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Report on GHEE & OIL INDUSTRY

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Report on GHEE & OIL INDUSTRY

In the Name of Allah,


The Most Beneficent,
The Most Merciful.
Read:
In the Name of your Lord
Who Created, Created Man from a Clot.
Read:
And your Lord is the most Bounteous,
Who taught by the pen,
The man that which he did not Know

Al-
Quran

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“ALLAH DOES NOT LOOK AT


YOUR FORMS AND POSSESSIONS
BUT HE LOOKS AT YOUR
HEART AND DEEDS”

(MUSLIM)

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DEDICATED TO ALLAH

The Almighty

The Omniscient

The Omnipotent

The Omnipresent

The creator of creative mind.

PREFACE
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Department Of COMMERCE has always tried to make its students be familiar

with the different techniques in the field of Project Appraisal in order that they

can understand & present the concepts of Project Appraisal in the light of

present-day progress & development.

The importance of principal work almost exists in every professional field.

Practical knowledge makes man a technical person who enables to do every

work promptly regarding his profession. The very distinctive feature of the

degree of MASTER OF COMMERCE is that it stresses more on the practical

aspects of study. Our teachers have extremely realized this importance & they

use all the tact’s to expose us to the real field circumstances.

Project Appraisal has become a common phenomenon now-a-days. We have

also endeavored to consolidate in this assignment all the important features of

the topic. Every effort has been made to incorporate all the available means of

information to make this assignment exhaustive & comprehensive. We tried our

best to accomplish our work with honesty and diligence.

Mr. Ali Gulzar


Mr. Fahad Mehmood
Mr. Zubair Khan

Acknowledgement

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 Special thanks to Almighty Allah, creator of the creative minds.

 We pay abundant thanks to our encouraging teacher & instructor


Mr. JAWAD DILAWAR for enlightens our minds with the rich
information about the topic.

SPECIAL THANKS

• MR. RAO EHSAN, Admin. Manager, HAFEEZ GHEE & OIL


INDUSTRIES (pvt ltd.) MULTAN
• MR. AMJAD HUSSAIN, C.F.O MEHMOOD AGRO GROUP OF
INDUSTRIES (pvt ltd.)
• Mr. Nadeem, PRODUCTION MANAGER MEHMOOD AGRO
GROUP OF INDUSTRIES (pvt ltd.)
• Mr. kashif Accountant Hoor Banaspati and cooking oil

OIL PLANT

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Table OF Contents
Sr. No Particulars

1 Executive Summery
Introduction & Estimated Cost of the
2
Project
Name of Machinery Supplier
3
Implementation Schedule
4
Introduction to Industry
5
Market Analysis
6
Raw Material
7
Technical Analysis
8
SWOT Analysis & Financial Ratios
9
Manufacturing Process
10
Economic Analysis
11

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EXECUTIVE SUMMERY

1. The project
The proposed project site enjoys the benefits of easy availability of raw material, quick
access to the markets of Pakistan as it is located on the main road, source of power and
electricity & transportation. The project will be equipped with most locally manufactured
plant and machinery and rest of equipment will be imported from China.
.
2. Product’s Range
A. Cooking OIL
B. Vegetable Ghee
C. Laundry Soap
D. Meal
Cooking will be in the packaging of 1 kg, 2.5 kg and 5 kg and Vegetable Ghee will be in the
packaging of ½ kg, 1 kg, 2.5 kg, 5 kg, 10 kg and 16 kg.
3. Market
Our site is centrally located in Pakistan from where we can easily get access to the markets
of the country. We have some competitors but its success and profitability is very much
related to its low cost and high quality. Oil and Ghee is basic ingredient of every meal so it
has high demand locally and nationally. Oil and ghee are also exported to Afghanistan and
Central Asian countries.

