Project Profile on Potato processing -Fabricated Potato Chips

Mott MacDonald iNDEXTb

Sector Sub - sector Project No. Project Title

Agro and Food Processing Food Processing AF-23 Potato processing - Fabricated Potato chips

Project Description
The proposed project envisions setting up of a Fabricated Potato chips manufacturing unit in the state, using potato powder as raw material. Such premium quality fabricated potato chips of international brand (Pringle) is being imported in India at premium price and finds ready market of foreign tourist and NRI / NRG coming to India. The proposed project is suggested keeping in view the development of contract farming and ready availability of quality potatoes for Chips manufacturing in Gujarat.

Product Application Fabricated potato chips offer consistent quality, taste and find ready market against conventionally prepared potato chips. They have wide application in the processed and snack food industries, with the development of different flavors meeting regional and global taste preferences.

Market & Growth Drivers

Global potato production for the year 2005 was around 322 million MT, of which China dominated the world by contributing around 23%, followed by Russian federation, India, USA and Germany. Netherlands dominate the world in export as well as import of
Russian Federation 11% India 8% USA 6% Germ any 3%

potatoes, exporting around 170000 MT valued US $ 498 million and importing around 1650000 MT

valued at US $ 208 million in the year 2004-2005. France, Germany, Egypt and USA are the other leading exporters of potatoes. The countries importing

China 23% Others 49% World Potato production - 2005, FAO statistics

substantial quantum are Germany, USA, Algeria and Brazil. Indian snack food industry is one of the largest snack markets in the world growing at the rate of 10% and estimated at INR 15300 million. Potato chips contribute around 85% and by far the largest product category within snacks. The average annual value of imports of potato products in India remained at US $ 1.19 million up to year 2003, while in the year 2004 Indian imports was estimated at US $ 3.48 million from USA, Netherlands, New Zealand, Italy and Canada.

AF-23

Project Profile on Potato processing -Fabricated Potato Chips

Mott MacDonald iNDEXTb

Pringle a reputed brand of Fabricated Potato chips from USA, finds ready market in India with visibility on shelf of all reputed retail chain stores. India offers good opportunity for similar product with variation in flavors and tastes as per regional preference. Growth Drivers Increasing consumption of fast food and snacks foods such as potato chips and French fries in all class of people is boosting the market for fabricated chips. Changing societal trends, increasing nuclear families, aging population and people looking for more convenient snacking and pleasure food with less indulgence.

Why Gujarat?
Gujarat produced around 9.78 Lac MT of potatoes from 43268 hectare cultivated in the year 2004-05. Rapidly growing food processing industry in Gujarat offers opportunity for newer products from potato powder and flakes. Gujarat offers availability of technical / skilled manpower for Food processing industry. Easy availability of industrial land with basic facilities (power, water, fuel and drainage etc.) in potato producing areas.

Technology/Process
Fabricated Potato chips can be manufactured either by using potato powder or farm fresh potatoes. The manufacturing process using potato powder is briefly summarized below: Potato powder of suitable fineness is mixed with various ingredients, This powder is cooked and extruded into sheet. Products are sheeted, rotary cut and fried. Uniform size shapes are die-cut from extruded sheet where low pressure extrusion provides a variety of shape with consistent density and continuous operation. Controlled temperature continuous frying is done to get uniform quality and golden yellow appearance with consistent Crispy taste. Automatic packaging in Nitrogen filled moisture proof boxes or in colorful Multilayer Plastic film Pouches for longer shelf life. Packing of Pouches and boxes in Cartons for Marketing.

Another technique used for production of fabricated potato chips is thru using farm fresh potatoes, the process of which is briefly summarized below: As per the company norms the potatoes bought from farm are made to pass thru a quality test. The potatoes are then passed thru a conveyor where they are de-stoned and then peeled. The peeled potatoes are then washed with cold water. A slicer then cuts the potatoes into thin slices. The slices are again washed in cold water in order to purge any released starch content. The slices are then passed thru a chemical solution in order to augment its colour if required. The slices are then fried and salted, and passed through a conveyor belt so as to drain excess oil. The chips are then cooled and sorted. The figure below shows the whole process in sequence.

AF-23

Project Profile on Potato processing -Fabricated Potato Chips

Mott MacDonald iNDEXTb

Source: Madehow

Raw Material
The principle raw materials required for making Potato fabricated chips are potato, salt, spices, preservatives, edible oil, flavors and hard coke. Since Gujarat is one of the leading states producing potatoes availability of raw material in sufficient quantity will not pose a bottle neck for the unit. Potato production and area per hectare are summarized in the following table in giving an overview of raw material availability in the state. Area and Production of Potatoes in Gujarat

Sr. 1 2 3 4 5

Year 2001-02 2002-03 2003-04 2004-05 2005-06

Area (Hectares) 40,163 35,794 31,211 43,268 40,992

Production (MT) 978358 780001 704099 978182 1088530

Source: Department of Agriculture Statistics, Gandhinagar, Government of Gujarat

AF-23

Project Profile on Potato processing -Fabricated Potato Chips

Mott MacDonald iNDEXTb

Kheda, Banaskantha, Mehsana, Sabarkantha and Anand are major potato producing districts in Gujarat. It can be observed that there is difference in area and productivity every year, the reason being fluctuations in rain fall.

