
distance cycled can easily be 20 km. Most of the katcha dodhis are independent, only a few
are employed by larger highway collectors. Under the traditional system, women sell the
milk.
Where competition is strong, usually in production areas with good access, the katcha dodhis
often have contracts with the producers to secure milk supply for a certain period. Then the
purchasing price may be fixed, interest free advances may be given or both ties will be used.
The value of advances usually corresponds to the value of milk supplied within two to four
weeks. As most katcha dodhis do not have sufficient resources to finance their suppliers, they
in turn get advances from the larger collectors and sometimes from rural shopkeepers. If no
advances are granted, payment is normally effected within one week after milk collection.
With a few exceptions, milk is collected only in the morning, the evening milk being used
mainly for home consumption. Milk is always collected by volume, never by weight, using
measures of varying types and sizes. Milk producers normally supply pure, unadulterated
milk; however, to prevent deterioration of the milk during their collecting tour, especially in
the hot season, the katcha dodhis add certain quantities of ice to lower the temperature. The
ensuing dilution may well result in a 10–20% increase of the milk volume.
Marketing Through Rural and Highway Milk Collectors
The highway milk collectors, or pacca dodhis, obtain their supply of milk almost exclusively
from the katcha dodhis. The daily volume collected by a pacca dodhi often exceeds 2000
liters, especially in the Punjab. The number of katcha dodhis supplying a single pacca dodhi
ranges from 8 to 500, with a maximum of about 70 per collection point.

At their collection points along or near the main roads, most pacca dodhis check the milk
visually, test fat and solids-not-fat contents with their fingers and measure the volume by
pouring the milk into their own cans. If the quality meets requirements, the agreed price will
be paid. In some cases, cream separation is carried out to check the fat content (110 liters of
buffalo milk should yield at least one liter of cream) or the coagulation test is used to
determine the content of total solids (evaporation of one liter of milk in an open pan).
Collectors supplying dairy plants all use fat testing equipment.
The pacca dodhis do not own chilling facilities, but most of them have one or more motor
vehicle. Only the smaller collectors send milk to town by public transport or join other
collectors who own or hire a small pick-up truck. Before sending the cans to the urban
vendors or processors, especially during the summer season, more ice is added to the milk;
moreover, sometimes preservatives, such as hydrogen peroxide, are also added. Subject to the
distance to be covered, the milk reaches the urban markets at times between 0900 and 1200
hours.
One pacca dodhi may supply between 1 and 40 clients, depending on the milk volume
marketed and the demand of the individual contractor, milk shop or manufacturer. Advances
from shopkeepers seem to be rare. Normally, the milk supplied is paid for upon the next
delivery. Many collectors engage in fresh cream marketing. Principal clients are ice cream
factories and butter or ghee manufacturers.
Both katcha dodhi and pacca dodhi add ice to the milk, which reduces the original fat and
solids-not-fat contents by up to 20% but increases their margins. The rural collector has cash
expenses of about Rs. 1/litre for ice and octroi (communal merchandise tax), the highway
collector pays a similar amount and eventually Rs. 1/litre for hired transport. The vendor
increases his margin through the sale of sweetened milk and the manufacture of dahi or
sweetmeats.
If the pacca dodhi separates part of the cream from the milk traded, thus reducing the fat
content to 4.3%, he can increase his margin through cream sales to about Rs. 1.04/litre sold.
Consequently, the urban consumer pays Rs. 1.00 more per liter than the rural consumer does
for milk of lower quality. Of course, farm-gate trader and consumer prices are subject to
seasonal fluctuations. In summer, the urban consumer might well get milk with a fat content
<4%.
Milk Collectors Supplying Dairy Processors
Since the establishment of milk processing plants, highway milk collectors have been their
most important and effective suppliers. Despite rigid quality testing and payment according
to butterfat content, plants procure the major part of their raw milk through the private milk
collectors. This leads to difficulties during the lean production season when the supply gap
results in price increases, which the manufacturers were not willing or able to pay.

Milk Sale to Collection Centres of Dairy Processors
Neither factory linked livestock farms nor dairy co-operatives have managed to become
major suppliers to dairy processing plants. Size and production of the commercial farms have
limited their contribution. Of the milk marketed by the functioning co-operatives and Village
Livestock Associations, created in some districts of Punjab to supply the Lahore Milk Plant
(their designated long-term marketing partner), only a small proportion is channeled to the
dairy plants.
To improve the handling of raw milk and achieve a better quality for processing at the plant
site, some dairy plants have started to equip milk collection centers with chilling units and to
use insulated road tankers for bulk transport from the centers to the plant. This enables them
to buy milk direct from the katcha dodhis. Some plants already collect 80% of their
procurement themselves. Large-scale collectors supply the balance milk.
Milk collection is undertaken by dodhis or co-operative organizations (e.g. at Renala Khurd),

but the milk producers may also deliver to the centers themselves and this way may receive a
higher price. The farm-gate price in winter is Rs. 8–10 and in summer Rs. 10–12 per liter (6%
fat basis). A bonus of Rs. 1.00/litre is paid by some processing plants, if the milk is put into
chilling tanks provided by the plants but operated by the producers.
Direct Marketing and Contract Sale
Some producers manage to market their milk without the help of dodhis. They produce
quantities large enough to contract fixed regular supplies with urban wholesalers/retailers or
they sell straight to consumers (at the farm, in their own urban retail outlets or at the
consumer’s door).
The peri-urban milk producers, especially in Sindh, sell most of their milk on a contract basis
(one year, fixed price) to urban distributors, milk shops and institutional consumers (hotels
and restaurants). Milk in excess of the contracted quantities is sold through commission
agents in the ‘free’ wholesale market (auction sale). If a milk producer cannot supply the
agreed quantity in full, he is obliged to make up the deficit from outside purchases (e.g. in the
wholesale market). Some of the milk producers at Landhi Cattle Colony have established an
association. Most peri-urban and rural commercial milk producers who market milk
themselves do not maintain additional or better facilities than the pacca dodhis. Milk, with
ice added, is transported in their own cans and usually with their own vehicles to the
customers or the wholesale markets. Only a very few producers (e.g. a dairy co-operative, a
private cattle farm and some government dairy farms) use chilling facilities and insulated
storage tanks. In general, milk is distributed in cans with volumes of 40–50 liters.
Milk producers who own transport facilities usually deliver milk to their urban contractor
receiving about Rs. 14/litre of undiluted milk. Contractors are often milk shops converting
part of the milk into customary products. In summer, the margins of the intermediaries are
much higher as more ice is added to cool the milk.

Milk Retailers
The final middlemen in raw milk marketing are the milk shops, which in urban centres often
also exercise distribution functions (supply of the small retailers) and/or transform milk into
local yoghurt (dahi), yoghurt drinks and a simmered, sweetened concentrate (khoa) for sweet
dishes or ice cream. They often separate cream from part of the milk bought.
The major part of the raw milk reaching the milk shops is sold untreated within one to two
hours after arrival. Some shops, particularly those operated by commercial milk producers
keep the milk in cooling tanks (500–1000 litres contents) or fill a certain proportion into
plastic sachets, which after sealing are kept in a refrigerator. Milk, which is not sold
immediately, is boiled for sale later or converted into dahi, khoa etc. Nevertheless, the
consumers boil all liquid milk bought before drinking.
Marketing of Processed Liquid Milk
The only type of processed liquid milk that is found in markets all over the country is
sterilized long-life (ultra heat treated; UHT) milk produced by eight domestic dairy plants.
Standardized UHT milk is marketed in 200-, 250-, 500-ml and 1-litre packages, mostly
tetrahedron or tetra briks. The 500-ml packages account for about 60% of the total quantity
sold, 200- and 250-ml packages for 20–25% and the 1-litre tetra briks for 15–20%.
The marketing chain is short; from the factories, the milk is transported by truck to regional
distributor– wholesalers who in turn supply general stores and supermarkets in the big cities.
Regional distribution of sales demonstrates that the majority of milk is consumed within a
limited area around the processing plants.
Ex-factory prices vary according to the destination of sales and freight costs involved. The
distributor–wholesaler receives commissions of between Rs. 1.00 and 2.00/litre, depending
on brand and package size. Most manufacturers refund or replace damaged and expired
packages.
Compared with the margins in the marketing of raw liquid milk (especially the extra margins
resulting from dilution), the margins on processed milk are much smaller and cannot be
increased by adulteration. However, retailers do not deal exclusively in UHT milk, it is just
one of many items sold; this applies to most wholesalers as well.
Marketing of Dairy Products
Traditional dairy products like dahi and khoa are manufactured and sold by most milk shops
across Pakistan. On average, these shops convert about 20% of the raw milk purchased into
dahi and/or khoa. During Ramadan and in summer, dahi consumption increases considerably.

Local or desi ghee is mainly produced by farmers in areas that are not penetrated by milk
collectors. The major part of ghee is home consumed but an estimated annual volume of 34%
is marketed through wholesalers, vendors and shopkeepers, both in rural and urban areas.
Because of its relatively high price (consumers have to pay between Rs. 160 and 180/kg), it
cannot compete with vegetable ghee or oil, which costs only a third of the price and is used
increasingly as a substitute.
In contrast, desi butter seems to have a stable market, especially during the winter months.
The quantity marketed may reach 60,000 tonnes per year. The larger dairy shops in the cities
and special creameries are the principal manufacturers of local butter. They usually buy
cream from wholesalers or pacca dodhis and each day produce only what can be sold within
one day.
Some milk processing plants have introduced a number of new dairy products into the
market:
• Yoghurt (natural and flavored),

• Drinking yoghurt
• Sweetened, flavored milk
• UHT and pasteurized cream
• Butter
• Ghee
• Cheese and
• Ice cream mix.
The quantities sold, however, are very modest for most items; only yoghurt and butter sales
have reached significant volumes. Three major yoghurt manufacturers sell about 4000 t
annually. Consumer prices of Rs. 17–21 per 450 ml cup (3.5% fat) assure a good margin
despite high packaging costs. The modern butter manufacturers produce about 800 t/year. It is
mainly packed and sold in portions of 200 g with ex-factory prices from Rs. 30–35/pack and
consumer prices from Rs. 35–40/pack.
The ice cream industry, producing 9–10 thousand tones of ice cream/annum, uses mainly
dairy ingredients, especially fresh cream. Fresh milk is mostly substituted by imported milk
powder.
Marketing of Milk Powder
In the past, more than 60% imports, mainly whole milk powder, was sold by the importers to
wholesalers and then distributed to a large number of retailers (e.g. grocery stores) where the
private households could buy it. About 2666 t, almost exclusively skim milk powder, were
used by the poultry feed industry and food processors, the dairy plants consuming some 1600
t and the ice cream factories approximately 1000 t. Since 1978–79 only licensed importers
who obtain certain quotas are allowed to import milk powder. UHT milk plants are direct
importers. The introduction of a fixed import duty for all kinds of milk powder has slightly
increased domestic milk powder prices.