4. Plant capacity
The 100% capacity of plant is 150 Tons per day, of which 50 Tons would be the production
of cooking oil and 100 Tons of Vegetable Ghee. The actual production will be 110 tons per
day, in which 80 tons will be for Ghee & 30 tons for Oil.

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5. Material and input

The raw materials required for the production of GHEE & OIL are as follows,\
Cotton seed oil (ghee)
Sunflower oil (ghee)
Palm oil (ghee)
Palm olien oil (ghee)
Soya been oil (cooking oil)
Canola oil (cooking oil)

The raw material required for producing cooking oil will be imported from Canada,
Australia and Palm Olean oil for ghee will be imported from Malaysia. Palm fatty will be
imported from Malaysia. Other inputs like Caustic Soda, Bleaching Earth, Common Salt,
Antioxidant, Citric Acid, and Nickel Catalyst are available in Pakistan.

6. Project Engineering
The plant and machinery used for production consist of Storage Section, Pre-Refining
Section, Hydrogenation Section, Post-Refining Section, Ghee Filling Section, Refrigeration
Section, Steam Generation, Soap Section, Water Pump Section, Hydrogen Gas Generation &
Storage Section, Electric Section, Mechanical workshop.

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7. Implementation:

The total time period for the installation & execution of output is estimated to be 6 months
from the date of approval of finance.

8. Estimated Cost: Rs. (000)

Total fixed cost of project 327,602

+ Initial permanent working capital 790,091.18

Total cost of Project 1,117,693

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Machinery Suppliers
Universal engineering Faisalabad
Company Name: Universal Engineering
Street Address: P.O. Nishatabad Sheikhupura Road
City: Faislabad
Province/State: Punjab
Country/Region: Pakistan

Telephone: 0092-41-754481/ 754469

Fax: 0092-41-752135

THE PROJECT INTRODUCTION

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The proposed project contemplates to set up a new Oil & Ghee Mill Unit at Multan. The
annual rated production capacity of the plant is estimated about 150 ton of which 50 ton oil
and 100 ton ghee working 350 days a year and tripled shift per day of 8 hours each. The
project shall be equipped with latest locally manufacturing plant and Machinery.

Estimated Cost of the Project (Rs. 000)


Total Fixed Cost 327,602
Initial Fixed Working 790,091.18

Total 1,117,693

Introduction to Industry
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The manufacture of Vegetable Ghee/ Cooking Oil in the organized sector contributing
around Rs.30 billion annually to the government exchequer in the form of Custom
Duty, Federal Excise Duty and Income Tax etc. Ghee & Oil Units are not only catering
to the needs of Pakistan’s whole population, but also supplying this dietary item of
daily use to the people of neighboring countries. The export of the Vegetable Ghee to
Afghanistan and the Central Asian States via land route through Torkhum and
Chamman borders is a good source to earn precious foreign exchange for our country.
In addition of boosting trade relations with these countries that’s why the future of this
industry is bright in Pakistan.

Industry Background and History

Ghee industry was introduced in the sub continent in mid thirties, and since then it has
grown tremendously in face of all environmental hazards. It has been subjected to
serious edible Oil shortages, government inconsistent policies and severe variations
between demand and supply in the domestic market.
There are about 150 units of edible oil and oil extraction in Pakistan, involved in
extraction and production of various types of cooking oil and ghee. However, the
number of ghee manufacturer's registered with PVMA at present are 95.
The country which was self sufficient in edible Oil production (0.154 million MT), till
1960, and paying not a single dollar against the import bill, is today importing well over
1.160 million MT against an import bill of no less that Rs.33000 million per year, being
the third largest edible Oil importing country of the world, after China and the
European Union. All these imports originated from Malaysia.

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During the past 21 years of interrupted and partially half hearted efforts of successive
governments since 1979, the country has been able to procure only 0.5 million MT of edible
Oil from indigenous resources while the rest of the 1.1 million MT is procured from imports.