Suggested Plant Capacity & Project Cost

Suggested Capacity for Fabricated Potato chips plant is 1500 tons out put per annum The indicative project Cost for the proposed unit is INR 50 million (US $ 1.11 million). Sr. No. 1 2 3 4 5 6 7 8 Estimated Project cost & Means of finance Cost of project Land and Land development Building 1500 Sq. mt. Plant & Machinery 10 MT per day finished product line Misc. Fixed Assets Preliminary & Pre-operative Provision for contingencies Total Fixed Assets Margin Money for working capital Total Means of Finance Promoters contribution Term loan Total INR in million 4.20 6.75 27.00 2.50 3.00 2.55 46.00 4.00 50.00

9 10

14.30 35.70 50.00

As indicated above the proposed project will require approx. 6000 Sq. mt of land and proposed built up area for proposed unit will be approx. 1500 sq. mt. The unit will have installed capacity of 1500 TPA considering 150 working days in a year. Total estimated fixed cost of the project in INR 46.00 million and INR 4 million will be as working capital margin, which will make estimated capital cost of INR 50 million. The proposed unit will cater to domestic and international demand so the Debt equity ratio of 2.5:1 is suggested. Thus, the estimated term loan amount would be of INR 35.70 million and Equity will be INR 14.30 million.

Plant and Machinery Required

The proposed project would require the following basic as well as necessary plant and machinery: List of Plant and Machinery Sr. No 1 Particulars Potato peeler Automatic Quantity 4 Supplier/Technology Provider Honey Comb Products, Ahmedabad Economode Food Equipment Private Ltd.. Mumbai 2 Power operated Slicer 2 (India)

Ambica Boiler & Fabricators, Ahmedabad Hind Pulverizer works, Ahmedabad

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Project Profile on Potato processing -Fabricated Potato Chips

Mott MacDonald iNDEXTb

Sr. No 3

Particulars Cutting machine

Quantity 2

Supplier/Technology Provider Kanchan Metals Pvt Ltd, Kolkata Dornow food technology GmbH, Germany

Salting drum

Economode Food Equipment Private Ltd.. Mumbai Economode Food Equipment Private Ltd.. Mumbai Spantek Food Machines, Pune Economode Food Equipment Private Ltd.. Mumbai

(India)

Hydro extractor to extract moisture

(India)

Continuous fryer Line

(India)

Continuous Filling / Weighing line

Economode Food Equipment Private Ltd.. Mumbai Ajinomoto India Pvt Ltd, Chennai Thermax Ltd-Pune,

(India)

9 10

Automated Bag sealing machine Thermic Fluid heater for Frying oil bath heating at controlled temperature

4 1

Utilities
The unit would necessitate utilities like water, electric power and fuel for cooking of potatoes and frying of Potato chips. 30 KL / day water, 150 HP power and 5 MTPD Coal or equivalent FO as fuel, would be a basic requirement for the proposed unit.

Estimated Man Power Required

Estimated total manpower requirement for the proposed unit is 20 persons, that will include 3 people at managerial grade, 8 people staff in the manufacturing section, 2 persons in quality control and 7 other staff members for other departments including purchase and marketing assistants.

Suggested Location
The suggested locations for the proposed potato processing unit for powder and flakes manufacturing are Banaskantha, Kheda, Rajkot, Sabarkantha, and Anand districts.

Project Time Line

The proposed project will have cumulative period of 10-12 months of which 5 to 6 months would entail obtaining the obligatory clearances from various authorities.

AF-23

Project Profile on Potato processing -Fabricated Potato Chips

Mott MacDonald iNDEXTb

Financial Indicators
Based on the profitability projections worked out for the proposed project, key financial indicators are as summarized below: Key Financial Indicators Sr. No A B C D E Financial Ratios Break-Even Point in % capacity Debt-service Coverage Ratio Average DSCR Return on Investment (ROI) IRR for 10 Years Project period 23.72 % 1 Year 42.75 1.70
st

nd

Year 38.32 2.04 2.13 27.51 % 47%

3 Year 34.02 2.65

rd

34.10%

As perceived from the Project cost and Means of finance table, the suggested Debt Equity Ratio for the proposed project is 2.5:1. The IRR (Internal Rate of Return) for the proposed project is approx. 47% projected for a period of 10 years.

Clearances required
The proposed unit will have to register itself with Secretariat of Industrial Approvals (SIA), Ministry of Industries and Government of India, by filing Industrial Entrepreneurs Memorandum (IEM), as it will have plant and machinery investment of more than INR 10 million. The most critical aspect of this product will be its shelf life for export consumers and hence there will be need for stabilizers and preservatives meeting FDA regulations in consuming countries and Codex standards followed by them. Being an EOU the unit will have to follow strict quality standards as accepted in the countries where export is to be made. It is obligatory to meet provisions under the PFA act for all ingredients and quality aspects for marketing product in Indian market The unit will get EOU registration from RBI, DGFT and with APEDA as registered manufacturer exporter to avail export incentives.

Agencies to be contacted
Industrial Extension Bureau Mott MacDonald India Gujarat Agro Industries Corporation Ltd.

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