Detailed Feasibility Report

DETAILED FEASIBILITY REPORT

Animal Feed Unit

in conformity with The Royal Government of Bhutan’s Vision of Achieving Economic Self-Reliance

June 2015

Ministry of Economic Affairs Royal Government of Bhutan DETAILED FEASIBILITY REPORT - Animal Feed Unit

CONTENT

Section Topic Page Abbreviations and Definitions 4 1.0 Executive Summary 6 2.0 Justification of the project 8 2.1 The need for the project 8 2.2 Competition Analysis 11 3.0 Market Analysis 12 3.1 Structure of the industry 12 3.2 Demand vs. Supply 13 3.3 Pricing & Marketing Strategies 13 3.4 Technological changes that could impact costing 15 3.5 Competitiveness of the project 15 3.6 Special attributes desired by target customers 15 Terms & conditions and product specifications desired by target 3.7 15 customers 3.8 Packaging & Transportation 16 3.9 Assessment of Comparative Advantage 17 3.10 Potential for Marketing Collaboration 17 4.0 Resource 18 4.1 Sources of Inputs Including Water 18 4.2 Comparative Analysis of Critical Inputs 18 4.3 Sources of Raw Material 18 4.4 Availability of Manpower &Skills 22 4.5 Need for Skill Development 22 5.0 The Plant 23 5.1 Choice of Technology 23 5.2 Source 24 5.3 Rate of Consumption of Power, Fuel, Utilities &Consumables 26 5.4 Raw Material Consumption 26 5.5 Manpower Requirement and Organization Chart 27 5.6 Specification of Product and Byproduct 27 5.7 Extent of Technical Assistance NeededIncluding Training 28 6.0 Plant Location & Infrastructure 29 6.1 Raw Material Availability 29

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6.2 Availability of Electricity 29 6.3 Topography, Hydrology &Seismology Data Requirement 30 6.4 Availability of Land 31 6.5 Availability of Transportation Facilities 31 6.6 Availability of Ancillary Facilities 31 6.7 Availability of Housing, Schooling and Hospital Facilities 31 6.8 Communication Facilities 33 6.9 Presence of Approach Road 33 6.10 Factory layout plan 33 7.0 Environmental Aspects 34 8.0 Project Implementation Schedule 41 9.0 Cost Presentation 43 9.1 Capital Costs 44 9.2 Operating Costs 46 10.0 Financial Analysis 51 10.1 Profitability 51 10.2 Calculation of Interest on Term Loan 52 10.3 DSCR Calculation 52 10.4 Break Even Point 53 10.5 NPR & RI 54 10.6 Cash Flow Statement 54 Reference 56

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ABBREVIATIONS AND DEFINITIONS

BEP Break Even Point

BHU Basic Health Units

BTL Bhutan Telecom Limited

CP Crude Protein

CUSP Caltech-USGS Seismic Processing

DCP Digestible Crude Protein

DE Digestible Energy

DSCR Debt Service Coverage Ratio

EA Environment Assessment

EI Environmental Information

EMP Environment Management Plan

EPI Expanded Program on Immunization

ETP Effluent Treatment Plant

IMNCI Integrated Management of Neonatal and Childhood Illness

IRR Internal Rate of Return

ISPs Internet Service Providers

MT Metric Ton

NACP National HIV/AIDS & STIs Control Program

NEC National Environment Commission

NPV Net Present Value

NTCP National Tuberculosis Control Program

OHS Occupational Health & Safety

ORC Out Reach Clinics

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RH Reproductive Health

RPM Revolutions Per Minute

RWSS Rural Water Supply and Sanitation Program

SPM Suspended Particulate Matter

TICL Tashi Info Comm Limited

TSPM Total Suspended Particulate Matter

TSS Total Suspended Solids

VDCP Vector Borne Disease Control Program

VHW Village Health Workers Program WFP World Food Program

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1.0 EXECUTIVE SUMMARY

This report is a detailed feasibility study on setting up an animal feed manufacturing unit in Bhutan conducted by the Department of Industry under the Ministry of Economic Affairs, Royal Government of Bhutan.

It is proposed that the unit will have a capacity of processing 16,000 tons of animal feed per annum. With the increased demand for livestock products primarily for domestic consumption, farmers realise the importance of ensuring that their cattle stays healthy and productive during their life time. This has necessitated higher demand for balanced feed.

The report presents in detail the justification of the project, market analysis of the service, resources required, technology used in the plant, plant location, environmental aspects, implementation of the project, cost presentation and financial analysis.

(i) Justification of the Project:About 90 percent [Source: Investment Opportunity in Bhutan_2006] of the rural households own livestock, which forms an integral part of the Bhutanese farming system. Yet there is a drastic shortage of fodder during winter months and there is a demand for cattle feed

(ii) Market Analysis: Currently there is only one large animal feed manufacturing unit in Bhutan and it is difficult for a single manufacturer to meet the total demand of cattle feed. So, there is a scope for new entrants.

(iii) Resources required: Some of the raw materials like maize, wheat, limestone are readily available within the country and the rest needs to be imported. Apart from this the unit requires electricity, water and manpower which are also available in Bhutan.

(iv) Technology required: A mechanized plant using state of the art technology has been proposed for this purpose. The plant has the capacity to process not only cattle feed but fish feed and poultry feed as well.

(v) Plant Location: Considering the availability of raw materials and other infrastructure Phuentsholing has been proposed as the ideal location for the plant.

(vi) Environmental Aspects: The production of animal feed may cause air and water pollution but this may be reduced up to a great extent by by following the recommended measures.

(vii) Implementation of the Project: The implementation of the project will take more than 12 months including pre-project activities.

(viii) Cost Presentation and Financial Analysis:

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Table 1: Project Summary

Plant Capacity: 50 Tons per day (16,000 Tons per annum)

No. of Shift: One ( 8 hours per shift ) per day

Working Days in Year: 320

D.S.C.R. : 1.97

B.E.P. : 19.18%

IRR : 22.97

NPV : Nu. 12.29 millions

Internal Rate of Return of the project is 22.97%, which is much higher than the bank rate of 13%.Hence the project is financially viable. The NPV of the project is positive (Nu. 12.29 millions) at a discount factor of 13% during the first 10 years of operation. This implies that the project is financially viable.

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2.0 JUSTIFICATION OF THE PROJECT 2.1 The Need for the Project

General Scenario: About 90 percent[Source: Investment Opportunity in Bhutan_2006] of rural households in Bhutan own livestock, which forms an integral part of the Bhutanese farming system, providing support to agriculture through draught power and the providing manure. Livestock also provides increasingly greater value by generating cash incomes from butter, cheese and meat. Cattle, yak, buffalo, sheep & goats are the major livestock owned and reared by farmers. Accordingly, the Royal Government is preparing a Livestock Breeding Policy in every Dzongkhag. Projects have already been identified for Dairy Development.

In Bhutan, a major source of food for livestock is fodder. Main fodder resources in summer are:

Serial Number Fodder Resource for Large Ruminants

1 Forest Grazing

2 Grazing Crop Land/Fallow Land

3 Crop Residues

4 Improved Pasture

5 Native Pasture

6 Hay and Silage

7 Fodder Species grown on cropland

8 Fodder trees

Lack of animal feed during the winter months is an acute problem for almost all Bhutanese cattle farmers.

Cattle Population

The table below shows the cattle population in Bhutan as per figures released by Department of Livestock, Ministry of Agriculture and Forests, Thimphu, Bhutan for 2013

Table 2: Cattle Population_2013

Dzongkhag Cattle Bumthang 11,023 Chukha 21,633 Dagana 16,619 Gasa 804 Haa 97,02 Lhuentse 14,133 Mongar 25,316 Paro 13,052

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Pemagatshel 7,825 Punakha 11,042 Samdrup Jongkhar 18,139 Samtse 33,411 Sarpang 19,813 Thimpu 3,908 Trashigang 26,908 Trashiyangtse 10,422 Trongsa 11,093 Tsirang 10,912 Wangdue 25,534 Zhemgang 11,237 Total 302,526

Benefits of Commercially Manufactured Feed

The primary purpose of commercial feeds is to provide concentrated sources of necessary nutrients for livestock. These nutrients include not only macro-nutrients of energy and protein but also important specific nutrients such as amino acids, fatty acids, enzymes, vitamins, minerals and others.

With the increased demand for livestock products for domestic consumption as well as export, farmers realise the importance of maintaining the health of their animals with proper feeding and management. The proportion of crossbred animals increased over the years. This has necessitated higher demand for balanced feed. The feed supply could not keep pace with the growth in various species of cattle.

To meet the growing demand of processed and complete feeds for different class of animals there is a good scope for setting up feed processing plants of different capacities for production of various quality feeds in Bhutan.

