FEASIBILITY ANALYSIS OF A TEXTILE PROJECT- A CASE STUDY OF A

YARN DYED WOVEN TEXTILE

by

Md. Abdullah Ibne Tozammal

This thesis work has been submitted in partial fulfillment of the requirements for the
degree of Master of Engineering in Advanced Engineering Management

Department of Industrial and Production Engineering (IPE)

Bangladesh University of Engineering and Technology (BUET)

September, 2011

i
 CERTIFICATE OF APPROVAL

The thesis titled Feasibility Analysis of a Textile Project- A Case Study of a Yarn
Dyed Woven Textile submitted by Md. Abdullah Ibne Tozammal, Roll No.
100608110 P, session October, 2006 has been accepted as satisfactory in partial
fulfillment of the requirement for the degree of Master of in Engineering in Advanced
Engineering Management on September 26, 2011.

BOARD of EXAMINERS

Dr. Abdullahil Azeem Chairman

Professor (Supervisor)

Department of IPE, BUET, Dhaka

Dr. A.K.M Masud Member

Professor
Department of IPE, BUET, Dhaka

Dr. Nafis Ahmad Member

Associate Professor
Department of IPE, BUET, Dhaka

Department of Industrial and Production Engineering (IPE)

Bangladesh University of Engineering and Technology (BUET)

September, 2011

ii
 CANDIDATES DECLARATIONS

It is hereby declared that this thesis or any part of it has not been submitted elsewhere
for award of any degree or diploma.

Md. Abdullah Ibne Tozammal

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This thesis is dedicated to the people who are dreaming for a corruption free

Bangladesh

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 ACKNOWLEDGEMENT

First of all I would like to express my sincere gratitude to Almighty Alllah whose
blessings made me capable of accomplishing this thesis work.

This study would not have been possible without the support and guidance of my
project supervisor Dr. Abdullahil Azeem, Professor, Department of Industrial and
Production Engineering, BUET. I would like to take this opportunity to thank him for
his valuable advice, constant guidance and encouragement in completion of the
research work.

I also extend thanks to all the individuals of Spintex Technology and Noor Checks &
Stripes Ltd. who directly or indirectly helped me giving their precious support and
information.

I also wish to express my gratitude to my parents and wife, whose constant support
and sacrifice make me possible to complete this thesis work.

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 ABSTRACT

According to the constitution of Bangladesh, the provision for basic necessities of life
including food, clothing, shelter, education and medical care have been recognized as
fundamental responsibility of state (Article 15). Thanks to Bangladesh textile and
apparel industries for their contribution to fulfill one of these basic needs. RMG is our
major export product. About 80% of foreign earnings come from RMG. Our national
economy mostly depends upon this RMG sector. But it is a matter of great sorrow that
this RMG sector depends upon foreign raw materials (fabric). This dependency may
incur a great risk.

In this thesis feasibility of a yarn dyed woven textile has been studied. In this regard,
technical feasibility and financial feasibly have been performed. For the study of
technical feasibility different technical aspects have been discussed, which includes
civil construction, local and imported machinery, power consumption, raw materials
production etc. For the study of financial feasibility cost of the project, means of
finance, working capital assessment, annual planned production & estimated sales,
cost of goods sold, raw material cost, salaries and wages, utility cost, projected
income, break even analysis etc. have been calculated.

From technical point of view the project is found feasible. From the analysis of IRR,
NPV, Benefit Cost Ratio and Discounted Pay Back Period, it is found that the project
is also financially feasible.

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 TABLE OF CONTENTS

Title Page No.

