BULK MILK CHILLING

PLANT
Business Plan

NOVEMBER 19, 2019

JADHAVNAGAR FARMER PRODUCER COMPANY LIMITED
A/P-Jadhavnagar, Tal- Khanapur, Dist- Sangli - 415307
Contents
1. Project at Glance ...................................................................................................................... 2
2. Introduction ............................................................................................................................. 2
2.1. District Profile .................................................................................................................. 2
2.1.1. Administrative Profile............................................................................................... 2
2.1.2. Socio-economic Profile ............................................................................................. 2
2.1.3. Agriculture Profile .................................................................................................... 3
3. Market Analysis ....................................................................................................................... 4
3.1. Industry background ......................................................................................................... 4
3.2. Market Potential ............................................................................................................... 4
4. Business Model........................................................................................................................ 6
4.1. FPC Details ...................................................................................................................... 6
4.2. Process flow ..................................................................................................................... 7
5. Financial model ....................................................................................................................... 9
5.1. Project cost ....................................................................................................................... 9
5.2. Assumptions ................................................................................................................... 10
5.3. Profit & Loss .................................................................................................................. 12
5.4. Balance Sheet ................................................................................................................. 13
5.5. Cash Flow....................................................................................................................... 14
6. Financial Ratios ..................................................................................................................... 15
7. Annexure ............................................................................................................................... 16
1. Project at Glance
Milk is a good food supplement and is an important part of the diet of majority of people in India.
It is hence important for nutrition security for significant size of the population. It also is a raw
material to a variety of derived products including paneer, khoya, milk powder, ice cream among
others.
Most farmers rear milch animals in small numbers as a subsidiary activity. There is hence
substantial amount of marketable surplus of milk produced at a village level. Milk is a perishable
item and hence needs to be processed to improve shelf life.
This project entails setting up of a milk collection center and a bulk milk chilling center to process
larger quantities of milk and have an assured market for the same; with remunerative prices.
Around 1000 liters of milk will be procured daily from nearby villages; which will be filtered and
chilled to 3-4 degrees centigrade to inhibit the growth of bacteria. This extends the shelf life of
milk. This chilled milk will be supplied to nearby dairies.

2. Introduction
2.1. District Profile
2.1.1. Administrative Profile
Sangli district is in western region of Maharashtra. It shares its borders with Satara, Solapur,
Kolhapur and Ratnagiri districts of Maharashtra along with Bijapur and Belgaum districts of
Karnataka. The district is divided into 10 talukas with geographical area of 8600 sq. km1. The
district is well connected to major markets with the district headquarters 230 km away from Pune
and 370 km away from Mumbai. The district has a good road network of 11,975 km but relatively
poor rail network of only 174 km2. The nearest national airport is located at Kolhapur,
approximately 50 km away from Sangli.
2.1.2. Socio-economic Profile
The total population of the district is 28 lakhs; with 25% of population residing in urban centers.
Close to 53% of the working population is dependent on agriculture as a livelihood. Average
landholding size in Sangli is 1.25 Ha, lower than average of 1.44 Ha3 for the state of Maharashtra.
Net Domestic Product (NDP) per capita of the district is INR 47 thousand which is lower than
average of INR 55 thousand for Maharashtra4.
Industrial activity in the district is dominated by agro based industry. Major exportable items in
the district are Turmeric, Raisins and Grapes. A food park is being planned on 305-acre plot at

