Ghee and Oil Mill

National Ghee & Oil Mills (Pvt) Limited
A FEASIBILITY REPORT On
NATIONAL GHEE & OIL MILLS (PVT) LIMITED
Submitted to:
Sir Javed
Iqbal
Submitted by:
Aasma Amanat Roll
No: 38 Taneem Akhtar
Roll No: 12
Ambreen Shahid Roll
No: 20
Department Of Commerce
Preface
To understand the Project Appraisal an integral
part of MSc. Accounting & Finance Program
because it gives us practical knowledge of what we
have learnt during our study period. This report is
being written to fulfill the requirement of degree
MSc. Accounting & Finance. Project Appraisal
provides opportunity to have keen observation and
experience. This report process is valuable in
course of learning.
This report is also a step of some chance of

practical experience form. In this report we will be
covering all vital information and their scanning
exposures in the form of our observation.
In this report we have tried our level’s best effort

to encompass and elaborate the necessary
inferences suitable to enhance the knowledge. We
hope our effort of transfer of knowledge through
this report will be information gaining for readers.
A
asma Amanat
Taneem Akhtar
2
Am
breen Shahid
Dedication
We dedicate this Report to our dearest
parents and teachers whose prayers &
Support are always with us.
3
Acknowledgement:
We owe our heart-felt thanks to God Almighty who

enabled us to discharge such an onerous
responsibility with due care and caution in the
prime interest of the general public and to the
great credit of our worthy teacher and “Sir Javed
Iqbal” who is the main source of the enlightment
of our minds and the development of our natural
potentialities. We also feel highly indebted to our
parents who guided us at every stage and whose
pains are repaid in the form of what we are today.
Our thanks are bound even to our beloved country
Pakistan the sacred soil of which goes to the
making of our whole personality and character by
providing every possible facility and golden
opportunity of ideal education and training.
Aasma Amanat
TaneemAkhtar
AmbreenShahid
4
5
Table of Contents
Contents Page#
Executive Summary 06
Vision and Mission Statement 09
Objectives & Key Success Factors 12
Introduction 14
Management 15
Technical Analysis 17
Market Analysis 26
Economic Analysis 33
Assumptions underlying Earning Forecast 40
Projected Financial Statements 41
Auditing Plan 53
Exit Strategy and Risk Assessment 54
6
EXECUTIVE SUMMARY
The proposed project contemplates to set up a new Ghee & Oil Mill Unit
at Baghdad 1-Km away from Hamatian, Hasilpur Road, Bahawalpur. The
sponsors of the project are professionally qualified and have valuable and
extensive experience of business management in industrial fields namely
Miss Aasma, Miss Tasneem, Miss Ambreen. The overall
management and control of the firm will be actively managed by the full
time paid management under the direct supervision of Miss Aasma,
Miss Tasneem, Miss Ambreen, who will actively participate in
management decisions and control the affairs of the firm.
The production of Oil Cake, Refined Oil, and Oil Dirt (By-Product) will be
obtained by crushing Cotton Seed as input. The entire production of the
firm will be sold locally to the local Ghee Mills. The proposed project site
enjoys the benefits of
1) Easy availability of raw material,
2) Quick access to main road,
3) Sources of power, water, fuel etc.,
4) Availability of Transport and modern Communication systems,
5) Availability of Skilled and Un-Skilled labor, and
6) Free from environmental hazards like water logging and salinity and
floods.
The demand of the project is sophisticated enough on the basis of which
project will make sales of Rs. 256,244,000 in its first year of Operations,
Rs. 286,813,000 in its 2nd year of Operations whereas it will make sales of
Rs. 304,795,000 in its 3rd and subsequent years of operations. The annual
7
rated crushing capacity of the plant is estimated about 21,600,000
kilogram of Cotton Seed working 360 days a year and tripled shift per day
of 8 hours each. The project shall be equipped with latest locally
manufacturing plant and Machinery. The plant of the proposed project will
be capable of crushing 10,000/kg/expeller/day.
Of the total production of sunflower seed and cotton seed of the country
the share of Multan, Bahawalpur and D.G. Khan Division is more than
60%. Further Multan division consisting of Sahiwal, Vehari, Khanewal, and
Lodhran is the major cotton seed production area, nearly 40% of the total
production of cotton seed is produced by this division. The basic raw
materials of the proposed project are Cotton Seed and Caustic Soda of
which later is used to refine crude oil. The proposed project is located at
Hasilpur Road, 1-Km away from Hamatian, Plot No. 15/06 Jindu Missan.
The project will contribute in eliminating unemployment and will best
make the use of available resources. This project will create employment
opportunities for Skilled, Semi-Skilled and Unskilled labor along with the
Factory administrative and Marketing Staff.
The total cost of the project have been estimated to be Rs. 33,053,000
consisting of Land, Building Machinery (including installation and other
cost), Vehicle, Furniture, Office Equipment, Pre-Production Expenses,
Interest during construction and the initial net working Capital
Requirement.
The completion time period of the project is estimated to be 6 months. A
plot of land measuring 1 Acre has been purchased in the name of the
company at the proposed site. The cost of land including cost of
registration and development etc. is Rs. 1,590,000. The land is considered
8
to be sufficient for the proposed project. Building and Other Civil Works
consist of mainly Factory Building, Ware house, and Administrative Staff.
The erection and installation cost is estimated amounting to Rs. 838,000.
The debt equity ratio fulfills the maximum requirement i.e. 60 : 40of the
bank even though the current government policy is leaner towards easy
loan and lower equity requirement. The ratio of debt in the cost is such
that it allows for easy servicing of the loan. The debt equity-ratio is
considered satisfactory and long term loan would have a safe equity
margin.
The total manufacturing cost of the project have been bifurcated Rs.
211,410,000 in respect of raw material consumption, Rs. 9,666,000 for
labor and Rs. 5,532,000 for Factory overheads rated at 75% Capacity.
The financing cost of the project is estimated to be is to be 14% of the
debt obtained from the financial institution. Firm's total administrative,
General and Selling Expenses have been estimated to be Rs. 14,416,000.
9
VISION, MISSION & CORE VALUES
Our Vision
To be the premier Pakistani
, enterprise with a global reach
eulav gniusrup yletanoissaP
sredlohekats lla rof noitaerC
ruO
noissiM
tsom eht reviled dna poleved oT
remotsuc eganam ,stcudorp lio laedi
ecivres ytilauq reviled ,ecneirepxe
,htgnerts dnarb ot setubirtnoc taht
egatnavda evititepmoc a sehsilbatse
suht ,ytilibatiforp secnahne dna
sredlohekats eht ot eulav gnidivorp
ynapmoc eht fo.
10
“Leadership
We value leaders of high integrity, energy and enthusiasm who
have the necessary managerial, professional and people skills to
inspire a group or an organization to set high goals and achieve
them willingly. We believe that leadership skills need to be
strengthened at all levels within our organization and that
managerial and professional competence is a necessary foundation.
“Teamwork and Partnership

We believe that high performing teams containing appropriate
diversity can achieve what individuals alone cannot. Consciously
using the diversity of style, approach and skills afforded by teams is
strength we must continue building into our organization.
“Diversity
We value differences in gender, race, culture, personality and style
because diverse solutions, approaches and structures are more
likely to meet the needs of customers and achieve our business
goals.
“Quality and Continuous Improvements

We believe that quality and relentless commitment to continuous
improvements are essential to our ongoing success. To this end, we
define quality as understanding the customer’s expectations,
agreeing on performance and value, and providing products and
services that meet expectations 100 percent of the time. Our motto
is, “Quality in all we do”.
“Ethics and Integrity

