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Monday, 4 April 2011

Automatic Milk Collection Stations

1. Introduction:
1.1 The Indian dairy industry is contributing significantly to the country's economy, besides improving the health standard by increasing the nutritional value of the food. India occupies first position in the world having a total bovine population of 288 million compared to the world's total bovine population of 1420 million. As per 1992 livestock census, the country has about 62.90 million breedable cows and 42.46 million breedable buffaloes. There has been a major improvement in milk production which increased from 17 million tones in 1951 to 74.7 million tonnes during 1998-99 and the growth was maximum between 1980 and 1990. Uttar Pradesh, Punjab, Madhya Pradesh, Rajasthan, Maharashtra, Gujarat, Andhra Pradesh, Haryana, Tamil Nadu and Bihar contributed to the extent of 85 percent of the total milk production in the country. Today, India is number one producer of milk in the world. The present per capita availability of milk is 212 gms as against the ICMR recommendation of 250 gms. 1.2 Recognizing the importance of the sector, the notable programmes taken up by GOI are key village schemes, intensive cattle development projects, crossbreeding projects through bilateral assistance, operation flood programme and technology mission on Dairy Development. In 1970 under the aegis of National Dairy Development Board, "Operation Flood" programme was launched to modernize the dairy sector and flood the 4 metro cities with milk from dairy cooperatives. By the end of September, 1999, 82000 village milk producers cooperatives were organised through 102 lakh farmers and with an average rural milk procurement of 13.13 million liters per day.
1.3 Having made a significant strides in production and processing, our country is topping the Globe as the highest milk producer. Now it is the time to upgrade the quality of milk by increasing the efficiency of procurement as well as the testing of milk for quality. In India the milk pricing is based on the fat percentage and to some extent Solid Not Fat (SNF) in milk. The determination of fat is based on the butyrometer method which is one of the oldest technology adopted by the Milk Collection Centres/Milk Cooperative Societies. Since 1980's many of the societies have been using Milko testers for testing the fat percentage in milk as this is a rapid method compared to former one. Of late Milk Collection Centres/Cooperative Societies are installing automatic milk collection stations (PC based milk collection stations, smart automatic milk collection stations and automatic milk collection stations) which measure the weight of milk, fat contents and gives a print out of payment slip to farmers in each shift. The systems also facilitates storing 10 days/monthly/yearly data and printing of cummulative summary of shift as and when needed. The state of art equipment is able to perform 120 to 150 operations in an hour.
2. Objectives:
The financial assistance is extended for purchase of Automatic Milk Collection Stations with the following objectives.
1.      To increase the efficiency and accuracy of fat testing in milk
2.      To reduce the staff of the society/collection centre through automation.
3. Potential areas: Automatic Milk Coollection Stations were introduced by the Milk Cooperative Union of KAIRA, Baroda and  Mehsana districts in cooperative sector and Dynamix Dairy, Heritage Foods and Nestle in private sector. The scheme has potential to finance in almost all the operation flood districts where the societies/milk collection centres are procuring more than 350 to 400 litres of milk per day.
4. Beneficiaries: Milk Cooperative Societies of the Cooperative Milk Union or Milk Collection Centre of private dairies.
5. Project Details:
1.   Components: Automatic Milk Collection Station is a specially designed integrated unit which is a combination of several units i.e. Milk Weighing System, Electronic Milk Testing, Personal Computer with printer and battery.
2.   Capacity: The capacity of Automatic Milk Collection Stations is to analyse 120 to 150 samples per hour.
3.   Specifications: The broad specifications are as under:
     a) Fat measurements : 0 - 13% b) Measuring capacity : 120 to 150 operations per hour. c) Power supply :   AC 220  to 240 watts 5O HZ 
4. Equipment suppliers: The equipment is supplied by various agencies which are as follows: Kamadhenu
Ahmedabad, Gujarat DODIA Himmatnagar, Gujarat PROMPT Baroda, Gujarat OPTEL Anand, Gujarat CAPITAL   Electronics Anand, Gujarat REIL Jaipur, Rajashtan

5. Processing: The sequence of operations require insertion of smart card/identity number, pouring of milk in a weighing  container, collection of milk samples at the time of pouring, meaurement of fat content and calculation of payment and printing of payment slip. 
6. Advantages:
1.      Saving in quantity of sample milk
2.      Saving of chemicals and detergents
3.      Saving of expenditure on glassware
4.      Saving in stationery and time
5.      Saving in expenditure on staff.
 