1
District Profile, Census of India, 2011
2
District Socio Economic Review, 2018
3
http://krishi.maharashtra.gov.in/Site/Upload/Pdf/Publications/Argi.pdf
4
https://www.undp.org/content/dam/india/docs/human-development/MHDR%20English-2012.pdf
Mane Rajuri near Sangli city which is a strategic location for processing of grapes, turmeric,
mangos, pomegranates, citrus and custard apples. Currently, there are close to 500 existing
manufacturing units of food products in the district. Moreover, major large-scale industries in the
district include sugar industries, textile mills etc.5
2.1.3. Agriculture Profile
Sangli district is part of the Deccan plateau and falls under hot and semi-arid agro climatic zone6.
The district comes under rain shadow region of the Sahyadri mountain7. Average annual rainfall
in the district is 692 mm with average 49 rainy days in a year. Temperatures in Sangli range from
around 22 degree Celsius to 30 degree Celsius over the year, with the highest temperature in the
month of May. Temperature level increases from west to east and rainfall decreases from west to
east in the district.
Soil in the central part of the district is predominantly black soil which is conducive to the growth
of majority crops. However, low rainfall in eastern part of the district restricts cropping pattern to
hardy crops, mostly in the absence of irrigation facilities in that part of the district including Jath
and Kavthe Mahakal talukas. Majority area in the district is under Jowar cultivation in both Kharif
and Rabbi seasons. However, Sugarcane production is the highest in the district. Farmers from
Sangli district also cultivate turmeric on a large scale, given its high productivity and the favorable
agro-climate.
The following table shows important data on crops for reference year 2016- 17 whereas data on
livestock is for the year 2013- 14.8
Table 1 Key Indicators

Name of the Crop/ Area under cultivation Production Yield

Livestock (Lakh Ha.)/ (’00 MT/ year) for (Kg/Ha.) for crops
Animals (number) crops / (Kg/ day) for milk
(‘000 MT/ year) for
milk
Jowar 2.71 1237 524
Sugarcane 0.55 59400 84
Bajra 0.42 60 248
Wheat 0.28 286 1516
Maize 0.17 1118 2338
In- milk Bovine 300000 526.8 4.73
Animals

5
District MSME Profile
6
District Agriculture Contingency Plan
7
Shodhganga
8
NDDB Dairy digest
Total area under cultivation in the district is 8 lakh Ha. Irrigation in the district is limited to only
21% of the area under cultivation. Forest area in the district is 47 thousand Ha.

3. Market Analysis
3.1. Industry background
Milch animals including cows, buffaloes, and goats among others serve an important role in the
lives of rural households. They serve as a supplementary source of income from the sale of surplus
milk for the rural households. These are typically more important for the small and marginal
farming community as they form significant portion of their household income. In India, close to
40 million households are dependent on dairy sector9. The dung of the animals also serves as a
fertilizer which can either be used in the farmers’ own farms or can be sold in the open market.
Fodder from their own farms can feed these animals, and hence cost of maintaining them reduces
to some extent. Milk also serves as a good supplement for household consumption.
However, most households own few animals and hence can produce only limited quantity of
surplus milk. Also, due to the perishable nature of milk, it becomes challenging to dispose it off in
a short period of time. This leaves them with no option but to sell their milk to the local markets
or the middlemen. This limits the returns farmers can derive for their produce.
Farmers can preserve the milk and shorten the value chain by setting up bulk milk chilling (BMC)
centers. Chilling of milk to 3-4 degrees centigrade stunts the growth of bacteria which are
responsible for curdling of milk. Also, with large volumes of milk, it can be directly supplied to
big dairies such as Amul, Govardhan and Mother Dairy, thereby providing assured markets and
better bargaining power to farmers. This shortens the value chain and provides the farmers more
remuneration for the milk produced. Milk from significant number of farmers can be aggregated
and chilled to be transported to nearby dairies for better price realization. BMCs present a business
case only with larger volumes of milk and hence aggregation of milk is inevitable to make the
business profitable.
3.2. Market Potential
Milk is one of the most produced agricultural commodities worldwide and the demand always
expand with supplemented supply. In 2013, with a total production of 770 billion liters valued at
USD 328 billion, milk ranked third by volume. Fresh cow milk represents 82.7% of global milk
production, followed by milk from buffaloes (13.3%), goats (2.3%), sheep (1.3%) and camels
(0.4%). India is the leading producer of milk. In 2017- 18 the production was 176.35 million tons,
with the annual growth rate of 6.6% over last year. The CAGR of milk production for the period
from year 2010 to 2018 is around 5% at an average10.
Milk has several derived products in the form of skimmed milk powder, ghee, butter, ice-cream,
khoya, paneer, and curd among others which have an immense demand. India exported 0.16 MMT