We do care how results are achieved and will demonstrate honest
and ethical behavior in all our activities. Choosing the course of
highest integrity is our intent and we will establish and maintain the
highest professional and personal standards. A well-founded
reputation for scrupulous dealing is itself a priceless asset.
“Candid and Open Communication

We value communications that are courteous, candid and open and
that enables each of us to do our jobs more effectively by providing
information that contributes to the quality of our judgment and
decision making. Effective communication should provide the means
for gaining understanding of the company’s overall objectives and
plans and of the thinking behind them.
11
“Innovation
Success requires us to continually strive to produce break through
ideas that result in improved solutions and services to customers.
We encourage challenges to the status quo and seek organizational
environment s in which ideas are generated, nurtured and
developed.
“Individual Growth and Development

We strongly believe in the dignity and value of people. We must
consistently treat each other with respect and strive to create an
organizational environment in which individuals are encouraged and
empowered to contribute, grow and develop them and help to
develop each other.
“Enjoyment and Fun

We believe that excitement, satisfaction and recognition are
essential elements of a healthy, creative and high performing work
environment. Having fun in our work should be a normal experience
for everyone
12
 OBJECTIVES AND KEY SUCCESS

FACTORS
The main objectives of the development of project are:
• Capitalize on excellent opportunity to extract maximum

revenue in a branch out market.
• To launch the oil unit with a highly targeted publicity
campaign and in a grand opening event in the mid September
of 2008.
• To maintain tight control of costs, operations, and cash
flow through diligent management and automated computer
control.
• To maintain a high standard of product and service
provided.
• Capitalize on excellent location opportunity.
• Maintain tight control of costs, operations, and cash flow
through diligent management and automated computer
control.
• To be the premier company that achieves the goals of
profit maximization and value maximization for all the
stakeholders of the company.
The keys to success in achieving our goals are:
• Provide an exceptional service and product that leaves

an impression.
• Consistent utilizing of ingredients that creates product
quality.
• Managing our internal finances and cash flow to enable
upward capital growth.
• Strict control of all costs at all times, without exception.
• The Company will be strategically located to
maximize the revenue derived from the sales of the quality
product.
• Provide exceptional product that leaves an impression
with our core customers.
• Consistent entertainment atmosphere and product
quality.
• Managing our internal finances and cash flow to enable
upward capital growth.
• Strict control of all costs, at all times, without exception.
• Accelerated sales growth experienced in the category of
sachet packs.
13
• Extensive distribution channel for the sachet packs

focusing even on small kiosks in the urban and rural areas.
• The product would be focusing the price conscious
segment of the market by providing similar and better quality
branded product at lesser price.
• Emphasizing on excellent service to the other
wholesalers.
• Adapting to the rapid social and economic changes.
• Regular flow of local as well as Export orders is the key
success factor for efficiently running of the project.
• Selection and procurement of consistent quality raw
material would be another contributing factor for carrying out
successful operations of proposed project.
• Production of quality products meeting the Health
Standards of International level is necessary for Export sales.
• Competitive price of end products.
• Abundant supply of raw material.
• Cost efficiency through better management.
• Media campaign for the awareness of the retail
customers.
• Availability of low cost skilled labor.
• The main elements of export strategy are reducing cost
of doing business, increasing market access, technology,
environmental & Security Compliance, encouraging export-
oriented foreign investment, region-specific strategy, country
& business image building and value addition.
14
INTRODUCTION
The proposed project contemplates to set up a new Oil Mill Unit at
Baghdad 1-Km away from Hamatian, Hasilpur Road, Bahawalpur. The
annual rated crushing capacity of the plant is estimated about 21,600,000
kilogram of Cotton Seed working 360 days a year and tripled shift per day
of 8 hours each. The project shall be equipped with latest locally
manufacturing plant and Machinery.
The total Capital Cost of the project is estimated to be Rs. 34,059,907.
This total Cost of the project comprises of Fixed Assets Rs. 25,162,873
and Initial Net Working Capital of Rs. 8897034.
The Cost of the Project is proposed to be financed by Debt and Equity in
the ratios of 60 : 40 respectively.The remaining cost of the project will be
financed by the sponsor's share capital of Rs. 13623963.
15
Management
The overall management and control of the firm will be actively managed
by its initiator who will actively participate in management decisions and
control the affairs of the firm.
Name Designation
1. Sir Javed Iqbal Managing Director
The partner will contribute in the equity of the project and participate in
the profit and loss of the firm's business according to her capital
contribution ratio.
Sponsors
The sponsors of the project are professionally qualified and have valuable
and extensive experience of business management in industrial fields.
They have got good trading contacts and market reputation in the
industry. Moreover, they are professionally qualified in the field of
business Management from the Islamia University of Bahawalpur under
MSc Accounting & Finance Program. The sponsors experience would assist
the firm in its smooth and profitable operations.
The sponsors are financially sound and capable to contribute their part of
equity in the proposed project.
16
The Sponsors detail is as under:-
1. Name : Miss Aasma Amanat
Age : 21 years
Address : House # 653, Block A, Mian Channu.
Qualification : MSc. Accounting & Finance
2. Name : Miss Tasnem Akhtar
Age : 21 years
Address : House # 65, Block B, Satellite town,
Bahawalpur.
3. Name : Miss Ambreen Shahid
Age : 21 years
Address : House # 159, Block C, Civil lines, jhang.
17
Technical Analysis
Location of the Project

The project is proposed to set up at Hasilpur Road, Bahawalpur. The site
enjoys the following advantages:-
- Easy availability of raw material
- Access to the main road, Sources of Power, water, fuel etc.
- Availability of transport & communication like telephone,
telex, Internet etc.
- Availability of skilled and Un-Skilled manpower
- Free from other environmental hazards like water logging,
floods, salinity etc
SCOPE OF BUSINESS:
This business has widely scope in the field of Ghee mills. This business
provides the raw material to the Ghee Mills, from which they make the
cooking oil & Ghee from it and then they provide us in final shape.
CRUCIAL FACTORS & STEPS IN DECISION

MAKING INVESTMENT.
Before making any investment decision it is admissible to
evaluate the associated risk factor by taking into consideration certain key
elements. These may include
• Availability of resources
• Technical know-how
• Past experience
• Managerial skills
At the time of evaluation and analysis of strength, weakness,
opportunities & threats [SWOT] for a particular business serves the of
basic tools in investment decision making
18
KEY SUCCESS FACTORS/ PRACTICAL TIPS

:FOR SUCCESS
• Availability of trained and professional staff
• Reasonable prices against the competitors
• High stander environment for the staff and customers
:OPERTUNITIES
• Availability of raw material easily.
• Availability of labour at low cost.
• Transportation facilities
• Availability of electricity easily.
• Skilled person is available easily.
:THREATS
One of the major threat to business is highly salary pakge should be
.competitive
:IMPORTANCE OF OIL MILLS

