Draft report prepared by Uday Kumar, YP-NF,

DPCU-Gaya

Draft report on Scenting and packaging of hand rolled Agarbatti of Jeevika

There are 107 Agarbatti Producer Groups in Gaya district as on Novemeber, 2014. The total
quantity production of hand rolled Agarbatti by Producer Group members comes to 107000 kgs every
month (1070 quintal or 107 tons, assuming an average of 1000 Kgs production per Producer group per
month). The span of Agarbatti Producer Groups is in 10 blocks viz. Bodhgaya, Dobhi, Khizersarai,
Sherghati, Manpur, Barachatti, Atri, Gurua, Tankuppa & Belaganj. Around 4500 SHG members are
involved in Agarbatti production in these 107 Producer Groups.
The scale of 100 tons of Agarbatti production every month in Gaya district has given us the
quantum uplift of operating our business to the next layer of Agarbatti production i.e. scenting and
packaging of our Agarbatti in Producer Group units. The scenting of Agarbatti requires only two
ingredients Perfume and DEP oil. These two ingredients need to be mixed in standard ratios of 1:3 or
1:4 or 1:5. The correct ratio depends upon the selection of perfume. Higher the concentration of
Perfume, more DEP oil needed to dilute it. In this case, ratio 1:5 will work best. Lower the concentration
of Perfume, less DEP oil needed to dilute it. In this case, ratio 1:3 will work best. Hence, the foremost
exercise is the selection of right choice of Perfume for our PG members hand rolled Agarbatti. This
selection of Perfume hinges upon the aroma/ fragrance of a perfume lasts longer, the purchasing cost of
a perfume, whether more DEP oil needed to dilute if the cost of perfume is higher, the quality of hand
rolled Agarbatti the quantity of noorwa powder used in making Agarbatti. Jeevika may associate with a
perfuming house/manufacturing unit to ascertain the right perfume for our handmade Agarbatti. We
may go for memorandum of Understanding for supplying the finalized perfume in subsequent months in
same concentration. Big industries like ITC have their own research units of perfumery and scenting to
ascertain the perfume of Agarbatti.
The varieties of perfume are available in Sandal, Rose, Jasmine, Mogra etc. The cost of one litre
of perfume varies from Rs. 2000/- to Rs. 5000/- in markets of Gaya district. The cost of one litre of DEP
oil comes to Rs. 150/- and is easily available in Gaya. Karamat Enterprises near Fire Brigade, Station
road-Gaya is one such factory which has a tie-up with ITC which supplies perfume to ITC as per their
MoU. Isopropyl ingredient is needed to wash off the container used in scenting. This Isopropyl removes
any stains of the container. This is ideally used prior for any scenting so as not to contaminate or mix
bad flavor to the scent which is being used to fragrant Agarbatti. The cost of one litre of Isopropyl is Rs.
1000/-.
In order to make one unit of scenting solution, (let us assume that the finalized ratio is 1:4), we
shall take 250 ml of Perfume and 1 litre of DEP oil. The total quantity of solution is 1250 ml. This is mixed
for half an hour and then it is poured in a rectangular open container. Hand rolled Agarbatti is spread on
this container, dipped evenly by fingering , if anything left out. After dipping for few minutes, Scented
Agarbatti is kept covered for 12-14 hours and then it is packed. This one unit of solution can be used for
scenting 4 Kgs of raw Agarbatti or around 5200 to 5500 sticks. The packaging of scented Agarbatti costs
Re. 1 per packet including labour charge for inserting 20-25 sticks in each packet.
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Draft report prepared by Uday Kumar, YP-NF,

DPCU-Gaya
The costing of scenting and packaging is better understood in this way,

Sl.

Particulars

Calculation*

Cost

1
2.
3.
4.