Milk Marketing Constraints
The marketing of raw liquid milk, principally produced by a large number of smallholders, is
a difficult and time-consuming task, especially against the background of poor infrastructure,
unfavorable climatic conditions during a major part of the year and a low technology level.
From production areas that have poor road access, marketable quantities of milk are not, or
are only partly, collected. The katcha dodhis cannot spend more than three to four hours on
one collecting tour because of the perishability of the produce. Poor transport conditions also
increase their costs considerably (e.g. by necessitating frequent repairs). As the producers
tend to meet their own milk requirements from the evening milk, virtually no dodhis go on a
second collecting tour each day, although more milk would be available.
During the flush season of milk production, larger marketable quantities are not absorbed by
the collectors, as with a copious supply it is more difficult to sell the milk with attractive
margins despite lower farm-gate prices. Even the modern milk processing plants face
problems relating to an over-supply in the flush season and during introduced milk holidays.
The quality of milk supplied to the consumers and many of the dairy processors is often very
poor due to skimming, dilution and addition of dirty ice or chemical agents. At the critical
points in the milk marketing chain (e.g. where the rural collectors sell to the highway
collectors), chilling facilities are rarely available.
The conditions of milk handling are often unhygienic. Containers and cans are not well
cleaned and lids are frequently sealed with a wad of straw. Despite the addition of ice or
preservatives, bacterial activity can increase considerably. Although the Pure Food Ordinance
and the Pure Food Rules require hygienic handling of milk and prohibit mixing, coloring,
staining or powdering of milk with any matter or ingredient, high rates of adulteration are
reported by the food inspectors. Severe penalties can be enacted but, in reality, only small
fines are imposed with minimal impact on the unhygienic practices.
With few exceptions, milk producers have been unable to organize themselves, take over
marketing functions and remove the deficiencies of the traditional marketing system.
The major constraints to the marketing of processed liquid milk are the higher price in
comparison with that of raw milk and the often-quoted consumer dislike of heat-treated
homogenized milk because of its taste and lower fat content. It is difficult to say which of the
two constraints is more important in the stagnating of UHT milk sales. Definitely, the dairy
processing industry could do more in terms of consumer education to overcome the quality
prejudice.

(D-3) TECHNICAL ASPECT:
MILK PROCESSING
Milk from the cow is virtually a sterile product. All post-milking handling must
maintain the milk’s nutritional value and prevent deterioration caused by numerous
physical and biological factors. In addition, equipment on the farm must be
maintained to government and industry standards. Most cows are milked twice a day,
although some farms milk three or four times per day. The milk is immediately
cooled from body temperature to below 40°F (5°C), then stored at the farm under
refrigeration until picked up by insulated tanker trucks at least every other day. The
milk tanker driver records the amount of milk and notes the temperature and the
presence of any off-odors. If the milk is too warm or has an off-odor, it will not be
picked up, and the farmer will have to feed it to his animals or dump it. When the
milk is pumped into the tanker, a sample is collected for later lab analysis.
When the milk arrives at the milk plant, it is checked to make sure it meets the
standards for temperature, total acidity, flavor, odor, tanker cleanliness, and the
absence of antibiotics. The butterfat and solids-not-fat content of this raw milk is also
analyzed. The amounts of butterfat (BF) and solids-not-fat (SNF) in the milk will
vary according to time of year, breed of cow, and feed supply. Butterfat content,
solids-not-fat content, and volume are used to determine the amount of money paid
the farmer.
Once the load passes these receiving tests, it is then pumped into large refrigerated
storage silos (nearly half-million pounds capacity) at the processing plant.
All raw milk must be processed within 72 hours of receipt at the plant. Milk is such a
nutritious food that numerous naturally occurring bacteria are always present. The
milk is pasteurized, which is a process of heating the raw milk to kill all “pathogenic”
bacteria that may be present. A pathogen is a bacteria that could, if allowed to grow
and multiply, make humans sick. It should be noted that pasteurization is not
sterilization (sterilization eliminates all viable life forms, while pasteurization does
not). After pasteurization, some harmless bacteria may survive the heating process. It
is these bacteria that will cause milk to “go sour.” Keeping milk refrigerated is the
best way to slow the growth of these bacteria. Some bacteria do not cause spoilage,
but are actually added to milk or cream after pasteurization to make “cultured”
products such as cheese, cottage cheese, yogurt, buttermilk, acidophilus milk and sour
cream.
There are different ways to pasteurize milk. The “batch” method heats the milk to at
least 145° and holds it at the temperature for at least 30 minutes.
Since this method may cause a “cooked” flavor, it is not used by some milk plants for
fluid milk products.

High temperature/Short time (HTST) pasteurization heats the milk to at least 161° for
at least 15 seconds. The milk is immediately cooled to below 40° and packaged into
plastic jugs or plastic-coated cartons. Most milk plants have at least one HTST
processor. This piece of equipment is considered the “heart” of the plant.
Butterfat content accounts for several different types of products. Whole milk, 2%,
1%, Nonfat, and Half & Half are some examples. A machine called a separator
separates the cream and skim portions of the milk. A separator is really a large
centrifuge that spins about 2,000 rotations per minute. The different types of milk
products are then “standardized” by blending the components (skim milk, raw milk,
cream) in the correct proportions to yield the desired end-products. Water is never
added to lower the butterfat content of fluid milk. Excess cream is used to make ice
cream and butter.
Milk is homogenized to prevent the cream portion from rising to the top of the
package. The expression “cream rises to the top,” is accurate because cream is lighter
in weight than milk. The cream portion of un-homogenized milk would form a cream
layer at the top of the carton. A “homogenizer” forces the milk under high pressure
through a valve that breaks up the butterfat globules to such small sizes they will not
“coalesce” (stick together). Homogenization does not affect the nutrition or quality of
the product; it is done entirely for aesthetic purposes.
Vitamin quantities may be reduced by the heating process and removal of the
butterfat. Therefore, to replace the natural nutrition of nature’s perfect food, liquid
vitamins are added to fortify most fluid milk products. Many states have milk
standards that require the addition of milk solids. These solids represent the natural
mineral (i.e. calcium, iron), protein (casein), and sugar (lactose) portion of nonfat dry
milk. You will see this shown as an ingredient on those products needing
fortification.
Quality Control personnel conduct numerous tests on the raw and pasteurized
products to insure optimum quality and nutrition. A sample is analyzed for the
presence of microbiological organisms with a standard plate count (SPC) and ropey
milk test. The equipment used to analyze butterfat and solids-not-fat is calibrated on a
regular basis to insure a consistent, quality product that meets or exceeds government
requirements.
All milk products have a sell-by date printed on the package. This is the last day the
item should be offered for sale. However, most companies guaranty the quality and
freshness of the product for at least 7 days past the date printed on the package.
Samples of each product packaged each day are saved to confirm that they maintain
their freshness 7 days after the sell-by date.
Once the milk has been separated, standardized, homogenized and pasteurized, it is
held below 40°F in insulated storage tanks, then packaged into gallon, half-gallon,
quart, pint, and half-pint containers. The packaging machines are maintained under

strict sanitation specifications to prevent bacteria from being introduced into the
pasteurized product. All equipment that comes into contact with product (raw or
pasteurized) is washed daily. Sophisticated automatic Clean-in-Place (CIP) systems
guarantee consistent sanitation with a minimum of manual handling, reducing the risk
of contamination.
Once packaged, the products are quickly conveyed to a cold storage warehouse. They
are stored there for a short time and shipped to the supermarket on refrigerated
trailers. Once at the store, the milk is immediately placed into a cold storage room or
refrigerated display case.
BLOCK DIAGRAM FOR MILK PROCESSING:
FLOW DIAGRAMS:
FIGURE 1
STEPS IN MAKING A “SAINT-PAULIN/GOUDA” TYPE CHEESE
Equipment Operation
Reception - Filtering
↓
• Hand-operated separator
Standardization
↓

Pasteurization (63°C for 30 minutes)

↓
Cooling (32 – 35°C)
↓
Inoculation (rennet; starter culture;
calcium chloride)
↓
• One vat for pasteurization and cheese- Cutting the coagulum and stirring
making
↓
Drawing off part of the whey
↓
Addition of water or brine
↓
Second stirring
Moulding
• Moulding table
↓
Pressing (1 to 5 hours)
• Press
↓
Salting in brine
• Brining tray
↓
• Ripening cellar Turning and ripening (at least 2 weeks)
FIGURE 2
STEPS IN MAKING LACTIC BUTTER-MAKING
Cream
Pasteurization
Cooling

Inoculation with lactic starter culture
Ripening
Churning
Washing
Working
Packaging
Storage and marketing
FIGURE 3
STEPS IN MAKING YOGHURT
Skimmed or standardized milk

↓
Pasteurization
↓
Cooling to 42 – 45°C
↓
Inoculation (approximately 1%)
↓
Stirring
↓
Packaging in tubs
↓
Incubation 42 – 45°C for 2 – 5 hours
↓
Cooling

FIGURE 4
STEPS FOR FERMENTED MILK
Standardization
↓
Pasteurization
↓
Cooling to 20 – 25°C
↓
Addition of lactic acid bacteria
↓
Stirring for a few minutes
↓
Ripening (12 – 24 hours)
↓
Packaging
FIGURE 5
STEPS FOR MAKING GHEE
Cream during standardization of milk
Churning into white butter
Boiling of butter
Clarification of ghee
Packing into containers
Storage in godown
Dispatch to market
(D-4) ORGANIZATIONAL SET-UP:

Organizational Setup
Total of 53 persons are required in the project. Details are given in the table below.
The total cost of manpower at full capacity works out to Rs. 858,500
S/N Category Number Average Monthly Salary
1 Managing
Director 1 100000
2 Ex- partite 2 50000
3 Managerial
Staff 5 40000
4 Officer 8 20000
5 Skilled
Workers 12 8000
6 Unskilled
Workers 25 6500
Total 53

II Legal and Taxation Issues
The legal scenario does not pose any restrictions. In fact there is no tax on milk since
it is an agricultural product and the basic necessity of life as well. This makes this
industry a lucrative one.
Rates of Tax for Companies
(i) The rates of tax imposed on the taxable income of a company shall be set out in
the following table, namely:-
TABLE
Tax Banking Public company Private company

Year Company other than a other than a banking
banking company company
(2) (3) (4)
(1)
2003 47% 35% 43%

2004 44% 35% 41%
2005 41% 35% 39%
2006 38% 35% 37%
2007 35% 35% 35%]
[(ii) Where the taxpayer is a society or a cooperative society, the tax shall be
payable at the rates applicable to the public company or an individual, whichever is
beneficial to the taxpayer.]
[(iii) Where the taxpayer is a small company as defined in section 2, tax shall be
payable at the rate of 20%.]
Rate of Dividend Tax
The rate of tax imposed under section 5 on [dividend] received from a company
shall be –
(a) In the case of [dividend] received by a public company or an insurance company,

5% of the gross amount of the dividend; or
(b) In any other case, 10% of the gross amount of the dividend.