The oil mills have an important role in the economy of our country,
because our country is an agricultural country, in this way we are
producing more cotton. The cotton seed is taken from raw cotton which is
used in oil mills for the purpose of oil and as well as seed cake. This oil is
sent to the Ghee Factories for ghee & cooking oil purpose which we use
in daily cooling. The seed cake is sold to the farmers for animal’s
19
requirement & the wastage is sent to the soap factories for making soaps.
.The usage of oil is very high in shape of cooking oil & ghee
Oil Mills are performing very high level of business. They are providing the
employment opportunities in the country. They are contributing in GOVT taxes as the
GOVT revenue. It is also a profitable business, so that I have decided to start an Oil
.Mill
Manufacturing Process
o Some vegetable oils, such as olive, peanut, and
some coconut and sunflower oils, are cold-
pressed. This method, which entails minimal
processing, produces a light, flavorful oil
suitable for some cooking needs. Most oil
sources, however, are not suitable for cold
pressing, because it would leave many
undesirable trace elements in the oil, causing it
to be odiferous, bitter tasting, or dark. These
oils undergo many steps beyond mere
extraction to produce bland, clear, and
consistent oil.
 Cleaning and grinding
Incoming oil seeds are passed over magnets to remove

any trace metal before being dehulled, deskinned, or
otherwise stripped of all extraneous material. In the case
of cotton, the ginned seeds must be stripped of their lint
as well as dehulled. In the case of corn, the kernel must
.undergo milling to separate the germ
The stripped seeds or nuts are then ground into coarse

meal to provide more surface area to be pressed.
Mechanized grooved rollers or hammer mills crush the
material to the proper consistency. The meal is then
heated to facilitate the extraction of the oil. While the
procedure allows more oil to be pressed out, more
impurities are also pressed out with the oil, and these
.must be removed before the oil can be deemed edible
20
 Pressing
The heated meal is then fed continuously into a screw

press, which increases the pressure progressively as the
meal passes through a slotted barrel. Pressure generally
increases from 68,950 to 20,6850 kilopascals as the oil is
squeezed out from the slots in the barrel, where it can be
.recovered
 Extracting additional oil with solvents
Soybeans are usually not pressed at all before solvent

extraction, because they have relatively little oil, but most
oil seeds with more oil are pressed and solvent-treated.
After the initial oil has been recovered from the screw
press, the oil cake remaining in the press is processed by
solvent extraction to attain the maximum yield. A volatile
hydrocarbon (most commonly hexane) dissolves the oil
out of the oil cake, which is then recovered by distilling
the light solvent out. The Blaw-Knox Rotocell is used to
meet the demands of the United States soybean oil
industry. In using this machine, flakes of meal are sent
through wedge-shaped cells of a cylindrical vessel. The
solvent then passes through the matter to be collected at
the bottom. Also still in use by a significant number of
manufacturers is the Bollman or Hansa-Muhle unit, in
which oilseed flakes are placed in perforated baskets that
circulate continuously. The solvent percolates through the
.matter which is periodically dumped and replaced
 Removing solvent traces
Ninety percent of the solvent remaining in the extracted

oil simply evaporates, and, as it does, it is collected for
reuse. The rest is retrieved with the use of a stripping
column. The oil is boiled by steam, and the lighter hexane
.floats upward. As it condenses, it, too, is collected
 Refining the oil
21
The oil is next refined to remove color, odor, and

bitterness. Refining consists of heating the oil to between
107 and 188 degrees Fahrenheit (40 and 85 degrees
Celsius) and mixing an alkaline substance such as sodium
hydroxide or sodium carbonate with it. Soap forms from
the undesired fatty acids and the alkaline additive, and it
is usually removed by centrifuge. The oil is further washed
.to remove traces of soap and then dried
Oils are also degummed at this time by treating them with

water heated to between 188 and 206 degrees Fahrenheit
(85 and 95 degrees Celsius), steam, or water with acid.
The gums, most of which are phosphatides, precipitate
.out, and the dregs are removed by centrifuge
Oil that will be heated (for use in cooking) is then

bleached by filtering it through fuller's earth, activated
carbon, or activated clays that absorb certain pigmented
material from the oil. By contrast, oil that will undergo
refrigeration (because it is intended for salad dressing, for
example) is winterized—rapidly chilled and filtered to
remove waxes. This procedure ensures that the oil will not
.partially solidify in the refrigerator
Finally, the oil is deodorized. In this process, steam is

passed over hot oil in a vacuum at between 440 and 485
degrees Fahrenheit (225 and 250 degrees Celsius), thus
allowing the volatile taste and odor components to distill
from the oil. Typically, citric acid at. 01 percent is also
added to oil after deodorization to inactivate trace metals
that might promote oxidation within the oil and hence
.shorten its shelf-life
 Packaging the oil
The completely processed oil is then I V measured and

poured into clean containers, usually plastic bottles for
domestic oils to be sold in supermarkets, glass bottles for
imports or domestic oils to be sold in specialty stores, or
.(cans for imports (usually olive oil
o By products/Waste
The most obvious byproduct of the oil making process is oil

seed cake. Most kinds of seed cake are used to make animal
feed and low-grade fertilizer; others are simply disposed of.
22
In the case of cotton, the lint on the seed is used to make

yarn and cellulose that go into such products as mattresses,
rayon, and lacquer. Coconut oil generates several
byproducts, with various uses: desiccated coconut
meat(copra) is used in the confectionery industry; coconut
milk can be consumed; and coir, the fiber from the outer
coat, is used to make mats and rope. Since corn oil is derived
from a small portion of the entire kernel, it creates corn meal
and hominy if it is dry milled, and corn starch and corn syrup
if it is wet milled.
Lecithin is a byproduct of the degumming process used in

making soybean oil. This industrially valuable product is
used to make animal feed, chocolate, cosmetics, soap, paint,
and plastics—to name just a few of its diverse uses. Recent
research has focused on utilizing the residual oil seed cake.
The cake is high in protein and other nutrients, and
researchers are working to develop methods of processing it
into a palatable food that can be distributed in areas where
people lack sufficient protein in their diets. This goal
requires ridding (through additional processing) the oil seed
cake of various undesirable toxins (such as gossypol in
cotton seed, or aflatoxin in peanut meal). Initial results are
promising.
o Quality Control
The nuts and seeds used to make oil are inspected and
graded after harvest by licensed inspectors in accordance
with the United States Grain Standards Act, and the fat
content of the incoming seeds is measured. For the best oil,
the seeds should not be stored at all, or for a only very short
time, since storage increases the chance of deterioration due
to mold, loss of nutrients, and rancidity. The seeds should be
stored in well-ventilated warehouses with a constantly
maintained low temperature and humidity. Pests should be
eradicated, and mold growth should be kept to a minimum.
Seeds to be stored must have a low moisture content
(around 10 percent), or they should be dried until it reaches
this level (dryer seeds are less likely to encourage the
growth of mold).
Processed oil should be consistent in all aspects such as

color, taste, and viscosity. Color is tested using the Lovibund
Tintometer or a similar method in which an experienced
observer compares an oil's color against the shading of
standard colored glasses. Experienced tasters also check the
23
flavor of the oil, and its viscosity is measured using a

viscometer. To use this device, oil is poured into a tube that
has a bulb at one end set off by two marks. The oil is then
drained, and the time required for the bulb to empty is
measured and compared to a chart to determine viscosity.
In addition, the oil should be free of impurities and meet the

demands placed upon it for use in cooking. To ensure this,
the product is tested under controlled conditions to see at
what temperature it begins to smoke (the smoke point),
flash, and catch on fire; warnings are issued appropriately.
To allow its safe use in baking and frying, an oil should have
a smoke point of between 402 and 503 degrees Fahrenheit
(204 and 260 degrees Celsius). The temperature is then
lowered to test the oil's cloud point. This is ascertained by
chilling 120 milliliters of salad oil to a temperature of 35
degrees Fahrenheit (zero degrees Celsius) for five and a half
hours, during which period acceptable salad oil will not
cloud.
Before being filled, the bottles that hold the oil are cleaned
and electronically inspected for foreign material. To prevent
oxidation of the oil (and therefore its tendency to go rancid),
the inert (no reactive) gas nitrogen is used to fill up the
space remaining at the top of the bottle
24
RAW MATERIAL AVAILABILITY