ACKNOWLEDGEMENT v

ABSTRACT vi

TABLE OF CONTENTS vii-xiii

LIST OF TABLES xiv-xv

LIST OF FIGURES xvi

CHAPTER 1: INTRODUCTION 1-7

1.1 Background 1
1.2 Bangladesh Context 2
1.3 Textiles Industries in Bangladesh 3
1.4 Problem Definition 5
1.5 Objective and Scope of Study 6
1.5.1 Objective 6
1.5.2 Scope 6
1.6 Methodology 7

CHAPTER 2: LITERATURE REVIEW 8-15

2.1 Background 8
2.2 Backward Linkage 9
2.3 Need for Strong Backward Linkage 9
2.4 The Condition for Backward Linkage 12
2.4.1 Cotton 12
2.4.2 Spinning 13
2.4.3 Weaving and Knitting 13
2.4.4 Dying, Printing and Finishing 14

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 2.5 Prospect of Weaving 14

CHAPTER 3: PROCESS DESCRIPTION 16-34

3.1 Yarn Dyed Weaving Process 16

3.2 Yarn Formation 17
3.2.1 Natural Fiber 18
3.2.1.1 Opening/Blending 18
3.2.1.2 Carding 18
3.2.1.3 Combing 19
3.2.1.4 Drawing 19
3.2.1.5 Drafting 19
3.2.1.6 Spinning 20
3.2.2 Manmade Fibers 20
3.3 Dyeing 21
3.3.1 Methods of Dyeing 22
3.3.2 Yarn Dyeing 23
3.3.3 Types of Dyes 23
3.4 Fabric Formation 24
3.4.1 Weaving 24
3.4.1.1 Shedding 26
3.4.1.2 Picking 26
3.4.1.3 Battening 26
3.4.1.4 Taking up and letting off 27
3.4.1.5 Shuttle Less Loom 27
3.5 Wet Processing 27
3.5.1 Singeing 29
3.5.2 Desizing 29
3.5.3 Scouring 30
3.5.4 Bleaching 30

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 3.5.5 Mercerizing 31

3.6 Finishing 31
3.6.1 Mechanical Treatments 32
3.6.1.1 Heat Setting 32
3.6.1.2 Brushing and napping 32
3.6.1.3 Softening 33
3.6.1.4 Optical finishing 33
3.6.1.5 Shearing 33
3.6.1.6 Compacting 33
3.6.2 Chemical Treatments 34
3.6.2.1 Optical finishes
3.6.2.2 Absorbent and soil release finishes 34
3.6.2.3 Softeners and abrasion-resistant finishes 34
3.6.2.4 Physical stabilization and crease-resistant 34
finishes 34
3.7 Fabrication

CHAPTER 4: TECHNICAL APPRAISAL 35-60

4.1 Basic Design of the Project 35

4.2 End Product, Capacity Utilization, Efficiency and Wastage 35

4.2.1 End Product 35

4.2.2 Capacity Utilization 36

4.2.3 Calculation of Weaving Efficiency 36

4.2.4 Wastage Calculation 37

4.3 Product Types and Quantity 37

4.3.1 Product Types 37

4.3.2 Production Quantity 38

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4.4 Requirement of Raw Materials 40

4.4.1 Yarn and size chemicals 40

4.5 Brief Description of the Project 41

4.5.1 Land 41

4.5.2 Location 41

4.5.3 Land Requirement 41

4.6 Civil Works for Factory Premises 41

4.6.1 Weaving Building 41

4.6.2 Sizing and Warping Building 42

4.6.3 Air Compressor Shed 42

4.6.4 Generator and LT Switchgear Shed 43

4.6.5 Boiler Shed 43

4.6.6 Shed for Electric Chiller 43

4.6.7 Plant Room for Air Handling Unit 44

4.6.8 Yarn Dyeing Building 44

4.6.9 Rooms for Cone to Cone Re-winders 44

4.6.10 Rooms for Precision Package Winders 45

& Dyeing Laboratory

4.7 Civil Works for Other Buildings 45

4.7.1 Three Storied Building 45

4.7.2 Civil Works for Effluent Treatment Plant 45

4.7.3 Deep Tube Well and RMS Room 46

4.8 Auxiliary Civil Works 46

4.8.1 Underground Ducting 46

4.8.2 Civil Works for Water Treatment Plant 46

4.8.3 Underground Water Reservoir 46

4.8.4 Surface Drainage 47

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 4.8.5 Inner Roads, Parking and Unloading Area 47