Total Project Cost and Financing Plan
Total project cost: - The total project cost works out to Rs92 million, the break-up is
given below:
Account Amount in Relative

S.No
Head (000) Percentage
20,
1 Land & Site Development 000 21.74
8,
2 Building and Civil Structure 500 9.24
50,
3 Plant and Machinery 000 54.35
2,
4 Miscellaneous Fixed assets 000 2.17
Preliminary and pre-operative expenses 1,
5 500 1.63
Total Capital Cost 82,
000
Technical Know- how fees 1,
6 500 1.63
Contingency provision 3,
7 500 3.80
Margin Money for working Capital 5,
8 000 5.43
Total Project Cost 92,
000
Financing Plan
Total Project Cost Rs. 92000000

Less Margin Money - working capital Rs. 5000000
Capital Cost of Project Rs. 87000000
Equity Finance (50%) 46000000

Debt finance at 18 %( 50%) 46000000
92000000

PART E
“COMPREHENSIVE FINANCIAL
STATEMENT”

Financial analysis comprising of projected profitability, break-even analysis and internal

rate of return (IRR) for the proposed project have been presented. The purpose of this
exercise is, thus, to assess the economic and financial viability of the venture.
Production Program
The details of quantities of different products have been discussed under Product-Mix
section Table-1.
It is assumed that the milk collected as well as purchased from outside would have 7.0
percent fat and 9.0 percent SNF (solid-non-fat).
Daily output of the various products is estimated by using the standard conversion norms.
As mentioned earlier in the report, the proposed unit at 100 % capacity utilization would
collect 50,000 liters of milk/day. Initially, we will collect whatever is available locally
and make it up with the milk from outside. Slowly, more and more milk will be collected
locally and less and less from outside.
It is further assumed that the unit would work at 50 percent capacity utilization in the first
year, 60 percent in the second year, 75 percent in the third year, 85 percent in the fourth
year and 90 percent in the fifth year onwards. The maximum processing capacity of the
unit is 50,000 liters of milk per day.
The annual production of various products is worked out based on the above
assumptions.
Accounts Receivable is 2.5% of the sales
Net Sales Revenue
The ex-factory sales price of the various products is given in Table 16. Annual sales
realizations are worked out in Table-16. As can be seen from the table, the total sales
realization in the first year is estimated at Rs. 340 million which increases to Rs. 675
million in the fifth year and onwards.
Cost of Raw Materials
The details of raw materials expenses are presented in Table-11and Raw material
required are given in Table 10.

Stores and Consumables
Stores and consumables expenses include general lubricants, cleaning rags, small tools,
cutting tools and miscellaneous stores.
Selling Expenses
Selling expenses include traveling expenses, entertainment expenses, advertising

expenses, distribution to the retailers, and others. This expense item is given in Table-19.
Administrative Expenses
Administrative expenses include items such as expenses on correspondence, telephones,

fax, traveling and other miscellaneous office expenditures. This expense item is assumed
at 2-1/2 percent of net sales and is shown in Table-20.
Repair and Maintenance
Repairs and maintenance expenses have been estimated at the rate of 2 percent of plant
and machinery and miscellaneous fixed assets and 1 percent of building and civil
structures. Detailed calculations are given in Table-21.
Insurance expenses
Insurance expenses are estimated at 0.5 percent of fixed assets. Detailed calculations are
given in Table-22.
Power Expenses
Details of power expenses have been worked out in Table-13.
Manpower Expenses
Annual wages and salaries bill have been estimated and worked out in Table-15.

Fuel Expenses
Fuel expenses have been indicated in Table-14.
Transportation Expenses
Transportation expenses on finished product are worked out and given in Table-23.
Transport expenses for milk are also included in the same table.
Depreciation Schedule
Depreciation has been calculated by SLM method. Depreciation values of assets have
been determined after capitalizing items such as contingency, technical know how fees
and preoperative expenses. The detailed calculations of depreciation schedule are
presented in Table-24.
Interest Schedule and repayment of Term Loan
Calculation of interest on long term loan and short term loan and repayment schedule of
term loan are presented in Table 25.
Tax Liability
Tax would at the rate of 35%.
Profitability
The details of profit and loss are given in Table-26As we can see in the Profit and loss
summary, our firm profit is fluctuating because of the price fluctuation and Inflation
Rate. There is a mixed trend of profit in our firm case. In first year it is 22 Million but
decrease in second year by 5 million and then increase in a fast manner.
Net Cash accruals have been worked out by adding back straight line depreciation to
profit after tax. As can be seen from Table-26, the net cash accruals in the first year of
operation works out to Rs. 41 million and reaches Rs. 98 million in the V year of
operation.

Break-even Calculations
The pro-forma income-expenditure statement of the proposed project at maximum

capacity utilization i.e. 90% is presented in Table-27. In this table, the expenditure items
have been duly segregated into variable and fixed costs and these work out to Rs. 600.97
million and Rs. 21.892 million respectively against total sales revenue of Rs. 745 million.
The break-even point is calculated to be 13.68 million percent.
Sensitivity Analysis
Sensitivity analysis is given in Table-30. It is clear that the project is more sensitive to
sale price of produce as compared to milk price purchase.
Cash Flow
Cash flow has been worked out and presented in Table-31. It is quite clear that we will
have sufficient cash with us, even after meeting all the requirement of loan repayment -
principal as well as interest amounts. Thus, we can think of further expansion /
Diversifications and taking up other welfare activities for the members of our co-
operative societies after 2-3 years of starting up of the dairy plant.
Conclusion
The project is financially viable.

LIST OF MAJOR PLANT AND MACHINERY
A. MILK RECEIVING SECTION
1. Tanker unloading pump - 20,000 LPH---------1

2. Flow meter - 20,000 LPH---------1
3. Plate heat exchanger - 20,000 LPH---------1
4. Can washer - Hand scrubber - ------2
5. Cans steaming blocks - ------2
6. Milk weighing scale with bowl - 500 Kgs ------1
7. Dump Tank - 1,000 L ------1
8. Centrifugal pump - 5,000 LPH---------1
9. Raw Milk Storage Tank - 15,000 Liter---------1
10. Can Drip Saver ------1
11. Can tipping bar
12. Can Conveyor
13. Duplex filter
B. MILK PROCESSING SECTION
1. Centrifugal pumps - 5,000 LPH----------2

2. Plate Heat Exchanger (Milk Pasteurizer) - 5,000 LPH----------1
3. Cream Separators - 5,000 LPH----------2
4. Homogenizer - 5,000
LPH----------1
5. Vertical Storage Tanks - 15,000 Liters---------3
6. Cream Storage tanks - 5,000
Liters---------2
7. Plate heat exchanger ( Cream Chiller ) - 2,000 LPH----------1
C. GHEE SECTION
1. Centrifugal pump - 5,000 LPH----------1

2. Drum butter churn - 3,000 Liters---------1
3. Butter Trolleys - 750 Kgs-----------2
4. Ghee Boiler - 1,000 Kgs-----------1
5. Ghee Clarifier - 1,000
LPH----------2
6. Ghee tins filling and sealing machines - 8 - 10 Tins/min-----1
3-4 Tins/min-----1
7. Ghee settling tanks - 1,000
Liters---------2
8. Centrifugal pump - 2,000 LPH----------1
9. Corrugated boxes strapping machine - 2-3
Boxes/min---1

10. Multipurpose vat - 2,000

Liters---------1
11. Ghee Storage tank - 1,000
Liters---------1
12. Ghee strainer vat - 100
Liters---------1
E. MILK STERILIZATION
1. Counter pressure sterilizer ------------------1

2. Milk bottles filling and sealing machines 70 to 80 BPM----------1
3. Metal crates for the above
4. Conveyors for the above
5. Shrink wrapping tunnels 1 no.
6. Empty bottles cleaning machine 1
F. FLAVOURED DRINK SECTION
1. Sugar syrup vat - 1000 Liters

-----------1
2. Filter press
3. Centrifugal pumps - 5000 LPH
-----------2
4. Mixing tanks - 5000
Liters-----------3
5. Filling and sealing machine - 60 to 70
glasses/min----1
6. PHE - 5000
LPH------------1
7. Shrink wrapping tunnel -
---------1
G. YOGHURT AND DAHI SECTION
1. Mother culture incubator 1

2. Starter vat 1
3. Centrifugal pumps - 5000 LPH------------2
4. Vertical Storage tanks - 5000 Liters
---------2
5. Cups filling and sealing machine - 1
6. Fruits and nuts addition machine - 1
7. Shrink wrapping tunnel - 1
H. C.I.P. SECTION
CIP Supply and rectum pump - 10000 LPH 3 nos.

CIP solution heater - 20000 LPH 1

CIP tanks (Acid, Lye and Hot water) - 1500 Liters 3
I. BOILER SECTION
Oil fired boiler 1500 Kgs/hr.water evaporation. 1

Feed Water Tank 5000 Liters 1
Water softener
Fuel Storage tank 10000 Liters 1
J. REFRIGERATION SECTION
Ice bank tank, Ice- bank coil, ACU for Cold store, condenser water pumps,
Evaporative condensers, ammonia compressors, oil separators, chilled water pumps,
air curtains etc.
K. AIR - HANDLING UNIT
Air compressor, Motor, Receiver, Drier
M. ELECTRICAL INSTALLATION
D.G. Set 450 KVA 1
N. WATER SUPPLY
Bore -wells 2 nos.

Water treatment plant 15000 LPH 1 Lot
TOTAL COST Rs.50.0 Million
a. Cost of indigenous plant and machinery (20%) Rs.9.2 million

b. Cost of imported plant and machinery (80%) Rs.32 million
TOTAL COST Rs.41.2 Million
c. 20% duty on imported plant and machinery Rs.6.4 million

Erection and commissioning expenses (7.5 % of a, b and c) Rs.2.4 million

GRAND TOTAL Rs.50 Million

Notes to the Accounts
TABLE - 10
Annual Requirement of Major Raw Materials
YEAR OF OPERATION
S ITEMS 1 2 3 4 5 6 7
1 Milk(Lakh 70.0 85 110 135 160 160 160
Liters)
2 Sugar 310 410 510 590 650 650 650
( M.T )
3 Flavors 1500 1750 2400 3000 3777.74 3777.75 3777.75
(Liters)
4 Fruit 65.7 98.55 123.18 139.61 147.82 147.82 147.82
( M.T )
TABLE - 11
Annual Cost of Raw materials
YEAR OF OPERATION (Rs. in Million)

S/N ITEMS 1 2 3 4 5 6 7
1 Milk 210.0 255 330 405 480 480 480
2 Sugar 8.06 10.66 13.26 15.34 16.9 16.9 16.9
3 Flavors 1.80 2.1 2.88 3.6 4.53328 4.5333 4.5333
8
4 Fruit 3.285 4.9275 6.159 6.9805 7.391 7.391 7.391
5 Miscellaneous 2.215628 3.6234 4.5293 5.1332 5.43516 5.43516 5.43516
4 4 1
1 % of 1,2,3,4
Grand Total 225.3606 272.68 352.29 430.92 508.824 508.824 508.824

3 8 9 1 3 3
Note: Prices to supplier assumed are
a) Milk - Rs. 30 / liter per 7 % fat and 9 % SNF milk

b) Sugar - Rs. 26 / kg.

c) Flavors- Rs. 1200/ liter

d) Fruits - Rs. 50 / Kg.
TABLE - 12
List of connected power load
S/N ITEM DESCRIPTION H.P
1 Compressor motors 150