Amongst the oil seeds cultivated in Pakistan, the most important is the
cotton seed, like some other oil seeds cotton seed is also a by-product as
the crop is mainly cultivated for fiber. Its contribution, however, to the
local domestic oil production is about 57%. Next to the cotton seed is the
rape and mustard which account for about 31% of the vegetables by-
production in the country. In addition to these, production of other non
traditional oil seeds such as sunflower, sesamem, groundnuts, linseed &
castor is also increasing.
Out of total production of sunflower seed and cotton seed of the country
the share of Multan, Bahawalpur and D.G. Khan Division is more than
60%. Further Multan division consisting of Sahiwal, Vehari, Khanewal, and
Lodhran is the major cotton seed production area, nearly 40% of the total
production of cotton seed is produced by this division. On the basis of the
information collected, the yearwise production of cotton seed based on
3% Growth Rate is given below:-
Production of Cotton seed
YEAR COTTON SEED (000 Tons)

2003-04 2369
2004-05 2523
2005-06 2687
2006-07 2862
2007-08 3049
2008-09 3141
PROJECTED AVAILABILITY OF COTTON SEED (3% growth)
YEAR COTTON SEED (000 Tons)

2008-09 3141
2009-10 3235
2010-11 3332
2011-12 3432
2012-13 3535
25
Against the requirement of the proposed project of cotton seed at 10000

Kg/Expeller/day the estimated production of cotton seed is 3141000 tons
during 2008-09. Keeping in view the past trend, the available production
of cotton seed in Bahawalpur Division the proposed Project would not face
any problem.
PRODUCTION CAPACITY
The Plant is capable of crushing 10000 Kg/Expeller/day of Cotton seed. It
is based on 360 working days per annum and tripled shift per day of eight
hours.
The break up of the Capacity is given as under:-
Crushing of Cotton Seed (10000/Expeller/Day for 360 Days)
Materials Annual Production (Kgs)

(000)
Cotton Seed 21,600
Caustic Soda 648
80% of the Crushing of Cotton Seed will produce Ghee, 10% would be
Refined Oil, whereas the 5% would be Oil Dirt obtained after applying
Caustic Soda over Crude Oil and the 5% would be Wastage.
Production of: (000)
Items Annual Production (Kgs)

Oil Cake 17,280
Refined Oil 2,160
Oil Dirt 1,080
Wastage 1,080
26
MARKET ANALYSIS
INTRODUCTION
In Pakistan at present, the edible oil industry includes the manufacture of
compound cooking oils (which is a recent development) table or salad oils
(this process is still in its infancy) margarine and refined oils. Important
products of this industry are mustard oil, cotton seed oil, groundnut oil
and newly developed sunflower seed oil, sunflower seed oil and soyabean
Oil of late a number of modern oil mills have been set up for the
production of solvent extraction oils. At present, major sources of raw
materials are cotton seed (about 50%) (Rape and mustard seed about
36%) and other about (6%).
Traditionally the edible oil industry started operation at small and cottage
industry scale. At the village level, there was bullock driven "Kohlu" which
was the oldest way of extracting oil. Later few crushing units of much
bigger size were established which were equipped with locally
manufactured expellers which were equipped with locally manufactured
expellers. These units produced edible oil in raw form and oil meal or oil
cakes, food for animals or exported. Both these processes were inefficient
and left much oil unrecovered. It is estimated that about one third of oil
was left in the oil cakes. Further, large sized units were developed,
equipped with modern expellers and a few of them with preparatory
equipments for cleaning and Delinting of seeds. Finally, solvent extraction
plants were set up and their number is increasing. These considered being
the most efficient way of oil extraction.
27
PRESENT CAPACITY
At present, there are over 300 oil mills with more than 1500expellers in
Sindh and 1000 mills with 4000 expellers in the Punjab. Most of these
units are old and are generally equipped with locally fabricating expellers.
Moreover, many units are not equipped with decorticating and Delinting
machinery for cotton seed as a result of which oil recovery in very low.
Total annual production is 3,000,000 to 5,000,000 tons in Punjab and
1,800,000 in Sindh. This Capacity has been estimated on the basis of 20
to 25 percent of Oil recovery.
In addition to this the following are the Oil Mill Units in Sindh and Punjab
with a total annual Production Capacity of 80.154% tons of vegetable oil
per year. Thus total production capacity of all types of edible producing
units is 765,000 tons a year.
Following is the detail of Oil Mill Units along with their production
capacity:-
NAME OF FIRM/COMPANY LOCATION CAPACITY

Fatima Enterprises Multan 30,000
Solvex Pakistan Ltd. Multan 18,750
P.P. Industries Khanewal 22,500
Bureewal Textile Mills Vehari 25,000
Oil & Cake Industries Nawabshah 20,000
Kohinoor Oil Mills Sheikhupura 30,000
Unied Oil Industries Muridke 4,800
Jeelan Oil Mills Sialkot 8,750
Kuku Abbas & Co. Vehari 3,600
Data Oil Mills Faisalabad 12,000
AL-Data Oil Mills Vehari 3,600
Aleem Oil Mills Sukkar 4,000
Ali Saqib Enterprises Vehari 3,600
Roshan Oil Mills Okara 3,600
Jilan Oil Mills Sialkot 17,500
Friends Oil Mills Bhakkar 3,600
Haq Baho Oil Mills Jacobabad 4,500
Shary Extraction (Pvt) Ltd. Bahawalpur 18,000
28
Adnan Hanir Enterprises (Pvt) Ltd. Karachi 21,500

Sattar Solvent Extraction & Scap Ltd. Sukkar 17,500
Khokar Industries (Pvt) Ltd. Norwal 10,395
Raja Oil Mills Chichawatni 3,600
Tariq Oil Mills Okara 3,600
Mughal Oil Mills Multan 3,600
Rohel Industries Sahiwal 3,600
Roshan Oil Mills Okara 3,600
Al-Rehan Oil Mill Bahawalpur 22,500
Shamim Oil Mills Bahawalpur 23,500
Al-Hamd Oil Mills Bahawalpur 17,500
Naveed Oil Mills Bahawalpur 16,000
Friends Oil Factory Bahawalpur 10,500
Malik Oil Mills Bahawalpur 8,500
29
PRODUCTION
Actual Production is very low about 457000 tons a year. The following
table shows the output of edible oil in recent years from various oil
seeds:-
REFINED OIL PRODUCTION
("000" Tons)
YEAR TOTAL PRODUCTION COTTON SEED OTHER

2002-03 2,286 1,341 945
2003-04 1,836 774 1062
2005-06 2,826 1,746 1080
2006-07 3,060 1,935 1125
2007-08 3,111 1,977 1134
2008-09 3,134 2,090 1044
IMPORTS
Since the domestic availability of refined (5 red to 7 red) oil is below the
requirement, Pakistan has to import it to meet the gap. The vegetable oil
imported in the country can be grouped as edible and non-edible or the
soft and technical oils. The refined oil, particularly is imported every year
against a lot of foreign exchange. Imports are being made from several
sources including the U.S.A., Brazil, Indonesia, Malaysia, and Singapore.
The refined oil imports and value since 1981-82 are shown in the table:-
IMPORT OF REFINED OIL
YEAR QUANTITY (000 Tons) AMOUNT ($ 000)