Average Nutritive Values of common feed ingredients (Dry Matter basis) Table 3: Average Nutritive Values of Common Feed Ingredients

CP DCP TDN DE ME Common No. Botanical Name Name (%) (%) (%) MCal MCal A Cereal Grains 1 Avena Sativa Oats, Jai 10 7.5 80 3.5 2.8 2 Eleusine coracana Finger millet 10 7.0 70 3.1 2.5 3 Hordeum vulgare Barley, Jav 11 7.7 85 3.7 3.1 Rice, Cha- 4 Oryza sativa 8 6.0 85 3.7 3.2 wal 5 Panicum millaceum Proso millet 6 4.0 70 3.1 2.5

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Pennisetum ty- 6 Pearl millet 12 6.0 65 2.8 2.3 phoides sorghum, 7 Sorghum bicolor 12 6.6 85 3.7 3.2 Jowar 8 Triticum aestivum Wheat 13 9.0 87 3.8 3.4

Maize, 9 Zea mays 10 7.0 85 3.7 3.3 Makka

B Leguminous Seeds

1 Cajanus cajan Pigeonpea 20 14.5 75 3.3 2.7 Chickpea, 2 Cicer arietinum 20 14.0 85 3.7 3.2 Gram Cyamopsis 3 Cluster bean 30 22.5 79 3.5 2.8 tetragonolobo Hyacinth 4 Dolichos lablab 17 10.2 70 3.1 2.5 bean 5 Gossypium spp. Cotton seed 18 12.5 88 3.8 3.3 6 Glycine max. Soyabean 40 37.0 90 4.0 3.4 7 Lathyrus sativus Khesari 29 22.0 85 3.7 3.2 Lentil, 8 Lens esculenta 25 20.0 80 3.5 2.9 Masoor Phaseolus aconiti- 9 Moth bean 27 22.0 82 3.6 2.9 folius 10 Paureus Green gram 26 20.0 82 3.6 2.9 11 P.radiatus Black gram 19 14.0 78 3.4 2.9 12 P.calcaratus Rice bean 21 15.0 73 3.2 2.7 Cowpea, 13 Vigna sinensis 26 20.0 75 3.3 2 Lobia C Oil Seeds Groundnut 1 Arachis hypohaea 30 23.0 130 5.8 5.0 seed CP DCP TDN DE ME Common No. Botanical Name Name (%) (%) (%) MCal MCal Linseed, 3 Lunium usitatissium 19 15.5 118 5.2 4.3 Flex 4 Sesamum indicum Sesame, Til 24 19.5 125 5.5 5.0 Non Conventional D Seeds Babul seed/ 1 Acacia nilotica 14 10.2 65 3.0 2.6 pod 2 Cannabina Seeds 33 ------3 Cassia tora Chakunda 18 12.5 88 3.9 3.2 4 Crotalaria juncea Sunhemp 36 31.0 70 3.1 2.5

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E Protein Supple- ment’s (Vegetable Source) 1 Arachis hypogaea Expeller 47 32.0 85 3.7 3.3 Solvent ext. 49 43.2 70 3.1 2.6 2 Brassica spp. Expeller 34 28.5 80 3.5 2.9 Solvent ext. 38 30.5 68 3.0 2.4 3 Carthamus tinctorius Expeller 42 32.0 69 3.0 2.5 4 Cocos nucifera Coconut 23 18.0 85 3.7 3.2 5 Glycine max. Expeller 41 35.7 86 3.7 3.3 Solvent ext. 46 41.4 80 3.5 3.0 CP DCP TDN DE ME Common No. Botanical Name Name (%) (%) (%) MCal MCal 6 Gossypium spp. Expeller 28 20.0 80 3.5 2.9 7 Linum Usitatissium Expeller 30 25.5 80 3.5 3.0 8 Sesamum inidcum Expeller 40 35.0 85 3.7 3.3 9 Zea mays cake 20 15.0 82 3.6 3.1 10 Helianthus spp Sunflower 26 22.0 70 3.1 2.7 11 Guizotia abyssinica Niger cake 45 25.5 55 2.4 2.0 Animal Protein Source 1 Blood Meal 87 62.0 90 4.0 3.4 2 Meat Meal 65 52.5 85 4.2 3.6 3 Fish Meal 50 45.0 70 3.4 2.7

[Source: http://www.keralaagriculture.gov.in/htmle/bankableagriprojects/ah/feed.htm] CP: Crude Protein DCP: Digestible Crude Protein TDN: Total Digestible Nutrients DE: Digestible Energy ME: Metabolizable Energy 2.2 Competition Analysis

One of the leading manufacturers in Bhutan is Karma Feeds, Phuentsholing which provides similar products. They have different agents located in east, west, south and central zones of Bhutan. Karma Feeds has an installed capacity of about 16,000 tons per annum to produce all types of feeds (cattle, poultry, fish and pig).

Shab Feed is another known supplier of animal feed in Bhutan.

Per the Department of Livestock, the cattle population in 2013 in Bhutan was 302,526]. On a pessimistic count, if one looks at an average consumption of 2kg per animal per day as a dietary supplement during the winter months only, the market is estimated to be as big as 54,454 tons. Therefore, there is definitely viable space for new entrants in this market. 11 DETAILED FEASIBILITY REPORT - Animal Feed Unit

3.0 MARKET ANALYSIS 3.1 Structure of the Industry The Key Stakeholders

For Bhutan, the animal feed marketing systems can be said to comprise of following stakeholders

MANUFACTURERS/

IMPORTERS

WHOLESALERS

RETAILERS

END USERS

Manufacturers/Importers: Persons or firms that manufacture or import cattle feed.

Wholesalers: Intermediaries in the distribution channel that buy large quantity of animal feed from the manufacturers and resells it to retailers.

Retailers: Persons or entities who buy the feed from the wholesalers and sell it to the end users.

End Users: End users are those who buy the feed from retailers. They are cattle farmers. 12 DETAILED FEASIBILITY REPORT - Animal Feed Unit

3.2 Demand vs. Supply

Livestock are raised as a source of milk, meat, manure, draught power and therefore they are reared as assets. Dairy products, especially butter and cheese, form an important component of the Bhutanese diet. About six cattle breeds are used for milk production in Bhutan. In Bhutan, a major source of animal feed is forest grazing, fodder trees, native pasture and crop residues. But to improve the quality and quantity of milk, one has to overcome the scarcity of animal feed in winter months. According to Department of Livestock, Ministry of Agriculture and Forests, Thimphu, Bhutan for 2013 total cattle population of Bhutan was 302,526. It has been estimated that in a day a cattle can have 2 kg of feed. So, for the 302,526 animals, average demand for feed will be 605,052 kg per day or about 220,825 tons per year. To meet the above demand of composite animal feed adequate amount of supply is required. Out of 220,825 tons required annually or about 18,402 tons/month, Karma feeds supplies about 1,300 tons/month.

3.3 Pricing & Marketing Strategies

This marketing effort will call for a strategy based on segmenting, targeting & positioning.

Segmenting: Segmenting is the act of dividing the market into distinct groups of buyers who might require separate offerings in terms of product attributes, pricing, promotion and distribution. Broadly speaking the animal feed market in Bhutan is primarily a rural phenomenon. It can be classified in to 1. Individuals 2. Institutional buyers

For animal feed individual consumers would be lower income group generally the farmers. In 2012, 90% of the farmers in Bhutan owned an average of two to three cattle.

Institutional buyers can be split into following groups:

1. Dairy Farms

2. Cattle Farms

Targeting: This is the act of choosing some of the segments identified from considerations of commercial attractiveness. The company will try to focus much in winters to serve the farmers as there will be scarcity of natural feed during this period.

But for institutional side, the company has to focus meeting up the demand all throughout the year. Accord- ingly, the Sales team should have clearly spelt out responsibilities for team members to address the above segment with a properly devised sales plan.

Positioning: This is the act of providing a viable competitive positioning of the firm and its offer in each target market. It should ideally communicate uniqueness that adds value.

Some viable positioning statements could be:

. Nutritional value of the feed which would help to make the cattle healthy and increase their productivity

. A quality product

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. Affordably priced

. Readily available round the year – even in winter

The marketing mix should accordingly be defined encompassing aspects like the product attributes including quality and packaging, pricing strategy, promotion and distribution and logistics all carefully designed to ensure a high level of consumer satisfaction.

Product: By ensuring proper quality of raw material and strict adherence to manufacturing process guidelines, the company can ensure that their products are better than prevalent standards in the market. The units can then even thinking of branding their products through an appropriate logo that communicates value.

Price: To gain an entry in the market a competitive pricing strategy would be used. As there is only one large manufacturer of animal feed the price will be compared with theirs and therefore the price cannot be very different. Similarly there should be attractive margins for the trade – in keeping with or ahead of the market.

Promotion: The promotional strategy for individual buyers could be as follows. For individual consumers, the company would target dealers, wholesalers and consumers to convey to them the benefits of the products through proper media channels like radio, television and outdoors. There should be attractive performance recognition schemes and contests for dealers – particularly for the first year of operation.

The promotional strategy could also induce trial through free sampling of the product. For institutional buyers, the sales team would ensure that the segment is well covered by initiating cold calls and staging product presentations to spread awareness and generate interest. For customers who already are in a higher state of readiness and floating enquiries, the Sales team would respond to them by sending in quotations followed by a discussion and negotiation leading to closures.

The table below shows the promotional activities that must be undertaken

Table 4: Promotional Activity

Serial Number Promotional Activity

01 The product must be launched with coverage on the radio, TV and newspaper.

02 Occasional TV and radio advertisements to make farmers aware about the benefits of the product. 03 Distribution of leaflets, pamphlets, stickers wherever possible

04 Promotional & discounted sales campaigns to farmers and retailers

05 Regular liaisoning with Diary & cattle farms

Place: Superior Distribution & Logistics would be the key to success in a geographical area where rural roads as well as transportation facilities are in a state of evolution so that the product can be easily trans- ported. The right place for the sales offices would be rural areas. Company can hire local people who can operate from their home offices.

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3.4 Technological Changes that could Impact Costing

One of the biggest technological changes that can impact the way the unit would conduct business in the future would be the progress of information technology in shaping e-commerce and its adaption in the Bhutanese economy.

It may be used to find out the customers on line. Similarly it may be possible to generate and respond to customer’s enquiries on line and transact business with those who stay outside the country.

It has been found that most of the raw materials are imported. So, if these things are produced within the country it would make the product more cost effective.

The basic impact of all this would help to reduce the cost and therefore the price of the product. 3.5 Competitiveness of the Project

The project advocates setting up a manufacturing plant of cattle feed.

This would compete against some of the manufacturers of cattle feed and would reduce the import rate of cattle feed.

The unit aspires to deliver quality products which would be beneficial for the health of the cattle and improve their longevity and productivity.. It is expected that there would be a demand pull at the customer end which can be further strengthened through innovative promotional strategies. The demand pull is estimated to be significant thereby ensuring lowering of costs through economies of scale.

It is expected that some of the competition would eventually get eliminated.

3.6 Special Attributes Desired By Target Customers

In general customers would prefer :

1. High Quality Graded Feed

2. They would prefer an affordable price: some may prefer to have a credit period

3. Some would look forward to promotional offer

4. Timely delivery in good condition

However the customer needs and wants may vary from one customer segment onto the other. For example, the requirements of feed type of Holstein Friesian cattle farmers would be different from requirements of feed type of Beefalo cattle farmers.

3.7 Terms & Conditions and Product Specifications desired by target customers

Types of Cattle Feed

a) Calf Starter: Specially formulated feed for calves to be started from the 42nd day till 8 months.