2 Air Compressor 30
3 Chilled water pumps 25
4 Condenser pump 10
5 Agitator motor 10
6 Condenser fan 2
7 Air Fan 10
8 Boiler pump 10
9 Burner 1
10 Pouch filling machines 6
11 Conveyors 3
12 Can scrubbers 2
13 Sterilizer 12
14 Cream separator 15
15 Milk pumps 40
16 Ghee pumps 3
17 Water softener 3
18 Ghee clarifier 2
19 Ghee Transfer pump 3
20 Tank agitators 12
21 Cans conveyor 3
22 Bottles/ Glasses filling machinery 7
23 Shrink wrapping tunnels 6
24 Miscellaneous - Lighting, Laboratory etc. 25
=============
Total 390 HP
=============
TABLE - 13

Details of Electricity Cost
Total connected load = 390 HP = 293 KW

Assuming power factor to be 0.90, total connected load would be 325.6 KW.
Normally, maximum demand at 100 % capacity utilization is estimated at 80% of
connected load, which works out to 260.48 KW or 306.1 KVA.
Average consumption at 100 % capacity utilization is estimated at 75 % of maximum

demand, which works out to 195.36 KW.
Therefore, total unit consumption at 100 % Capacity utilization on 24 hrs per day at 365
working days works out to 1.71 millions units.
Assuming per unit cost to be Rs. 13.5 per unit, the total power cost works out to:
YEAR OF OPERTION
Power Cost 1 2 3 4 5 6 7
(Rs. in million ) 13.85 17.31 19.62 21.93 23.10 23.10 23.10
Note: Water charges are included in this, since we will be getting water from our own
bore wells.
TABLE - 14
Details of fuel expenses
FOR BOILER: At 100 % capacity utilization, fuel consumption is estimated to be

1560 liters/day i.e. 65 x 24 = 1560
However, the average utilization of boiler at 100% capacity utilization would be 75%.
Hence, fuel consumption at 100% capacity would be 1560 x 0.75 = 1170 liters/day.
Assuming cost of fuel to be Rs. 15 per liter, the fuel expenses for running boiler works
out to Rs. 17550/day.
I.e. Rs. 17550 x 365 = Rs.6.4 million/annum
FOR GENERATOR: Assuming that generator will have to be run for 4 hours every
day, fuel consumption is estimated to be 120 liters/day i.e. 30 x 4 = 120
Assuming the cost of fuel to be Rs. 15 per liter, the fuel expenses for operating generator
works out to Rs. 1800 per day.
I.e. 1800 x 365=Rs. 0.657 Million / annum
Total Expenses for fuel = 6.4 + 0.657 = Rs. 7.06 million per annum

YEARWISE, it works out to: (Assuming that in me, II, III, IV, V, VI and VII years,
Consumption will be 60, 75, 85, 95, 100, 100, and 100 % of full capacity utilization).
Year I II III IV V VI VII

Rs in million 4.24 5.30 6.00 6.707 7.06 7.06 7.06
TABLE - 15
Details of Manpower Schedule
Average Total Monthly Total Annual

S/N Category Number
Monthly Salary Salary Salary
1 Managing Director 1 80,000 80,000 960,000
2 Ex- patriate 2 55,000 110,000 1,320,000
3 Managerial Staff 6 30,000 180,000 2,160,000
4 Officer 11 15,000 165,000 1,980,000
5 Skilled Workers 18 6,000 108,000 1,296,000
6 Unskilled Workers 30 4,000 120,000 1,440,000
Total 68 763,000 9,156,000
Add benefits
@ 25 % of above 2,289,000
Grand Total 11,445,000

Year-wise cost, depending on the total capacity utilization, and general growth of the
company.
Year I 60 % of Above = 6.88

Year II 80 % of Above = 9.16
Year III 90 % of Above = 10.30
Year IV 100 % of Above = 11.45
Year V 100 % of Above = 11.45
Year VI 100 % of Above = 11.45
Year VII 100 % of Above = 11.45
Table - 16
NUFSO Milk (Rs in 000)

Years 2008 2009 2010 2011 2012 2013 2014
Production 9.120 10.950 13.687 15.512 16.425 18.250 18.250
Add! Opening
Inventory 0 0.912 1.86 1.55 1.7 1.812 2.006
Good Available for
sale 9.120 11.862 15.547 17.062 18.125 20.062 20.256
Less! Closing
Inventory -0.912 -1.86 -1.55 -1.7 -1.812 -2.006 -2.25
Net Sale 8.208 10.002 13.997 15.362 16.313 18.056 18.006
Table #17
(Rupees in Million)
S/N ITEMS QUANTITY Relative Price
( Liter /Day ) Percentage @
Sold
1 Pasteurized milk in polypacks 24,000 0.48 40
2 Sterilized milk in polypacks 10,000 0.2 42

3 Sterilized flavored milk in 10,000 0.2 20
plastic bottles
5 Yoghurt 2,000 0.04 60
6 Dahi in bulk packing 2,000 0.04 50

7 Desi Ghee 2,000 0.04 135

Total 50,000
Annual Sale Annual Annual Annual Annual Annual Annual

2008 Sale Sale Sale Sale Sale Sale 2014
2009 2010 2011 2012 2013
158 192 269 295 313 347 346
69 84 118 129 137 152 151

33 40 56 61 65 72 72
20 24 34 37 39 43 43
16 20 28 31 33 36 36
44 54 76 83 88 98 97
340 414 579 636 675 748 745
TABLE - 19
Selling Expenses
This has been assumed as 5 % for I year, 4.5 % for II year, 4 % for III year, 3.5 % for the
IV year and 3% for the V, VI and VII years. Hence, this works out as follows:
Rs. in million
I year 17.00
II year 18.00
III year 23.00
IV year 22.20
V year 20.25
VI year 22.44
VII year 22.35
This includes the expenses for the advertisement and other expenses involved in the
selling of the products. For advertisement, the budget provided is 4 % for I year, 3.5 %
for II year, 3% for III year, 2.5 % for IV year and 2% for V, VI and VII years.

TABLE - 20
Administrative Expenses
This has been assumed as 2.5 % of the sales revenue.

Hence, it works out to Rs. in million
I year 8.5
II year 10.00
III year 14.50
IV year 15.90
V year 16.90
VI year 18.70
VII year 18.636
TABLE - 21
Repairs and Maintenance Expenses
Repairs and maintenance expenses have been assumed at 2 % for plant and machinery
and miscellaneous fixed assets and 1 % for building and civil structures.
S. No. Items Value of Asset Total Expense

(Rs. million) (Rs. million)
1 Plant & Machinery 50 1
2 Miscellaneous fixed assets 2 0.04
3 Building and Civil Structure 8.5 0.085
Total 1.125
TABLE - 22
Insurance Expenses

INSURANCE EXPENSES HAVE BEEN ASSUMED AT 0.5 % OF FIXED ASSETS
S. No Items Value of Asset Insurance Expense

(Rs. million) (Rs. million)
1 Plant and machinery 50 0.25

2 Miscellaneous fixed assets 2 0.01
3 Building and Civil Structure 8.5 0.0425
Total 0.3025
TABLE - 23
Transportation Expenses
A. Raw Milk : Transport cost of raw milk has been considered as 20 paise/Liter.
Hence, the total cost works out to:
YEAR I II III IV V VI VII

Cost (Rs. in million) 1.52 2.28 2.85 3.23 3.42 3.42 3.42
B. Finished Products: Transport cost of finished product has been considered as 40

paise/Liter.
Hence, the total cost works out to:

Cost (Rs. in million) 3.60 5.41 6.76 7.66 8.11 8.11 8.11
Hence, the total transportation expenses are:

Total Cost (Rs. in million) 5.12 7.68 9.6 10.88 11.52 11.52 11.52
TABLE - 24
DEPRECIATION SCHEDULE (SLM)

(Rs in million)
S/N ASSET DIRECT ALLOCATED TOTAL RATE % AMOUNT
COST COST COST
1 Land 20.0 - 20.0 - -
2 Building 8.5 1.5 10.0 5% 0.5
3 Plant and Machinery 50 12.00 62.0 10 % 6.2
4 Electrical 6.8 - 6.8 10 % 0.68
5 Miscellaneous 2.1 - 2.1 10 % 0.21
6 Vehicle 0.5 - 0.5 15 % 0.075
Total 7.665
EXPENSES PLANT AND BUILDING TOTAL

CAPITALIZED MACHINERY
a Pre operative expenses 1.3 0.20 1.5

b Contingency 3.0 0.50 3.5
c Technical know-how fees 1.2 0.30 1.5
d Margin money 4.30 0.70 5.0
Total 11.79 1.91 13.7

TABLE - 25
Loan Repayment and Interest Schedule
ITEMS I II III IV V VI VII
1. Term Loan outstanding at 46.0 46.0 38.3 30.6 22.9 15.2 7.5
the beginning of the year.
2. Repayment Schedule - 7.7 7.7 7.7 7.7 7.7 7.5
3. Term Loan at the end of 46.0 38.3 30.6 22.9 15.2 7.5 -
the year
4. Total Repayment - 7.7 15.4 23.1 30.8 38.5 46
5. Interest on term loan @ 8.28 8.28 6.9 5.51 4.12 2.73 1.35
18% of 1
6. Working Capital loan 40 50 30 - - - -
from Bank
7. Repayment Schedule for - 40 50 30 -
working capital
8. Interest on working 6 7.5 4.5 - - -
capital loan @ 15% p.a.

TABLE - 26
PROFIT AND LOSS STATEMENTS
(Rs. in million)
Year of Operation
ITEMS I II III IV V VI VII

Sales Revenue 340 414 553 633 675 748 745
Raw materials 352. 508.824
225.8 272 430.921 508.8243 508.824
29 3
Power 19.6
13.85 17.31 21.93 23.1 23.1 23.1
2
Stores and consumables 0.48 0.72 0.9 1.02 1.08 1.08 1.08
Fuel 4.24 5.3 6 6.707 7.06 7.06 7.06
Salaries and Wages 6.8 9.16 10.3 11.45 11.45 11.45 11.45
Repairs and 1.12
1.125 1.125 1.125 1.125 1.125 1.125
Maintenance 5
Insurance 0.30
0.302 0.302 0.302 0.302 0.302 0.302
2
Administrative Expenses 6.8 10.87 13.8 15.8 16.8 18.7 22.35
Selling Expenses 22.1
13.6 19.6 22.15 20.25 20.4 22.35
2
Transportation Expenses 5.12 7.68 9.6 10.88 11.52 11.52 11.52
Interest-Term loan 8.28 8.28 6.9 5.51 4.12 2.73 1.35
Interest- Working
0 6 7.5 4.5 - - -
Capital loan
Depreciation 7.66
7.665 7.665 7.665 7.665 7.665 7.665
5
Total cost or production 458. 613.956
294.062 366.012 539.96 613.2963 618.176
122 3
Sales Tax -12.53 -21 -21 23.04 24.48 27.2 27.04
Profit/loss before Tax 33 27 74 117 86 161 154

Tax @ 35% -
-11.6928 -9.2918 25.9 -40.775 -30.2462 -56.2667 -54.009
662
Profit after tax 22 17 48 76 56 104 100
NET CASH
ACCRUAL
PBT + Depreciation 41 34 82 124 94 168 162

TABLE - 27
Break-even calculations-@ 90% Capacity Utilization
Amount
(Rs. in million)
I. Sales Revenue 745
II. Variable Costs
1. Raw materials
508.824
2. Stores and consumables 1.08
3. Power Charges 23.1
4. Transportation Expenses 11.52
5. Fuel Expenses
7.06
6. Administrative Expenses 22.35
7. Selling Expenses 22.35
8. Interest on working Capital Loan 0.00
9. Sales Tax 27.04
Total 600.974
III. Fixed Costs
1. Wages and Salaries

11.45
2. Repairs and maintenance 1.125
3. Insurance Expense
0.302
4. Interest on Term Loan
1.35
5. Depreciation
7.665
Total 21.892
IV. Total Cost of Production 618.176

V. Profit before Tax 154
Break-even Capacity = Fixed Cost x Production Level

Sales - Variable Cost
= 21.892 x 90 = 1970.28

745 - 600.974 144.026
= 13.68 %
TABLE - 30
Sensitivity Analysis
CASE A : Raw material purchase price increases by 10%

CASE B : Sale price decreases by 10%
(Rs. in million)
BASE YEAR CASE A CASE B
Cost of Raw materials 508.82 559.70 457.94187

Sales 675 675 607.5
Net Profit 56 23 12
Hence, the project is more sensitive to reduction in sale price of products as compared to
purchase price of raw materials.