The share of ghee & cooking oil in large scale manufacturing is 7.4 percent. During the last
seven years (FY01-07) the average annual growth for ghee/edible oil production is about
seven percent

The structure of Ghee/Oil industry is just like all the other developing industries of Pakistan.
There are certain well-established companies working with good brand names, serving the
nation as a whole. Along with them there are certain units, which are working in limited areas,
meeting the requirements of these niche markets. Some of the vegetable Ghee mills are
working under the control of government and other are held privately.

The raw material required for the production of Ghee/Oil is imported from different countries
and this is the biggest imported item in food category. The prices of Ghee/Oil are very much
influenced by the duties on these imports and the international price fluctuations of these
items.

In early 1990’s there had been a serious crisis in the Ghee industry, and the main reason for
this was that production of Ghee was greater than the demand. In this period due to the heavy
looses on account of these units government privatize so many Ghee producing units.

Vegetable Ghee is the commercial term for vegetable Oil hardened by the process of
hydrogenation. Cottonseed, soybean Oil, Sun Flower Oil, corn Oil, is being mainly used in
Pakistan for the manufacturing of Oil/Ghee. Pakistan is importing Palm Oil and Soya bean Oil
from America, Indonesia and Malaysia. During 1999-2000 Pakistan imports of soya bean Oil
and palm Oil has drastically decreased both in quantity and value. Pakistan imported soya
bean Oil worth $75.8 million and Palm Oil $267.8 million in year 1999-2000.

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Market Analysis
Pakistan is the third largest importer of edible oil as only around 27.0 percent of its
requirement is met through domestic production. Pakistan: Per Kg Consumption of Vegetable
Ghee Per Annum Is Lower Than EU, USA and Russia But Is Above India and Bangladesh
(18.86 Kg per Annum per Person)

The remaining needs are met from imports of various edible oils. The ghee and cooking oil are
the basic food items of human diet all over the world. With the passage of time the overall
production as well as consumption of ghee & cooking oil has significantly increased in
Pakistan.

Competitors

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In Pakistan ghee industry is flourished over the years. Today there are many Locals and
National companies as well as international companies engage in the production of ghee and
oil working in Pakistan.

Among multinational companies includes Lever Brothers (Pvt.) Ltd. They manufacture
DALDA and PLANTA cooking oil and ghee. Some other companies are as follows.

1) Al Hilal Vegetable Ghee Mills engages in the production of Sultan Banaspati Ghee. It is
situated in Multan.
2) Shahbaz Ghee Mills is engage in the production of Shahbaz Banaspati. It is situated in
Rahim Yar Khan.
3) Wazeer Ali Industries Ltd. engages in the production of Tallo Banaspati ghee and cooking
oil. It is situated in Hyderabad.
4) Fatima Enterprises Ltd.
5) Rafhan Maize Product Company involved in the production of Rafhan Corn Oil and it is
situated in Faislabad.
6) Ahmad Food Industries manufactures Ahmad Soya bean Oil.
7) Ghee Corporation of Pakistan (G.C.P) under which 26 units engaged in the production of
ghee is working all over the country.
8) Hafiz ghee & oil industries pvt ltd multan
Apart from these combines there are many other firms manufacturing ghee. Now Brothers
ghee and Oil Mill is entering in the market.

Raw material:

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The basic raw material required for producing cooking oil and vegetable ghee is Canola oil,
Palm oil and Palm alien. These raw materials are not locally available; they would be imported
from Canada and Malaysia. There are some other input materials which are necessary for
production but they are available in Pakistan. List of raw materials and their prices are listed
below.
Cooking Oil
Raw Material
Quantity Price Rs (000)
Canola Oil (Tons) 17500 86000/Ton
Caustic Soda (Kg) 102000 25/kg
Fuller Earth (Kg) 204000 30/kg
Common Salt (Kg) 26000 3/kg
Antioxidants (Kg) 3400 160/kg

Vegetable Ghee

Raw Material
Quantity Price Rs (000)

