Feed Processing Plant

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Feed Processing Plant 1.Importance of feed in livestock sector The success of livestock farming is largely dependent on the continuous supply of good quality nutritious feeds at competitive price. Feed alone constitute about 60-70 per cent of total cost of production of livestock products. Therefore, it needs more attention though other factors are also important for remunerative return from livestock enterprises. The farmers used to feed the crop residues to the cattle and buffaloes, however, sheep and goat are normally maintained on grazing/browsing with supplementary feeding of broken grains/other bypoducts. Therefore, feeding of balanced concentrate feed to these animals was not common, because of low productivity and unremunerative prices for the livestock products. The improved poultry is fed only with concentrated feed. The requirement of food of animal origin like milk, meat and eggs is increasing at a faster rate due to increased awareness about the significance of protective proteins for the maintenance of human health. The farmers realised the importance and started rearing good quality and high productive animals/birds under stall fed conditions. 2.Scope for feed industry 2.1 With the increased demand for livestock products for domestic consumption as well as export, the farmers realised maintaining of quality animals with proper feeding and management. The proportion of crossbred animals or improved strains of birds increased over the years. This has necessitated higher demand for balanced concentrate feed. Presently, various milk unions, poultry corporations/ federations and private companies are supplying both cattle and poultry feed of different qualities and forms (mash/ pellets/ crumbles) to the farmers. Large size poultry farm/dairy farm owners, hatcheries and cooperative poultry units are normally manufacturing their own feed by installing the necessary plant and machinery on the farm. Some of the farmers are still feeding broken grains, cakes, gur, salt,etc. to dairy animals by mixing at home. 2.2 The compounded feed manufactured by CLFMA (Compounded Livestock Feed Manufacturers Association) members during 1998-99 was 3.16 million tonnes. The feed production under organised sector since 1965 is given in Annexure-I. The demand-supply position for various feeds is given in Annexure - II. The present supply is only half of the total requirement. Moreover, the demand for small ruminants (goat and sheep) under stall fed conditions, rabbits and pigs is not estimated. Considering their requirements, the gap is much more. 2.3 The feed production could not keep pace with the growth in various species of farm animals and poultry. To meet the growing demand of processed and complete feeds for different class of animals, the unconventional feeds should also be used in the rations through proper processing for removal of anti nutritional factors. Thus, it indicates that there is a good scope for setting up feed processing plants of different capacities for production of various quality feeds. 3.Financial assistance for feed industry 3.1 NABARD is an apex institution for all matters relating to policy, planning and operations in the field of agricultural credit. It serves as a apex refinancing agency for the institutions providing investment and production credit. It promotes development through formulation and appraisal of projects through a well organised Technical Services Department at HO and Technical Cells at each of the ROs. 3.2 Loans from banks with refinance facility from NABARD are available for starting feed processing plants. For obtaining the bank loan, the entrepreneurs/companies should apply to the nearest branch of the commercial or cooperative or regional rural banks in their area in the prescribed application form which is available in the branches of financing banks. The entrepreneurs are also required to submit a detailed project report for which they can also take the help or guidance of the technical officers attached to the bank. 3.3 For feed processing plant with very large outlay, a detailed project reports will have to be prepared. The model format for formulation of bankable project is given in para 4. Banks provide financial assistance for the following purposes. (a) Construction of factory building, godowns for raw materials as well as for finished products, office, canteen,