6. Technical Collaboration: Since the process is simple, no technical collaboration is envisaged for the project, however the Milk Unions/Private Dairy Plants would be providing guidance to the societies/collection centres in purchase and installation of Automatic Milk Collection Stations and also training of manpower in operations and maintenance. 
7.Capital Cost:  
The capital cost varies with the specifications and also the manfacturers. However, based on the information furnished by the manufacturers, an average unit cost of Rs.1.15 lakhs including the cost of battery has been considered. The detailed unit cost is given in Annexure I. 
 
8. Economics of the project
Based on the various techno economic parameters furnished in Annexure I, the economics of the project has been worked out and presented in Annexure II. The items of income include saving in expenditure on staff, stationery, chemicals and detergents and glassware and also income from saving of sample milk, while the items of expenditure are the repairs and maintenance of the Automatic Milk Collection Stations.
9. Financial Analysis:
The cash flow analysis covering the Benefit Cost Ratio (BCR) Net Present Worth (NPW) and Internal Rate of Return (IRR) has been worked out for the project and presented in Annexure III. For the model under consideration, the BCR is 1.434:1 NPW is Rs. 47800 and IRR is 47%. The entire bank loan can be repayable in seven years without any grace period. Hence repayment has been fixed at 7 years for the model project.(Annexure IV)
10. Financial assistance:
Automatic Milk Collection Stations would be considered for refinance support by National Bank. Therefore all participating banks may consider financing this activity subject to their technical feasibility, financial viability and bankability.
11. Lending Terms:
11.1 Margin Money: The Milk Cooperative society or Milk collection centre should normally meet 25% of the project cost either out of their own resources or through subsidy.
11.2 Interest rate: Interest rate will be as determined by the financing bank.
11.3 Security: As stipulated by the RBI.
11.4 Insurance: The financing bank may ensure that the society takes adequate insurance cover for the asset.
11.5 Repayment period: Depends upon the gross surplus generated, it may be upto 7 years without any grace period.
12 Special terms and conditions:
The special terms and conditions of the project are given in Annexure V.
Annexure - I
MODEL SCHEME ON AUTOMATIC MILK COLLECTION STATIONS (AMCS)
Unit Cost and Technoeconomic parameters
S.No.
Particulars

A.
Unit Cost, Bank loan & Margin Money

i)
Cost of Automatic Milk Collection Unit (Rs.)
115000
ii)
Margin Money / Subsidy (Rs.)
30000
iii)
Bank loan (Rs.)
85000



B.
Income Parameters

i)
Volume of milk procured (lts/day)
400
ii)
No. of milk samples / day
200
iii)
Quantity of Sample Milk Saved (ml per sample)
10
iv)
Sale of sample milk @ 10ml/sample (lts/month)
60
v)
Sale price of sample milk (Rs./litre)
9.00
vi)
Savings in expenditure on staff (Rs./month)
1500
vii)
Saving in stationery (Rs. / month)
200
viii)
Saving in expenditure on glassware
(@ Rs./sample/day)
0.05
ix)
Savinb on chemicals & detergents
(@ Rs./sample/day)
0.10

 

C.
Expenditure parameters
 
i)
Repairs & Maintenance (Rs./month)
200



D.
Others

i)
Depreciation on AMCU (%)
10
ii)
Interest rate (%)
13.5
iii)
Repayment period (years)
7

ANNEXURE - II
Income and Expenditure - Automatic Milk Collection Stations
(Rs. in Lakhs)
Sr. Particulars Years