2003-04 1872 10350
2004-05 1968 11010
2005-06 2571 19554
2006-07 1992 20862
2007-08 2475 18387
2008-09 2654 19861
30
FUTURE DEMAND
According to the Nutritional Plan of the Federal Government per capital
availability of cooking medium should be at least one ounce per day or
365 ounce per year. As such present consumption of edible oils comes
very high. Refined Oil serves as input for edible oil.
The consumption of edible oil is directly proportionate with population.
Therefore, future projection is made on the basis of population only, which
is increasing about 3.00% a year. Yearwise future Demand and Supply
gap is given below:-
PROJECTED DEMAND FOR REFINED OILS (In "000" Tons)
YEAR POPULATION PROJECTED DEMAND SUPPLY GAP

2009-10 167,753,406 5,780 1,445 4,335
2010-11 170,819,939 5,898 1,475 4,423
2011-12 173,942,527 6,006 1,502 4,504
2012-13 177,122,197 6,115 1,529 4,586
OIL CAKE
The Cotton seed actually result in two main products one is the crude oil
and the other is Oil Cake. Crude oil is further converted into refined oil by
applying Caustic Soda which separates the Oil Dirt from Crude Oil. This Oil
Dirt is by-product which is being sold to Soap Manufacturing firms for the
production of Soap.
The Oil Cake is mainly used as raw material in poultry and animal feed. It
is an excellent source of nutrition having almost double the protein
content over the undlinted and undecortecated expeller cakes. It is mainly
used to increase the nutritional value and balance the cattle and poultry
feed.
The establishment of modern "Diary" cattle and poultry farms, the
demand for specially prepared feed is increasing rapidly.
31
The ever increasing demand for milk and meat has led to the
establishment of large scale cattle farms in urban areas. This in turn has
created the demand for proper animal feed. It is very clear that in order
to improve the growth performance and productivity of livestock
population; it is necessary that balanced diet in the form of un-
conventional feed be provided to the animals.
The growth of poultry feed industry started with the growth of commercial
poultry industry after 1963. This in turn resulted in the generation of
demand for mixed feeds for commercial hybrid chickens which have exact
nutritional requirements. The present installed capacity of poultry feed
and cattle feed is around 2595000 Tons per annum.
In Pakistan, about 15% of the total areas is meant for fodder crop. This is
decreasing rapidly mainly because other cash crops are high yielding
products. The demand for compound feed is increasing due to the more
development of livestock and its products.
It can therefore, be reasonable assumed that the meal, hull and husk etc.
shall be readily sold to the feed milks.
OIL DIRT OR SOAP FOOTING
Soap footing or Oil dirt is obtained as a by-product in the process of
refining crude oil obtained from extraction. Caustic Soda is then applied
for refining the Crude Oil which in turns refines the Crude Oil into three
categories ranging from "5 red to 8 red" (the oil is red to the extent of
these numbers, however it is the refined oil quality, considered to be one
of the good quality refined oils) and separates Oil Dirt from the Crude Oil.
The application of Caustic Soda over improves the Color of the Oil. The
by-Product obtained is being sold to soap manufacturing firms who further
process the Oil Dirt and manufactures soap. This soap is being sold in the
market under the name of "KALA SOAP".
There is large consumption of this "KALA SOAP" in our country. it is widely
produced all over in the country at cottage industry level and in the
unorganized sector.
CONCLUSION
32
To conclude, it is evident that nothing obtained as main product or by-

product, fro the proposed unit goes waste or has no outlet. All the
products serve directly of indirectly human needs as well as they are
involved in the development of overall economic outlook. Hence the
market viability of the project being based on local raw material will result
in substantial saving in valuable foreign exchange.
PRICING ANALYSIS
Main Products
OIL CAKE
The Cotton Seed Oil Cake will be sold in the Grain Market to the dealers @
of 12.00/Kg. The prices of Oil Cake have been computed on average of
past five years.
REFINED OIL
The Cotton Seed Refined Oil will be sold to the local ghee mills in bulk
quantities @ 67.00/kg.
OIL DIRT
Oil Dirt will be sold to Soap Manufacturing Firms @ 7.00/kg. Oil Dirt will
be sold in large bulk quantities but will not be kept as inventory, however
a provision of 5% inventory has been assumed at the end of every year.
Following is the table showing prices of the products and by-products:-
TABLE SHOWING THE PRICES OF PRODUCTS AND BY-PRODUCTS
S. No. Product Prices (Per Kg)

1 Oil Cake 12.00
2 Refined Oil 67.00
3 Oil Dirt 7.00
NOTE: The current prevailing prices of Cotton Seed and Caustic Soda are
Rs. 12.00/kg and Rs. 35.00/kg. Moreover, these prices have been
computed on average of past five years.
33
Economic Analysis
Economic evaluation is considered prominent yardstick to measure the
viability of a project. This analysis is directed towards determining
whether the project is likely to contribute significantly to the development
of the economy as a whole and the contribution of the project would be
great enough to justify the use of available resources. This aspect is
reviewed under the following:-
INITIAL IMPACT
In order to pursue a theory of balanced growth of the economy the
current government is putting an emphasis on industrialization of our
inherently agrarian economy. Industrialization of substantial dynamic
benefits is important for changing the traditional structure of our less
developed economy, while providing employment for a rapidly increasing
labor force, and saving scarce foreign exchange by import substitution
and creating export potentials.
A capital expenditure creates incomes for people engaged in the
fabrication of capital goods, who in turns spend their incomes on
consumer goods. An initial original capital investment creates a wave of
income and spending which has multiplied effect on the national income,
increasing it by several times, the original investment. The initial original
capital investment of Rs. 34,174,000 in local currency would have a
healthy impact on the GNP of the country, the extent of which depends on
the degree of multiplied effect.
EMPLOYMENT OPPORTUNITIES
The project would create employment opportunities for the following staff:
Detail Total Nos.
Skilled Labor 18
Semi-Skilled Labor 18
Factory Administrative Staff 26
Marketing Staff 05
BENEFIT COST ANALYSIS
The benefit/Cost ratio of the project is worked out in times which are
considered satisfactory. The NPV of the expected benefit and costs has
been taken into account for the calculation of this ratio.
34
National Ghee & Oil Mills

(Pvt) Limited Annexure - I
Estimated Cost of Land
Sr. Area in Unit Rs ("000")

Description
No. Cost
Marlas Total Cost
1 Land 160 7,500 1,200
Registration & Legal Requirements 10% of
2 160 750 120
cost of Land
3 Stamp Duty 5% of Cost of Land 160 375 60
4 District Council Fee 2.5% of Cost of Land 160 188 30
5 Development Charges 15% of Cost of Land 160 1,125 180
Total Cost of Land 9,938 1,590
35
Annexure - II

Estimated Cost of Civil Works
Sr. Type of Unit of Covered Rate Per Rs ("000")

Description
No.
Building Construction area Unit Total Cost
1 Oil Cake Store 1 RCC Square feet 7,065 575 4,062
Expeller Room
RCC Square feet 2,214 575 1,273
2 (G/Floor)
3 Expeller Room (F/Floor) RCC Square feet 2,214 575 1,273
4 Refinery Room RCC Square feet 196 575 113

Office Block and
RCC Square feet 694 575 399
5 Corridor
Machinery Covered
RCC Square feet 403 575 232
6 area
7 Store RCC Square feet 714 575 411
8 Guest Rooms RCC Square feet 492 500 246

Cost of Jumbo Lon for Open
Square feet 42,174 45 1,898
9 insulation area
Boundary Wall and
Running feet 503 - 276
10 Gate
11 Brick Pavement Running feet 901 - 690
12 Contingency 833 - 544