TABLE - 31
Cash Flow Statements
YEAR OF OPERATION (Rs. in millions)

S/N PARTICULARS Const
Period I II III IV V VI VII
A-SOURCE OF FUNDS:
1 Promoters’ Contribution 46 - - - - - - -
2 Share Issue - - - - - - - -
3 Profit before taxation with - 41.28 41.28 88.4 127 90.12 167.7 155.35
interest added back
4 Depreciation Provision for the - - 7.665 7.665 7.665 7.665 7.665 7.665
year
5 Investment allowance reserve - - - - - - - -
6 Increase in secured medium 46 - - - - - - -
term, long term, borrowings
7 Other medium term/ long term - - - - - - - -
loan
8 Increase in unsecured loans and - - - - - - - -
deposits
9 Increase in bank borrowings for 40 55 30 - - - -
working capital
10 Increase in liabilities for deferred - - - - - - - -
payments ( including interest )
11 Sale of fixed Assets - - - - - - - -
12 Sale of investment - - - - - - - -
13 Other Income: Cash subsidies - - - - - - - -
14 Sales Tax Interest free loan - - - - - - - -
======= ==== ==== ==== ==== ==== ==== ====
Total 92 81.28 103.945 126.065 134.67 97.785 175.37 163.015

======= ==== ==== ==== ==== ==== ==== ====


YEAR OF OPERATION
S/N PARTICULARS CONSTRUCTION
PERIOD I II III IV V VI VII
B-DISPOSITION
OF FUNDS:
1 Capital Expenditure 92 - - - - - - -
for the project
2 Other normal - - - - - - - -
capital expenditure
3 Increase in working 32.25 36.66 43.05 55.44 1.33 - - -
capital
4 Decrease in - 7.7 7.7 7.7 7.7 7.7 7.7
secured medium
and long term
borrowings
5 Decrease in -
unsecured loans and
deposits
6 Decrease in -
liabilities for
deferred payments
7 Decrease in bank - 40 50 30
borrowings for
working capital
8 Increase in -
investment deposit
account
9 Interest on term 8.28 6.9 5.51 4.12 2.73 1.35
loan 8.28
10 Increase in - -
investment deposit
account
11 Taxation - -
13 Other expenditure - -
14 Pre-operative 1.5
expenses
=======
Total B: 125.75 44.94 99.03 120 44.54 11.82 10.43 9.05
Opening Balance: - -33.75 2.59 7.5 14.11 104.2 170.16 335.1

Cash in Hand/ Bank
Net Surplus/Deficit -33.75 36.34 4.91 6.61 90.12 85.96 164.93 153.965
( A-B )
Closing Balance: -33.75 2.59 7.5 14.11 104.23 190.16 335.09 489.065
Cash in Hand /
Bank

TABLE - 32
Debt Service coverage Ratio

(Rs. in million)
YEAR AVAILABLE INT. ON TERM REPAYMENT OF INT. ON TERM

SURPLUS LOAN TERM LOAN LOAN
I 36.64 8.28 - 8.28
II 4.91 8.28 7.7 8.28
III 6.61 6.9 7.7 6.9
IV 90.12 5.51 7.7 5.51
============= ============= ============= =============

TOTAL 138.28 28.97 23.1 28.97
============= ============= ============= =============
D.S.C.R. = Available surplus + Interest = 138.28 + 28.97 = 167.25

Repayment + interest 23.1 + 28.97 52.07
= 3.212

TABLE - 33
Profitability Ratio
I YEAR II YEAR III YEAR IV YEAR
Gross profit before tax as % of Sales 9.70 6.52 13.38 18.48
Profit after tax as % of Sales 6.47 4.11 8.68 12.00
Cash surplus to % of Sales 10.69 1.19 1.19 14.24
TABLE - 34
Foreign Exchange Requirement
For the Project
A. PLANT AND MACHINES
The total cost of Plant and Machinery, including its erection and commissioning, works
out to Rs. 50million. Details are as follows:
a. Basic cost of indigenous plant and machinery Rs. 9.2 million

b. Basic cost of imported plant and machinery Rs. 32
million
c. 20% duty on imported plant and machinery Rs. 6.4
million
d. Erection and commissioning (7.5% of a, b and c) Rs. 2.4
million
Total Rs. 50 million
Rs. 32 million will have to be paid in foreign exchange, which works out to
U.S $ 438,356.1644 @ I.U.S. $ = Rs. 73.
TECHNICAL CONSULTANTS FEES

This is Rs. 1.5 million, which works out to U.S. $ 20,547.94521
SALARIES AND WAGES

Part of the salaries to the 2 expatriates will have to be paid in foreign currency. @ U.S. $
6.8/month each, for the first year, it works out to 163.2 Dollars.

Thus, the total foreign exchange requirement, including the first year of the operation of
the plant, works out to;
438,356.1644
+ 20,547.94521
+ 163.2
===============
U.S. $ 459,067.3096
===============
TABLE - 35
Calculations of Sales Tax
S/N ITEMS RATE Amount ( Rs. in million

YEAR )
I II III IV V VI VII
1 Milk in polypacks - - - - - - - -
2 Sterilized milk in - - - - - - - -
polypacks
3 Flavored Milk in 16% 5.28 12.8 8.96 9.76 10.4 11.52 11.52
bottles
5 Yoghurt - - - - - - - -
6 Dahi - - - - - - - -
7 Desi Ghee 16% 7.04 8.64 12.16 13.28 14.08 15.68 15.52
Total 12.53 21.44 21.12 23.04 24.48 27.2 27.04

PART F
“CONCLUSION AND RECOMMENDATIONS”

PAKISTAN is stated to be the third largest milk producer in the world, yet milk
production is the least commercialized enterprise in the agricultural sector. Livestock
herd is distributed in small units with production fragmented across 55 million small
farmers.
On the supply side, much of the traded milk is marketed unprocessed, and hardly three
per cent is processed by the dairy industry. Hence no value addition is taking place.
As it appears, the demand for dairy products will continue to outpace supply. The
industry today estimates that the current gap of 250 mio liters will balloon to a massive
shortfall of 3.56 bio liters in less than seven years. The current non-commercialized
scattered farm network is not geared to avert this looming crisis.
The second major challenge facing local dairy is quality. Milk marketing is dominated by
the informal private sector, consisting of agents such as collectors, middlemen, and
traders. Alarming rates of adulteration have been witnessed in the last few years
especially in the central Punjab region.
There is no quality check at any stage along this chain. For example, those who handle
milk right from the beginning till it reaches the final consumer are not conscious of
hygiene. As a result, the average TPC — bacteria count - is at least 60 times higher than
that in the Middle East, thereby making the issue of poor quality the biggest hurdle for
dairy exports.
Pricing is the most serious challenge that organized dairy faces today. Despite a single
digit processed milk market share, factory gate prices have increased by at least 20 per
cent per annum since 2006. This situation is exacerbated by the fact that the government
and industry’s efforts to improve milk supply have been based on the questionable
premise that annual milk production is at least 32 bio liters of which 40 per cent is wasted
due to poor infrastructure.
Efforts to improve this dairy landscape and the entry of dairy players have partially
contributed to severe upheavals, resulting in price increases, and major adulteration by
the informal sector and short-term animal malpractices.
Each of the above challenges has a prescription. The milk industry today recognizes that
the barriers to sustainable dairy development impact milk supply, milk quality and price.
On the supply side, the absence of infrastructure and utilities support in the milk shed
areas is an urgent priority for the government. A recommended approach would be the
prioritization of milk shed areas for developmental investments in utilities access, tube
welling and electrification programs.
The encouragement of dairy breeding farms at the same time would offset animal
malpractices such as increased culling trend predicted to erode our herd base in the near
future. Finally, the government again would need to play a critical role of enforcing dairy
financing targets set for financial institutions.

The challenge of improving milk quality requires a strategic change. It is in this initiative
that dairy industry can play a pivotal role. While the industry strongly believes in
participating in developmental programs and in working in tandem with the government
in the establishment of independent agencies, mandated to ameliorate poor breeding
practices resulting in low yield animals, but the end results have not been encouraging.
The government’s experience in making available attractive incentives to individual

farmer for chiller infrastructure has not been encouraging. Remedies would include herd
registration, the concentration on phenotype — local breeds having the capacity to
improve yield -- in the selection criteria and making available ‘bull stations’ nationwide.
This would improve the breeding element, provide greater numbers of good animals and
in the end result in improvement of milk volumes and quality.
An immediate ban on export and slaughter of female breeding stock is possible along
with the release of government land for breeding farms. Similarly, a regulatory
framework establishing a milk procurement standard is a quick remedy and supported by
the industry. Regulation regarding the efficacy of animal health medicine can also be
passed by our government in the short-term.
However, in the medium-term, the government would have to make concentrated efforts
in upgrading dairy knowledge and technical skills. Despite the country’s high-ranking in
milk production,, there is a real dearth in local knowledge and technical skill. Not only
would dairy departments have to be incorporated in existing agricultural universities but
also a dedicated effort would have to be made in updating curriculum and awarding
recognition to the resulting certification. The industry today has proven the critical role
expatriate trainers/experts can play in this regard.
The absence of private sector in dairy farming is a major hurdle to achieving economies
of scale in dairy. It is here that the private enterprise today can play the real role of a
change agent especially in the current scenario of the non-commercialized scattered farm
network’s inability to yield effective production increases.
By awarding “agricultural industry” status to the dairy sector, the government would
effectively establish incentives and policies supporting dairy farming on a wider scale.
The initiation of a Five-Year Plan setting targets and benchmarks for achievement will
focus efforts in this sector.