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b) Cattle Concentrate: Feed formulated for milking cows to maintain health, ensure milk production and reproductive health.

c) Milk Ration: Milk ration is a high energy feed to ensure higher milk production and maintenance of the cattle and is recommended for milking cow producing more than 10 liters of milk per day.

Nutrient Content of Cattle Feeds The table below shows the nutrient content of different types of Cattle Feeds:

Table 5: Nutrient Content

Types of Feeds ME(kcal/g) Moisture% CP% Ca% P% Calf Starter 3,000 13% 19% 0.6% 0.5% Cattle Concentrate 2,500 13% 18% 0.8% 0.7% Milk Ration 2,890 13% 18% 0.85% 0.75%

3.8 Packaging & Transportation

Large loads of premixed feed stuffs are packed into bulk bags. If the ingredients have to travel greater distances Q bags are used to assist in stability and maximize the load. All types of Polythene Sacks are used, depending on the size of the business you could have Automated Form Fill and Seal Machines and the market is filled with printed Open Mouth Bottom Weld, Block Bottom and Valve Sacks printed to the individual requirements of the product and company. Paper Sacks are used where dry foods stuffs and powders are used within industry and through to the end user in over Figure 1: Q Bag the counter sales.

Woven Polypropylene Sacks have a significant role within this sector predominantly because of their inherent strength.

It needs to satisfy the following objectives:

1. Protects the quality of the product. Figure 2: Polythene Sack

2. Provide information to buyers, such as variety, weight, specification of the product, quality grade, producer’s name, country, area of origin, etc.

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3.9 Assessment of Comparative Advantage a) Abundance of Hydroelectric Power

Bhutan is an energy surplus state. 97% of its energy is obtained from hydro power. During the summer months Bhutan exports quite a bit of electricity to India. Total exports to India were Nu. 10,633.639 million for 2013 – 14. The cost of electricity is lower than many power deficient economies. b) Availability of Water

Bhutan is endowed with rich perennial water resources fed with permanent glaciers, glacier lakes and recurrent monsoons. The per capita mean flow availability is as high as 109,000 3m . This compares very favourably with a developing economy like India which has per capita mean flow availability as low as 1,588 3m . c) Ready availability of Limestone, Maize, Bran of Cereals & Other Grains (Rice & Wheat)

Limestone, maize, bran of cereals and other grains (rice, wheat) are some of the raw materials that are used for manufacturing of cattle feed and these raw materials are readily available in Bhutan.

3. 10 Potential for Marketing Collaboration

There is a tremendous potential for marketing collaborations at the customer end of the supply chain. The unit can think of appointing independent sales agents or exclusive tie ups with certain stores or outlets.

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4.0 RESOURCE

4.1 Sources of Inputs

Utilities required by the plant consist of electricity, water and furnace oil.

Electricity is required to run the production machinery and to provide lighting for the plant. So except for very remote areas availability of electricity is not a handicap.

Water is required for general purposes and for supplying to the boiler, where steam is produced to be supplied to the molasses tank. Bhutan is drained by many rivers flowing south between these ranges and for the most part ultimately emptying into the Brahmaputra River in India. The river basins are oriented north-south and are, from west to east, the Jadalkha, Torsa, Raidak, Sankosh, Mao Khola/Aie, Manas and eastern river basins, this last basin being composed of the Bada and Dhansiri rivers. Two wastewater treatment projects are being implemented in the cities of Thimphu and Phuntsoling. More are expected to come up shortly. Bhutan with a population of only 7 lakhs is a water surplus country.

Furnace oil: Furnace oil is used to fire the boilers. Steam from the boiler is pumped into the molasses tank as a part of the production process. This oil is not manufactured in Bhutan and would have to be imported. 4.2 Comparative Analysis of Critical Inputs

Electricity: It may be possible to set up one’s own generator set and produce electricity. Theoretically it may also be possible to set up one’s own solar panels and be self sufficient on electricity. But it would certainly be more cost effective to source power from the grid. Keeping a small generator as a part of redundancy may be considered to take care of the lighting load.

Water: The most cost effective manner of catering to the requirements of water would be to locate the plant near a river. This is because deep tube wells may not be feasible owing to the mountainous terrain and from the point of view of cost. It is recommended however a hard water treatment plant be set up as the water is likely to be hard and unsuitable for boiler operation.

Furnace oil: Would have to be imported from the neighboring countries namely India or China. In case of inability to source importing from other countries can be explored. There need to be a means for checking the quality of furnace oil as the high price often encourages intermediaries to pilfer and contaminate the oil.

4.3 Sources of Raw Materials for Cattle Feed

Major raw materials required for the manufacture of cattle feed are oil cake, bran of cereals, molasses, maize, salt, limestone (ground), other grains (wheat, barley, etc), meal (bone or flesh or blood). The feed consists of three major groups of substances: carbohydrates, oils and proteins together with smaller amounts of minerals and vitamins.

Oil Cake: Oil-cake is the residue obtained after the greater part of the oil has been extracted from an oilseed. Oil- cakes are rich in protein and are valuable for cattle feed. Oil-cakes are great source of fiber and energy.

Bran of Cereals: Different bran of cereals such as rice bran, wheat bran is used in the manufacturing process of cattle feed. Bran is used widely as the energy portion. Bran contains fiber and protein. 18 DETAILED FEASIBILITY REPORT - Animal Feed Unit

Molasses: Molasses is a source of quick energy and a rich source of minerals. Molasses in cattle feed increasE milk solid production, improving milk let-down, promoting animal health, improving digestion of fiber, helping to reduce heat related stress, helping in growth and development of young stock.

Maize: Maize is the most common grain used for cattle feed. The energy value of maize is commonly used as a standard with which other energy sources are compared. Thus, if the relative energy value of maize is taken as 100, the energy value of other grain sources is generally lower. The efficient utilization of the gross energy is mainly due to the low fiber content of the maize kernel and the high digestibility of its starch. The crude protein content of maize is relatively low, ranging from 8–11%.

Meat & Bone Meal: It is typically about 48–52% protein, 33–35% ash, 8–12% fat, and 4–7% moisture. It is primarily used in the formulation of cattle feed to improve the amino acid profile.

Limestone (ground): Calcium plays essential roles in cattle nutrition. It is required for proper development of bones and teeth, regulation of heartbeat and blood clotting, muscle contraction, nerve impulses, enzyme activa- tion, hormone secretion and milk production.

Other Grains (wheat, barley, etc): Wheat is low in fiber and high in energy and compares favorably with other grains in energy content. The protein content of wheat from the world collection was shown to vary from 6 to 22% but the wheat most commonly used contains 13–15% crude protein. The protein content of oats (Avena sativa L) is relatively high (11–14%) and the amino acid distribution is more favorable than that of maize. Recent studies with cattle of different age groups indicate that steers and non-lactating cows digest completely the starch of rolled oats and that steers digested more of the starch of the whole grain than did cows. Barley has a feeding value of 91% that of maize.

From the view of ease of sourcing and cost of sourcing, it is recommended that the following category of products be sourced from within Bhutan. In case it is not possible to source from within the country then import option may be exercised.

1. Bran of Cereals – locally available

2. Maize – locally available

3. Limestone (ground) –locally available

4. Other Grains (wheat, barley) –locally available

The following items would necessarily have to be imported preferably from a neighboring country like India or China to keep costs low. In case the requirement could not be met, options to import from other countries can also be explored.

1. Oil Cake – to be imported

2. Molasses – to be imported

3. Meal (Bone/Flesh/Blood) – to be imported

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Suppliers of Imported Raw Materials

1. Oil Cake

Shree Ganpati Enterprises

No. 2647, 1st Floor Street

Raghunandan, Naya Bazar

New Delhi-110006, India

Contact Number: +91-9811077100, 011-43536445

Marudhar Foods Private Limited

B-108, Asthivinayak Complex

2nd Floor, Outside Dariiyapur Darwaja

Ahmedabad-380004

Gujarat, India

Contact Number: +91 7965437111

2. Molasses

Canny Overseas Private Limited

B-170, Priyadarshini Vihar

New Delhi - 110092

Delhi, India

Contact Number: 08045359140

Atlas

No.55, K.J.Building

34/A Khadak Street, Near Snow White Hotel

Masjid Bunder (W)

Mumbai: 400009

Maharastra, India

Contact Number: 08046035474

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Shiva Transport

No.5, Manorath Complex, Behind Mother School, Gotri

Near Jalaram Nagar Bus Stand,

Vadodara-390021, Gujarat

India

Contact Number: 08046046377

3. Bone Meal

Global Enterprise

No. 10, Green Park Society, Opposite M.S. Public School, Near Pirkamal Masjid, Danilimada

Ahmedabad: 380028, Gujarat

India

Contact Number: 08376809573

Sri Sai Sagar Traders

No. 206, Ellora, Sant Muktabai Marg, Vile Parle East

Mumbai: 400057, Maharastra

India

Contact Number: 08045136604

Giriraj Chemicals

No. 201-A, IInd Floor, Sumedha Market Complex, RDC Raj Nagar

Ghaziabad: 201002, Uttar Pradesh

India

Contact Number: 09643203160

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4.4 Availability of Manpower and Skills

The Labour Force Survey Report 2013 finds that the agriculture sector employs over 55 percent of total employed persons, while 17 percent are employed in public administration & defense, education, electricity, gas & water supply sectors, and the remaining 28% in real estate, construction, hotels & restaurants, and mining & quarrying sectors.

The survey finds that a total of 335,870 individuals were employed and 9,916 were found to be unemployed out of a total projected population of 745,939 in 2013, making unemployment rate at the national level by 2.9%.

Chart 1: Unemployment Rate in Bhutan (2009-13)

(Source: Statistical Yearbook of Bhutan 2014)

The Labour Force Survey Report 2012 indicates that by 2020 there will be 267,000 students seeking jobs. A variety of skills are available from the various training institutions to support any service enterprise. However, higher technical courses for engineering & technology, international law and finance are required to meet the requirements of the imminent future.