Perfume @ Rs. 2000/- per litre

DEP oil @ Rs. 150/- per litre
Packaging @ Re. 1/- per packet of 25 sticks
Isopropyl solution @ Rs. 1000/- per litre

250 ml
1000 ml
5200 sticks in 208 packet
10 ml

Rs. 500
Rs. 150
Rs. 208
Rs. 10

Total

Rs. 868/* This calculation is for scenting of 4 Kgs of raw Agarbatti.

The scenting and packaging can be done at Storeroom. One separate room for scenting and
packaging can be kept for this purpose. A group of 2-3 members are enough for this activity. The
remuneration and charges for this activity need to be ascertained. This activity is doable by our Producer
Group members. The packaging packets making can be outsourced to third party who will make us
available the customized and agreed packets to our storehouses. The packet name/ branding name is
altogether different subject which needs to be looked at on a different platform.
The profit /margin calculation after scenting and packaging can be better understood in this way
(Note: this calculation has been done for production, scenting and packaging of 4 Kgs. Of Agarbatti for
understating it better),

Sl.

Particulars

Calculation*

Cost

1.
2.
3.
4.

Cost of purchase of raw material

Transportation & others
Labour charge paid to PG members
Cost of scenting

Rs. 92
Rs. 8
Rs. 108
Rs. 660

5.

Packaging cost

Rs. 23 X 4 = Rs. 92
Rs. 2 X 4 = Rs. 8
Rs. 27 X 4 = Rs. 108
Rs. 660 for one unit of scenting
volume cost as illustrated above
Re. 1 for 208 packets

Rs. 208

Total cost of production of 4 Kgs of scented and packetized Agarbatti

Rs. 1076/-

Sl.

Particulars

Revenue/Cost

1.
2.

Sale of 208 packets @ Rs. 10/Rs. 10 X 208 = Rs. 2080/Costs

involved
in
selling/ Re 1 for 1 packet
transportation and others
Margin calculation
Rs. 2080 Rs. (1076/- + 208/-)

2.

Calculation*

Margin in selling 4 Kg accrued to PG

Rs. 2080
Rs. 208
Rs. 796

Rs. 796/-

*This calculation is for 4 Kgs of Agarbattti.

If the selling price of each packet containing 25 scented Agarbatti sticks be reduced to Rs. 8/from Rs. 10/-, the margin will come down to Rs. 380/-.

Sl

Cost
of Costs involved in Selling price
production
of selling
scented
Agarbatti and
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Margin in 4 Kg Margin per Kg

Draft report prepared by Uday Kumar, YP-NF,

DPCU-Gaya

packaging
1

Rs. 1076/-

Rs. 1076/-

Rs. 1076/-

Rs. 1076/-

Re 1 for
packet
75 paisa for
packet
75 paisa for
packet
Re 1 for
packet

each Rs. 10
packet
each Rs. 10
packet
each Rs. 8
packet
each Rs. 8
packet

for each Rs. 796/-

Rs. 199/-

for each Rs. 848/-

Rs. 212/-

for each Rs. 432/-

Rs. 108/-

for each Rs. 380/-

Rs. 95/-

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Draft report prepared by Uday Kumar, YP-NF,

DPCU-Gaya
Considering the estimated volume of quantity wise production of Agarbatti in Gaya district by
Jeevika Producer Group members, this next step of scenting and packaging is pragmatic and achievable.
This scale of volume will further help in negotiating the prices of perfumes and packaging costs, which
will ultimately bring down the costs and increase margin level to our Producer Groups of Agarbatti in
Gaya district. Initially, there needs to have a heightened level of sales efforts to push Jeevika made
Agarbatti in markets of Gaya district. This needs to be taken/ implemented strategically by SPMU &
District team. We can also explore the possibilities of selling scented and packaged Agarbatti to a third
party, if costs and margins are negotiated properly to the advantages of Agarbatti Producer Group
members. The selling strategy needs to be looked in details, if taken a step of selling on our own. What
will be the selling outlets for Scented and packaged Agarbatti? Who will sell these Agarbatti? What will
be the flow channel of revenue collection? How will the revenue accumulate finally to Producer Group?
What will be the mechanism to regulate the quality of Agarbatti across all 107 Producer Groups?
Funds required at Producer Group level for scenting and packaging is mentioned below in the
table. In order to understand this better, there are some basic numerals/assumption which need to be
kept in mind at the primary level. On an average, an Agarbatti Producer Group produces 1000 kgs of
hand rolled raw Agarbatti in a month. Each Kilogram of Agarbatti contains an average of 1300 sticks of
Agarbatti. So, One Producer Group produces 13,00,000 (Thirteen lakhs) raw Agarbatti sticks in a month.
While packaging, each packet will contain 25 scented Agarbatti sticks. Calculating this, one Producer
group will produce 52,000 (Fifty two thousand) packets in total. Now, this table is illustrated here for
one Agarbatti Producer Group for one month,