9
http://pib.nic.in/newsite/PrintRelease.aspx?relid=145394
10
Computed from available data on NDDB website
of dairy products valued at INR 3.31 lakh crore in 2013-14, which has been growing at 10% CAGR
from year 2011 to 2016.
Around 72% of marketable surplus of milk in India (amounting to 69.81 MT in volume) is sold in
informal markets as unpacked milk or processed products. This indicates huge scope for market
players in milk processing11. The government has also realized the importance of dairy in the micro
(household economy) and the macro-economic perspective and hence is supporting the growth of
this sector through various schemes at central and state level. Majority of the schemes are aimed
at improving formal market linkages and dairy infrastructure which will ultimately help in
realization of better value for the milk producers.
Sangli district has a significant population of milch animals. The following pie chart presents the
data of in-milk bovine animals in Sangli for year 2013- 14.

In-milk bovine animals ('000), Sangli (2013-14)

37

52

211

Indigeneous cattle Crossbred cattle Buffaloes

The milk production in Sangli was 527 thousand metric ton in the year 2013-14 with milk yield of
5 kg per day12. Various major dairy players such as Amul, Gokul, Hutatma, Chitale are present in
Sangli.
Sangli district has about 513 dairy cooperatives with a member base of 29298 members. The
average daily milk collection by these cooperatives was 1520 thousand liters (2018). In addition
to that, milk collection centers and BMCs from the private sector are also present in the district.
Still, growing demand of dairy sector indicates imminent need of improvement in dairy
infrastructure in Sangli13.

11
http://www.fao.org/3/i0588e/I0588E05.htm
12
https://www.nddb.coop/sites/default/files/NDDB%20Maharashtra%20dairy%20Diggest.pdf
13
https://mahades.maharashtra.gov.in/publications.do?pubId=DSA
4. Business Model
4.1. FPC Details
Farmers from Jadhavnagar village in Khanapur block of Sangli district in Maharashtra are
interested to form a farmer producer company namely - Jadhavnagar Farmer Producer Company.
The company proposes to set up a milk collection and chilling center as a feasible business activity.
Vision -
The vision of the Farmer Producer Company is to become a role model farmer organization by
utilizing the true potential of the farming community in their sphere of influence.
Mission –
FPO intends to leverage the agricultural and allied activities carried out by the member farmers as
well as other farmers in the geography. They intend to effect improvements along each stage of
the livestock cycle from breeding, feeding, collection and marketing of milk through aggregation
and thereby entailing advantage of economies of scale and scope as the operations of the FPO
mature. This will lead to better prize realization for their produce and supplementing incomes
from allied activities.
Organization structure –

Board of
Directors

CEO Admin

Operations
manager

Operators

The management structure of the FPC will include mechanisms to ensure that each member farmer
has a say in operations as well as the operations are professionally managed for efficiency and
effectiveness.
The Board of Directors will consist of elected representatives from the member farmers to ensure
decision making is done based on consensus and reflects the priorities of all members. Operations
will be managed professionally by the Chief Executive Officer (CEO, who will be responsible to
the Board of Directors and eventually the member farmers).
4.2. Process flow
The process flow of business activity is summarized as follows:

Transportation of milk to
collection centers by farmers

Testing of milk on various

parameters

Filtering of milk to reomve

impurities

Chilling of milk in bulk milk

chiller

Transportation to nearby
processing plant

The FPC plans to procure milk from approximately 70 farmers in the village. The 10 FPC members
can supply around 300-400 liters of milk a day. They propose to collect additional milk from
around 60 more farmers from the nearby villages from around 5- 8 km from the site.
Each farmer will get the milk produced by his cattle to the collection center. The staff at the
collection center will test every sample of milk on various parameters such as amount of fat, solid
not fat (SNF) and others using standard milk testing equipment. Testing will serve the purpose of
ascertaining the quality (in terms of fat and SNF) and presence of curdling bacteria in the milk.
Once the milk is tested, it will be pumped in to a filter to remove all solid impurities.
The filtered milk will then be pumped in to the bulk milk chiller. The bulk milk chiller cools the
milk to a temperature of 3-4 degrees centigrade. This cooling inhibits growth of bacteria in milk
thereby extending shelf life of milk for a few hours more. FPC will tie up with a private diary viz.
AMUL, Mahananda or Rajhans for supply of chilled milk daily. After chilling, nearby private
dairy will procure it from the BMC and transport it to the nearest processing plant for
pasteurization and manufacturing milk-based products.
5. Financial model
5.1. Project cost
Particulars Amount (INR)

