COMMUNITY BASED LIVELIHOODS RECOVERY PROGRAM (CBLRP) FOR EARTHQUAKE AFFECTED AREAS OF AZAD JAMMU AND KASHMIR AND

NWFP

CBLRP-UNIDO

INVESTMENT OPPORTUNITY PROFILE FOR COLD STORAGE IN NWFP

SEPTEMBER 2007
SUBMITTED TO AYESHA KHAN CHIEF TECHNICAL ADVISOR Community Based Livelihood Recovery Program (CBLRP) United National industrial Development Organization (UNIDO)

BY Sardar Shahid Farid Chartered Accountant

Disclaimer All material included in this document is based on data/information gathered from various sources and certain assumption. Due care and diligence has been taken to compile this document. The document may contain human, mechanical error or non accuracy of the information at the source. No liability for error, or omission or unintentional misrepresentation will be accepted. We reserve the right to make correction and changes wherever desired in this document or its subsequent versions.

1. 1.1

PROJECT EXECUTIVE SUMMARY PROJECT BRIEF All fruits and vegetables require specialized post harvest treatment, appropriate temperature and relative humidity for their storage, which most of the existing cold stores in Pakistan lack. In this proposed Compartmentalized Cold Storage project storage will be done according to the modern technology and on scientific lines. The project will ensure the increased availability and improved quality of high value perishable fruits and vegetables for both export and local sale, which would otherwise perish or deteriorate. The project is designed in such a way that it will be able to store multiple products, stored in different compartments of the unit, where relative temperatures for respective products will be maintained. The major clientele of this business will be the local trading and marketing units of fruits and vegetables. The project will further aim at storing fruits & vegetables even during off-seasons. The project will ultimately assist the clientele in maintaining market price equilibrium throughout the year for fruits and vegetables. The proposed Cold Storage facility has a maximum storage capacity of 53,760 cubic feet. The cold storage is proposed to be located at Manshera giving easy access to the customers. The region has access to all public amenities including water electricity and telecommunication facilities. The proposed project of Cold Storage needs a capital investment of about Rs.13.3 million, which includes machinery, equipment as well as infrastructure. In addition to this, a sum of Rs.0.6 million is required as working capital, mostly for meeting the pre-operational expenses. The total project cost amounts to Rs.13.38 million. The facility is expected to be completed in period of 06 months. Eleven skilled and semi skilled workers will be required to run the cold storage premises, besides creating indirect job opportunities for many others. The annual turnover is to the tune of Rs 9,418,752 for 53,760 Sq Ft of space.

1.2

FINANCIAL SUMMARY Sales Gross Profit Margin Net Profit Margin before tax Internal Rate of Return Rs 9.418 Million per annum 85% 31% 32%

Foreign collaboration sought

Joint Venture Loan Market access Sub contracting Buy back arrangement Equipment purchase Feasibility study Other Specify 25th October 2007

Management expertise Technical expertise Marketing expertise Technology transfer Joint R&D Other :Project description

Studies Available

Date:

2.