APPENDIX

GENERAL
INTRODUCTION
The government of Pakistan was based on the Government of India Act (1935) for the first nine
years after independence. The first Constitution of Pakistan was adopted in 1956, but was
suspended in 1958 by General Ayub Khan. The Constitution of 1973, was suspended in 1977 by
Zia-ul-Haq, re-instated in 1991 and is the country's most important document, laying the
foundations of government. Pakistan is a semi-presidential federal democratic republic with Islam
as the state religion. The bicameral legislature comprises a 100-member Senate and a 342-
member National Assembly. The President is the Head of State and the Commander in Chief of
the Armed Forces and is elected by an electoral college. The prime minister is usually the leader
of the largest party in the National Assembly. Each province has a similar system of government
with a directly elected Provincial Assembly in which the leader of the largest party or alliance
becomes Chief Minister. Provincial Governors are appointed by the President. The Pakistani
military has played an influential role in mainstream politics throughout Pakistan's history, with
military presidents ruling from 1958–71, 1977–88 and from 1999 onwards. The leftist PPP, led
by Zulfikar Ali Bhutto, emerged as a major political player during the 1970s. Under the military
rule of Muhammad Zia-ul-Haq, Pakistan began a marked shift from the British-era secular
politics and policies, to the adoption of Shariat and other laws based on Islam. During the 1980s,
the anti-feudal, pro-Muhajir Muttahida Qaumi Movement (MQM) was started by unorthodox and
educated urban dwellers of Sindh and particularly Karachi. The 1990s were characterized by
coalition politics dominated by the PPP and a rejuvenated Muslim League. In the October 2002
general elections, the Pakistan Muslim League (Q) (PML-Q) won a plurality of National
Assembly seats with the second-largest group being the Pakistan Peoples Party Parliamentarians
(PPPP), a sub-party of the PPP. Zafarullah Khan Jamali of PML-Q emerged as Prime Minister
but resigned on 26 June 2004 and was replaced by PML-Q leader Chaudhry Shujaat Hussain as
interim Prime Minister. On 28 August 2004 the National Assembly voted 191 to 151 to elect the
Finance Minister and former Citibank Vice President Shaukat Aziz as Prime Minister. The
Muttahida Majlis-e-Amal, a coalition of Islamic religious parties, won elections in North-West
Frontier Province, and increased their representation in the National Assembly - until their defeat
in the 2008 elections. Pakistan is an active member of the United Nations (UN) and the
Organisation of the Islamic Conference (OIC), the latter of which Pakistan has used as a forum
for Enlightened Moderation, a plan to promote a renaissance and enlightenment in the Muslim
world. Pakistan is also a member of the major regional organisations of the South Asian
Association for Regional Cooperation (SAARC) and the Economic Cooperation Organisation
(ECO). In the past, Pakistan has had mixed relations with the United States especially in the early
1950s when Pakistan was the United States' "most allied ally in Asia" and a member of both the
Central Treaty Organisation (CENTO) and the Southeast Asia Treaty Organisation (SEATO).
During the Soviet-Afghan War in the 1980s Pakistan was a crucial US ally, but relations soured
in the 1990s, when sanctions were applied by the US over suspicions of Pakistan's nuclear
activities. The September 11, 2001 attacks and the subsequent War on Terrorism have seen an
improvement in US–Pakistan ties, especially after Pakistan ended its support of the Taliban
regime in Kabul. This was evidenced by a drastic increase in American military aid, which saw
Pakistan take in $4 billion more in three years after the 9/11 attacks than in the three years before.
On February 18, 2008, Pakistan held its general elections after being postponed from 8 January
2008. The Pakistan Peoples Party won the majority of the votes and formed an alliance with the
Pakistan Muslim League (N). They nominated and elected Yousaf Raza Gilani as Prime Minister
of Pakistan.

GEOGRAPHY AND NATURAL RESOURCES
Pakistan covers 340,403 square miles (881,640 km²), approximately the combined land areas of
France and the United Kingdom, with its eastern regions located on the Indian tectonic plate and
the western and northern regions on the Iranian plateau and Eurasian landplate. Apart from the
1,046 kilometre (650 mi) Arabian Sea coastline, Pakistan's land borders total 6,774 kilometres—
2,430 kilometres (1,509 mi) with Afghanistan to the northwest, 523 kilometres (325 mi) with
China to the northeast, 2,912 kilometres (1,809 mi) with India to the east and 909 kilometres
(565 mi) with Iran to the southwest. The different types of natural features range from the sandy
beaches, lagoons, and mangrove swamps of the southern coast to preserved beautiful moist
temperate forests and the icy peaks of the Himalaya, Karakoram and Hindu Kush mountains in
the north. There are an estimated 108 peaks above 7,000 metres (23,000 ft) high that are covered
in snow and glaciers. Five of the mountains in Pakistan (including Nanga Parbat) are over
8,000 metres (26,000 ft). Indian-controlled Kashmir to the Northern Areas of Pakistan and
running the length of the country is the Indus River with its many tributaries. The northern parts
of Pakistan attract a large number of foreign tourists. To the west of the Indus are the dry, hilly
deserts of Balochistan; to the east are the rolling sand dunes of the Thar Desert. The Tharparkar
desert in the southern province of Sindh, is the only fertile desert in the world. Most areas of
Punjab and parts of Sindh are fertile plains where agriculture is of great importance. The climate
varies as much as the scenery, with cold winters and hot summers in the north and a mild climate
in the south, moderated by the influence of the ocean. The central parts have extremely hot
summers with temperatures rising to 45 °C (113 °F), followed by very cold winters, often falling
below freezing. Officially the highest temperature recorded in Pakistan is 50.55 °C (122.99 °F) at
Pak Indian. There is very little rainfall ranging from less than 250 millimetres to more than 1,250
millimeters (9.8–49.2 in), mostly brought by the unreliable south-westerly monsoon winds during
the late summer. The construction of dams on the rivers and the drilling of water wells in many
drier areas have temporarily eased water shortages at the expense of down gradient populations.
EDUCATION LEVEL
Education in Pakistan is divided into five levels: primary (grades one through five); middle
(grades six through eight); high (grades nine and ten, leading to the Secondary School
Certificate); intermediate (grades eleven and twelve, leading to a Higher Secondary School
Certificate); and university programs leading to graduate and advanced degrees. Pakistan also has
a parallel secondary school education system in private schools, which is based upon the
curriculum set by the University of Cambridge. Some students choose to take the O level and A
level exams, which are administered by the British Council, in place of government exams. There
are currently 730 technical & vocational institutions in Pakistan.[70] The minimum qualifications
to enter male vocational institutions, is the completion of grade 8. The programmes are generally
two to three years in length. The minimum qualifications to enter female vocational institutions,
is the completion of grade 5. All academic education institutions are the responsibility of the
provincial governments. The federal government mostly assists in curriculum development,
accreditation and some financing of research.English medium education is to be introduced on a
phased basis to all schools across the country.[72] Through various educational reforms, by the
year 2015, the ministry of education expects to attain 100% enrolment levels amongst primary
school aged children, and a literacy rate of 86% amongst people aged over 10.

SOCIETY AND CULTURE:
Pakistan has a rich and unique culture that has preserved established traditions throughout
history. Many cultural practices, foods, monuments, and shrines were inherited from the rule of
Muslim Mughal and Afghan emperors. The national dress of shalwar qamiz is originally of
Central Asian origin derived from Turko-Iranian nomadic invaders and is today worn in all parts
of Pakistan. Women wear brightly coloured shalwar qamiz, while men often wear solid-coloured
ones. In cities western dress is also popular among the youth and the business sector.
Pakistani society is largely multilingual and 96% Muslim, with high regard for traditional family
values, although urban families have grown into a nuclear family system due to the socio-
economic constraints imposed by the traditional joint family system. Recent decades have seen
the emergence of a middle class in cities like Karachi, Lahore, Rawalpindi, Hyderabad,
Faisalabad, and Peshawar that wish to move in a more liberal direction, as opposed to the
northwestern regions bordering Afghanistan that remain highly conservative and dominated by
centuries-old regional tribal customs. Increasing globalization has increased the influence of
"Western culture" with Pakistan ranking 46th on the A.T. Kearney/FP Globalization Index. There
are an approximated four million Pakistanis living abroad, with close to a half-million expatriates
living in the United States and around a million living in Saudi Arabia. As well as nearly one
million people of Pakistani descent in the United Kingdom, there are burgeoning cultural
connections.
ECONOMIC
a) History Of Economic Growth (Agricultural, Infrastructural, Industrial and
Services)
In spite of persistently falling share since 2002-03, agriculture remains the single largest sector of
the national economy. It still accounts for 20.9 percent of GDP and employed bulk of the total
work force. Agriculture contributes to growth as a supplier of raw materials to industry as well as
a market for industrial products and is the main source of foreign exchange earnings.
Approximately 66.7% of the country’s population live in rural areas and are directly or indirectly
rely on the agriculture sector for their livelihood.
The agriculture sector consists of crops, livestock, fishing and forestry sub-sectors. The crop sub
sector comprises major crops (primarily wheat, cotton, rice, sugarcane, maize and gram) and
minor crops (such as pulses, potatoes, onions, chilies and garlic). The internal composition of the
agriculture sector has changed over time and the share of crops sub-sector in agriculture has
gradually declined from 65.1% in 1990-91 to 47.9% in 2006-07. By contrast, the share of
livestock in agriculture has increased from 29.8% to 49.6% in the same period. The contributions
of fishing and forestry have been insignificant with only 0.3% and 0.2%, respectively. Growth in
the agricultural sector bounced back from a modest 1.6 percent last year to 5.0 percent this year.
The major crops registered an impressive growth of 7.6 percent. The performance of all the sub-
sector of agricultural remained robust with the exception of minor crops and fishing. The detailed
discussion on the sub-sectors of agriculture is presented below:

Major Crops
Major crops, accounting for 36.3 percent of agricultural value added, witnessed an impressive
growth of 7.6 percent as against a negative growth of 4.1 percent last year. Four major crops
wheat, sugarcane, cotton and rice account for almost 90 percent of weight in major crops. The
impressive growth in value added of major crops was underpinned by robust growth in two major
crops, namely, wheat and sugarcane. Cotton maintained its previous year’s production level of
13.0 million bales. The other two major crops, namely maize and rice, registered negative growth
of 2.0 percent and 4.5 percent, respectively. Wheat production increased by 10.5 percent and
stood at 23.5 million tons—highest ever production of wheat in the country’s history.
Minor crop
Minor crops, accounting for 11.7 percent of value added in overall agriculture, grew by 1.1
percent – slightly up from last year’s growth of 0.4 percent. Production of pulses such as masoor
and mung registered a sharp increase of 17.9% and 21.5%, respectively. Vegetables such as
potatoes and onions exhibited mixed performance as the former registered an increase of 67.2
percent while the later posted a decline of 14.3 percent. Chillies, being an important minor crop,
registered a sharp decline of 49.6 percent during the year under review. Edible oils also witnessed
decline in production.