4.5 Need for Skill Development

As the workforce is mostly unskilled, there is a need to develop their skills according to the need of the industry. Workshops or on-site short term trainings may be organized by the suppliers of machineries on how to control the temperature, operate machineries etc. The training should be a combination of theory sessions, on the job coaching sessions and on the job supervision. For people joining with no relevant experience training in their respective functional area would be mandatory. There should be a periodic skill assessment done by the management on the basis of observation of on the job performance. Based on the findings, a training calendar needs to be drawn up.

22 DETAILED FEASIBILITY REPORT - Animal Feed Unit

5.0 THE PLANT

5.1 Choice of Technology for Cattle Feed Manufacturing Process

The major operations involved in the production of animal feed are: raw materials preparation, primary crushing, assorting and measuring, molasses mixing, fine crushing, pellet making, and packaging. Raw and auxiliary materials are first charged into silos and tanks where they are made ready for further processing. They are then processed by primary crusher. Crushed materials are further separated by means of a sifter, and then stored in the assorting tanks according to the kind of raw materials. In assorting and measuring operation, small amounts of additives are charged into the bins containing different assort- ments of raw materials. The raw materials stored in the assorting tanks are used in accordance with the desired proportion. The raw materials are then mixed by means of a mixer. In this process, fatty ingredients are added to the materials in order to raise the nutritional value of the feed. The feed obtained from the mixer is blended with molasses. After the feed is blended with molasses, it is further crushed by means of the second crusher. Assorted animal feed that is crushed into fine particles is further formed into pellets. The pellets, which are cylindrical type and size, 6mm in diameter and 2cm in length, are then dried. The product is next stored in the product tanks, weighed and packaged in jute bags.

Manufacturing Process Diagram of Animal Feed

Figure 3: Manufacturing Process 23 DETAILED FEASIBILITY REPORT - Animal Feed Unit

Machinery & Equipment Required By Cattle Feed Producing Plant

The table below shows the machinery required by Cattle Feed Producing Plant. While the project is about manufacturing animal feed, the manufacturing system proposed would have the capacity to process fish feed and poultry feed as well.

Table 6: Machinery Requirement

S. No. Description Quantity 1 Tank & Silos for raw and auxiliary materials storage 5 2 Metal Screen & Shaker 1 3 Hammer Mill 2 4 Blender 1 5 Weighing Scale (5 tons) 4 6 Bagging Machine 1 7 Dust Collector 2 8 Product Tank 2 9 Pellet Producing Machine 1 10 Tanks for oil cakes and molasses 2 11 Boiler 1

5.2 Source

Grain Storage Silos

Capacity: 10 tons

Dimension: 3.6m*3.6m*3.19m

Weight: 1.7 ton

Volume: 14 cubic meters

Material: Steel

Brand Name: TSE

Model Number: TCZK03601

Supplier’s Details: Shelly Engineering Company Limited, China

Hammer Mill

Capacity (ton/hour): 2-220

Power: 11-220 KW

Brand Name: Hongii 24 DETAILED FEASIBILITY REPORT - Animal Feed Unit

Model Number: PC Series, PCH Series

Supplier’s Details: Henan Hongii Mine Machinery Company Limited, China

Fully Automatic Bagging Machine

Voltage: 220V

Power (W): 3 KW

Dimension (L*W*H): 2.5*1.5*1.8m

Model Number: Namdhari FABM

Supplier’s Details: Namdhari Industrial Works, D-26 Focal Point,

Khanna-141401,Punjab, India

Pellet Machine

Brand Name: GOYUM

Model Number: 142

Voltage:220V

Supplier’s Details: Goyum Screw Press, India

Dust Collector

Brand Name: Casen/Hexie

Model Number: BLMB Series

Minimum Particle Size: 3-15g/cubic meters

Dimension (L*W*H): 1350*960*1320

Supplier’s Details: Xinxiang Casen Industrial Commerce Corporation, China

Weighing Machine

Brand Name: Hualitai

Model Number: hlt-208

Battery: 4V or 6V

Power Supply: AC/DC

Voltage: 220 V

Features: Rechargeable Battery, overload and low voltage indication, automatic standby mode

25 DETAILED FEASIBILITY REPORT - Animal Feed Unit

Boiler

Brand Name: YANO

Model Number: LSS

Dimension (L*W*H): 1480*1480*3100mm

Weight: 1500kg

Capacity: 1000kg/hr

Supplier’s Details: Shangai YANO Boiler,China

Product Tank

Brand Name: Huabo

Model Number: HBS

Capacity: 2.9 tons to 27 tons

Supplier’s Details: Huabo Technology Company Limited, China

5.3 Rate of Consumption of power, fuel, utilities & consumables

A plant with annual capacity of 16,000 tones is envisaged considering the market study and minimum economies of scale. The plant will operate a single shift of 8 hours a day, and 320 days a year.

The table below shows the annual requirement of utilities:

Table 7: Annual Requirement of Utilities

Sl. No. Item Annual Requirement 1 Electricity 175 kw 2 Water 10,000 cubic meter 3 Fuel Oil 50,000 liter

5.4 Raw Material Consumption

The table below shows the annual requirement of raw materials:

Table 8: Annual Requirement of Raw Materials

Sl. No. Description Quantity (Tons)

1 Oil Cake 3,450

2 Bran of Cereals 3,705

3 Molasses 750

4 Maize 6,000

26 DETAILED FEASIBILITY REPORT - Animal Feed Unit

5 Salt 21

6 Limestone (ground) 24

7 Other grains (wheat, barley, etc) 450

8 Meal (bone/flesh/blood) 600

5.5 Manpower Requirement & Organization Chart

The table below shows the manpower requirement:

Table 9: Manpower Requirement

Serial Number Job Title Required No.

1 Plant Manager 1

2 Secretary 1

3 Accountant 1

4 Personnel Officer 1

5 Salesperson/purchaser 1

6 Cashier 1

7 Clerks 2

8 Store Keeper 2

9 Production Supervisor 1

10 Maintenance Engineer 1

11 Technician Operators 6

12 Laborers 6

13 Cleaner 2

14 Driver 2

15 Guard 4

5.6 Specification of Product & Byproduct

Types of Cattle Feed

a) Calf Starter: Specially formulated feed for calves to be started from the 42nd day till 8 months.

Figure 4: Calf Starter 27 DETAILED FEASIBILITY REPORT - Animal Feed Unit

b) Cattle Concentrate: Feed formulated for milking cows to maintain health, ensure milk production and reproductive hea lth.

c) Milk Ration: Milk ration is a high energy feed which ensures higher milk production and maintenance of the cattle and is recommended for milking cow producing more than 10 liters of milk per day. Figure 5: Cattle Concentrate Nutrient Content of Cattle Feeds Table 10: Nutrient Content

Types of Feeds ME(kcal/g) Moisture% CP% Ca% P% Calf Starter 3,000 13% 19% 0.6% 0.5% Cattle Concentrate 2,500 13% 18% 0.8% 0.7% Milk Ration 2,890 13% 18% 0.85% 0.75% 5.7 Extent of Technical Assistance Needed Including Training

As the workforce is not so much skilled there is a need to develop their skills according to the need of the industry. Workshops or on-site short term trainings may be organized by the suppliers of machineries on how to control the temperature, operate machineries etc. The training should be a combination of theory sessions, on the job coaching sessions and after that on the job supervision. The duration of training will be of 2 weeks, 1 week for the theory and on the job training and 1 week for the supervision at a pre-fixed rate. The duration of training may be extended later on if required.

28 DETAILED FEASIBILITY REPORT - Animal Feed Unit

6.0 PLANT LOCATION & INFRASTRUCTURE

The location of a plant is determined on the basis of proximity to raw materials, availability of infrastructure and distance to market outlets. It is proposed that this plant be located in Phuentsholing so that access to raw materials is easy. Plus, Phuentsholing is a major commercial hub making the logistics of sale and distribution easy. The other possible location is Samtse which provides easy access to the Indian border and has a rich source of home- grown raw materials and a demand for the end product thanks to its large cattle population. Maize & wheat are the major raw materials for the production of animal feed. Samtse, which is 81.4 km from Phuentsholing produced 13,647.15 metric tons and 167 metric tons of maize and wheat respectively in 2005 [Source: Invest- ment Opportunity Study-2006, Bhutan]. In addition, Samtse’s cattle population of 33,411 is the highest in the region [Source: De- partment of Livestock, Ministry of Agriculture and Forests, Thimphu, Bhutan].

Phuentsholing, under Chhukha Dzongkhag, is the main gateway to Bhutan and as a result, it has become the biggest commercial Figure 6: Map of Bhutan and industrial hub of the country.

6.1 Raw Material Availability

Maize & wheat are the major raw materials for the production of animal feed. Limestone, another raw material required for production of animal feed is readily available in Chhukha Dzongkhag. Import of other raw materials from India would be easy as Phuentsholing has close proximity to the Indian towns of Siliguri and Jaigaon.

6.2 Availability of Electricity

As of 2013, Bhutan has 5,021.27 km & 104.41 km of over- head and underground high tension lines respectively [Source: Statistical Yearbook of Bhutan, 2014]. This dzongkhag has Chhukha Hydropower Plant which is the major source of electricity. Construction of three new mega hydroelectricity projects viz. 180 MW Bunakha Hydroelectric project, 540 MW Ammochhu Hydroelectric project, and 570 MW Wangchu Hy- droelectric project have been proposed.

Figure 7: Chhukha Hydropower Plant

29 DETAILED FEASIBILITY REPORT - Animal Feed Unit

6.3 Topography, Hydrology & Seismology Data Requirement

Topography, Hydrology & Seismology of the location must be checked before setting up the manufacturing plant.

Topography: Topography is a detailed map of the surface features of the land. It represents a particular area in detail, including everything natural and manmade - hills, valleys, roads or lakes.

An objective of topography is to determine the position of any feature or more generally any point in terms of both a horizontal coordinate system such as latitude, longitude, and altitude. Identifying (naming) features and recognizing typical landform patterns are also part of the field. A topographic study may be made for detailed information about terrain (vertical & horizontal dimension of land surface) and surface features is essential for the planning and construction of any major civil engineering, public works, or reclamation projects.

Hydrology: Hydrology is the scientific study of the movement, distribution and quality of water on Earth including the hydrologic science, water resources and environmental watershed sustainability. Hydrology is subdivided into surface water hydrology, groundwater hydrology (hydrogeology), and marine hydrology.