[A] Investment in Plant & Machineries Capacity Rate (INR)

1] Reception Section
Electronic weigh scale (500 kg) 500 kg 15,000 15,000
Dump Tank 1000 lit 40,000 40,000
Milk filter 1.5 Hp 40,000 40,000
Set of lab Equipments (1 set) 30,000 30,000
125,000
2]Process Section
Balance Tank with Float 100 lit 30,000 30,000
Milk Pump 2 HP 20,000 20,000
Milk Chiller (3 KLPH) 1000 lit 350,000 350,000
Flow Diversion Valve Mannual (1 unit) 30,000 30,000
Interconnecting Pipeline and Valves 20,000 20,000
Total 450,000
3]Storage and Packing Section
Milk Pump (1 Hp) 25,000
Milk Canes and miscellineous 50,000
Total 75,000

Factory Shed (Sq ft) 1000 400,000

Rate (Rs per sq ft) 400

Total Investment in Long term uses 975,000

[C ] Working Capital 140,000

Total Project Cost 1,115,000

MEANS OF FINANCE Percentage

A] Debt Finance
- Term Loan 1,000,000

Sub Total [A] 1,000,000

B] Own Contribution
Mandatory 111,500
3,500

Sub Total [B] 115,000

Grand Total [ A + B ] 1,115,000

Notes:
1. Repayment tenure is expected to 84 months
2.In respect to Working capital we have assumed that funds earned will be used in
company itself .
5.2. Assumptions
A. Cost of Goods sold (per liter)
Sr No Particulars Procurement rate (INR)
1 Cow milk 27

B. Allied costs
Annual Cost
Sr No Particulars Rate (INR) Duration Quantity (INR)
1 Unskilled Labor 300/Day 335 days 2 201,000
2 Admin Staff 7000/Month 12 months 1 84,000
3 Electricity 86 / unit 335 days 19 units 38,190

C. Sales turnover
Sr No Particulars Milk- Cow
1 Input Raw Milk Available (Ltr / Day) 1000
2 Normal Loss 5% 50
3 Capacity of Unit 950
2 No of Working Days
4 Total Days in Years 365
Less: Holidays 10
Less: Repairs & Other 20
Actual Working Days 335 335
5 Yearly Production 318,250
6 Rate Per Ltr 32
7 Annual Sales @ 100% Capacity 10,184,000

Sale price per liter of milk (INR) -

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Milk - Cow 32 33.60 35.28 37.04 38.90 40.84 42.88

D. Capacity utilization

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

70% 75% 80% 85% 90% 95% 100%
E. Working capital requirement

Particulars No of Days outstanding Amount

a) Investment in Inventories 5 Days 97,655
b) Receivable from debtors 10 Days 195,310
c) Other Advances 5 Days 100,000
Less:
i) Payable to Creditors 15 Days 255,301
Net Investment in Working Capital 137,663
Approximate requirement limited to 140,000

F. Gross profit analysis

Sr No Particulars Milk- Cow

1 Sales Price Per Ltr 32
2 COGS
Purchase Cost 27
Loss 1.35
Total COGS 28.35
3 Gross Profit 3.65
4 Gross Profit Ratio 11.41%
5 Sales Mix Percentage 100%
6 Weighted Average 11.41%
7 Gross Profit Ratio 11.41%
5.3. Profit & Loss
PROJECTIONS
Particulars
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Revenue
Sales 7,128,800 8,019,900 8,982,288 10,020,865 11,140,844 12,347,769 12,965,157

Total 7,128,800 8,019,900 8,982,288 10,020,865 11,140,844 12,347,769 12,965,157

Cost of Goods Sold

Opening Stock 97,655 109,862 123,045 137,272 152,614 169,148
Add: Purchases 6,212,326 6,896,237 7,727,719 8,624,556 9,591,150 10,632,172 11,138,693
Add: Direct Expenses
- Labour 201,000 221,100 243,210 267,531 294,284 323,713 356,084