4.8.6 Electric Works 47

4.8.7 Plumbing Works and Others 47

4.9 Imported Machinery 48

4.9.1 Air-jet Weaving Looms 48

4.9.2 Sizing Machine 49

4.9.3 Warping Machine 49

4.9.4 Air Handling Unit -AHU 49

4.9.5 Air Compressors 50

4.9.6 Electric Industrial Chiller 50

4.9.7 Overhead Travelling Cleaners 50

4.9.8 Hydraulic Beam Lifters 51

4.9.9 Yarn Dyeing Vessels 51

4.9.10 Precision Package Winders 52

4.9.11 Hydro Extractor 52

4.9.12 Radio Frequency Dryer 52

4.9.13 Cone to Cone Re-winders 53

4.9.14 Knot Tying Machine 53

4.9.15 Inspection and Folding Machine 53

4.9.16 Gas Generator with Cooling Tower 53

4.9.17 Gas Fired Steam Generating Boiler 54

4.9.18 Water Treatment Plant 54

4.9.19 Effluent Treatment Plant 54

4.10 Local Machinery 54

4.10.1 Fabrication of Compressed Air Line 55

4.10.2 Piping and Other Works to Transport Steam 55

4.10.3 Overhead Air Supply Duct 55

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 4.10.4 Electric Components and Cables 55

4.10.5 Conduits and Pumps for Water Circuits 56

4.10.6 Indoor Lighting and Exterior Security Lights 56

4.10.7 Workshop Machinery 56

4.10.8 Other accessories 57

4.11 Utility Services 57

4.11.1 Electric Power 58

4.11.2 Steam Requirement 59

4.11.3 Water 60

4.12 Operative Life and Implementation Schedule 60

4.12.1 Operative Life 60

4.12.2 Implementation Schedule 60

CHAPTER 5: FINANCIAL APPRAISAL 61-103

5.1 Introduction 61

5.1.1 Cash Flow 62

5.1.2 Discount Rate 62

5.1.3 Profitability Index 63

5.1.4 Pay Back Period 63

5.1.5 Discounted Pay Back Period 64

5.1.6 Internal Rate of Return (IRR) 64

5.1.7 Net Present Value (NPV) 65

5.1.8 Benefit Cost Ratio (BCR) 65

5.2 Criteria Fixation 65

5.2.1 Assumption 65

5.2.2 Exchange Rate 67

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 5.2.3 Project finance 67

5.2.4 Moratorium Period 67

5.3 Financial Appraisal 67

CHAPTER 6: CONCLUSIONS AND RECOMMENDATIONS 104-105

6.1 Conclusions 95

6.2 Recommendations 96

REFERENCES 106-107

APPENDIX A: DETAILS OF FIXED COST 108-114

APPENDIX B: PRODUCTION CALCULATION 115-119

APPENDIX C: DETAILS OF FACTORY STAFFS AND THEIR

WAGES 120-121

xiii
 LIST OF TABLES

Table No. Title Page No.

Table 1.1: Average Hourly Labor Cost in Textile and Apparel
Manufacturing 11
Table 4.1: Loom Speed for Different Fabric Construction 36
Table 4.2: Capacity Utilization (Weaving) 36
Table 4.3: Fabric Types and Their Construction 38
Table 4.4: Monthly and Annual Production of Different Products 39
Table 4.5: Total Monthly and Annual production 39
Table 4.6: Yarn and Sizing Chemical Requirement 40
Table 4.7: Weaving Machine Details 48
Table 4.8: Electric Load 58-59
Table 5.1.1: Cost of the Project (Natural Gas) 68
Table 5.1.2: Cost of the Project (Fuel Oil) 69
Table 5.2.1: Means of Finance (Natural Gas) 70
Table 5.2.2: Means of Finance (Fuel Oil) 71
Table 5.3.1: Working Capital Assessment (Natural Gas) 72
Table 5.3.2: Working Capital Assessment (Fuel Oil) 73
Table 5.4.1: Planned Production & Estimated Sales p.a. (Natural Gas) 74
Table 5.4.2: Planned Production & Estimated Sales p.a. (Fuel Oil) 75
Table 5.5.1: Raw Material Costs (at 100% Capacity Utilizations) (Natural Gas) 76
Table 5.5.1: Raw Material Costs (at 100% Capacity Utilizations) (Fuel Oil) 77
Table 5.6.1: Cost of Goods Sold (Natural Gas) 78
Table 5.6.2: Cost of Goods Sold (Fuel Oil) 79
Table 5.7.1: Factory Wages and Salaries (Natural Gas) 80
Table 5.7.2: Factory Wages and Salaries (Fuel Oil) 81
Table 5.8.1: Power Requirement & Utility Costs (Natural Gas) 82
Table 5.8.1: Power Requirement & Utility Costs (Fuel Oil) 83