Application of Hydrology

. Determining the water balance of a region.

. Determining the agricultural water balance.

. Mitigating and predicting flood, landslide and drought risk.

. Real-time flood forecasting and flood warning.

. Assessing the impacts of natural and anthropogenic environmental change on water resources.

. Assessing contaminant transport risk and establishing environmental policy guidelines.

Seismology: Seismology is the scientific study of earthquakes and the propagation of elastic waves through the Earth or through other planet-like bodies. The field also includes studies of earthquake environmental effects, such as tsunamis as well as diverse seismic sources such as volcanic, tectonic, oceanic, atmospheric, and artificial processes (such as explosions).Seismic waves are elastic waves that propagate in solid or fluid materials.

They can be divided into body waves that travel through the interior of the materials; surface waves that travel along surfaces or interfaces between materials; and normal modes, a form of standing wave.

Seismological instruments can generate large amounts of data. Systems for processing such data include:

• CUSP (Caltech-USGS Seismic Processing)

• RadExPro seismic software

• SeisCom

30 DETAILED FEASIBILITY REPORT - Animal Feed Unit

6.4 Availability of Land

There are two industrial estates in Phuentsholing. The Phuentsholing Industrial Estate has an area of 61 acres, including one acre near Doti khola, and houses more than 15 industrial sheds. The Pasakha Industrial Estate is located 16 km east of Phuentsholing in an area of 267 acres [Source: Eleventh Five Year Plan].

6.5 Availability of Transportation Facilities

Apart from national highways, the Dzongkhag have good network of roads and bridges:

Table11: Types of Road

S. No. Road Type Km

1 National Highway 272.00

2 Dzongkhag Road 58.6

3 Urban Road 28.6

4 Farm Road 334.6

Access Road (Forest Road & Power 5 231.5 Tiller Road)

(Source: Statistical Yearbook of Bhutan 2014)

6.6 Availability of Ancillary Facilities

An industrial unit which manufactures parts or intermediaries, or provides services is ancillary unit. A large chunk of its production or services is used by another industrial taking. An ancillary unit is typically small - whose investment in fixed assets in plant and machinery, does not exceed Nu. 7.5 million. So a farmer’s cooper- ative growing maize could be an ancillary unit for animal feed.

6.7 Availability of Housing, Schooling and Hospital Facilities

Housing

The amount of land suitable and available for urban development is extremely constrained on the Bhutanese side of the border in Phuentsholing.

The administration is seeking to extend the municipal area beyond the present ju- risdiction of the City Corporation. Parcels of land available in surrounding vicini- ty have been analyzed for incorporation into new development area –known as the Phuentsholing Urban Area (PUA).

Housing in Phuentsholing has received a Figure 8: Housing of Phuentsholing

31 DETAILED FEASIBILITY REPORT - Animal Feed Unit major boost by the delineation of the PUA. It is important to recognize that private developments are coming up in these surrounding areas and the city is expanding. The PUA delineated for urban use is 1968.0 ha. (19.68 sq. kms.).

The City Corporation area comprises of multi-storeyed (newly built G+4, mainly private buildings), low rise and detached housing units. The multi-storeyed structures (60%-90% ground coverage) have increased in number.

Schooling

There are four renowned schools in Phuent- sholing. These are:

1. Tenzin School

2. Phuentsholing Higher Secondary School

3. Phuentsholing Lower Secondary School Table 12: Number & Type of Schools

4. Reldri Higher Secondary School

The table given below shows the number and type of schools in Chhukha Dzongkhag as of 2013:

S. No. Type of School Number of School 1 Extended Classroom 8 2 Primary School 26 3 Lower Secondary School 3 4 Middle Secondary School 6 5 Higher Secondary School 2 (Source: Statistical Yearbook of Bhutan, 2014)

Hospital Facilities

There are healthcare facilities in Chhukha dzongkhag in general and Phuentsholing in particular.

While a general hospital already exists, residents of Phuentsholing also have easy access to India where private medical institutes offer a range of health care solutions.

In all, Chhukha dzongkhag has three hospitals and Figure 9: District Hospital at Phuentsholing

32 DETAILED FEASIBILITY REPORT - Animal Feed Unit other healthcare facilities.

Table 13: Number & Type of Hospitals

S. No. Type of Hospital Number of Hospitals 1 Hospital 3 2 Basic Health Units 19 3 Out Reach Clinics with shed 24 4 Out Reach Clinics without shed 15 Total 61 (Source: Statistical Yearbook of Bhutan, 2014)

6.8 Communication Facilities

Bhutan Telecom Limited, Tashi InfoComm Limited, Samden Tech and Drukcom are the four Internet Service Providers (ISPs) in the country. Bhutan Telecom Limited is the sole provider of fixed-line telecommunication services while cellular mobile services are provided by Bhutan Telecom Limited and Tashi InfoComm Limited. With the exception of Bhutan Telecom, all other ISPs are private sector ventures.

Road connections and quality of roads are reasonably good. With a series of new road constructions and widening along the Thimphu-Phuentsholing highway, travel time to the capital is expected to be shortened to less than five hours.

6.9 Presence of Approach Road

Presence of approach road from and to the plant must be Figure 10: Road Connectivity from taken into consideration before zeroing down on the plot. Phuentsholing to other Dzongkhags 6.10 Factory layout plan

33 DETAILED FEASIBILITY REPORT - Animal Feed Unit

7.0 ENVIRONMENTAL ASPECTS

The following environmental aspects need to be considered.

Air Quality

Animal feeding operations produce several types of air emissions, including gaseous and particulate substances, and concentrated animal feeding operations (CAFOs) produce even more emissions due to their size. The primary cause of gaseous emissions is the decomposition of animal manure, while particulate substances are caused by the movement of animals.

The most typical pollutants found in air surrounding CAFOs are ammonia, hydrogen sulfide, meth- ane, and particulate matter, all of which have varying human health risks. Most manure produced by CAFOs is applied to land eventually and this land application can result in air emissions.

Odors

One of the most common complaints associated with CAFOs are the odors produced. The odors that CAFOs emit are a complex mixture of ammonia, hydrogen sulfide, and carbon dioxide, as well as volatile and semi-volatile organic compounds (Heederik et al., 2007). These odors are worse than smells formerly associated with smaller livestock farms. The anaerobic reaction that occurs when manure is stored in pits or lagoons for long amounts of time is the primary cause of the smells. Odors from waste are carried away from farm areas on dust and other air particles.

Insect Vectors

CAFOs and their waste can be breeding grounds for insect vectors. Houseflies, stable flies, and mosquitoes are the most common insects associated with CAFOs. Houseflies breed in manure, while stable and other flies breed in decaying organic material, such as livestock bedding. Mosquitoes breed in standing water, and water on the edges of manure lagoons can cause mosquito infestations to rise. Flies can change from eggs to adults in only 10 days, which means that substances in which flies breed need to be cleaned up regularly.

Antibiotics

Antibiotics are commonly administered in animal feed in the United States. Antibiotics are included at low levels in animal feed to reduce the chance for infection and to eliminate the need for animals to expand energy fighting off bacteria, with the assumption that saved energy will be translated into growth. The main purposes of using non-therapeutic doses of antimicrobials in animal feed is so that animals will grow faster, produce more meat, and avoid illnesses. Supporters of antibiotic use say that it allows animals to digest their food more efficiently, get the most benefit from it, and grow into strong and healthy animals. The trend of using antibiotics in feed has increased with the greater numbers of animals held in confinement. The more animals that are kept in close quarters, the more likely it is that infection or bacteria can spread among the animals. Seventy percent of all antibiotics 34 DETAILED FEASIBILITY REPORT - Animal Feed Unit and related drugs used in the U.S. each year are given to beef cattle, hogs, and chickens as feed additives. Nearly half of the antibiotics used are nearly identical to ones given to humans (Kaufman, 2000). There is strong evidence that the use of antibiotics in animal feed is contributing to an increase in antibiotic-resistant microbes and causing antibiotics to be less effective for humans (Kaufman, 2000). Resistant strains of pathogenic bacteria in animals, which can be transferred to humans thought the handling or eating of meat, have increased recently. This is a serious threat to human health because fewer options exist to help people overcome disease when infected with antibiotic-resistant pathogens. The antibiotics often are not fully metabolized by animals, and can be present in their manure. If manure pollutes a water supply, antibiotics can also leech into groundwater or surface water.

Other Effects – Property Values

Most landowners fear that when CAFOs move into their community their property values will drop significantly. There is evidence that CAFOs do affect property values. The reasons for this are many: the fear of loss of amenities, the risk of air or water pollution, and the increased possibility of nuisances related to odors or insects. CAFOs are typically viewed as a negative externality that can’t be solved or cured. There may be stigma that is attached to living by a CAFO. The most certain fact regarding CAFOs and property values are that the closer a property is to a CAFO, the more likely it will be that the value of the property will drop. The exact impact of CA- FOs fluctuates depending on location and local specifics. Studies have found differing results of rates of property value decrease. One study shows that property value declines can range from a decrease of 6.6% within a 3-mile radius of a CAFO to an 88% decrease within 1/10 of a mile from a CAFO (Dakota Rural Action, 2006). Another study found that property value decreases are negligible beyond 2 miles away from a CAFO (Purdue Extension, 2008). A third study found that negative effects are largest for properties that are downwind and closest to livestock (Herriges, Secchi, & Babcock, 2005). The size and type of the feeding operation can affect property value as well. Decreases in property values can also cause property tax rates to drop, which can place stress on local government budgets.

Environmental aspects are of high importance during setting up any plant. These aspects play a vital role in the ecological balance.This chapter covers the environment management aspects for the project. The degree of detail is based on the Reference Document, Environment Assessment Act, 2000 and the Regulation for the Environ- mental Clearance of Projects, 2002. Reference has also been made to the Procedures for Project Review in the NEC guidelines, rules and regulations for establishment and operation of Industrial and commercial ventures in Bhutan, 1995. In accordance to these, for this project an Environment Assessment (EA) document including Environment Management Plan (EMP) and a monitoring plan shall be required. Since the impacts of the project are known, an Initial Environmental Evaluation is not required.