Sub Total
Less: Closing Stock 97,655 109,862 123,045 137,272 152,614 169,148 177,605
Cost of Goods Sold 6,315,671 7,105,130 7,957,746 8,877,860 9,870,092 10,939,351 11,486,319

Gross Profit 813,129 914,770 1,024,542 1,143,005 1,270,753 1,408,417 1,478,838

Indirect Expenses
Salary 285,000 313,500 344,850 362,093 398,302 418,217 439,128
Repairs & Maintained 40,000 44,000 48,400 50,820 55,902 58,697 61,632

Audit Fees 20,000 22,000 24,200 25,410 27,951 29,349 30,816

Communication Expenses 15,000 16,500 18,150 19,058 20,963 22,011 23,112
Printing & Stationery 15,000 16,500 18,150 19,058 20,963 22,011 23,112
Local Conveyance 20,000 22,000 24,200 25,410 27,951 29,349 30,816
Professional Fees 25,000 27,500 30,250 31,763 34,939 36,686 38,520
Staff & Labour Welfare 30,000 33,000 36,300 38,115 41,927 44,023 46,224
Factory Rent 25,000 27,500 30,250 31,763 34,939 36,686 38,520
Electricty 38,190 40,100 44,109 46,315 50,946 53,494 56,168

Total Indirect Costs 513,190 562,600 618,859 649,802 714,783 750,522 788,048

PBIDT (Operating Profit) 299,939 352,170 405,683 493,202 555,970 657,896 690,790

PBDT 299,939 352,170 405,683 493,202 555,970 657,896 690,790

Depreciation 26,250 22,688 19,622 16,982 14,708 12,748 11,057
Book Profit 273,689 329,483 386,061 476,220 541,261 645,147 679,733
Income Tax* 68,422 82,371 96,515 119,055 135,315 161,287 169,933
Profit after tax 205,267 247,112 289,546 357,165 405,946 483,861 509,800
Less : Appropriation
Profit After Appropriations 205,267 247,112 289,546 357,165 405,946 483,861 509,800
5.4. Balance Sheet
PROJECTIONS
Particulars
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Owners Funds
Opening Bal. / Addition 115,000 320,267 567,379 856,924 1,214,089 1,620,036 2,103,896
Add: Profit 205,267 247,112 289,546 357,165 405,946 483,861 509,800
Less : Drawing - - - - - - -
Closing Balance 320,267 567,379 856,924 1,214,089 1,620,036 2,103,896 2,613,696

Secured Loans
- Term Loan (New Machine) 923,077 769,231 615,385 461,538 307,692 153,846 0
- Cash Credit - - - - - - -
923,077 769,231 615,385 461,538 307,692 153,846 0

Current Liabilities
Sundry Creditors 255,301 283,407 317,578 354,434 394,157 436,939 457,754

255,301 283,407 317,578 354,434 394,157 436,939 457,754

Total 1,498,645 1,620,016 1,789,886 2,030,062 2,321,885 2,694,681 3,071,450

Fixed Assets
Opening WDV / Addition 200,000 173,750 151,063 131,441 114,458 99,750 87,002
Less : Depreciation 26,250 22,688 19,622 16,982 14,708 12,748 11,057
Closing WDV 173,750 151,063 131,441 114,458 99,750 87,002 75,944

Other Non Current Asset 25,000 50,000 95,000 171,000 263,340 387,110 526,469

Current Assets
Sundry Debtors 195,310 219,723 246,090 274,544 305,229 338,295 355,210
Inventory 97,655 109,862 123,045 137,272 152,614 169,148 177,605
Cash & Bank Balances 1,011,930 1,064,369 1,129,311 1,217,787 1,335,952 1,478,127 1,651,222
Farmers Advaces 100,000 130,000 170,000 220,000 270,000 340,000 390,000
1,404,895 1,523,954 1,668,446 1,849,603 2,063,795 2,325,569 2,574,037