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Table No. Title Page No.
Table 5.9.1: General, Administrative & Selling Expenses (Natural Gas) 84
Table 5.9.2: General, Administrative & Selling Expenses (Fuel Oil) 85
Table 5.10.1: Estimated Financial Expenses (Natural Gas) 86
Table 5.10.2: Estimated Financial Expenses (Fuel Oil) 86
Table 5.11.1: Projected Income Statement (Natural Gas) 87
Table 5.11.2: Projected Income Statement (Fuel Oil) 88
Table 5.12.1: Projected Balance Sheet (Natural Gas) 89
Table 5.12.2: Projected Balance Sheet (Fuel Oil) 91
Table 5.13.1: Cash Flow Statement (Natural Gas) 93
Table 5.13.2: Cash Flow Statement (Fuel Oil) 94
Table 5.14.1: Schedule of Long Term Loan Payback Instalments (Natural Gas) 95
Table 5.14.2: Schedule of Long Term Loan Payback Instalments (Fuel Oil) 96
Table 5.15.1: Expected Key Ratios (Natural Gas) 97
Table 5.15.2: Expected Key Ratios (Natural Gas) 98
Table 5.16: Break - Even Analysis (Natural Gas) 99
Table 5.17.1: IRR and NPV (Natural Gas) 100
Table 5.17.2: IRR and NPV (Fuel Oil) 101
Table 5.18.1: Cost - Benefit Analysis (Natural Gas) 102
Table 5.18.2: Cost - Benefit Analysis (Fuel Oil) 102
Table 5.19.1: Discounted Pay Back Period (Natural Gas) 103
Table 5.19.2: Discounted Pay Back Period (Fuel Oil) 103

xv
 LIST OF FIGURES

Table No. Title Page No.

Figure 1.1: Location of Textile Industries in Bangladesh 04
Figure 3.1: Yarn Dyed Weaving Process 17
Figure 3.2: Yarn formation Process for Natural Fibers 17

xvi
 CHAPTER 1

INTRODUCTION

1.1 Background

The wearing of clothing is exclusively a human characteristic and is a feature of most

human societies. It is not known when humans began wearing clothes.
Anthropologists believe that animal skins and vegetation were adapted into coverings
as protection from cold, heat and rain, especially as humans migrated to new climates;
alternatively, covering may have been invented first for other purposes, such as
magic, decoration, cult, or prestige, and later found to be practical as well.

Clothing and textiles have been important in human history and reflects the materials
available to a civilization as well as the technologies that it has mastered. The social
significance of the finished product reflects their culture.

Textiles, defined as felt or spun fibers made into yarn and subsequently netted,
looped, knit or woven to make fabrics, appeared in the Middle East during the late
stone age. From ancient times to the present day, methods of textile production have
continually evolved, and the choices of textiles available have influenced how people
carried their possessions, clothed themselves, and decorated their surroundings. [1]

The oldest known textiles, which date back to about 5000 B.C., are scraps of linen
cloth found in Egyptian caves. The industry was primarily a family and domestic one
until the early part of the 1500s when the first factory system was established. It
wasnt until the Industrial Revolution in England, in the 18th century, that power
machines for spinning and weaving were invented. In 1769 when Richard
Arkwrights spinning frame with variable speed rollers was patented, water power
replaced manual power. [2]

1
1.2 Bangladesh Context

In Bangladesh, the Textile Industry has a long history of many centuries and has been
seen as the part of an economy of undivided India and later on of Pakistan.