This report includes characterization of environmental consequences due to various project activities, both during the construction phase as well as the operational phase and measures to mitigate them. The elaboration of these features shall meet the requirements of EA document. The environmental elements considered for this purpose are shown in the following table.

35 DETAILED FEASIBILITY REPORT - Animal Feed Unit

Table 14: Elements considered for environmental impacts

Element Element Element 1 Land Use 2 Soil 3 Ecology Noise Quality and 4 Subsidence and Landslide 5 6 Vehicular Movement Ground Vibration 7 Water Resources 8 Hydrology 9 Water Quality 10 Air Quality 11 Solid Waste 12 Human Settlement Socio-economic Site of Cultural Heritage 13 14 Aesthetics 15 Conditions and Scenic Importance Mitigation measures based on the systems & practices foreseen in plant design, for addressing each environmental component has been described.

It is to be understood that this report meets the requirements of initial Environmental Information (EI), as per the prevalent norms in Bhutan.

Environmental Impacts

The environmental impacts that are likely to arise out of the proposed project, during their construction and operation phases, are summarized in the sub-sections that follow. During Construction Phase Table15: Environmental impacts during construction phase

S. Attributes Problem Impacts due to Plant No Degradation in land values due to construction waste 1 Land Use & construction silt runoff. Loss of soil due to clearing, excavation, soil removal, 2 Soil road construction, etc. 3 Ecology Encroachment in ecology; loss of flora and fauna. 4 Water Resources Depletion of ground water resources, if used. 5 Water Quality A sewage treatment plant will be installed 6 Air Quality Fugitive emission and dust impair air quality. Increase in noise levels. 7 Noise Quality Traffic congestion/accidents and adverse effects on air 8 Vehicular Movement quality & noise levels. Increased excavated soil, debris, garbage, etc., at the 9 Solid waste construction site. 10 Aesthetics Aesthetics marred by project structures. Site of Cultural, Historical and Sce- Impact on the site of Cultural, Historical and Scenic 11 nic Importance Importance, if available

36 DETAILED FEASIBILITY REPORT - Animal Feed Unit

During Operation Phase Table16: Environmental impacts during operation phase

S. Attributes Problem Impacts due to Plant No 1 Land Use Area is industrial/agricultural land.

2 Soil Positive impact due to horticulture and plantation. No major impact due to vegetation and plantation in 3 Ecology the surrounding area.

4 Subsidence and Landslide Problems No impact.

Depletion of water resources due to water 5 Water Resources withdrawal. Discharge of sewage and storm water run-off may 6 Water Quality cause deterioration of water quality.

Increase in TSPM and RPM levels and impairment of 7 Air Quality ambient air quality.

8 Noise Quality Increase in noise level in the surrounding area.

Traffic congestion/accidents in conjunction with loss 9 Vehicular Movement in air quality. Inappropriate disposal of garbage/ sewage could be 10 Solid Waste hazardous. 11 Aesthetics Loss in environ-aesthetics to some extent.

Site of Cultural, Historical and Impact on the site of Cultural, Historical and Scenic 12 Scenic Importance Importance, if available

No impact as no relocation/resettlement required if 13 Human Settlement industrial area. Increased economic activities in the region resulting 14 Socio-Economic condition in new jobs and better quality of life of people.

37 DETAILED FEASIBILITY REPORT - Animal Feed Unit

Environmental Management The mitigation measures including prevention and control for each environmental component have been delineated in the sub-sections that follow. During Construction Phase Table 17: Mitigation measures during construction phase

S. Attributes Problem Impacts due to Plant No 1 Land Use Plantation and green belt development shall commence.

2 Ecology Plantation and vegetation shall commence

3 Water Resources Controlled use of water resources Debris shall be isolated from waste water and disposed off sepa- 4 Water Quality rately. All waste shall be treated in septic tanks and ETP. Regular water sprinkling at the construction site. Construction ma- 5 Air Quality terials shall be totally covered during transportation.

Use of silencers, noise isolators etc. in machines. Use of equip- 6 Noise Quality ment, which keep noise levels within limits prescribed by regula- tory agencies.

Sewage treatment plant will be installed in the colony as well as 7 Solid Waste at the plant.

8 Vehicular Movement Proper metallic access road will be constructed upto the site.

Construction activities commensurate with landscaping in the 9 Aesthetics area.

During Operation Phase Table18: Mitigation measures during operation phase

S. No Attributes Problem Impacts due to Plant 1 Land Use Development of green belt in and around the plant.

2 Soil Tree plantation all around the plant.

3 Ecology Development of green belt in and around the plant.

38 DETAILED FEASIBILITY REPORT - Animal Feed Unit

There shall be a perpetual demand on water resources. The water requirement in the plant will have no adverse effect on the water 4 Water Resources source and the water required at the plant can be adequately met from the current allocation to the plant from the community.

The plant shall take into consideration the local geological, geomor- 5 Hydrology phological and hydro-geological settings.

There will be substantive generation of waste water at the plant 6 Water Quality premises besides the use at the staff quarters for sanitation purposes. This waste water will be collected in septic tanks.

Provision of suitable bag filters for dust control. Provision of leak proof and properly covered transport equipment to prevent dust from being airborne. Adequate dust suppression and extraction Air Quality 7 facilities at material handling and transfer points. Provision of green belt around the plant. Provision of a well-equipped workshop for regular maintenance of vehicles in order to control emissions

Noise abatement at source by choosing machinery and equipment suitably. Proper mounting of equipment and ventilation systems. Noise Quality and 8 Provision of noise insulating enclosures or padding, wherever Ground Vibration possible. Provision of personal protective equipment for workers. Dense belt of trees to act as acoustic barriers.

Provision of wide tar/concrete road. Provision of a well-equipped 9 Vehicular Movement workshop for regular maintenance of vehicles in order to control emissions. No solid waste will be generated besides from the staff quarters. 10 Solid Waste Proper disposal of the waste based on terrain, landscaping, drainage & aeration. Septic tanks will be constructed at the staff quarters. 11 Aesthetics Landscaping and use of vegetation. 12 Human Settlement Not applicable. Maintaining good communication with local communities before, Socio-Economic 13 during and after construction. Training of local personnel for specif- Conditions ic (skilled) positions. Welfare measures for local populace.

39 DETAILED FEASIBILITY REPORT - Animal Feed Unit

Solutions Adopted in the Technical Concept

The guidelines for various industrial units, stipulate “limiting values” for water quality, air quality and noise quality.

For the project, adequate pollution control equipment has to be considered. The general requirement and measures to be considered for arresting the pollutants is tabulated in the following table. Table 19: Estimated release of pollutants

S.No. General Requirement Measure Considered 1 Water Quality For plant a Treated Effluent discharges should have a pH Sewage treatment plant of adequate capac- in the range of 6-9. ity to control the pH and TSS. 2 Air Quality For Plant The air quality should conform to the limiting Bag Filters & modern burner with precise a values of SPM. fuel dosing system should be considered for the air quality. 3 Noise Quality For Plant A maximum increase in background levels of The plant should be designed not to gen- 3 dB (A) or the following levels: erate more than 60 dB (A) maximum. All Residential 55/45 dB (A) high noise emitting machinery such as the Industrial 75/70 dB (A) roller mills will be enclosed in a housing a Commercial 65/55 dB (A) (lined with a 2 inch glass wool) so as to minimize sound emissions outside the plant. The walls of the structure housing the machinery will be made of mud bricks to absorb the sound Occupational Health and Safety

All workers in the plant, crusher and mine locations will be provided with and shall be mandated to use protective gear and equipment to ensure their personal safety. Safety boots, gloves, eye goggles, helmets, nose masks (wherever necessary), ear plugs, reflective jackets and other protective equipment will be provided bythe company. Trainings on safety for all new recruits as well as refresher courses on safety for the regular staff will be conducted regularly from time to time in order to ensure that safety procedures are followed at all times.

A safety inspector shall be appointed (plant manager) and an OHS committee comprising of employees shall be formed to monitor and ensure compliance to safety norms and procedures.

40 DETAILED FEASIBILITY REPORT - Animal Feed Unit

8.0 PROJECT IMPLEMENTATION & SCHEDULE

The key factors that would facilitate successful and timely project implementation are:

• Proper choice of technology and machinery suppliers.

• Adequate diligence in formulating the technical concept and system design.

• Proper choice of contractors for civil construction and erection of equipment.

• Formulation of an effective project team led by an experienced Project Manager.

• Establishment of an efficient system for project planning & monitoring including reporting procedures for progress review & co-ordination.

Implementation Strategy

Typically any project has four core dimensions which are as follows –

• Engineering: this directly impacts the smooth operations of the plant over its entire life.

• Procurement: is critical on account of the impact that it has on investment and performance benchmarks and also in ensuring the choice of appropriate technology.

• Construction: is critical in terms of its impact on completion quality and the duration of the project phase.

• Project Management: other than its obvious impact on project timeliness it also contributes to risk minimization for the promoter.

Implementation Schedule

It is suggested that the project implementation will not take more than 12 months out of which six months will be allotted for pre project activities. And the rest should be done within the next six months from the date the project is approved by the Ministry of Economic Affairs.