Livestock
The government has placed great focus on this important sector which accounts for 49.6 percent
of agriculture value addition. The importance of this sector can be gauged by the facts that the
livelihoods of about 35 million rural population depend directly or indirectly to livestock and
dairy sector; it is highly labour– intensive and good source of job creation; its share in agriculture
is much more than combined shares of all the major crops, it accounts for 10.4% of GDP and
most importantly its performance is not dependent on mother nature. Accordingly, it has emerged
as a major alternative source of income, particularly for rural poor. Livestock includes: cattle,
buffalos, sheep, goats, camels, horses, asses and mules. The livestock sector grew by 4.3 percent
during 2006-07 as against 7.5 percent last year.
Manufacturing
Manufacturing sector has reaped the benefits of the recent upsurge in the growth momentum and
its share in the GDP has persistently increasing from 14.7 percent in 1999-2000 to 19.1 in 2006-
07. Large-scale manufacturing, accounting for 69.9% of overall manufacturing, registered a
growth of 8.8% in 2006-07 against the target of 12.5% and last year’s achievement of 10.7%.
Although large-scale manufacturing is exhibiting a decelerating trend in growth over the last four
years, a growth of 8.8 percent is still robust and is likely to show further improvement once the
numbers for May and June 2007 are incorporated. The main contributors to the 8.8% growth
during July-April 2006-07 were the textile and apparel group (8.4%), chemicals (6.5%), , tires
and tubes group (16.1%), non-metallic mineral products (21.7%), engineering goods group
(21.5%), electrical items group (12.9%), and automobile group (6.2%). The items that registered
positive growth were cotton yarn (12.0%), vegetable ghee (1.5%), cooking oil (6.9%), cement
(21.1%), cigarettes (4.1%), jeeps and cars (3.0%), tractors (11.4%), L.C.V’s (17.0%),
motorcycles/scooters (12.3%), sugar (19.6%), cotton cloth (7.0%), motor tyres (17.2%),
refrigerators (9.8%) and caustic soda (11.6%). The individual items exhibiting negative growth
include: cotton ginned (10.9%), billets (47.9%), petroleum group (2.3%), nitrogenous fertilizer
(4.5%), and phosphatic fertilizer (12.0%).
Finance and insurance sector
Finance and insurance sector spearheaded the growth in the services sector and registered stellar
growth of 18.2 percent during the current fiscal year 2006-07 which is slightly lower than 33.0
percent of last year. Value added in the wholesale and retail trade sector is based on the margins
taken by traders on the transaction of commodities traded in the wholesale and retail market. In
2006- 07, the gross value added in wholesale and retail trade increased by 7.1% over the previous
year, compared to 8.6% growth in 2005-06.
Infrastructural
Value added in the transport, storage and communications sector is based primarily on the profits
and losses of Pakistan Railways, Pakistan International Airlines and other airlines, Pakistan Posts
& Courier Services, Pak Telecom and motor vehicles of different kinds on the road. In 2006-07,
this sector grew by 5.7% from the previous year compared to 6.9% growth in 2005-06. The
moderation in the growth rate resulted primarily from stabilization of strong consumer demand
for mobile phones, internet services of Pak Telecom, and motor vehicles on road. Public
administration and defense posted a growth of 7.0 percent while;

Term Of Trade, Foreign Debt, etc.

• Trade Balance
Despite sharp deceleration in imports the merchandise trade deficit widen on the back of abrupt
and sharp deceleration in exports. The merchandise trade deficit widen to $11.1 billion in the first
ten months (July-April) of the current fiscal year as against $9.5 billion in the same period last
year. However, as percentage of GDP, trade deficit is likely to be 9.0 percent in 2006-07 as
against 9.5 percent last year. Thus, trade deficit is expected to improve this year despite less than
satisfactory performance of exports.

• Terms Of Trade
The terms of trade with base year 1990-91 (equal to 100) aggregated to 64.2 during 2006-07 as
compared to 66.4 of 2005-06, showing a deterioration of 3.4 percent. The increase in unit prices
of petroleum and machinery/transport caused terms of trade to deteriorate. This declining trend
has persisted and the terms of trade during the first half of the current fiscal year worsened by
11.6 percent down to 65.0 over the level of 73.6 recorded in the same period last year. The trend
depicted by the terms of trade is also shown below;
• External Debt
Until a few years ago, Pakistan was facing serious difficulties in meeting its external debt
obligations. Not only was the stock of external debt and foreign exchange liabilities growing at an
average rate of 7.4 percent per annum during 1990-99, but the debt carrying capacity of the
country was weakening at a similar pace.
Consequently, the debt burden (external debt and foreign exchange liabilities as percentage of
foreign exchange earnings) reached an unsustainable level of 335 percent by 1998-99. Following
a credible strategy of debt reduction, over the last six years, Pakistan has succeeded in not only
slowing the pace of debt accumulation but also succeeded in reducing the country's debt burden
in a substantial manner.

Pakistan's external debt and liabilities have declined by $2.4 billion in seven years - down from
$38.9 billion at the end of the 1990s to $36.5 billion by end-March, 2006. The other indicators of
debt burden which are widely monitored by the international financial institutions, rating
agencies, and participants of the international debt capital markets, have shown sharp reduction.
For example, the external debt and liabilities as percentage of GDP which stood at around 52
percent in end-June 2000, declined to 28.3 percent in end-March 2006. Similarly, the external
debt and liabilities as percentage of foreign exchange earnings was reduced from 335.4 percent in
1998-99 to 127.6 percent by end-March 2006.
It may also be pointed out that Pakistan's external debt and liabilities were 22 times of its foreign
exchange reserves in 1998-99 but declined sharply to 3.1 times in just seven years.
These statistics suggest that Pakistan's external debt burden has declined at a much faster pace
than anticipated and that it is now on a solid downward footing. It may also be noted that the
maturity profile of the debt has also improved during the period. The short-term debt was 3.2
percent of the external debt and liabilities but declined to 0.9 percent in the same period.
Rate Of Inflation/Bank Interest, and average, Exchange Rate Per $ : Last 3 years and
latest:
Since April 2005 in response to the headline inflation reaching 11.3%, SBP has been and remains
in monetary tightening phase. It has to be recognized that the inflationary pressures build up in
2005 because of the preceding few years of easy monetary policy. While SBP addressed this
overhang by raising policy discount rate from 7 to 9% in April 2005, there were renewed demand
pressures as fiscal and external account deficits rose in wake of both international oil price
increase as well as unforeseen spending demands triggered by the earthquake. To offset
additional demand pressures, SBP had to further raise its policy discount rate by 50bp in July
2006 along with 4.5 percentage point upward revision in reserve ratios. In line with the evidence
observed for developing countries, impact of monetary tightening on curbing inflation started to
be visible after 12-18 months or so. As aggregate demand pressures moderated, CPI fell to 7.9
percent in FY06 (remaining well within the annual target of 8%) and CPI continued to decline to
7.7% in March 2007 with core inflation being still low at 5.4%. However, CPI remains above
annual target of 6.5% largely because of a number of factors that disrupted the impact of
monetary tightening:
(i) Food prices remained quite volatile during FY07 due to supply disruptions;
(ii) Higher fiscal pressures resulted in greater than planned recourse to the central bank
borrowing. More specifically, government has borrowed Rs. 180 billion for budgetary support by
14-April-2007 compared with only Rs. 37 billion during the same period last year. During the
later part of FY the Government has been retiring part of the central bank borrowing and
financing its deficit by external flows or commercial bank borrowings;
(iii) Heavy borrowing from commercial banks seems to have been crowding out private sector
borrowing for long-term investment as banks find it convenient to park their funds in government
securities rather than lending;
(iv) SBP being mandated to provide higher than projected refinancing for the textile sector –
besides its high borrowing to meet working capital requirements through EFS, textile exporters
were allowed debt swap and new long term borrowings which ranged around Rs50 billion;

(v) Higher than expected foreign inflows are expected to enhance the levels of net foreign assets
and result in monetary expansion.


b) Role Of Government/Private Sector, Specially In Industrialization
Globally, governments have sought to generate growth and eliminate structural inefficiencies by
eradicating impediments and opening up economies to competition. Private sector investment,
including FDI which has become the largest and fastest growing single component of capital
inflows for developing countries, has opened new prospects. By the same token, the government
of Pakistan acknowledges the significance of private sector investment as part of its dynamic
policy for restructuring and revitalizing the national economy”.
“The Government is conscious to make Pakistan both attractive and rewarding for investors”.
The government is implementing a strategic approach to the “sector-focusing- first” on national

trade corridor, which is linking Pakistan’s major ports in the south with its major cities and trade
corridors to the north. The ports, roads and railways along with corridor handle 95% of external
trade and 65% of total land freight. Some resource informed that modernization of the trade
corridor alone will require investment of about USD 1 billion per year over the medium–term.
Thus, opening new venues for both individual and institutional investors to target Pakistan’s
infrastructure sector as a potential investment opportunity.
He further elaborated on the manifold economic challenges including the unprecedented surge in
the international oil and food prices, he was of the view, “we are confident that we will meet the
challenges keeping in view our will and commitment to bring progress and prosperity in our
country. We will adopt the right policies in attainment of our objectives”.
In his concluding remarks, the Minister said “The Government of Pakistan places high priority on
the main role of Private Sector for industrialization and is playing a complementary role for
developing infrastructure and institutional support. As a result of ID&BOI’s efforts to promote
Pakistan as an investor friendly country, there has been regular improvement in the inflow of
FDI”.
c) Foreign Participation : Nature/Involvement
Pakistan is another important and strategic country in South Asia and its growth and development
has far reaching implications for the Asian region in general and the South Asian region in
particular. Its growth and development is become sine qua non for South Asia. This could be
possible when Pakistan will transform its slow growth economy into an accelerated economy. For
this resources are required. There are three major options for Pakistan to get resources for its
transformation. First, to get Official Development Assistance (ODA) from donors’ nations and
ODA is a mercy and a country like Pakistan cannot depend on this source. Second, to borrow
loans for development of the economy and loans are liability and these loans if not properly
utilized for productive use, debt problem would cost the Pakistan economy. A third option, which
is more logical and most convenient for Pakistan, is to financing development through export-led
growth, ie, earn more FOREX through exports and then finance its developmental needs. Export-
led growth requires resources namely investment, technology, management and marketing
techniques for the attainment of global competitiveness. These inputs could come through FDI
inflows. Therefore, FDI has to come to Pakistan.
The Board of Investment is a prime agency created by the government of Pakistan for facilitating
local and foreign investors to establish business in the country. According to the BoI, there are
bright prospects for FDI inflows to Pakistan. This is because the government of Pakistani has
successfully created both macro and micro business environment in the country. The country has

offered foreign and domestic investors a string of high profit businesses as part of its new
industrial policy, which is advocating for totally opening up the economy. Prospective investors
have been allowed certain essential segments required for attracting FDI inflows namely a 100
per cent ownership and equity, full repatriation of total dividends, profits, gains and
remunerations, wages and fees. These concessions would go a long way in making Pakistan a
favorable destination for FDI.
From the foregoing pages it is clear that Pakistan has not been a favorable destination for FDI
inflows. But the present government is committed to making Pakistan a favorable destination for
FDI inflows. Accordingly, the government has taken a lot of measures in this direction. Recently
the government said the trade deficit would be bridged by inviting more FDI inflows to Pakistan.
The government of Pakistan has made concerted efforts on both the counts, i.e., micro and macro
environment, sine qua non for becoming favorable destination. It is hoped that in years to come
Pakistan would get a reasonable volume and value of FDI, which is the necessity of the day.
LEGAL
a) Laws Regarding Finance, Taxation, Trade and Industry, Labor, etc
FINANCE
Financial law deals with the broad range of savings and investments products in which
individuals, businesses and institutions hold trillions of dollars, and the services related to those
products. The products and services play a vital role in the world economy and directly employ
millions of individuals. They include:
(1) Banking (whether at banks, trust companies, savings banks, savings and loans or credit
unions)
(2) Brokerage services (covered under Broker Disputes)
(3) Commodities
(4) Consumer lenders (including credit card issuers)
(5) Insurance including annuities (which is covered in a Practice Area of its own)
(6) Investment advisors
(7) Mortgages (which are covered as a topic in Real Estate)
(8) Mutual funds (a type of security)
(9) Stocks and bonds (covered under Securities)