RBD Palm Olein Oil (Tons) 32,000 75000/ton


Caustic Soda (Kg) 75,000 25/kg
Fuller Earth (Kg) 67,000 30/kg
Common Salt (Kg) 50,000 3/kg
Citric Acid (Kg) 7000 120/kg
Nickel Catalyst (Kg) 5000 1400/kg

Project demand, Products and product mix:

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The main products of the company are cooking oil and vegetable ghee and by-products will be
laundry soap and carbon dioxide gas. At 100% capacity, annual production of cooking oil will
be 17500 Tons, vegetable ghee 32000 Tons and Laundry soap 1050 Tons.

TECHNICAL ANALYSIS

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Location of the Project
The project is proposed to set up at MULTAN. 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, Internet etc.
- Availability of skilled and Un-Skilled manpower
- Free from other environmental hazards like water logging, floods, salinity etc.

Utilities
Main utilities required for project are gas, electricity, water, and transportation and disposal
arrangement.
Gas
Gas is very important for our project because our production process needs steam. And
hydrogen gas. So you will have to get commercial connection of gas from Sui northern gas
pipelines limited, main line of gas is 1.5 km away from the proposed site
Electricity
Machinery can not work without power, so power is like blood for project; you will have to
get connection of power from MEPCO.
Water
Water is needed during the process we will get water through water pumps.

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SWOT ANALYSIS
Strength:
 Raw material is easily available
 Access to customers
 Well technology is used
 Demand is very high
 Profit earning is high
Weakness:
 Recourses are going to be end
 Security problem
 Government restriction
 Load shedding of sui gas & electricity

Opportunities
 High demand
 Payback period can be minimum.

Threat
The proposed project will be facing the following threat:

 Market saturation over a longer period of time due to a large number of entrants
 Threat of increase in the import duty by the government

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Gross Profit Ratio 39% 34% 33%


Operating Profit Ratio 39% 34% 33%
Net Profit Ratio 17% 15% 15%

Ratios 1 2 3 4
Current Ratio 1.43 2.23 2.79 3.34
Quick Ratio 1.24 1.95 2.50 3.03
Debt Ratio 84% 58% 44% 35%
Total Assets Turnover 0 25% 25% 20%
Return on Equity 52% 37% 30%
Return on Assets 4% 4% 3%

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Manufacturing Process

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In our proposed project we will produce three elements


1. Cooking Oil
2. Vegetable Ghee
3. Laundry Soap

Process has following stages:


A) Decantation
Decantation is a process of unloading of unprocessed oil from carriage into decanting tanks.
You will have to get a 50 ton decanting tank.

B) Oil Storage
The next step is storage. Oil from decanting tanks is transformed from decanting to storage
tanks with the help of powerful pumps. Two storage tanks of 500 tons capacity are needed.

C) Refining
The oil in refined to remove free from acids and phosphatides and the gaining material and to
improve its color. The oil is refined with strong Caustic Soda. This result in two products one

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is the refined oil and the other is it’s by product namely mud which is being used for
manufacturing soap but the firm sells the mud it does not manufacture soap. We will produce
soap.

After Refining Process is divided in to three independent processes

OIL REFINING PLANT

MANUFACTURING PROCESS OF COOKING

OIL
0.Neutralizing
The Crude Oil temporarily stored in Crude Oil Tank is pumped into neutralizing tank by Oil Pump.
The oil is mixed with alkali lye in Mixer and neutralized in Neutralizing Tank, free fatty acid has been
neutralized or saponified to be Soap stock.

1. Bleaching

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In this step we decolorize the oil by using Fuller Earth, Caustic Soda and Activated Carbon at
high temperature.

2. Filtration
In this step we remove impurities (Fuller Earth) from oil through filtration medium. All
impurities that become part of oil in Bleaching process are removed in this step.

