PRE-FESIBILITY STUDY
INLAND FISH FARMING
PRODUCTION OF CHANNEL CATFISH
PAKISTAN AGRICULTURE RESEARCH COUNCIL ISLAMABAD
MINISTRY OF NATIONAL FOOD SECURITY AND RESEARCH
Government of Pakistan
www.parc.gov.pk
February, 13 2014
1
Contents
1. DISCLAIMER 4
2. PURPOSE OF DOCUMENT 4
3. INTRODUCTION TO SCHEME 4
4. EXECUTIVE SUMMARY 5
5. BRIEF DESCRIPTION OF PROJECT 5
6. CRITICAL FACTORS 6
7. INSTALLED AND OPERATIONAL CAPACITY FOR CHANNEL CATFISH 6
8. GEOGRAPHICAL POTENTIAL FOR INVESTMENT 6
9. POTENTIAL TARGET MARKETS 7
10. PRODUCTION PROCESS FLOW 7
11. PROJECT COST AND BENEFIT SUMMARY 7
11.1. Project Economics 7
11.2. Project Financing 8
11.3. Project Cost 8
11.3.1. Space Requirement 8
11.3.2. Machinery and Equipment 9
11.3.3. Furniture and Fixture 9
11.3.4. Operational and Maintenance cost 9
11.3.5. Human Resource Requirement 10
11.4. Revenue Generation 10
12. KEY ASSUMPTION 10
13. USEFUL LINKS 11
14. ANNEXURES 12
Annexure I: Income Statement 12
Annexure II: Summary Statistics 13
List of Tables
Table 1. Project Economics ------7
Table 2. Project financing ------8
Table 3. Total Project Cost ------8
Table 4. Space requirement and its cost ------8
Table 5. List of Machinery and equipment and its cost ------9
Table 6. List of Furniture & Fixture and its cost ------9
Table 7. Operational & Maintenance cost ------9
Table 8. Human Resource Requirement its cost ------10
Table 9. Revenue of the Project ------10
Table 10. Key Assumption ------10
1. DISCLAIMER
This information memorandum is to introduce the subject matter and provide a general idea and information on the subject. Although, the material included in this document is based on data / information generated from experiments and field testing by a team of relevant scientists; however, it is based upon certain assumptions which may differ from case to case. The contained information may vary due to any change in any of the concerned factors, and the actual results may differ accordingly from the presented information. The PARC and its employees do not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. The prospective user of this memorandum is encouraged to contact qualified consultant/technical expert, especially designated focal person(s) of this enterprise for reaching to an informed decision.
2. PURPOSE OF DOCUMENT
The purpose of this document is to facilitate potential investors in Catfish Fish Farming Business by providing them with a general understanding of the business, with the intention of supporting potential investors in crucial investment decisions. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective, the document/study covers various aspects of project concept development, start-up, production, finance, and business management. The need to come up with pre-feasibility reports for undocumented or minimally documented sectors attains greater imminence as the research that precedes such reports reveal certain thumb rules; best practices developed by existing enterprises by trial and error, certain industrial norms and well established research findings that become a guiding source regarding various aspects of business set-up and it’s successful management. Apart from carefully studying the whole document, one must consider critical aspects provided later on, which form the basis of investment decisions.
3. INTRODUCTION TO SCHEME
Prime Minister’s Youth Business Loan Program, for young entrepreneurs, with an allocated budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide subsidized financing at 8% mark-up per annum for one hundred thousand (100,000) beneficiaries, through designated financial institutions, initially through National Bank of Pakistan (NBP) and First Women Bank Ltd. (FWBL). Loans from Rs. 0.1 million to Rs. 2.0 million with tenure up to 8 years inclusive of 1 year grace period, and a debt: equity of 90: 10 will be disbursed to SME beneficiaries across Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan, Gilgit-Baltistan, Azad Jammu & Kashmir and Federally Administered Tribal Areas (FATA).
4. EXECUTIVE SUMMARY
Channel catfish is considered for Inland Fish Farming Business in this project pre-feasibility. This business is proposed to be located primarily in a warm area, having a water temperature range of 5 - 30 degrees centigrade. All the prospects of channel catfish culture i.e. stocking density, nutritional requirement, reproductive performance and management and development of brood stock has been studied at Aquaculture and Fisheries Program (AFP), Animal Sciences Institute (ASI), National Agricultural Research Centre (NARC), Islamabad. Successful breeding of channel catfish has been achieved at AFP, NARC. After successful experimentation, this species is declared technically feasible for commercial fish farming. The technology of channel catfish culture and breeding are in the phase of extension to the farmers. Farmers are already practicing its culture at their farms under polyculture system with carps. They have registered a weight gain up to one kg from fingerling in six months. The production of catfish can be successfully carried in Sindh, Punjab and some parts of Balochistan and Khyber Pakhtunkhwa. The project can be started at an area of three acres with 9,000 fish fingerlings of channel catfish for the first nine month cycle with survival rate of 90%. Total cost estimate is Rs.2.128 million, with fixed investment of Rs.0.83 million and working capital amounting to Rs.1.298 million. Given the cost assumptions, Net Present Value (NPV), Internal Rate of Return (IRR), Benefit Cost Ratio (BCR) and payback period are Rs. 4863068, 34%, 1.5 and 3.52 years respectively.