Sl Particulars
1
2
3
4

Fund
required/
revenue
generated/ Expenditures/ Profit

Cost of production of raw Agarbatti (Rs. 208 for 4 Kgs, hence

for 1000kg production, Rs. 208 X 250)
Scenting costs (Rs. 660/- for 4 Kgs, hence for scenting 1000kg,
Rs. 660 X 250)
Packaging costs (Re. 1/- for each packet, hence Re. 1 X 52000)
Selling cost involved (Re. 0.75/- for each packet, hence Re.
0.75 X 52000)

Rs. 52,000/Rs. 1,65,000/Rs. 52,000/Rs. 39,000/-

Total costs for production of 1000 kgs of scented &

packaged Agarbatti or 52000 packets of scented &
packaged Agarbatti

Rs. 2,08,000/-

Revenue generated out of selling (@ Rs. 10 for each packet,

hence Rs. 10 X 52000 packets)

Rs. 5,20,000/-

Margin accumulated to Producer Group (Rs. 5,20,000

Rs. 2,08,000)

Rs. 3,12,000/-

It is worth noting here that this profit margin is coming after hand rolling labour charge payment
to Producer Group members, which has been taken into calculation while calculating Cost of Production
of raw Agarbatti @ Rs. 27/- per kilogram of hand rolling Agarbatti. This profit margin is worth attractive
and a teasing one also. The teasing one in this sense, that there needs to have strategic selling points of
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Draft report prepared by Uday Kumar, YP-NF,

DPCU-Gaya
Agarbatti in local bazaars and shops. Scenting and Packaging costs come around roughly Rupees Two
lakhs. Hence, Producer Groups need additional layer of funding for this activity. This can be done by
generating signed and approved applications of fund requisition of scenting and packaging from
Agarbatti Producer Groups and thereupon fund transferring in these Producer Groups. Certainly, this
fund of Rs. 2 lakhs will be on loaning basis.The selling can be handled by developing marketing/ sales
team at the CLF team/ cadres with the nomenclature of Agarbatti Sales Person (ASP). An additional layer
of funding of Rupees Fifty Thousand only can be done to concerned CLF. This amount can be varied
depending upon the number of Producer Groups in its cluster area or the number of Agarbatti packets
being produced in its cluster area. All networked channels of selling points, route charts of raw material
procurement, its distribution, finished goods sales route chart and its distribution, revenue collection
and simultaneous books of records updation/ proper accountings need to be looked at in detail once
scenting and packaging plan get approved. A Lead Manager will be required to oversee this business
functioning, its production, distribution, sales and revenue generation and profit distribution.
The best part in this process is non-creation of infrastructure; It will not have to invest heavily on
creating anything big infrastructure for scenting and packaging unit, rather it will invest in human capital
value generation, which will be an asset to the Producer Group in itself. The sustainability of this
business plan depends upon the quality and constant production of handmade scented Agarbatti and
thereupon its selling in the market. The sales depend upon the Brand value created out of faith, trust
and winnability over other competitors pricing, product and availability.
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