3. Deodorization
It is a process of purify the oil. Its odor is removed by using vacuum vessels. All those
impurities that are reason of odor in oil are removed in this section. The temperature of oil is
very much increase in this process.

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4. Cooling
In the Deodorization Process temperature of oil much rises so it needs to cool again. In
Cooling Section oil is cooled to normal temperature by using coolers.
5. Filtration
To remove the impurities, oil is re filter through filtration process.
6. DE-Waxing
It is a complex process that is used to remove Wax from oil. It is necessary to remove wax for
further processing. For this purpose some organic compounds are used in chemical reaction.
These reaction are much complex in nature. Samples are taken and laboratory tests are
applied.
7. Filtration & Vitamin Addition
De-waxed oil is passed through further filtration. Move over some essential Vitamins (A&D)
are added in this section. Nickel catalyst (Ni) is used in this process.
8. Storage
After final filtration and Vitamins addition oil is stored in storage tanks. In these tanks oil is
store at moderate temperature.
9. Packing
In packing section oil is packed in deferent weights plastic bags. These bags properly sealed
and again weigh before forward to store rooms.

10. Godown
After packing oil bags are forward to Godown. Ammonia section is there to control
temperature of Godown.

MANUFACTURING PROCESS OF VEGETABLE GHEE


0. Neutralizing
The Crude Oil temporarily stored in Crude Oil Tank is pumped into neutralizing tank by Oil Pump.
The oil is mixed with alkali lye in Mixer and neutralized in Neutralizing Tank, free fatty acid has been

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neutralized or saponified to be Soap stock.

1. Bleaching
In this step we decolorize the oil by using Fuller Earth, Caustic Soda and Activated Carbon at
high temperature.
2. Filtration
In this step we remove impurities (Fuller Earth) from oil through filtration medium. All
impurities that become part of oil in Bleaching process are removed in this step.
3. Hydrogenation
Hydrogenation is process of addition of hydrogen gas in oil. It is a complex organic process in
which unsaturated hydrocarbon are convert into saturated hydrocarbons. It is main process of
converting oil into ghee. At high temperature hydrogen gas is passed into the oil, chemical
reaction occurs in presence of Nickel (Ni) catalysts.
4. Filtration
In this step we remove impurities (Fuller Earth) from ghee through filtration medium. All
impurities that become part of oil in Bleaching process and Hydrogenation process are
removed in this step.

5. post Refining
After hydrogenation oil is once again refined by using caustic soda in order to remove the
entire harmful chemicals that become part of oil during process.
6. Post Bleaching
After refining, once again bleaching is done in order to decrease the color of oil.
7. Filtration
To remove the impurities, ghee is re filter through filtration medium.
8. Deodorization
It is a process of purify the ghee. Its odor is removed by using vacuum vessels. All those
impurities that are reason of odor in ghee are removed in this section. The temperature of ghee
is very much increase in this process.

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9. Cooling
In the Deodorization Process temperature of ghee much rises so it needs to cool again. In
Cooling Section ghee is cool down by using coolers.
10. Filtration & Vitamin Addition
For further filtration ghee must re heated. Move over some essential Vitamins (A&D) and
ghee flavors are added in this section.
11. Storage
After final filtration and Vitamins addition ghee is stored in storage tanks. In these tanks ghee
is store at high temperature.

12. Packing
In packing section ghee is packed in deferent weights plastic bags. These bags properly sealed
and again weigh before forward to store rooms. 0.5kg, 1kg, 2kg, 2.5kh, 5kg, 10kg, 16kg
packing is available. Plastic bags and steel teens are used for packing.
13. Chilling
Packed ghee is in melted form and hot. It is passed through chiller to decrease its temperature.
14. Godown
After packing ghee bags and teen packs are forward to Godown. Ammonia section is there to
control temperature of Godown.