5. BRIEF DESCRIPTION OF PROJECT
Following key parameters must be addressed as per pre-feasibility study:
• Techniques: Different techniques are used for catfish farming. However, keeping in view the economical, technical and managerial factors, semi-intensive fish farming, monoculture technique is suggested for the proposed project.
• Location: The business can be initiated in warm areas of Sindh, Punjab and some parts of Balochistan and Khyber Pakhtunkhwa having suitable environment, particularly freshwater temperature range between 5-30 oC. Suitable locations are Gujranwala, Lahore, Multan, Faisalabad and Rawalpindi Divisions in Punjab, Thatta, Badin, Dadu and Sukkur in Sindh, Mardan, Peshawar, Nowshera, Charsada and D.I.Khan districts in KPK, and Nasirabad and Jaffarabad districts in Balochistan.
• Product: Fish consumption is increasing in Pakistan due to changing food habits and special preferences for high quality white meat. Channel Catfish is becoming very popular due to its taste and absence of intra muscular bones/spines.
• Target Market: In addition to major cities, such as Quetta, Karachi, Lahore and Islamabad, there is an enormous export potential for Middle Eastern countries.
• Employment Generation: The proposed project will provide direct employment to two individuals. Financial analysis shows the profitability of proposed business within first year of its operation.
6. CRITICAL FACTORS
The commercial viability of the proposed project depends on the following factors:
• Selection of proper location with water, equipment, and staff play very important role in ensuring the project to run successfully. Soil rich in clay is suitable for fish farm. This species is sensitive to temperature and grow well in suitable temperature.
• Farm may be positioned away from agricultural activities, to avoid spray application of pesticides.
• It should have enough elevation, so it can be drained easily during the off season.
• Healthy seedlings must be purchased from reliable/reputed dealers, for the assurance of desired fish species.
• Farm is required to maintain the record of production and management practices for successful marketing and traceability.
• Farm should have strong market linkages for effective disposal of produce.
7. INSTALLED AND OPERATIONAL CAPACITY FOR CHANNEL CATFISH FARMING
This pre-feasibility suggests a farm operation on three acres of land with 9,000 fish for the first nine month growing cycle with survival rate of 90%.This area can be increased from 3 acres to six acres with double input and output.
8. GEOGRAPHICAL POTENTIAL FOR INVESTMENT
The proposed location for establishment of the fish farms will primarily be warm areas that provide suitable environment for species (channel catfish) with particularly water temperature. Suitable locations are Gujranwala, Lahore, Multan, Faisalabad and Rawalpindi Divisions in Punjab, Thatta, Badin, Dadu and Sukkur in Sindh, Mardan, Peshawar, Nowshera, Charsada and D.I.Khan districts in KPK, and Nasirabad and Jaffarabad districts in Balochistan.
9. POTENTIAL TARGET MARKETS
The marketing of fish follows the traditional distribution channel, through middlemen or wholesalers at farm who identifies potential buyers and negotiate price, or directly to retailers in urban markets. The time spent in transportation, from farm to the retail shop, varies from area to area. Over the years, collection and transportation of fish has improved with the use of loader vehicles. However, greater the distance between farm and consumer, more complicated will be the marketing or distribution system, due to the perishable nature of the product. The key factors in marketing are availability of current market information, quality of fish and supply demand which will determine the selling price.
10. PRODUCTION PROCESS FLOW
The overall production cycle for the inland fish farming comprises of 9 months. In case of fresh seedlings (with an age of 20 days), the production cycle will take more time to achieve the desired output. It varies respectively, with the selection of fish (seedlings/fingerlings) size. Keeping in view the economic perspective, it is suggested that fish with 3-4 inches may be used for different ponds.
11. PROJECT COST AND BENEFIT SUMMARY
A detailed financial model has been developed to analyze the commercial viability of Catfish Fish Farming under the Prime Minister’s Small Business Loan Scheme. Various cost and revenue related assumptions, along with results of the analysis, are outlined in this section.
