The feasibility of establishing a 2,000 ton capacity cold storage for potato in Haryana (India)

• Main Author: Anand, Navneet
• Format: text
• Language: English
• Published: Animo Repository 1979
• Subjects: Cold storage industry > India > Haryana; Potatoes > Preservation; Agriculture
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/525
• Institution: De La Salle University

This project is on agricultural business and deals with the feasibility of putting up a 2,000 tons capacity cold storage facility in Haryana, India. It also tests the feasibility of combining the trading function with it. The utilization of the establishment of 2,000 tons capacity cold storage will be shared equally by the traders on one hand, and the growers and other traders for a rent of Rs. 20 per bag. This rent is regulated by the Indian government. In the first two years of operation, capacity utilization is assumed at 80 percent, i.e., 1,600 tons and from year three onwards to the tenth year, 90 percent capacity utilization is assumed, i.e. 1,800 tons. The total project cost is Rs. 1,250,000, broken down into : a) Rs. 34,320 for land and improvements, b) Rs. 588,000 for administration and factory buildings, c) Rs. 469,000 for refrigeration plant and insulation, d) Rs. 100,347 for racking arrangements, e) Rs. 6,940 for furniture and fittings, f) Rs. 31,250 for pre-operating expenses, and g) Rs. 20,143 for working capital. Forty percent of the project cost will be financed by the State Bank of India. The project borrows short term loans in the first, second and third years. Maximum borrowing will be Rs. 350,000 in the first year to meet purchases of potatoes and operating commitments. In year two, Rs. 200,000 will be borrowed and in year three, Rs. 50,000. Subsequent to year three up to year ten, there will be no additional borrowings because the product generates enough cash balance. The project starts gaining profits in the first year of operations. The average profitability ratios of years 1 to 10 are, as follows : Return on net worth, 10.09 percent Return on equity, 12.78 percent net profit before taxes and interest/net sales : Profit margin, 28.79 percent net Profit/Net sales : Profit margin, 11.33 percent. Based on the assumptions for the Modified Income Statements at constant prices for I.R.R., the internal rate of return is shown at 12.13 percent whereas under the sensitivity analysis, it shows the I.R.R. of 11.42 percent. Both the I.R.Rs are higher as compared to the cost of long term debt which is 10 percent.