Traditionally, artisans working in small groups, in what are often referred to as

cottage industries, produced most of the textile in the sub-continent. There were many
such artisans in the area that was to become Bangladesh. In fact, from prehistoric
times until the Industrial Revolution in the eighteenth century, East Bengal was self-
sufficient in textiles. Its people produced Muslin, Jamdani, and various cotton and silk
fabrics. These were all well regarded even beyond the region as they were
manufactured by very skilled craftsmen.

The material produced by the artisans of Bengal started facing vigorous competition
beginning in the eighteenth century after the growth of mechanized textile mills in the
English Midlands. This eventually led to a great decline in the number of Bengali
workers skilled enough to produce such high quality fabrics. According to popularly
held beliefs, as the region's spinners and weavers meant competition for their
emerging textile industry, the British imperialists responded by trying to force the
artisans to stop production. They were said to have sometimes used methods as harsh
as cutting off the thumbs of the craftsmen so they would never be able to spin or
weave again.

Despite all obstacles handloom sector in Bangladesh consists of more than 0.183
million handloom units with 0.505 million handlooms and about 1 million handloom
weavers of which about 50% are female worker. A manpower of about one million
weavers, dyers, hand spinners, embroiderers and allied artisans have been using their
creative skills into more than 0.30 million active looms to produce around 620 million
meters of fabrics annually. Most of these fabrics meet our domestic demand only few
are exported.

In 90s Bangladesh starts its journey towards modern power loom. Fabrics produced
by the power looms meet partial requirements of export oriented garment industries.

2
1.3 Textiles Industries in Bangladesh

Currently the number of Membership of BTMA is 1306:

Yarn Manufacturing Member Mills = 373

Fabric Manufacturer Member Mills = 703
Dyeing-Printing-Finishing Member Mills = 230

Over 4.00 billion EURO has been invested in these mills and about 4.00 million
people are currently employed. BTMA fulfills:

100 % of the domestic fabric and yarn requirement.

50% of the cotton oven fabric requirement of export oriented garments sub-
sector.
Over 95% of the yarn and fabric requirement of export oriented knitwear sub-
sector.

Apart from these there are 18 textile mills under BTMC and hundreds of household
handloom factories. Below the common categories of weaving mills in Bangladesh
and some prominent names of them are given:

Denim mills.

i) Partex Denim (Rajendrapur, Gazipur)

ii) Envoy Denim (Masterbari, Mymensingh)

iii) Shasha Denim (Dhaka EPZ)

Yarn Dying mills (Shirting Fabrics)

i) Beximco Textile Mills (Zirabo, Gazipur)

ii) Evince Textiles (Bagher Bazar, Gazipur)

Solid Dying mills (Bottom Fabrics)

i) Noman Waeving (Maona, Gazipur)

ii) Talha Fabrics (Bangla Bazar, Gazipur)

3
Most of the textile mills are located in Gszipur, Narayanganj, Narshingdi, Shirajganj,
Pabna, Chittagong, Rangamati, Mymensingh.

Figure 1.1: Location of Textile Industries in Bangladesh

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1.4 Problem Definition

Textile and Apparel is one of the oldest and largest export industries in the world.
Although the global textile and apparel industry has been expanding at a rapid rate
since the early 1970s and providing employment to tens of millions of workers in
some of the least-developed countries in the world. There was a transition, the Multi-
Fiber Arrangement (MFA), which established quotas and preferential tariffs on
apparel and textile items imported by United States, Canada and many European
Nations since the early 1970s [3].

Bangladesh has pursued export-led industrialization as a major development strategy

over more than two decades now. Considerable progress has been achieved in this
effort; export structure has tended to remain narrow and undiversified. Export of
apparels is accounted for 79% of total export in FY2009 (75.1% in FY2001) [4]. The
phase-out of the Multi-Fiber Arrangement (MFA) on 31 December, 2004 has
important implications for all agents in the value chain including apparel
manufacturers, exporters, importers, retailers and consumers. This has made possible
for apparel manufacturing and exporting countries to operate without the restrictions
of the quota. As a result global export of textile and apparels has substantially
increased in 2005 (US$275.6 billion with a growth rate of 6.4 per cent). However, the
MFA phase out has not been an unmixed blessings for all apparel producing countries
of Asia. Bangladesh, surprisingly with all the apprehension of losing its market share
to major players, has been able to not only increase its export but also been able to
sustain it-- from US$6.4 billion in FY2005 to US$7.9 billion in FY2006 and US$9.2
billion in FY2007.

