Investment Analysis And Lockheed Tri Star Case Solution

Pre-Feasibility Study

FRESH FRUITS PROCESSING

(Kinnow)

Small and Medium Enterprise Development Authority

Government of Pakistan

www.smeda.org.pk

HEAD OFFICE LDA Plaza, 6th Floor, Egerton Road, Lahore Tel: (042) 111-111-456, Fax: (042) 6304926-7 helpdesk@smeda.org.pk

REGIONAL OFFICE PUNJAB 6th Floor, LDA Plaza, Egerton Road, Lahore. Tel: (042) 111-111-456 Fax: (042) 6304926-7 helpdesk@smeda.org.pk REGIONAL OFFICE SINDH 5TH Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 Fax: (021) 5610572 helpdesk-khi@smeda.org.pk REGIONAL OFFICE NWFP Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 9213046-47 Fax: (091) 286908 helpdesk-pew@smeda.org.pk REGIONAL OFFICE BALOCHISTAN Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 831623, 831702 Fax: (081) 831922 helpdesk-qta@smeda.org.pk

May, 2006

Pre-Feasibility Study

Fresh Fruits Processing (Kinnow)

DISCLAIMER

The purpose and scope of this information memorandum is to introduce the subject matter and provide a general idea and information on the said area. All the material included in this document is based on data/information gathered from various sources and is based on certain assumptions. Although, due care and diligence has been taken to compile this document, the contained information may vary due to any change in any of the concerned factors, and the actual results may differ substantially from the presented information. SMEDA does not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. Therefore, the content of this memorandum should not be relied upon for making any decision, investment or otherwise. The prospective user of this memorandum is encouraged to carry out his/her own due diligence and gather any information he/she considers necessary for making an informed decision. The contents of the information memorandum do not bind SMEDA in any legal or other form.

DOCUMENT CONTROL

Document No. Revision Prepared by Issue Date Last Revision Date Issued by PREF-11 2 SMEDA-Punjab December, 2005 May, 2006 Library Officer

1 PREF-11May, 2006/ Rev 2

Pre-Feasibility Study

Fresh Fruits Processing (Kinnow)

1

1.1

INTRODUCTION

Project Brief

The scope of the project includes processing of fresh citrus fruit locally known as "Kinnow". Kinnow fruit is a hybrid of Mandarins. There is huge demand for processed Pakistani Kinnows in the international markets. The major operational activities of the project include following processes:       1.2 Sorting Washing Waxing Drying Grading Packaging Opportunity Rationale

The human resource (labour) costs, in the Western Hemisphere and in developed countries, are much higher. Although, these countries now employ sophisticated farm machinery and implements, yet the production costs are on a higher side. So far, most of these countries compete due to heavy direct or indirect subsidies offered to them by governments and Trade Associations. However, under WTO (World Trade Organisation) convention, of which Pakistan is also a member country, subsidies are totally discouraged. The rising production cost and diminishing subsidies would make it difficult for these countries to compete in the international markets. With 1.76 million tons, Pakistan is the 10th largest producer of Kinnow (mandarin hybrid) and oranges in the world. Kinnow is only grown in Pakistan and its aroma and taste has obtained a good reputation and acceptability in the international markets. Pakistan's world mandarin and orange market share is 8 percent. Above state of affairs provide Pakistani Kinnow with an opportunity to compete in the international markets. 1.3 Viable Economic Size (Processing Capacity)

A plant having a capacity of processing 8 tons of Kinnow per hour is considered to an economically viable plant. This means, that for a total season of 135 days, a total of 8,100 tons of Kinnow can be processed, if the plant runs at 8 hours per day. 1.4 Total Project Cost

Rs. 13.390 million

2 PREF-11/May, 2006/ Rev 2

Pre-Feasibility Study

Fresh Fruits Processing (Kinnow)

Process Flow Chart

Washing Waxing Grading Manual Sorting Packing

1.5

Total Flow System

Picking Orchard

Transport to Processing Unit

Waxing Washing

Packing Chilled Storage 8 -10 o Weighing Sorting Grading Drying

Transport to Shipment Port: Reefer Container / Normal Truck

Shipping

Port of Shipment

International Wholesale Market

2

CURRENT INDUSTRY STRUCTURE

Table 2-1: Major Orange & Mandarin Producing Countries - Production & Yield (FAO 2004-5) Country World Brazil USA China Spain Italy Egypt Argentina Turkey South Africa Others Production (000MT 92,775 18,313 10,397 13,930 6,091 3,171 2,251 2,660 2,264 1,560 25,589 Utilization (000MT) 25,533 11,723 7,164 396 895 1,389 Not Available 1,185 Not Available 355 1,119

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Pre-Feasibility Study

Fresh Fruits Processing (Kinnow)

Table 2-2: Existing Capacity of Kinnow Processing in Pakistan Item Processing Plant (08ton per hour) (Local Manufactured) Processing Plant