Production Process

Paddy is its raw form cannot be consumed by human beings. It needs to be suitably
processed for obtaining rice. Rice milling is the process which helps in removal of hulls and
barns from paddy grains to produce polished rice. Rice forms the basic primary processed
product obtained from paddy and this is further processed for obtaining various secondary and
tertiary products.

Various process needs to be performed before obtaining rice from paddy. In a rice
mill, the following are main classifications of various functions which needs to be done:

 Acquiring and storage of raw materials

 Production of rice through milling operation
 Storage of the output products
 Marketing of the finished products

Raw Materials
 The main raw material for rice production is paddy. However the local paddy
production does not meet the local market demand for rice. In the paddy and rice could not be
moved from one district to another district or from a state to another state with out a official
permit. Every state was considered as a separate food zone. So rice production output was
low.

After 1990, the central Government of India the whole was a single food zone. All
restrictions to move paddy and rice from one state to another was removed. Any body can
move paddy and rice throughout India. Because of this ACT, throughout India, the price of
paddy and rice became stable and if there was any shortage in one state, paddy and rice is
moved from the adjacent states. Thus act made sure that farmers also get a global market for
their products which resulted in increase in production of paddy.

Purchase of Raw Materials:

The paddy required for rice production is being imported from various districts like
Villupuram, Thanjavour, Madurai, Tirunelveli and Ramanathapuram. Paddy will be
purchased directly from farmers or distributors after paddy cultivation (normally during the
months of December to March). The price of paddy is fixed by the government at the time of
cultivation based on total paddy production. Paddy will bought for this price based on the
market demand. Paddy bought will be stored in storage rooms and this will serve as the
inventory for the price production for the rest of the period till next cultivation of paddy.
Some times based on demand, paddy will be also bought in non-cultivation months however
the price of paddy will be high during this time.

The other raw material required is water, for soaking paddy the production process.
This is obtained from the local well underground bore wells.

Production of Rice
 Rice is produced from paddy through milling process. The milling process is very
well standardized. The process has to be accomplished with care to prevent excessive
breakage of the kernel and improve recovery of paddy or rice. The extent of recovery during
million depends on many factors like variety of paddy, degree of milling required, the quality
of equipments used, the operators, etc.

Milling is usually done when paddy is dry (around 14% moisture content). Wet soft
grains will be are powered and very dry brittle grains would break. The main operations
involved in rice mill are namely

 Cleaning and soaking the paddy

 Boiling the paddy
 Drying the paddy
 De-husking the paddy by milling machine
 Polishing the rice
 Removing the stones / dust from the rice
 Removing di-coloered grains using color sorter
 Packing the finished rice

These are three main departments involved in the rice production process.

 Paddy storage department

 Boiling and drying department
 Hulling department

Output Storage and Product Marketing

Output Storage and Packing

 Rice produced, is packing in jute bags weighing in 10kg, 25kg, 50kg and 100kg. The
bags will be stored in warehouse which is well aerated and free of dampness. Rice can turn
rancid due to heat, moisture or attacks by insects. So care should be taken before storing of
rice

Bran and husk are packed in jute bags of varying weights and stored in dry, moisture
free warehouses.

Production Marketing

As consumption and demand for rice is high in Sattur and hence sale of rice is done
mainly in Sattur and other districts around there. Apart from local retails shops, rice is sold to
many bulk buyers like hospitals, caterers, restaurants etc.

The Rice-Bran produced during the milling process is sold to oil mills in Madurai
districts for production of Rice Bran oil. The husk from paddy is sold fireworks industry and
farmers as cattle food.

Capital Inputs
Land and building

The industry is located in a plot area of around 1.5 hectares which would currently
cost around 60 lakhs. The paddy storage uilding is 2,100 (70*30) square feet of 2 no’s, the
dried dhed is 800 (20*40) square feet. The hulling machinery hall is 1,800 (60*30) square
feet. The drying yard is 10,000 (100*100) square feet. The total cost of the building is around
Rs.50 lakhs.

Plant and Machinery

The minimum viable capacity has to be processing of 12000 tonnes per year on single
shift working and around 230 to 250 working days. To install this production capacity, the
following equipments need to be installed:

 Boilers and Drier machine unit

 De-husking Machine with rubber roller of 10 inches

 Huller / Polishing Machine

 De-stoner

 Colour Sorter

 Elevators and other machine

 The entire machinery cost will worth around Rs.40 lakhs.

Miscellaneous Assets

A provision of Rs.50,000/- would be required towards furniture and fixtures, storage

facilities, packing and weighing machine etc. The monthly average electricity bill will be
around Rs.40,000/-

Utilities

Total power requirement will be 100 HP. The daily needs of water to soak and clean
the paddy will be around 6,000 liters. A open well of 40 feet depth is there (20 feet diameter
 round well) is being used to satisfy this needs. The Annual expenditure under this head at
100% activity level could be 5 lakhs.

Raw Material

Paddy is the one of the main raw material required. The input-output ratio is 100:70
and to that extend the quantum of paddy would go up. Thus at 100% utilization, the
requirement will around 18000 tonnes per year. So the working capital in need of purchase
for paddy will be around Rs.20 lakhs every year and this amount is increasing as the demand
increases.

Manpower Requirement

The rice mill currently employs 20 people for various operations being carried out. The
below table contains details of the employees:

Particulars Nos Monthly Salary / Total Monthly Salary

Person (Rs.) (Rs.)

Supervisors 2 6000 12000

Skilled Worker 4 4500 18000

Semi-Skilled Worker 10 4000 40000

Helpers 3 3500 10500

Sales Man 1 5000 50000

Total 20 85500

Considering an average 26 working days per month, the average salary per employee is
around Rs.3288/-
 Business Operations

Seasonal Business

Normally paddy cultivation will be done during the months of December, January,
February and March. So the raw material will be supplied to the rice mill in abundance only
in these months and the capital required to buy raw material will be required within these
months. In the remaining months, these will be low amount of paddy arrivals. So the mill be
running 180 to 200 days only in a year.

Sales Model

The rice produced will be sorted according to their variety and it will be packed in
10kg, 25kg, 50 kg and 100kg bags. The selling price of rice was fixed on the basis of out turn
from the paddy milling process. In the mill premises 10kg, 25kg, 50kg were sold directly to
consumers and small village traders. More than 50% of production sold to the dealers at
Sattur, Sivakasi, kovilpatti and Virudhunager.

Sales Revenue

Selling price of rice would vary depending upon the quality of inputs. Product-mix
may vary and hence an average selling price of Rs. 12,000/- per ton is assumed. Similarly,
price of husk and bran (Which is being used as cattle feed / producing oil) is also taken at
Rs.5,000/- which would fluctuate in line with quality of inputs, processing techniques etc.
The daily average sales will be around Rs.1 lakhs and annual turn over will be Rs.2 crore.

Profitability

Even with a daily average sales will be around Rs.1 lakhs, the capital expenses
required for running the industry is high. Average raw material expense is Rs.80,000,
electricity bill per day Rs.2000, cost for average daily salary is around Rs.3000, selling +
administrative + other Miscellaneous expense per day will be around Rs.4000 which result
in profit of Rs. 6000 per day. So normally the rice bag will earn a profit of around Rs.4/- per
25kg and rice bran will earn Rs.10/- per 100kg bags. So annual turn over will be around
Rs.15,00,000 lakh