11.1. Project Economics
All figures in the financial model have been calculated for 9,000 units of fish on three acres of land. The following table shows internal rates of return and payback period.
Table 1. Project Economics
Description / DetailsNet Present Value (NPV) / Rs. 4,863,068
Benefits Cost Ratio (BCR) / 1.5
Internal Rate of Return (IRR) / 34%
Payback Period (years) / 3.52
Factors that influence the profitability of Inland Fish Farm are farm management, quality of inputs and environmental factors.
11.2. Project Financing
Following table provides details of the equity required and variables related to bank loan;
Table 2. Project financing
Description / DetailsTotal Equity (10%) / Rs. 212,800
Bank loan / Rs. 1,915,200
Mark up to borrower (per annum) / 8%
Tenure of Loan (Years) / 8
Grace Period (years) / 1
11.3. Project Cost
Following requirements have been identified for operations of the proposed business and along with details costing (Table 3).
Table 3. Total Project Cost
Capital Investment / Amount (rupees)Capital Cost (one time investment) / 8,30,000
Initial operational cost / 1,298,000
Total / 2,128,000
11.3.1. Space Requirement
Following table gives details of space requirements and its costing for the project under consideration.
Table 4. Space requirement and its cost
Space Requirement (Sq. ft.) / Cost Rs./ Unit / Quantity (Nos) / Area (Sq. ft.) / Total Cost (Rs.)Office Building cum Store / 600 / - / 300 / 180,000
Construction of Ponds / 100,000 / 03 / - / 300,000
Total / 480,000
11.3.2. Machinery and Equipment
Given below is the list of all machinery and equipment and accordingly the cost of all machinery and equipment.
Table 5. List of Machinery Equipments and its cost
Description / Quantity (Nos) / Unit Price (Rs.) / Total (Rs.)Tube Well and Channels including boring & motor / 01 / 250,000 / 250,000
Electricity connections / 50,000 / 50,000
Total / 300,000
11.3.3. Furniture and Fixture
Following table provides list of Furniture and Fixture required for Inland Fish Farm.
Table 6. List of Furniture & Fixture and its cost
Description / Quantity (Nos) / Unit PriceFurniture and Fixture / Lump sump / 50000 / 50,000
Total / 50,000
11.3.4. Operational and Maintenance cost
Following table provides list of consumable requirement for Inland Fish Farm and accordingly cost of all the consumable required items using current prices.
Table 7. Operational & Maintenance cost
Seed* / 9000 / 15 / 135,000
Fish Feed / 9000kg / 70/kg / 630,000
Land Advance Rent / 4 acre / 30000/acre / 120,000
Depreciation cost / - / - / 17000
Utility Bills (Electricity & Diesel) / - / - / 100000
Communication Charges / - / 500/month / 6000
Miscellaneous (cash in hand) / - / - / 50000
Total / 1,058,000
* NARC, Islamabad/ Fisheries Development Board (FDB), Islamabad
11.3.5. Human Resource Requirement
The table below provides details of human resource required to manage basic fish farm. The staff salaries are estimated according to the market trends. However, these requirements and pay scales may vary area to area.
Table 8. Human Resource Requirement its cost
Description / No. of Employees / Salary/person/ month / Total salary per yearLabor / 2 / 10,000 / 240,000
11.4. Revenue Generation
Final product of Inland Fish Farm is fish ready for sale in market that will generate revenue. The capacity of farm is 8100 units of fish for first year sell price as per market Rs. 300.
Table 9. Revenue of the Project
Product / Unit / Survival @90% / Average Weight of fish / First Year Production (Kg) / Sales Price (Rs./Unit) / First Year Revenue (Rs)Fish / 9000 / 8100 / 0.9 kg / 7290 / 300 / 2,187,000
Total Sales Revenue / 2,187,000
12. KEY ASSUMPTION
Table 10. Key Assumptions*
Particulars / AssumptionSales Price Growth Rate / 10% per year
Increase in cost of raw material / 10% per year
Increase in utilities / 10% per year
Debt/Equity Ratio / 90:10
Building / 5%
Machinery / 5%
Office furniture & fixture / 5%
Loan Period / 8 years
Grace Period / 1 year
Loan installments / Annually
Financial charges (interest rate) / 8%
* Average inflation rate of past 10 years is used as proxy of input and out prices growth rate. (Source: Economic Survey of Pakistan)
13. USEFUL LINKS
Ø Resource/focal Person
PSO/Program Leader Aquaculture and fisheries program,
Livestock research institute, National Agriculture Research Center, Islamabad
Phone: 0518443868 OR 0519255331
Email:
Ø Muhammad Ramzal Ali
Aquaculture and fisheries program,Livestock research institute,