Total Cost of Civil
57763 10,872
Works
36
Annexure - III
Estimated Cost of Machinery
Rupees
("000")
Unit
Sr.No. Description Qty Total Cost
Cost
Oil Expeller Bearing Type duty weight (100 Mon)
1 with Crude Oil.
Production 250 m/24 hrs. 6 200,000 1,200
Electric Motor for Expeller 40 HP/950 RPM made
6 45,000 270
2 China new.
3 Electric Motor Pully V-Belt type Local 6 4,000 24

Small Crude Tank for Expeller material 1/4
6 7,500 45
4 thickness Local
5 Big Crude Tank cap (500 Mon) Local Material 1 60,000 60
6 Storage Tank Cap (500 Mon) Local Material 2 55,000 110

M.S. Refined Tank Cap (250 Mon) heavy material
3 85,000 255
7 (3/8 plate Local)
8 Electric Motor 10 HP/950 RPM China 2 20,000 40
9 Electric Motor 5 HP/950 RPM China 2 13,000 26
10 Refined Pump with Motor 1 16,000 16
11 Gear Pump 2" X 2" Local 2 9,500 19
12 Electric Cables with tape fitting Electric Panel 1 275,000 275
13 Expeller Bolt & Motor Bolts foundation bolts 3 75,000 225
14 Capacitor 40 HP Motor 4 20,000 80
15 Electric Pump Gear with 5 HP Motor 1 13,000 13
16 Contingency - - 133
Total Cost of Machinery 2,791
37
Annexure - IV

Estimated cost of the Project
Total cost
Sr.No. Description LCY
("000")
1 Land 1,590 1,590
2 Building 10,872 10,872
3 Machinery 2,791 2,791
4 Installation & Erection of Machinery 419 419
5 Insurance 5% of Cost of Machinery 140 140
6 Transportation 10% of Machinery 279 279
7 Vehicles 6,270 6,270
8 Furniture and Fixture 300 300
9 Office Equipment 150 150
10 Pre-operating expenses 980 980
11 Interest during construction 1,377
Estimated fixed cost 25,167
Add: Net Initial Net Working Capital 9,006
Total Estimated Cost of Project 34,174
38
Annexure - V
Initial Net Working Capital Requirement
Rs. "000"
A. Current Assets:
1 Inventories:
a) Raw Material 5 Days Requirement:
I) Cotton Seed 2,700
II) Caustic Soda 150
b) Finished Goods 11,450
c) Spares & Stores 142
Total Cost of Inventory 14,442
2 Advances and Deposits, & Prepayments 85
3 Accounts Receivables (2% of Sales) 5,202

Cash 1% of Amount withdrawn from Bank for
4 108
Inventory
Total Current Assets 19,838
B. Possible Current Liabilities:
Less: Bank Borrowing 75% of Inventories 10,832
Initial Net Working Capital 9,006
39
Annexure - VI
Estimated Income Statement
Years ending September 30 : 2011 2012 2013
Sales 260,091 291,119 309,371
Less: COST OF SALES
Raw Material 212,382 225,504 239,598
Labor 10,797 12,416 14,279
Manufacturing Overheads 5,822 6,031 6,241
Depreciation 2,250 2,250 2,250
Total Cost of Goods Manufactured 231,251 246,202 262,368
Inventory Adjustment – Less 11,563 748 12,371
Cost of Sales 219,688 245,454 249,997
Gross Profit 40,403 45,665 59,374
OPERATING EXPENSES:
Administrative Expenses 2,621 3,014 3,466
General Expenses 1,980 2,277 2,619
Selling Expenses 10,404 11,645 12,375
Total Operating Expenses 15,004 16,936 18,459
Operating Profit 25,398 28,729 40,915
OTHER EXPENSES:
Financial Charges on:
Long Term Loan 3,076 2,768 2,461
Bank Borrowings - - -
Amortization of Pre-Production Expenses 327 327 327
Total Other Expenses 3,402 3,095 2,787
Profit Before Tax and Worker's Fund 21,996 25,634 38,128
Worker's Fund 1,760 1,794 2,669
Profit/(Loss) Before Tax 20,236 23,840 35,459
Tax Provisions @ 45% 9,106 10,728 15,956
Net Profit 11,130 13,112 19,502
Ratios:
40
ASSUMPTION UNDERLYING
EARNING FORECAST
PRODUCTION AND SALES
1. The proposed Oil Mill Unit would be equipped with 6 most modern
Oil Expeller Bearing Type duty weight (100 Mon) with Crude Oil,
Production 250 m/24 hrs, Electric Motor for Expeller 40 HP/950
RPM, Electric Motor Pully V-Belt, Small Crude Tank for Expeller
material 1/4 thickness. The project will be capable of crushing
60000 kg/day of Cotton Seed. However, immediate target is to
meet the current demand level of the Ghee Mills.
2. Operating efficiency of the project is assumed at 75% for the first

year and 80% for the second 85% for third and subsequent years.
3. In line with recent experience of other units based on the most

modern oil mills machinery, 100% of the production would be sold
locally In Pakistan to Ghee Mills particularly located in Bahawalpur
Division.
4. Year-end Inventory is assumed at 5% of the production of that

particular year.
5. Selling Prices are assumed in accordance with the current prevailing

rates in the local market. These selling prices are based on average
of last five years.
Based over these assumptions, following is the year-wise detail of

production, Sales and Sales Revenue of the proposed project:-
41
Projected Financial Statement:

Annexure-VI-A
Year ending 30th September:

Capacity Utilized 2011 2012 2013
75% 80% Annexure-VI-A
85%
Production at 100% Capacity Quantity ("000")
Production of Oil Cake:
a) Number of Units Manufactured 12,960 13,824 14,688
Crushing Of Cotton Seed:
Add: Opening Inventory - 648 691
Total Units available for Sales 12,960 14,472 15,379
Less: Closing Inventory No. of
5% of Production 648 % 691 734
10000 Kg of Cotton Seed/day/Expellers
Expellers Output Units ("000")
Units Sold 12,312 13,781 14,645
Oil Cake 6 80 17,280
Production of Refined Oil:
Refined
b) Oil Number of Units Manufactured 6 1,620 10 1,728 1,836
2,160
Add:
Oil Dirt Opening inventory 6 - 5 81 86
1,080
Total Units available for Sales 1,620 1,809 1,922
Wastage 6 5 1,080
Less: Closing Inventory 5% of Production 81 86 92
Total 100 21,600
Quantity Sold 1,539 1,723 1,831
c) Production of Oil Dirt:
Number of Units Manufactured 810 864 918
Add: Opening Inventory - 41 43
Total Production available for Sales 810 905 961
Less: Closing Inventory 5% of Production 41 43 46
Quantity Sold 770 861 915
Sales Revenue:
Rupees
Description Unit Price
75% 80% 85%
a Oil Cake 13 160,056 179,150 190,382
b Refined Oil 62 95,418 106,801 113,497
c Oil Dirt 6 4,617 5,168 5,492
Total Sales (a+b+c) 260,091 291,119 309,371
42
Annexure-VI-A
Raw Material:
Years 2011 2012 2013