Pre-project Activities Include:

1. Hydrological investigations for ensuring the availability of the requisite quantum of water.

2. Receipt of requisite clearances from competent authorities with respect to :

• Environmental clearance

• Sanction and supply of power

• Sanction and supply of water

• Tying up sources of funds for the project to achieve financial closure

• Procurement of land

• Topographic & Seismologic survey for plant area

• Floating tender inquiries and evaluation of order 41 DETAILED FEASIBILITY REPORT - Animal Feed Unit

3. Site Preparation & Levelling of land.

The table given below shows the project schedule:

Table20: Project Schedule

Months Sl.No. Activity 1 2 3 4 5 6 7 8 9 10 11 12

1 Site Preparation & Levelling of Land Construction of factory shed & Civil 2 Infrastructure 3 Hiring of People (Phase 1)

4 Installation of Machineries

5 Hiring of people (Phase 2)

6 Training & Commissioning of People

7 Trial Production Runs

Table 21: Colour Coding

Colour Coding Site Preparation Construction & Civil Infrastructure Manpower Hiring (Phase 1) Installation of Machineries Manpower Hiring (Phase 2) Training & Commissioning Trial Production Runs

42 DETAILED FEASIBILITY REPORT - Animal Feed Unit

9.0 COST PRESENTATION Project cost/ Total Investment Summary: Table 22: Project Summary

Plant Capacity: 50 tons per day, 16000 tons per annum No. of Shift: One ( 8 hours per shift ) per day Working Days in Year: 320 D.S.C.R. : 1.97 B.E.P. : 19.18% IRR : 22.97 NPV : Nu. 12.29 millions

Cost of Project:

The total cost of the project is estimated at Nu. 33.24 millions as per the particulars given in the following table

Table 23: Project Cost

Value S. No. Particulars (Nu. In Millions) 1 Land 1,000 sq. meters (On lease) 2 Building & Civil Construction 7.8 3 Plant and Machinery 9.05 4 Misc. Fixed Assets 5 5 Preliminary Expenses 0.1 6 Pre Operative Expenses 4.85 7 Margin Money for Working Capital 4.25 8 Contingencies 10% of Fixed Assets 2.19 Total 33.24

Means of Finance

The table given below shows the means of finance:

Table 24: Means of Finance

S. No. Particulars Value (Nu. In Millions) 1 Promoters’ Equity 13.30 2 Term loan from FIs 19.94 Total 33.24

43 DETAILED FEASIBILITY REPORT - Animal Feed Unit

The term loan has been arrived based on the breakup of individual investment item and bank’s financing pattern as given in table.

9.1 Capital Costs

Land, Building & Civil Works

The total land area of the plant including the open space for future expansion is 1,000 square meters. The built-up area required by the plant is estimated at 600 square meters. The cost for Building & Civil Works for a covered area of 600 square meter is estimated at Nu. 7.8 millions taking construction cost per square meter to be Nu. 13,000.

Machinery

The table given below shows the cost of machinery:

Table 26: Cost of Machinery

Total Cost S. No. Description Quantity (Nu. In Millions)

Tank & Silos for raw and auxiliary ma- 1 5 1.00 terials storage

2 Metal Screen & Shaker 1 0.50

3 Hammer Mill 2 1.00

4 Blender 1 0.25

5 Weighing Scale (5 tons) 4 .08

6 Bagging Machine 1 0.7

7 Dust Collector 2 0.3

8 Product Tank 2 0.2

9 Pellet Producing Machine 1 3

10 Tanks for oil cakes and molasses 2 0.2

11 Boiler 1 1.00

Installation & commissioning charges 12 1 0.82 (10%)

Total Cost 9.05

44 DETAILED FEASIBILITY REPORT - Animal Feed Unit

Other Fixed Assets

The table given below shows the cost of other fixed assets:

Table 27: Cost of other fixed assets

Rate (Nu. In Mil- Amount S. No. Particulars Qty. (Nos) lions) (Nu. In Millions) 1 Office Equipment - 0.1

2 Furniture and Fixture 0.5

3 Electrical Accessories 0.5 Electrical cabling, ducting & 4 1.00 earthing 5 Computer System 1.00 Water Treatment Plant – 5,000 6 0.25 liters per hour 7 Fire Fighting 10 0.005 0.05

8 Utility Vehicles 02 0.8 1.6

Total 5.00

Pre Operating Expenses

Preliminary Expenses

The table given shows the preliminary expenses:

Table 28: Preliminary Expenses

S. No. Particulars Estimated Amount ( Nu. in millions) 1 Company Formation Expenses, Legal & Liaisoning 0.1 Total 0.1

Preoperative Expenses

Expenses incurred prior to commencement of commercial production are covered under this head that total Nu. 4.85 millions

Pre-operative expenses include establishment cost, rent, taxes, traveling expenses, interest during construction insurance during construction and other miscellaneous expenses. Based on the financing pattern envisaged, interest during construction has been estimated considering the phasing of in the cash requirements and the norms prevalent for various sources of funds. It has been assumed that the funds from various sources shall be available, as required.

Based on the project implementation schedule, the expected completion dates of various activities and the

45 DETAILED FEASIBILITY REPORT - Animal Feed Unit estimated phasing of cash requirements, interest during construction has been computed. Other expenses, under this head have been estimated on a block basis, based on information available for similar projects.

Table 29: Preoperative Expenses

Estimation Amount S. No. Particulars (Nu. In millions) (Nu. In millions)

for 1 year on term 1 Interest up to Production @ 13% on term loan 2.59 loan

0.25% of fixed 2 Insurance during Construction Period 0.05 assets

Electricity Charges during Construction Peri- 3 0.1 od(estimated) 4 Marketing Launch Expenses 0.3

5 Technology Know-how and Consultancy Fees 0.8

6 Training Expenses 0.5 7 Traveling Expenses 0.5 Total 4.85 9.2 Operating Cost

Cost of Raw Materials

The table given below shows the costing of raw materials:

Table 30: Cost of Raw Materials

Total Cost (Nu. in S. No. Description Quantity (Tones) Unit Price millions) 1 Oil Cake 3,450 15823.5 54.59 2 Bran of Cereals 3,705 16008.3 59.31 3 Molasses 750 9114 6.84 4 Maize 6,000 13700.4 82.20 5 Salt 21 12583.2 0.26 6 Limestone (ground) 24 2604 0.06 Other grains (wheat, barley, 7 450 173686 78.16 etc) 8 Meal (bone/flesh/blood) 600 22870.1 13.72 Grand 295.15 Total

Note: The cost for packing material (sack) is excluded from the annual cost of raw materials. It is included in distribution expenses 46 DETAILED FEASIBILITY REPORT - Animal Feed Unit

Land Lease Charge

Land Lease Rate: The land having an area of 1,000 square meters (10,758 square feet) has been considered on lease @ Nu.4.00 per sq. ft. per annum for first three years and @ Nu. 6.00 per sq feet for the fourth year and subsequently @ 3% increase every year.

The table given below shows the rate of land lease:

Table 31: Land Lease Charges

Lease Rate Lease Charges S. No. Year Per Sq. Ft Per Year Per Annum (Nu.) (Nu. In Millions)

1 1st Year 4.00 0.043

2 2nd Year 4.00 0.043

3 3rd Year 4.00 0.043

4 4th Year 6.00 0.065

5 5th Year 6.20 0.067

6 6th Year 6.40 0.069

7 7th Year 6.60 0.071

8 8th Year 6.80 0.073

9 9th Year 7.00 0.075

10 10th Year 7.21 0.078

Cost of Utilities

The table below shows the costing of utilities:

Table 32: Cost of Utilities

Cost S. No. Item Annual Requirement Unit Cost (Nu. in Millions) 1.81 1 Electricity 450,000 kilo watt hour 0.82 Nu./kWh 3.49 Nu./cubic 2 Water 10,000 cubic meter 0.04 meter 3 Furnace Oil 50,000 liters 1.49 Grand 2.35 Total

47 DETAILED FEASIBILITY REPORT - Animal Feed Unit

Manpower Costing

The table below shows the costing of manpower:

Table 33: Manpower Costing

S.No. Job Title Required No. Annual Salary (Nu. In Millions) 1 Plant Manager 1 0.25 2 Secretary 1 0.20 3 Accountant 1 0.14 4 Personnel Officer 1 0.25 5 Salesperson/purchaser 1 0.14 6 Cashier 1 0.08 7 Clerks 2 0.18 8 Store Keeper 2 0.12 9 Production Supervisor 1 0.15 10 Maintenance Engineer 1 0.2 11 Technician Operators 6 0.72 12 Laborers 6 0.43 13 Cleaner 2 0.11 14 Driver 2 0.18 15 Guard 4 0.24 Total 3.39

Sales Realization

It is assumed that 60% capacity utilization will be achieved during first year of operation, 70% in the second year and 80% from the third year onwards. The average selling price is calculated on the basis of the retail prices prevalent in Bhutan at the time of making this report. This has worked out to 450 USD per ton = Nu. 28.35 per kg. The price realizable by the company after allowing for transportation and dealer margin (totally 15%) is 24.10. Accordingly the revenues are:

Table 34: Sales Realisation

Nu. in Millions Total sales realization at 100% 385.56 First year 60% 231.34 Second Year 70 % 269.89 Third Year 80% 308.45

Term Loan Requirement from Financial Institutions

48 DETAILED FEASIBILITY REPORT - Animal Feed Unit

The table below shows the term loan requirement:

Table 35: Term Loan Requirement

Promoters Bank Loan Amount (Nu. Contribution S. No. Particulars (Nu. In mil- In millions) (Nu. In lions) millions) 1 Land 1,000 sq meters 0.00 2 Building & Civil Construction 7.8 3 Plant & Machinery 9.05 4 Other Fixed assets 5 5 Preliminary Expenses 0.1 6 Pre-operative Expenses 4.85 Margin Money for Working 7 4.25 Capital 8 Contingencies 2.19 Total 34.24 13.30 19.94

Working Capital Requirement

The table below shows the working capital requirement: Table 36: Working Capital Requirement

Particulars Period Margin Amount Promoters Bank Loan (Nu. In Mil- Contribution (Nu. In S. No. lions) (Nu. In Millions) Millions)

1 Raw Material 15 days 25% 7.38 1.84 5.53 2 Receivables 15 days 25% 9.64 2.41 7.23 Total 17.02 4.25 12.76

Estimated Cost of Production & Profitability

The profitability projections have been worked out for 10 years; at 60% capacity utilization during first year of operation, 70% in second year and 80% from third year onwards and following assumptions and basis as relevant and applicable to Bhutan have been considered while preparing the profitability.

• Repairs & maintenance have been taken as @4% p.a. on fixed assets.

• Bank interest rate has been calculated @13% p.a. on term loan & working capital loan.

• Insurance charges @0.25% on all assets in first year, then @5% decrease every year.

• Power & water charges are increased @5% every year.

• Administrative expenses have been increased @5% every year.

• Debt equity ratio has been taken to be 60:40 for term loan. 49 DETAILED FEASIBILITY REPORT - Animal Feed Unit

• Margin money on bank loan has been considered @ 25% on working capital

• Bank loan has been considered for repayment in 8 years with one year moratorium

• Preliminary exp. will be written off @10% every year in next 10 years.

