A presentation

onProject on banana cultivation

Presented by :Sondarva yagnesh MRoll no :105Reg .no : J1-O660-2011

IntroductionBanana is one of the important fruits in India and occupies about 4.83 lakh hectares with a production of about 16.17 million MT. Banana is considered as a rich source of energy producing food. It is consumed in several varieties of preparations and forms. Major share of banana production in the country is consumed in the fresh form. A small percentage of it is exported to Middle east, Gulf, Russia, Ukraine and other European countries.

Being highly perishable in nature, there is a need to preserve this important fruit by processing it to produce banana pulp, banana chips, banana powder etc. to cater to the needs of different sections of the society and thereby provides incentives to the growers.

 Its year round availability, affordability, varietal range, taste, nutritive and medicinal value makes it the favourite fruit among all classes of people. It has also good export potential. 

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Banana Production

• India’s production of Banana is 21% of total world’s production.

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Banana - International Market

• Phenomenal growth in export from India  

• Opportunities for Processing &  Export through cluster.

• Financial Aspects:• Sale price     Although the farmers realize a sale price ranging between Rs. 2000 to Rs. 4000 per tonne of banana, a conservative estimate of Rs. 3000 per tonne is considered in this model.

• Unit CostThe unit cost for raising  banana plants is Rs. 45000/ha in a year.  

• MarginThe percentage of margin / down payment to investment cost prescribed is 5, 10 and 15% for small, medium and large farmers respectively. The rest of the investment cost will be provided as bank loan.

• Bank LoanBank loan of 85 - 95 % shall be available from the financing institution. Bank loan considered in the model is 90%.

• Rate of InterestThe  rate  of  interest  to  be  charged  to  the ultimate  borrower  would  be  guided  by  RBI guidelines issued from time to time. However, the ultimate lending rate has been considered as 10 % for working out the bankability of the model scheme.

• TECHNICAL DETAILS 

1 Process Flow Chart Harvesting => Receiving => Packaging => Transport => Marketing

2 LocationThe site should be a raised one, well drained and must be well connected by roads. It should be preferably in a raw material production area or at the consumption centre. Raw materials must be produced in the area. Water and power in sufficient quantities and qualities must be available. 

Store room - 3 m X 4 m.

Other common facilities like lobby, water closet and bath.

Table 1: Cost associated with banana cultivation in a first year

• Financial Analysis of the Project:• Net Present Worth (NPW)

It is simply the present worth of the incremental net benefit or incremental cash flow. It is the difference between discounted benefits and discounted costs of a project.

T bt − ctNPV = Σ -------------- − K

t=0 (1 + r)t

 • Where, NPV = net present value from project                    bt = benefits ($) received from project in year t                    ct = costs ($) of project in year t                       1                ----------- = discount factor at interest rate r p.a.                   1 + r (t)                               T = lifetime of project                   K = initial (capital) outlay at t = 0 

Banana (one ha)Year Costs

(in Rs)Returns(in Rs)

Netincome

(in Rs)

Discountfactor at

10%

NPW (in Rs)

1 44700 - -44700 0.9090 -40632.30

2 42300 84000 41700 0.8264 34460.88

3 41500 85300 43800 0.7513 32906.94

4 40000 86200 46200 0.6830 31554.6

5 43500 88000 44500 0.6209 27630.05

NPW = 85918.17

Table: 2 Estimation of NPW

Conclusion: NPW show positive value (Rs.85918.17). It means the project is being selected.

Benefit-Cost Ratio (BCR):

This ratio is obtained when the present worth of the benefit-stream is divided by the present worth of the cost-stream.

Present worth of gross returns BCR= --------------------------------------------

Present worth of costs

Banana (one ha)Year Costs

(in Rs)Gross

Returns(in Rs)

Discountfactor at

12%

Presentworth of costs (in

Rs)

Presentworth of

gross returns(in Rs)

1 44700 - 0.9090 40632.30 -2 42300 84000 0.8264 34956.72 69417.603 41500 85300 0.7513 31178.95 64085.894 40000 86200 0.6830 27320.00 58874.605 43500 88000 0.6209 27009.15 54639.20

161097.12 247017.29

247017.29Benefit-Cost Ratio = ----------------- = 1.33 161097.12

Table:5 Estimation of Benefit-Cost Ratio (BCR)

Conclusion: It shows more than 1 value. It means the project is preferable and being selected.

Year Costs(in Rs)

Gross Income (in Rs)

Net Income (in Rs)

Discount Factor (40%)

NPW (in Rs)

DiscountFactor (43%)

NPW (in Rs)

1 44700 - -44700 0.7143 -31929.21 0.6993 -31258.71

2 42300 84000 41700 0.5102 21275.34 0.4890 20391.30

3 41500 85300 43800 0.3644 15960.72 0.3419 14975.22

4 40000 86200 46200 0.2603 12025.86 0.2391 11046.42

5 43500 88000 44500 0.1859 8272.55 0.1672 7440.4

85918.17 25605.26 22594.63

Table 5: Estimation of IRR for Banana (one ha)

Internal Rate of Return (IRR)It is the discount rate that makes the NPW of the incremental net benefit-stream or incremental cash flow equal to zero.

Lower Difference NPV at Lower Discount Rate IRR = Discount + between two x -------------------------------------------------- Rate Discount Rates Sum of NPVs at Lower & Higher Discount Rates (signs ignored) 

IRR = 40 + 3 {25605.29/25605.29-22594.63} = 40 + 3{8.50} = 40 + 25.5

IRR = 65.50 %

Profitability Index:

It is defined as the ratio of net present values of the cash flows to the initial capital expenditure (Co).

NPV

PI = ------ Co

Year Cash flow(in Rs.)

Discount factor(10 %)

Net Present worth (in Rs.)

1 0.90902 84000 0.8264 69417.603 85300 0.7513 64085.894 86200 0.6830 58874.465 88000 0.6209 54639.206 84000 0.9090 76356

323373.15

Table 6: Estimation of profitability Index Original amount invested in a project = Rs. 212000

Net present values of the cash flows 323373.15PI = -------------------------------------------- = -------------- = 1.32 Original amount invested 212000

Financial tools

Value Preferance

NPW Positive Preferble

B-C Ratio >1 Preferble

IRR Significant Preferble

Profitability Index

>1 Preferble

Overview of the result

Financial tools Value PreferanceNPW Positive Preferble

B-C Ratio >1 Preferble

IRR Significant Preferble

Profitability Index >1 Preferble

Overview of the project:

Thank you