PROJECT RATIONALE
2

In these present times of high population growth rates, food supply has become diminutive. For filling this gap between demand and supply, there is a need to conserve the food supply, in order to meet the growing and existing food requirements, especially fruits and vegetables, as these are more perishable. The problem related with food loss is more prevalent in the less developed world as compared to the developed world. The developed countries have curbed the loss of food to a great extent by adopting new technologies and ways of storing food. Some examples of such measures are adoption and development of better harvesting equipment; establishment of collection centers at strategic points in major crop producing areas; remodeling of containers to add more protection to the produce; and more importantly the development of commercial storage plants/cold storages.In comparison, this problem prevails in the less developed countries because modern storage, packaging, transporting and handling technologies for perishable crops like fruits and vegetables are practically non-existent. Thus, there is a dire need of establishing such systems in the less developed part of the world in order to meet their food requirements. A major step in overcoming the food loss problems in Pakistan especially in fruits & vegetables, would be the establishment of Compartmentalized Cold Storage units, where perishable commodities can be stored for a longer duration of time period to obtain a yearround supply and to reduce post harvest losses. It is estimated that in the area Pakistan 35% of fruits & vegetables produced each year are lost because of poor storage conditions. Some of the benefits of cold storage of vegetables and fruits are that it retards the decay development in fruits and vegetables because fresh fruits and vegetables are living tissues and they carry on respiration even after harvesting, which ultimately produces heat. Through control temperature respiration rate can be reduced, which is directly beneficial in slowing down the degradation of sugar and carbohydrates stored in the cells of these fruits & vegetables. 3. MARKET OPPORTUNITY There is no considerable cold storage in the area. The goods are not stored at their recommended relative storage temperatures and life, and because of this the quality of stored commodity is badly affected. Fruits & vegetables require specialized post harvest treatment, appropriate temperature and relative humidity control for their proper & optimum storage, which most of the existing local cold stores lack. As such there are no commercially operated compartmentalized cold storage existing in Pakistan. Investor has an attraction of great earning because there is no competition and clients are abundantly available. 4. BUSINESS PLAN High class storage facility will be provided to the farmers, stockholders. The facility will be located at place which is easily assessable. The storage would be able to provide a wide range of storage of different items at the same time. Latest technology will be employed to maintain the temperatures. Skilled labor would be employed to provide best services.

4.1

SALES Moveable rack and pallet storage system will be adopted as permissible according to the type of commodity. The racks will be adjustable in height and pallets will be placed inside the racks. It is assumed that 70% of the total volume will be availed for storage i.e. 53,760 cubic feet out of the total volume of 76,800 cubic feet, as normally 30% of the space is being spared for mobility of the fork lifter and ventilation of air. The product for sales are given for ready reference as well the expected sales at full capacity is also worked out in the table below.
Storage days 365.00 Storage space Sq Ft 53,760.00 Total Rate per Rs/Sq Ft 0.48 Amount 9,418,752 9,418,752

4.2

RAW MATERIALS This is a service industry and only main requirement is that of electricity. The consumption is worked out below. Electricity cost growth rate per annum Units consumed of Electricity in 5 Compartments Average unit cost of Electricity consumed (Rs.) Hours Operational per Day Days Operational per year 10% 110,965 10 24 365

4.3

PRODUCTION PROCESS The service cycle is explained below by a flow chart.

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DISTRIBUTION CHANNELS The marketing of Cold Storage follows the local existing distribution network i.e. storage of fruits & vegetables as well as other commodities such as fruit pulps and pharmaceuticals by middlemen (Artis), exporters, food processors, and pharmaceutical companies. These organizations or people store their commodities in cold storages, for future sales in the local market at better prices or for exports. However, until now the existing Cold Storages are generic in nature i.e. all the commodities are stored at uniform temperatures. There is a dire need of storage facilities, which can facilitate the proper storage of various commodities at their optimum temperatures.

4.5

HUMAN RESOUCE REQUIRMENT The project of Cold Storage requires the following Human Resources/Staff:

4.6
4.6.1

PROJECT FINANCIALS
OPERATIONAL DATA

The cold storage has maximum of 53,760 Sq ft area to be utilized. In the first year only 70 % space would be utilized however 100 % capacity would be utilized by forth year.
Year Capacity utillized Sq Ft space utillized 1 70% 37,632 2 80% 43,008 3 90% 48,384 4 100% 53,760 5 100% 53,760

4.6.2

FIXED COST

The initial investment in terms of capital cost is Rs 13,377,200 and includes the items detailed below.
ASSEST Land & Building Machinery & Equipments Initial Working Capital Project Cost Total Cost (Rs) 4,452,200 8,326,000 599,000 13,377,200

4.6.3

WORKING CAPITAL

The investment in the initial working capital is of Rs 292,680 Store and spares Upfront land lease rental Cash
Working Capital Requirement

72,680 140,000 80,000

4.6.4

OVERHEAD COSTS

In the first year following overhead cost are estimated. Admin and Selling Salaries Misc Expenses Land lease Rent Expenses Office expenses
Professional fees (legal, , consultants, etc.)

372,000 43,000 540,000 7,440 14,180 976,620