Capacity Utilized
75% 80% 85%
Consumption of Raw
Material:
Description Quantity ("000")
Cotton Seed
16,200 17,280 18,360
a) 10000kg/day/Expeller
Caustic Soda 486 518 551
b) Total Quantity Consumed 16,686 17,798 18,911
Cost of Raw material:
Description Rs. ("000")
Cotton seed @ 12/kg 194,400 207,360 220,320
Caustic soda @ 37/kg 17,982 18,144 19,278
Total Cost 212,382 225,504 239,598
43
Annexure-VI-A
Labor Cost:
a) Direct Labor:
No. of Salary/Month Annual
Sr. Salary
Plant Labor Employees /Worker
No. ("000")
1 Skilled 18 14,000 3,024
2 Semi-Skilled 18 9,000 1,944
3 Un-Skilled 18 5,000 1,080
Total 54 28,000 6,048
Add: Fringe Benefits (45% of Basic Salary) 2,722
Total Cost of Plant Labor 8,770
No. of Salary/Month Annual
Sr. Salary
Production Labor Employees /Worker
No. ("000")
1 Plant Manager 2 20,000 480
2 Electricians 6 9,000 648
3 Peon/Sweeper 5 4,500 270
Total 13 33,500 1,398
Add: Fringe Benefits (45% of Basic Salary) 629
Total Cost of Production Labor 2,027
Assumptions:
1 Direct labor will increase every year @ 15%.
Year Wise Wages of Labor:

Years
Sr. No. Description
2011 2012 2013
Rs ("000")
1 Plant Labor 8,770 10,085 11,598
2 Production Labor 2,027 2,331 2,681
Total Cost of Labor 10,797 12,416 14,279
44
Annexure-VI-A
Manufacturing Overhead Cost:
Rs
Description ("000")
a) Fixed Cost:
Power: @ 365/200/KW/Month 876

Insurance: @ 3% of Fixed Assets Cost 849
Maintenance and Depreciation:
Overhauling Expenses @ 16000 Per Expeller 96

Maintenance of Building @ 5% of Cost of Building 544
Maintenance of Vehicles @ 5% of Cost of Vehicles 314
Total Fixed Cost 2,678

b) Variable Manufacturing Expenses:
Power: @ 4.87/unit of 200/KW/Monthx90% 3,787

Machinery Re. 1.00 Per 40/Kg on Crushing of Cotton Seed 405
Total Variable Cost 4,192
The fixed cost has been projected as constant while the variable cost has
been budgeted as per operational level for the corresponding years.
Following is the detail:-
Year ending Manufacturing Overheads as per Different Capacities:

Years
Description 2011 2012 2013
Rupees ("000")
75% 80% 85%
Fixed Cost 2,678 2,678 2,678
Variable Cost 3,144 3,354 3,563
Total Cost of Manufacturing Overheads 5,822 6,031 6,241
45
Annexure-VI-A
Administrative And General Expenses
Rupees
("000")
Sr. No. of Salary/ Annual
Designation
No. Employees Month Salary
1 Managing Director 1 50,000 600
2 Accountant 1 15,000 180
3 Clerk 4 12,000 576
4 Cashier 1 10,000 120
5 Chowkidar/Godown Keeper 3 6,000 216
6 Peon/Sweeper 3 5,000 180
Total 12 48,000 1,272
Add: Fringe Benefits @ 40% 21,600 572
Total Cost of Administrative Staff 69,600 1,844
General Expenses:
Year Exp.
Sr. No. Description ("000")
1 Traveling Expenses 250
2 Printing & Stationary 80
3 Telephone, Telex, Postage 500
4 Rents, Rates and Taxes 400
5 Entertainment 100
6 Legal & Audit 150
7 Miscellaneous 500
Total 1,980
Assumptions:
1 Administrative Salaries will increase @ 10% every year.
46
Year Wise Administrative Salaries:

No. of Rupees ("000")
Sr.
Designation
No. Employees 2009 2010 2011
1 Managing Director 1 600 690 794

2 Accountant 1 180 207 238
3 Clerk 4 576 662 762
4 Cashier 1 120 138 159
5 Chowkidar/Godown Keeper 3 216 248 286
6 Peon/Sweeper 3 180 207 238
Total 13 1,872 2,153 2,476
Add: Fringe Benefits @ 40% 749 861 990
Total Administrative Salaries per Year 2,621 3,014 3,466
General Expenses:
Sr.
No. Description Rupees ("000")
1 Traveling Expenses 250 288 331
2 Printing & Stationary 80 92 106
3 Telephone, Telex, Postage 500 575 661
4 Rents, Rates and Taxes 400 460 529
5 Entertainment 100 115 132
6 Legal & Audit 150 173 198
7 Miscellaneous 500 575 661
Total 1,980 2,277 2,619
Selling Expenses:
Selling Expenses are assumed to be 2% of Sales
Sr.
Description Rupees ("000")
No.
1 Selling Expenses 4% of Sales Revenue 10,404 11,645 12,375
Annexure-VI-A
47
Depreciation Schedule of Fixed Assets:
Sr. No. Description Total Cost (Rs.) Rs. ("000")

1 Plant & Machinery 10% 3,628 363
2 Building 5% 10,872 544
3 Vehicles 20% 6,270 1,254
4 Furniture & Fixture 20% 300 60
5 Office Equipment 20% 150 30
Total 21,220 2,250
Note:- Depreciation will be constant over the life of assets.
Year Wise Depreciation:
Years
Description
2011 2012 2013
Rupees ("000")
Depreciation 2,250 2,250 2,250
Pre-Production Expenses:
Rs.
Sr. No. Description
("000")
1 Registration Charges 150
2 Sales Tax Registration Charges 85
3 Consultancy & Report Preparation Charges 120
4 Printing & Stationary 25
5 Conveyance Charges 50
6 Telephone & Postage 50
6 Salaries and Wages during Construction 500
Total Pre- Preproduction Expenses 980
Annexure-VII
48
National Ghee Oil Mills (Pvt) Limited.

Cash Flow Statement
End of
Operating Years
Construction
years ending 30th
September: 2010 2011 2012 2013
SOURCES OF FUNDS:
Operating Profits - 25,398 28,729 40,915
Add: Depreciation - 2,250 2,250 2,250
Total Funds from Operation - 27,649 30,980 43,165
Other Sources:
Long Term Loan 20,504 - -
Paid-Up Capital 13,669 - -
Total Sources of Funds 34,174 27,649 30,980 43,165
APPLICATION OF FUNDS:
Investment in Fixed Assets 22,810 - - -