generator room, essential quarters,etc. (b) Purchase of equipments such as grinder, feed mixer, pelletizer, elevators, feed packing units, etc. (c) Miscellaneous equipments such as transformer, generators, weighing scales vehicles, etc. (d) Margin money for working capital requirement for one cycle of operation. The cost of land is not considered for loan. However, if land is purchased for establishing a feed processing plant, land cost can be treated as party's margin money upto a maximum of 10 per cent of the total cost of project. 3.4. Scrutiny of Scheme by the Bank: After the scheme is submitted to the Bank, it is examined for technical feasibility and economic viability. (a) Technical Feasibility: This would briefly include: (i) Availability of raw material such as grains, brans, oil cakes, mineral mixture, molasses, fish meal, vitamins, etc. (ii) Feed formulation and technical norms (iii) Infrastructure available for feed testing, procurement of raw material, marketing of different feeds, experience of the entrepreneur. (b) Financial Viability: This would briefly cover: (i) Project outlay, sources of funds and loan requirement (ii) Raw material cost, expenses on fuel, labour, transport commission to be paid and other overheads (iii) Output costs i.e. quantity and sale price of different feeds, number and sale price of empty gunny bags. (iv) Income Expenditure statement and annual gross surplus (v) Cash flow analysis - Benefit Cost Ratio(BCR), Net Present Worth (NPW) and Internal Rate of Return (IRR) (vi) Repayment Schedule i.e. Repayment of principal loan amount and interest Other documents such as loan application forms, security aspects, margin money requirements,etc. are also examined. A field visit to scheme area is undertaken for conducting techno economic feasibility study for appraisal of the scheme. 3.6. Sanction of Bank loan and its disbursement: After ensuring its technical feasibility and financial viability, the scheme is sanctioned by the Bank. The loan is disbursed in two or three stages against construction of various civil structures, purchase of plant and machinery, miscellaneous fixed assets and margin money for working capital requirements. Constant follow up and supervision of the scheme is done by the Bank. 3.7. Lending terms i) Unit Cost:

The Unit Cost depends upon the capacity of the feed mixing unit, type of feeds to be manufactured and also the infrastructure required. ii) Margin Money: In case if the feed mixing unit is integral part of the commercial poultry or dairy scheme, the down payment is based on the category of beneficiary. However, in respect of feed processing plant of larger size, the margin money is normally 25 per cent of the total cost of the project. iii) Interest Rate: It depends upon the RBI guidelines and also the individual banks. The present rate of interest for Rs.2.00 lakhs and above is linked to primary lending rates of banks which varies with the type of investment, beneficiary and also the credit rating. iv) Security: Security will be as per RBI guidelines issued from time to time. v) Repayment period of loan: It depends upon the gross surplus generation in the scheme. The loan will be repaid in suitable monthly or quarterly instalments usually within a period of 5-7 years. Wherever required, the grace period is also considered. vi) Insurance: The building and other assets such as poultry sheds, equipments may be insured against natural calamities. 4.Format of bankable project for feed plants 4.1 Introduction: It should cover the name of the company, location of plant, activities, products, capacity of plant and project outlay 4.2 Company : It should cover the location of registered office, date of formation, registration and authorised share capital. It should also cover the date of incorporation and commencement of business, the objectives, areas of operation, subscribed share capital. 4.3 Promoters and their background: Name and address of promoters, their background, experience and net worth. 4.4 Management of the company: Persons looking after the day to day management, their background, experience,etc. should be covered. 4.5 Project profile: i) Land and location: This should cover the area of land, location of the plant, distances from nearby town, availability of approach roads,

power and water supply and other communication including schools, banks, hospitals,etc. ii) Civil Structures: Name of the Architect, type of structures proposed, drawings and detailed cost analysis of various civil structures along with the present position of implementation may be indicated. The technical specifications of civil structures are given in Annexure - III. iii) Plant and Machinery: The major plant and machinery (imported and indigenous separately), sources of supply, specifications and quotations for various items of equipment need to be given. List of major suppliers of feed plant machinery is given in Annexure - IV. iv) Technical collaboration: The name of the technical collaborators for monitoring and marketing of the products along with their addresses and the type of collaborations should be indicated. Technical collaboration fee/royalty to be paid should also be indicated. v) Manufacturing process: It should cover the manufacturing process of feed (mash/ pelleted feed) in the form of flow chart, proportion of various feeds to be manufactured and the composition of the different feeds. vi) Infrastructural facilities: a) Raw Material: The feed ingredients (grains, cakes, brans, fish meal, molasses, vitamins, minerals,etc.