Total 1,603,645 1,725,016 1,894,886 2,135,062 2,426,885 2,799,681 3,176,450

5.5. Cash Flow
Particulars Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Cash Flow from Operating Activity
Profit after
Appropriations 205,267 247,112 289,546 357,165 405,946 483,861 509,800
Add: - Depreciation 26,250 22,688 19,622 16,982 14,708 12,748 11,057
Add: - Income Tax 68,422 82,371 96,515 119,055 135,315 161,287 169,933
299,939 352,170 405,683 493,202 555,970 657,896 690,790
Less: - Income Tax 68,422 82,371 96,515 119,055 135,315 161,287 169,933
Operating Cash flow
before change in working
capital 231,517 269,800 309,168 374,147 420,654 496,609 520,857
Add/Less Change in
Working capital (137,663) (38,515) (45,380) (55,825) (56,304) (76,818) (54,556)
Net Cash Flow From
Operating Activity 93,853 231,285 263,788 318,323 364,351 419,791 466,301

Cash Flow from Investing Activity

Factory Shed (75,000) - - - - - -
Plant & Machinery -new (20,000) - - - - - -
NonCash
Net Current
FlowAssets
From (25,000) (25,000) (45,000) (76,000) (92,340) (123,770) (139,360)
Investing Activity (120,000) (25,000) (45,000) (76,000) (92,340) (123,770) (139,360)

Cash Flow from Financing

Increase/Decrease in Activity
Capital 115,000 - - - - - -
Increase/Decrease in Loans
- Term
Net CashLoan
Flow(new)
From 923,077 (153,846) (153,846) (153,846) (153,846) (153,846) (153,846)
Financing Activity 1,038,077 (153,846) (153,846) (153,846) (153,846) (153,846) (153,846)

Net Cash Flow 1,011,930 52,439 64,942 88,476 118,165 142,175 173,095
Opening Cash & Cash
Equivalent 1,011,930 1,064,369 1,129,311 1,217,787 1,335,952 1,478,127
Closing Cash & Cash
Equivalent 1,011,930 1,064,369 1,129,311 1,217,787 1,335,952 1,478,127 1,651,222
6. Financial Ratios
Year Reference Cash Flow DF @ 10% DCF
0 Cash Outflow (1,115,000) 1 (1,115,000)
1 Cash inflow after tax 231,517 0.909091 210,470
2 Cash inflow after tax 269,800 0.826446 222,975
3 Cash inflow after tax 309,168 0.751315 232,282
4 Cash inflow after tax 374,147 0.683013 255,548
5 Cash inflow after tax 420,654 0.620921 261,193
6 Cash inflow after tax 496,609 0.564474 280,323
7 Cash inflow after tax 520,857 0.513158 267,282
Terminal Value 0.513158 -
Net Present Value / Value of the Business 1,730,072
IRR 22.89%
Payback Period in Years 4.76

EBIT 273,689 329,483 386,061 476,220 541,261 645,147 679,733

Capital employed
Owner Capital 320,267 567,379 856,924 1,214,089 1,620,036 2,103,896 2,613,696
Bank Finance 923,077 769,231 615,385 461,538 307,692 153,846 0
Total 1,243,343 1,336,609 1,472,309 1,675,628 1,927,728 2,257,742 2,613,696
ROCE 22.01 24.65 26.22 28.42 28.08 28.57 26.01

Sr No Particulars Amount
a] Fixed Cost
Staff Salary 285,000
Repairs & Maintained 40,000
Audit Fees 20,000
Communication Expenses 15,000
Printing & Stationery 15,000
Local Conveyance 20,000
Professional Fees 25,000
Staff & Labour Welfare 30,000
Factory Rent 25,000
Electricity 38,190
Total Fixed Cost 513,190
b] GP Ratio 11.41%
c] BEP in Sales (INR) 4,499,200
d] BEP in Ltr 169398
7. Annexure
Sr. Title Details
No.
1 Name of company JADHAVNAGAR FARMER PRODUCER COMPANY
LIMITED
2 Address of company A/P-Jadhavnagar, Tal- Khanapur, Dist- Sangli - 415307
3 CIN of company
4 Date of Registration N.A
5 Details of BoD Name Age
Manohar Janardhan Chavan
Sambhaji Shivaji Chavan
Adhik Anada Jadhav
Jayshree Ananda Jadhav
Shrikant Rangrao Jadhav
Rupali Shrikant Jadhav
Vandana Madhukar Jadhav

6 Details of chairman Mr. Manohar Chavan.