TRADE AND INDUSTRY
Pakistan inherited a crisis-ridden trade and commerce sector at the time of independence. The
share of trade and commerce in the national income was only nine per cent in 1948 compared to
corresponding figure of 19 per cent in India. The early commercial policies were aimed at
keeping a regular inflow of consumer goods and raw materials for the newly emerging industries.
The volume of this inflow was controlled by the country’s foreign exchange earning capacity and
the quantum of external assistance. Up to the middle of 1952 the situation was comfortable due to
sterling balances and foreign exchange earnings received during the Korean War of 1950-51.
However, by the end of 1952, the foreign exchange reserves had fallen steeply and all
commodities and goods were brought under import licensing. It was about this time that Pakistan
saw the introduction of trade policies which aimed at boosting exports and encouraging import
substitution industries. The Pakistani currency was devalued in 1955 to encourage exports and
discourage imports. In 1959, Export Bonus Scheme was introduced which was withdrawn in
1972. It covered ‘all items except major primary commodities. However, changes were made in it
from time to time till its withdrawal in May, 1972. The momentum of export efforts was also
sustained by taking several institutional steps including the introduction of Export Credit. With
Guarantee Scheme and Export Market Development Fund, establishment of Trading Corporation
of Pakistan and opening of trade offices in a number of foreign countries, the exports increased
from Rs. 542.4 million in 1948-49 to Rs. 3,371.4 million in 1971-72, while imports increased
from Rs. 1,176.8 million to Rs. 3,495.4 million during the same period.
In May 1972, the rupee was devalued to the extent of 131 per cent. This provided windfall profits
to exporters and caused losses to importers. The devaluation restricted imports and helped
increased exports initially. Thereafter, imports started increasing at a much faster rate than
exports and by 1976-77, imports shot up from Rs. 8,398 million in 1972-73 to Rs. 23,012 million,
while exports increased from Rs. 8,551 million in 1972-73 to Rs. 11,294 million in 1976-77. The
overall balance of payments deficit increased from 131 million dollars in 1972-73 to 1,051
million dollars in 1976-77, the year in which the foreign exchange reserves also declined by 252
million dollars. The post-77 Government adopted a firm policy of boosting exports and
encouraging the establishment and expansion of import substitution industries. The policy has
been given a new impetus by the elected government. Consequently, export earnings increased
from Rs. 11,294 million in 1976-77 to Rs. 29,280 million in 1980-81 and further rose to Rs.
49,592 million in 1985-86. The import and export policies of the present elected government are
geared towards increasing agricultural and industrial production, expanding employment
opportunities and promotion of exports. To back up high growth in the industrial sector, liberal
imports of machinery, spare parts, agricultural inputs and industrial raw materials have been
allowed. At the same time, the import of merchandise which are considered to be competing with
the national industries are being discouraged.
Edible oil, POL, fertilizers, tea, chemicals, drugs and medicines, machinery and transport
equipment remain the main items of import. The import bill rose from Rs. 23,012 million in
1976-77 to Rs. 53,544 million in 1980-81 and further to Rs. 89,778 million in 1984-85. Efforts
are however, being made to contain imports through enhancement of domestic production in the
fields of oil, energy, fertilizers, food grains and engineering goods.
The country gets generous aid from the OPEC countries bilaterally as well as through the
international agencies, including the Islamic Development Bank and the OPEC Fund for
Development. Besides, Pakistan is a regular recipient of aid from the World Bank and the World
Bank sponsored Aid-to-Pakistan Consortium comprising the developed countries. The IMF also
provides aid as a balance of payments support under various arrangements.
Pakistan has achieved, in recent years, a good growth rate of over six per cent reaching the
highest mark of 7.5 per cent in 1985-86. The unusually high growth rate was accompanied by
remarkable price stability. The average inflation rate dropped to 5.2 per cent in 1985-86, the

lowest in over a decade. Meanwhile, the country’s economy has undergone radical structural
changes. Islamisation of economy is going on at a rapid pace. The interest-free banking, Zakat
and Ushr system, introduced in Pakistan in recent years, are not only working satisfactorily in the
country but are also being keenly observed in the world. The IMF has recently conducted a
survey of the interest-free banking system and it has come to the conclusion that the system gives
most viable basis of banking. Similarly, Zakat and Ushr systems are being considered at various
international forums. Regulatory reforms of the economy are also in progress. A number of
industries, including edible oil and fertilizers, were deregulated by May, 1986.
a) Laws Governing Foreign Investment

1. Repatriation Of Capital/Profit
Repatriation of profits from the country rose by 12.2 percent during the first ten months
of the current financial year, putting further pressure on an already weakened Rupee.
Companies operating in the country with foreign shareholding sent $735 million abroad
from July 2007 to April 2008, up from $654.9 million repatriated in the corresponding
period last year.
The local currency has weakened from around Rs 60 per dollar in the beginning of the
current financial year to Rs 67 per dollar now.
This huge outflow of foreign exchange from the country gives strength to those who
criticize the policy of allowing 100 percent repatriation of profits. They say the foreign
companies must be made to invest a substantial part of their earnings locally. This will
not only help contain the outflow of foreign currency from the country, but will also
create employment opportunities and spur further growth locally.
Experts say that FDI is not beneficial for developing countries in the long run. In the
short run FDI is needed to provide a spurt in the growth rate, but analysis shows that
developing countries that receive a high level of FDI for sometime are worse off later due
to repatriation of profits and outflow of capital. Initially when FDI flows into the country,
governments are able to sustain high borrowing but FDI flows fall in the long run leaves
the developing countries in a debt crisis, they say.
Some economists have concluded after research that significant effects that FDI inflows
may cause to the deterioration of the balance of payments in the long run due to profit
remittance should be taken into account when policy makers decide to implement policies
to attract foreign investors.
Thermal power generation companies sent $151.27 million, the highest amount by any
sector of economy. This was 27.9 percent higher than $118.32 million sent last year.
It was followed by the telecommunications sector, which sent $92.06 million during July-
April period. It was 14.3 percent lower than $107.42 million sent last year.
The oil and gas exploration companies sent $64.56 million, up by 83.9 percent from
$35.1 million last year.
Petroleum refining sector repatriated $51.7 million compared to $48.69 million sent
abroad last year.
Repatriation of profits by companies making pharmaceuticals & OTC products declined
from $48.22 million to $26.31 million. Tobacco and cigarettes sector sent abroad $27.28
million as compared to $17.6 million last year.
Chemicals-making companies' profit repatriation declined from $42.74 million to $39.4
million. The repatriation of profit by financial businesses fell from $92.12 million to
$90.64 million.

2. Incentives : General and Special For Saudi

Investors
The incentives for Saudi investors was that they were allowed to invest in any of the
sectors such as finance, telecom, information technology, agriculture, manufacturing,
services infrastructure, tourism and social sectors on fast track and much larger basis. The
government of Pakistan was and is very keen to promote the trade and business relations
between the two countries. The Pakistani government was very friendly in the rules and
regulations regarding the investment by Saudi Arabia in Pakistan.
CONCLUSION
After 39 years of turbulent existence, material prosperity has brought Pakistan to the
threshold of becoming a “middle-income country”. The distribution of income in
Pakistan is better than in many countries, rich and poor, of the world.
Over the last eight years, Pakistan’s economy has exhibited strength. In difficult
international circumstances and under both adverse and favorable natural conditions, a
sustained increase in per capita income and living standards has been maintained, without
unduly straining the country’s domestic and external finances. And the following are the
industries where investment can be made;
• Investment in real estate projects

• Investment in power projects
• Investment in oil and gas related projects
• Investment in development projects
• Investment in construction projects
• Investment in IT related projects
• Investment in various manufacturing projects
• Investment in service related projects
• Investment in non-manufacturing projects
• Investment in health related projects
• Investment in cosmetics & toiletries related projects

Project Appraisal Full N Final Report

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PROJECT ARRPRAISAL : MILK INDUSTRY

PROJECT APPRAISAL TERM REPORT

SUBMITTED TO: SIR SIDDIQ KHATRI

SUBMITTED BY: UROOJ FAYYAZ

DATE OF SUBMISSION: 31TH AUGUST, 2008

INSTITUTE OF BUSINESS MANAGEMENT

INSTITUTE OF BUSINESS MANAGEMENT

DATE: 31st AUGUST, 2008

Mr. SIDDIQ KHATRI

UROOJ FAYYAZ (5542)

NAEEM NOORALI TEJANI (5622)

M. OMAIR IQBAL (5195)

SUMBUL FATIMA (5779)

FAHAD MOHSIN (5855)

INSTITUTE OF BUSINESS MANAGEMENT

INSTITUTE OF BUSINESS MANAGEMENT

DATE: 27TH AUGUST, 2008

This report is a comprehensive report covering all the topics given

This report has proved to be a great experience. We would like to

UROOJ FAYYAZ (5542)

NAEEM NOORALI TEJANI (5622)

M. OMAIR IQBAL (5195)

SUMBUL FATIMA (5779)

FAHAD MOHSIN (5855)

INSTITUTE OF BUSINESS MANAGEMENT

INSTITUTE OF BUSINESS MANAGEMENT

SERAIL TOPICS PAGE NUMBER

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“OVERVIEW OF THE INTERNATIONAL

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FOREIGN RELATIONS OF PAKISTAN:

BILATERAL AND REGIONAL RELATIONS:

PEOPLE'S REPUBLIC OF CHINA:

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Following Pakistan's defeat in the Indo-Pakistani War of 1971, Pakistan President

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SOVIET UNION/RUSSIAN FEDERATION:

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UNITED STATES OF AMERICA:

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IMPACT ON ECONOMY AFTER THE ASSASSINATION OF BENAZIR

CAUSES OF INTERNATIONAL TERRORISM:

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Globalization: a sugar-coated mantra like "One World Government," "World harmony"

Here a 6-point program outlining a strategy to achieve this goal is suggested:

(I) A restructuring of world economic order following a global Summit;

(III) An adequate representation of the developing countries in the UN and multi-lateral

(VI) Adoption and implementation of people-oriented public policies, mainly in the

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LONDON ATTACKS AND THEIR AFFECTS ON PAKISTAN:

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GLOBAL ECONOMIC ENVIRONMENT:

THE RISES AND FALLS OF OPEC:

Failure by the Organization of Petroleum Exporting Countries (OPEC) to cut production

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EFFECTS OF WTO ON THE DEVELOPING WORLD ESPECIALLY

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GAS PIPELINE ISSUE- INDIA- PAK – U.S RELATIONS:

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