Financial Charges during
1,377 - - -
Construction
Pre-Production Expenses 980 - - -
Repayment of:
Long Term Loan - - 2,050 2,050
Financial Charges On:
Long Term Loan - 3,076 2,768 2,461
Bank Borrowings - -
PAYMENT OF:
Taxes - 9,106 10,728
Dividends - - - -
Worker's Fund - 1,760 1,794
Short Term Investment 3,000 - 5,000 20,000
Increase in Current Assets
3,078 24,534 2,024 1,878
(Other than Cash)
Total Application of Funds 31,245 27,609 22,709 38,911
Cash Surplus/(Deficit) 2,928 39 8,271 4,254
Cash at the Beginning of the
- 2,928 2,968 11,239
Year
Cash at the end of the year 2,928 2,968 11,239 15,492
Annexure-VIII
Balance Sheet
End of Operating Years
49
Construction
Year ending 30th September:
2010 2011 2012 2013
ASSETS: Rupees ("000")
CURRENT ASSETS:
Cash and Bank Balance 2,928 2,968 11,239 15,492
Short Term Investment 3,000 3,000 8,000 28,000
Accounts Receivable - 5,202 5,822 6,187
Inventories:
Cotton Seed 2,700 9,720 10,368 11,016
Caustic Soda 150 899 907 964
Finished Goods - 11,563 12,310 13,118
Stores & Spares 142 142 142 142
Advances, Deposits and Prepayments 85 85 85 85
Total Current Assets 9,006 33,579 48,874 75,006
FIXED ASSETS:
Fixed Assets at Cost 24,187 24,187 24,187 24,187
Accumulated Depreciation on Fixed Assets - 2,250 4,501 6,751
Fixed Assets Net 24,187 21,937 19,687 17,436
Intangibles 980 653 327 -
Total Assets 34,174 56,170 68,888 92,442
LIABILITIES AND EQUITY:
CURRENT LIABILITIES:
Bank Borrowings - -
Taxes Payable - 9,106 10,728 15,956
Dividend Payable - -
Worker's Fund Payable - 1,760 1,794 2,669
Current Maturity of Log Term Debt - 2,050 2,050 2,050
Total Current Liabilities - 12,916 14,573 20,676
LONG TERM DEBTS:
Long Term Debt 20,504 18,454 16,403 14,353
Total long Term Debt 20,504 18,454 16,403 14,353
EQUITY:
Paid-Up-capital 13,669 13,669 13,669 13,669
Retained Earnings - 11,130 24,242 43,744
Total Equity 13,669 24,799 37,911 57,414
Total Liabilities and Equity 34,174 56,170 68,888 92,442
50
Annexure – XIII
National Ghee & Oil Mills (Pvt) Limited.
Financial Plan
Rupees ("000”)
Description LCY Total cost
Total Fixed cost of the project 25,167 25,167
Initial Permanent working capital 9,006 9,006
Total cost of the project 34,174 34,174
Long Term Debt 20,504 20,504
Equity Participation 13,669 13,669
Total Capital Required 34,174 34,174
Debt/Equity Ratio
Debt-to-Equity Ratio: 60 : 40
51
Annexure - XII
Loan Repayment Schedule

Opening Closing
Years Interest Principle
Balance Balance
1 20,504 3,076 2,050 18,454
2 18,454 2,768 2,050 16,403
3 16,403 2,461 2,050 14,353
4 14,353 2,153 2,050 12,303
5 12,303 1,845 2,050 10,252
6 10,252 1,538 2,050 8,202
7 8,202 1,230 2,050 6,151
8 6,151 923 2,050 4,101
9 4,101 615 2,050 2,050
10 2,050 308 2,050 -
52
PROJECT AUDIT
The company will have its internal audit committee, which will
conduct the audit of the various functions of the company as well as
the environmental audit. The audit committee of the company
comprises the Chairman of the company and all the functional
heads of the various departments of the company.
The audit committee will be responsible for the edifice of the

performance appraisal of the various functions of the company. The
audit committee will check the performance of the accounts
department, finance department, marketing department and also
check the performance of the human resources of the company. On
the basis of the performance determine by the audit committee
various rewards will be announced for the employees.
The company will utilize its promotion and reward system as the
motivation tool for its employees. On the basis of the performance
various monetary, stocks and training and educational rewards will
be announced for the employees of the company.
The company will strictly follow standards that will give the
guidelines to the company for the safe practices, so that no
environmental hazards will be done. The company will get its
registration with the ISO – 14000 and will use this as its promotional
tool in the marketing campaign in the media. The company will
regularly administer its standards and will keep its system up to
date, so that there will be no cause of the environmental pollution
and hazards by the operations of the company.
53
Exit Strategy and Risk Assessment

The owners are aware of the highly risky nature of launching a oil
unit in the highly competitive market. If the venture fails, the
owner's paid-in capital and expenses may not be recovered.
The venture's actual revenue will be tracked against projections on

a month-to-month basis. If net profitability is not in-line with
forecasts, management and operational adjustments will be made
to address the issues.
If the venture is undercapitalized and requires more working capital,

the owner will consider bringing on investment partners. The owner
will also review the return-on-investment for personally providing
more paid-in capital.
In the event that net profitability cannot be attained, the owner will
take the following sequential steps to exit the venture:
1. The owner will attempt to sell the venture outright to a suitable

buyer.
2. If a buyer cannot be found, the owner will liquidate all viable

assets, including the computers, play stations etc.
3. Capital raised through asset liquidation will be used to reduce

possible debt. All debt will be negotiated prior to settlement.
4. If debts cannot be eliminated, the owner will discuss corporate

bankruptcy options with legal counsel.
54

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Ghee and Oil Mill

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National Ghee & Oil Mills (Pvt) Limited

NATIONAL GHEE & OIL MILLS (PVT) LIMITED

This report is also a step of some chance of

In this report we have tried our level’s best effort

We owe our heart-felt thanks to God Almighty who

at Baghdad 1-Km away from Hamatian, Hasilpur Road, Bahawalpur. The

extensive experience of business management in industrial fields namely

Miss Aasma, Miss Tasneem, Miss Ambreen. The overall

time paid management under the direct supervision of Miss Aasma,

Miss Tasneem, Miss Ambreen, who will actively participate in

management decisions and control the affairs of the firm.

obtained by crushing Cotton Seed as input. The entire production of the

enjoys the benefits of

1) Easy availability of raw material,

2) Quick access to main road,

3) Sources of power, water, fuel etc.,

4) Availability of Transport and modern Communication systems,

5) Availability of Skilled and Un-Skilled labor, and

The demand of the project is sophisticated enough on the basis of which

rated crushing capacity of the plant is estimated about 21,600,000

of 8 hours each. The project shall be equipped with latest locally

be capable of crushing 10,000/kg/expeller/day.

60%. Further Multan division consisting of Sahiwal, Vehari, Khanewal, and

production of cotton seed is produced by this division. The basic raw

The project will contribute in eliminating unemployment and will best

Factory administrative and Marketing Staff.

consisting of Land, Building Machinery (including installation and other

cost), Vehicle, Furniture, Office Equipment, Pre-Production Expenses,

Interest during construction and the initial net working Capital

The completion time period of the project is estimated to be 6 months. A

company at the proposed site. The cost of land including cost of

registration and development etc. is Rs. 1,590,000. The land is considered

consist of mainly Factory Building, Ware house, and Administrative Staff.

The erection and installation cost is estimated amounting to Rs. 838,000.

211,410,000 in respect of raw material consumption, Rs. 9,666,000 for

The financing cost of the project is estimated to be is to be 14% of the

debt obtained from the financial institution. Firm's total administrative,

General and Selling Expenses have been estimated to be Rs. 14,416,000.

VISION, MISSION & CORE VALUES

, enterprise with a global reach

eulav gniusrup yletanoissaP

sredlohekats lla rof noitaerC

tsom eht reviled dna poleved oT

remotsuc eganam ,stcudorp lio laedi

ecivres ytilauq reviled ,ecneirepxe

,htgnerts dnarb ot setubirtnoc taht

egatnavda evititepmoc a sehsilbatse

suht ,ytilibatiforp secnahne dna

sredlohekats eht ot eulav gnidivorp

ynapmoc eht fo.

“Teamwork and Partnership

“Quality and Continuous Improvements

“Ethics and Integrity

“Candid and Open Communication

“Individual Growth and Development

“Enjoyment and Fun

 OBJECTIVES AND KEY SUCCESS

• Capitalize on excellent opportunity to extract maximum

The keys to success in achieving our goals are:

• Provide an exceptional service and product that leaves

• Extensive distribution channel for the sachet packs

Baghdad 1-Km away from Hamatian, Hasilpur Road, Bahawalpur. The

annual rated crushing capacity of the plant is estimated about 21,600,000

of 8 hours each. The project shall be equipped with latest locally