MANUFACTURING PROCESS OF LAUNDRY SOAP

1. Soap Stock
In the process of refining, dirt is separated and sent to soap section for making laundry soap.
2. Saopnification Cooking
This is process of making soap from soap stock. Soap stock is heated and treated by using
some techniques.

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3. Setting
Liquid is treated and soap in liquid form is made
4. Filling in Frames
Liquid is filled in frames to makes blocks of soap
5. Cutting into Cakes
Solid soap blocks are divided in small cubes.
6. Packing
Soap is packed in packets and cartons
7. Godown
Finished soap is sent to Godown and from Godown it is delivered to market.

DECANTATION

OIL STORAGE

REFINING

GHEE COOKING OIL SOAP

Neutralization Neutralization

Soap Stock
Bleaching Bleaching

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Filtration
Saopnification
Filtration Cooking
Deodorization
Setting
Hydrogenation
Cooling

Filling in Frames
Filtration
Filtration

Post Refining Cutting into cakes


De- Waxing

Post Bleaching Packing


Filtration & Vitamin Add.

Godown
Filtration
Storage

Packing Dispatch
Deodorization

Godown
Cooling

Filtration & Vitamin Add. Dispatch

Storage

Packing

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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. (000) 1,117,693.25 in local currencies would have a healthy impact on the GNP of the
country, the extent of which depends on the degree of multiplied effect.

EMPLOYMENT OPPORTUNITIES

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The project would create employment opportunities for the following staff:
Detail Total Nos.
Skilled Labor 40
Semi-Skilled Labor 60
Unskilled Labor 35
Administrative Staff 20

OIL & GHEE MILLS


Estimated Cost of Plant & Machinery
Rs.
S.NO. DESCRIPTION (000)
1 STORAGE SECTION 13,550
2 PRE-REFINING SECTION 6,110
3 HYDROGENATION SECTION 8,690
4 POST-REFINING SECTION 9,805
5 GHEE FILLING SECTION 8,650
6 REFRIGERATION SECTION 4,500
7 STEAM GENERATION 5,650
8 SOAP SECTION 1,595
9 WATER PUMP SECTION 1,150
10 HYDROGEN GAS GENERATION & STORAGE SECTION 9,950

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11 CO2 GAS SECTION 2,800
12 ELECTRIC SECTION 10,700
13 MACHANICAL WORKSHOP 900
COST OF MACHINERY 84,050
14 ERECTION & INSTALLATION:15 % of machinery 15% 12,608
15 TRANSPORTATION (10% of Machinery) 10% 8,405
16 INSURANCE (5% of Machinery) 5% 4,203
17 Contingencies 2% of Building & Machinery 2% 1,681
TOTAL COST OF PLANT & MACHINERY 194,996

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OIL AND GHEE MILLS


Estimated Cost of the Project

Cost of the Project Local Foreign Total


(Rs.000) (Rs.000) (Rs.000)
Project Land and it's Development 12,800 - 12,800
Building and Civil Works 61,753.35 - 61,753.35
Plant & Machinery 58,499 136,497 194,996
Furniture and Fixture 100 - 100
Utilities & Office Equipment 3,000 - 3,000
Vehicles 1,500 - 1,500
Markup during Construction 51,192 - 51,192
Pre Production Expenses 1,780 - 1,780
Contigencies 481 - 481

Total Fixed Cost 191,105 136,497.20 327,602


Initial Net Working Capital 790,091.18 - 790,091.18

Total Cost of the Project 981,196 136,497.20 1,117,693

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OIL AND GHEE MILLS .

PRODUCTION AT 100%
COOKING OIL

Output% Quantiy (Tons)


Production of oil 97%
16975
Wastage 1%
175
Soap Stock dirt 2%
350
Total 100 17500
VEGETABLE GHEE
Ghee 95%
30400
Wastage 5% 1600
Soap Stock dirt 3%
960
Total 100 32000
LAUNDY SOAP
Soap 75%
1050
Wastage 25%
350
Total 100
1400

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