  I II III IV V VI VII
1 Volume of Milk Procurement (litres/day) 400 400 400 400 400 400 400
2 No. of Milk Samples per day 200 200 200 200 200 200 200
3 Quantity of Sample Milk Saved @ 10 ml/sample (litres/day) 2 2 2 2 2 2 2
A INCOME              
i) Sale of Sample Milk 0.066 0.066 0.066 0.066 0.066 0.066 0.066
@ Rs.9.00/litre
ii) Savings in Expenditure on Staff @ Rs.1500/month 0.18 0.18 0.18 0.18 0.18 0.18 0.18
iii) Savings in Stationery 0.024 0.024 0.024 0.024 0.024 0.024 0.024
@ Rs.200/month
iv) Savings in Expenditure on Glassware 0.037 0.037 0.037 0.037 0.037 0.037 0.037
@ Rs.0.05/sample/day
v) Saving on Chemicals and Detergents 0.073 0.073 0.073 0.073 0.073 0.073 0.073
@ Rs.0.10/sample/day
  Total Income (A) 0.379 0.379 0.379 0.379 0.379 0.379 0.379
B EXPENDITURE              
i) Repairs and Maintenance 0.024 0.024 0.024 0.024 0.024 0.024 0.024
@ Rs.200/month
  Total Expenditure (B) 0.024 0.024 0.024 0.024 0.024 0.024 0.024
C GROSS SURPLUS (A-B) 0.355 0.355 0.355 0.355 0.355 0.355 0.355
ANNEXURE - III Financial Analysis - BCR, NPW and IRR - Automatic Milk Collection Stations (Rs. in Lakhs)

Sr.No Particulars
Years
 
I
II
III
IV
V
VI
VII
1 Capital Cost
1.150
 




2 Recurring Cost
0.024
0.024
0.024
0.024
0.024
0.024
0.024
3 Total Cost
1.174
0.024
0.024
0.024
0.024
0.024
0.024
4 Benefits
0.379
0.379
0.379
0.379
0.379
0.379
0.379
5 Depreciated Value of AMCS
-
-
-
-
-
-
0.345
6 Total Benefits
0.379
0.379
0.379
0.379
0.379
0.379
0.724
7 Net Benefits
-0.795
0.379
0.379
0.379
0.379
0.379
1.069
8 DF @ 15%
0.870
0.756
0.658
0.572
0.497
0.432
0.376
9 PWC
@15% DF
1.021
0.018
0.016
0.014
0.012
0.010
10 PWB @ 15% DF
0.330
0.287
0.249
0.217
0.189
0.164
0.143
11 NPW @ 15% DF
0.478






12 BCR @ 15% DF
1.434:1
 




13 IRR
47.03% i.e. 47%
 




ANNEXURE - IV
Repayment Schedule - automatic Milk Collection Stations
(Rs. in Lakhs)

    Total outgo
Net available to the society Collection centre
DSCR
     Repayment of Principal
           
                                 
Year Bank Loan Oustanding
 
Gross Surplus Payment of  Interest @ 13.5% p.a. Repayment of Principal Total Outgo Net available to the society collection center DSCR
  At the beginning of the year At the end of the year            
I 0.850
0.750
0.355
0.115
0.10
0.215
0.140
1.654
II 0.750
0.650
0.355
0.114
0.10
0.214
0.141
1.660
III 0.650
0.540
0.355
0.098
0.11
0.208
0.147
1.708
IV 0.540
0.430
0.350
0.081
0.11
0.191
0.164
1.860
V 0.430
0.290
0.350
0.065
0.14
0.205
0.150
1.733
VI 0.290
0.150
0.350
0.044
0.14
0.184
0.171
1.930
VII 0.150
0.000
0.350
0.023
0.15
0.173
0.182
2.053

Hence Average DSCR is 1.800
ANNEXURE V
Model Scheme on Automatic Milk Collection Stations
Special terms and conditions
The bank should ensure that:-
1.      The Milk Union/Dairy will identify the milk societies/collection centres whose milk collection is above 400 litres per
         day for financing Automatic Milk Collection Units.

2.     The Union/Dairy will guide the society/collection centre for the purchase and installation of Automatic Milk
        Collection unit.

3.      The Milk Union/Dairy will train the secretary/worker of the Milk Cooperative Society/Collection Centre in the
         operation and maintenance of the Automatic Milk Collection Unit

4.      The Union/Dairy will arrange to supply the required stationery and diluents to the milk cooperative society/collection
         centre.

5.      The Milk Society/Collection Centre will enter into an annual service contract with the supplying firm from second
         year onwards.

6.      The milk society/collection centre will insure the Automatic Milk Collection Unit with the insurance companies,
         provided the insurance coverage is available.

7.      The Union/Dairy will provide tie up arrangement for the repayment of bank loan.

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