• Pre operative exp. will be written off from II year @10% every year in next 10 years.

• Straight Line Depreciation has been charged taking useful life for buildings to be 30 years with a residual value of 10%; 7 years on other fixed assets and 6 years on machinery with no residual value.

• Insurance, lease rent & interest has been taken as fixed cost for calculating B.E.P.

• Income tax has been charged @30% every year as per Bhutan’s tax rates.

50 DETAILED FEASIBILITY REPORT - Animal Feed Unit

10.0 FINANCIAL ANALYSIS 10.1 Profitability The table below shows the profitability:

Table 37: Profitability

Heads Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

RM 177.08 206.60 236.11 236.11 236.11 236.11 236.11 236.11 236.11 236.11

Utilities 2.35 2.47 2.59 2.72 2.86 3.00 3.15 3.31 3.47 3.65

Salary 3.39 3.56 3.74 3.92 4.12 4.33 4.54 4.77 5.01 5.26 Fringe 0.51 0.53 0.56 0.59 0.62 0.65 0.68 0.72 0.75 0.79 benefits Insurance 0.05 0.05 0.05 0.05 0.04 0.04 0.04 0.04 0.04 0.03 Repair & 0.87 0.92 0.96 1.01 1.06 1.12 1.17 1.23 1.29 1.36 maintenance Land Lease 0.04 0.04 0.04 0.06 0.06 0.06 0.07 0.07 0.07 0.07 Rate Other Admin 0.14 0.14 0.15 0.16 0.16 0.17 0.18 0.19 0.20 0.21 expenses Production 184.44 214.31 244.20 244.62 245.04 245.48 245.94 246.43 246.94 247.48 Cost Sales 231.34 269.89 308.45 308.45 308.45 308.45 308.45 308.45 308.45 308.45

S&D Cost 34.70 40.48 46.27 46.27 46.27 46.27 46.27 46.27 46.27 46.27

Cost of Sales 219.14 254.79 290.47 290.89 291.31 291.75 292.21 292.70 293.21 293.74

PBIDT 12.20 15.10 17.98 17.56 17.14 16.70 16.24 15.75 15.24 14.70 Interest on 2.59 2.43 2.11 1.78 1.46 1.13 0.81 0.49 0.16 0 TL Interest on Loan for 1.66 1.66 1.66 1.66 1.66 1.66 1.66 1.66 1.66 1.66 WC

Total Interest 4.25 4.09 3.76 3.44 3.12 2.79 2.47 2.14 1.82 1.66 Deprecia- 2.36 2.36 2.36 2.36 2.36 2.36 1.53 0.23 0.23 0.23 tion

PAD 5.59 8.65 11.85 11.76 11.66 11.55 12.24 13.37 13.18 12.81

Write off 0 0.48 0.48 0.48 0.48 0.48 0.48 0.48 0.48 0.48 POE

Write off PE 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10

51 DETAILED FEASIBILITY REPORT - Animal Feed Unit

PBT 5.49 8.06 11.27 11.17 11.08 10.96 11.66 12.79 12.60 12.23

Tax @ 30% 1.65 2.42 3.38 3.35 3.32 3.29 3.50 3.84 3.78 3.67

PAT 3.84 5.64 7.89 7.82 7.76 7.67 8.16 8.95 8.82 8.56

Accumulated 3.84 9.49 17.37 25.20 32.95 40.63 48.79 57.74 66.56 75.12 Profit

NPR 1.66 2.09 2.56 2.54 2.51 2.49 2.65 2.90 2.86 2.77

ROI 2.40 3.75 5.24 5.20 5.16 5.10 5.42 5.95 5.86 5.69

10.2 Calculation of Interest on Term Loan The table below table shows the interest on term loan: Table 38: Interest on Term Loan (Figures in Nu. millions)

Year Opening Balance Repayment Closing Balance Interest 1 19.94 0.00 19.94 2.59 2 19.94 2.49 17.45 2.43 3 17.45 2.49 14.96 2.11 4 14.96 2.49 12.46 1.78 5 12.46 2.49 9.97 1.46 6 9.97 2.49 7.48 1.13 7 7.48 2.49 4.99 0.81 8 4.99 2.49 2.49 0.49 9 2.49 2.49 0.00 0.16

10.3 DSCR Calculation The table below shows the computation of Net Operating Income: Table 39: Net Operating Income

Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10

PAT 3.84 5.64 7.89 7.82 7.76 7.67 8.16 8.95 8.82 8.56

Dep. 2.36 2.36 2.36 2.36 2.36 2.36 1.53 0.23 0.23 0.23

Int 4.25 4.09 3.76 3.44 3.12 2.79 2.47 2.14 1.82 1.66

NOI 10.45 12.09 14.01 13.62 13.23 12.83 12.16 11.33 10.88 10.45

52 DETAILED FEASIBILITY REPORT - Animal Feed Unit

The table below shows the computation of Debt Services: Table 40: Debt Services

Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10 Repayment 0.00 2.49 2.49 2.49 2.49 2.49 2.49 2.49 2.49 Lease 0.04 0.04 0.04 0.06 0.06 0.06 0.07 0.07 0.07 0.07 Int 4.25 4.09 3.76 3.44 3.12 2.79 2.47 2.14 1.82 1.66 DS 4.29 6.62 6.29 5.99 5.67 5.35 5.02 4.70 17.76 13.23

The table below shows the computation of DSCR (Net Operating Income/Debt Services):

Table 41: DSCR

Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10 DSCR 2.44 1.83 2.23 2.27 2.33 2.40 2.42 2.41 0.61 0.79

10.4 Break Even Point

The table below shows the calculation of Break Even Point:

Table 42: Break Even Point

Calculation of B.E.P 1st Year 2nd Year 3rd Year Sales 231.34 269.89 308.45 Variable Cost 219.04 254.70 290.38 Fixed Cost 4.35 4.18 3.85 Break Even Point 21.21% 19.27% 17.07% (B.E.P) Average B.E.P 19.18%

Note on unit Costing & Pricing

Table 39: Unit Costing and Pricing

Heads Average %

Raw Material Costs 76.55

Sales & Distribution Costs 15.00

Overheads 6.08

Margin 2.37

Total 100.00

53 DETAILED FEASIBILITY REPORT - Animal Feed Unit

10.5 NPR and RI

The table below shows the Net Profit Ratio & Return on Investment:

Table 43: NPR and RI

2nd 3rd 4th 5th 6th 7th 8th 9th 10th Ratio 1st Year Year Year Year Year Year Year Year Year Year Net Profit 1.66 2.09 2.56 2.54 2.51 2.49 2.65 2.90 2.86 2.77 Ratio Return on 2.40 3.75 5.24 5.20 5.16 5.10 5.42 5.95 5.86 5.69 Investment

10.6 Cash Flow Statement (Nu. In Millions)

The table below shows the cash flow statement:

Table 44: Cash Flow

S. Years 0 1 2 3 4 5 6 7 8 9 10 No. 1 Inflows Net Profit 1.1 0.00 3.84 5.64 7.89 7.82 7.76 7.67 8.16 8.95 8.82 8.56 After Tax

1.2 Depreciation 0 2.36 2.36 2.36 2.36 2.36 2.36 1.53 0.23 0.23 0.23

Preliminary 1.3 Expenses 0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Write Off Pre Operative 1.4 Expenses 0 0 0.95 0.95 0.95 0.95 0.95 0.95 0.95 0.95 0.95 Write off Total Cash 1.5 0 6.30 9.05 11.30 11.23 11.16 11.08 10.74 10.23 10.10 9.84 Inflows

2 Outflows Investment in 2.1 21.85 Fixed Assets Investment 2.2 in Working 1.63 Capital Interest on 2.3 Term Loan 4.25 4.09 3.76 3.44 3.12 2.79 2.47 2.14 1.82 1.66 and WC

54 DETAILED FEASIBILITY REPORT - Animal Feed Unit

Total Out- 2.4 23.48 4.25 4.09 3.76 3.44 3.12 2.79 2.47 2.14 1.82 1.66 flows

3 Net Cashflow -23.48 2.05 4.96 7.53 7.79 8.05 8.29 8.27 8.09 8.28 8.18

Net Present 4 -23.48 1.81 3.89 5.22 4.78 4.37 3.98 3.51 3.04 2.76 2.41 Value

Internal Rate of Return (IRR) 22.97%

Net Present Value (NPV) at 13% Nu.12.29 Millions

Project Viability: The Internal Rate of Return of the project is 22.97%, which is significantly higher than the bank return rate of 13%.Hence, the project is financially viable. The NPV of the project is positive (Nu. 12.29 millions) at a discount factor of 13% during the first 10 years of operation considered. This implies that the project generates sufficient funds to cover all its cost, including loan repayments and interest payments during the period.

55 DETAILED FEASIBILITY REPORT - Animal Feed Unit

REFERENCE

Bhutan Trade Statistics 2014, Department of Revenue and Customs, Ministry of Finance, Royal Government of Bhutan (2014)

Dzongkhag-wise Inventory of Resources, Ministry of Economic Affairs, Royal Government of Bhutan (2005)

Environmental Assessment Act, 2000, National Environment Commission, Royal Government of Bhutan (2000)

Investment Opportunity Study, Department of Industry, Ministry of Trade & Industry, Royal Government of Bhutan – Volume I (2006)

Investment Opportunity Study, Department of Industry, Ministry of Trade & Industry, Royal Government of Bhutan – Volume II (2006)

Labour Force Survey Report 2012, Department of Employment, Ministry of Labour and Human Resources, Royal Government of Bhutan (2012)

Labour Force Survey Report 2013, Department of Employment, Ministry of Labour and Human Resources, Royal Government of Bhutan (2013)

Livestock Statistics 2013, Department of Livestock, Ministry of Agriculture and Forests, Royal Government of Bhutan (2013)

Regulation for the Environmental Clearance of Projects, 2002, National Environment Commission, Royal Government of Bhutan (2002)

Statistical Yearbook of Bhutan, National Statistics Bureau, Royal Government of Bhutan (2014) www.alibaba.com www.indiamart.com www.keralaagriculture.gov.in/htmle/bankableagriprojects/ah%5Cfeed.htm