Nevertheless, Bangladesh is still facing with some challenges such as competition

with China especially after lifting out safeguard against Chinese apparels in 2008,
poor compliance standard etc. The sector has weaknesses in some areas such as lack
of diversity in export market, high concentration in few products, and long lead-time
etc. In view of the pressure on lead time, a competitive textile sector would play a
critically important role in (a) raising the competitiveness of the forward-end apparels
and (b) reducing the lead time [5]. Exports of clothing from Bangladesh are
characterized by (i) high concentration on low value-added products; (ii) heavy

5
dependence on imported intermediate inputs; and (iii) high regional concentration of
exports [6].

1.5 Objective and Scope of Study

1.5.1 Objective

The main objective of the proposed project work is (a) analyze the technical
feasibility (b) evaluate financial viability using financial analysis. The possible
outcome of the project is to show the feasibility of woven textile in Bangladesh.

1.5.2 Scope

Around 50% of the total demand of Woven Fabrics for Export oriented RMG is
supplied by the local weaving mills. So there is a huge gap between demand and
supply. According to Bangladesh Bureau of Statistics, in 2008-09 Bangladesh has
imported Textile Fabrics (cotton and synthetic) costing 141469 million taka. On an
average demand for Textile Fabrics have been increased 47% from 2004-05 to 2008-
09. In 2009-2010 total woven apparel export from Bangladesh was 6013.43 million
USD mostly in forms of shirts, trousers and jackets. At present there are few textiles
in Bangladesh who are using modern technologies and be able to compete globally
[7]. In Europe feasibility of a woven textile has been proved long before [8]. Now
Europe is focusing its effort from general textile to technical textile.

Hence, it is understood that there is a great prospect of textiles in Bangladesh. The

proposed project work focuses on establishment of woven textile factory from
technical point of view. Financial feasibility for investment in the new project using
various evaluation criteria will also be focused in this study [9].

The scope of project includes (a) analysis of background of problem on the basis of
data available (b) initial sector assessment (c) cost estimate to establish a yarn dyed
textile factory.

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1.6 Methodology:

In this project at the very beginning basic data would be analyzed. Basic data includes
demand of fabrics, RMG exports in Bangladesh, prospects of weaving in Bangladesh
etc.

Second step is to analyzing different technical aspects of a woven textile.

Final step is to financial appraisal. In this step financial feasibility study of the project
will be accomplished. In this step Net Present Value (NPV) and Internal Rate of
Return (IRR) will be determined.

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 CHATER 2

LITERATURE REVIEW

2.1 Background

In global apparel markets, international buyers place an order with competitive

pricing along with shortest possible lead time. For Bangladesh, lead time is fast
emerging as a serious bottle neck. Backward linkages are playing major part of a
garment industry to reduce lead time and offer competitive price in the international
market. It is inevitable that one of the major issues of success in readymade
garment (RMG) industry in Bangladesh must depend on backward linkage
conditions, support, and strategy formulation.[10]

The performance of readymade garments (RMG) sector has been one of the most
notable success stories of the Bangladesh economy over the last two decades.
Nearly two million women workers were directly and more than ten million
habitants were indirectly associated with this industry. Over the past twenty years,
the number of manufacturing industries grew from 180 to over 3600. On the
average this sector alone fetches over 75 % of the total export earnings of the
country (BGMEA, March2007). Today, the RMG export sector consists of
multibillion dollar manufacturing and export industries in the country.

The overall impact of the readymade garment exports is certainly one of the
most significant social and economic developments in contemporary Bangladesh.
Because the economy of Bangladesh largely depends on the RMG sector, in short,
this sector is still considered as the lifeline of the Bangladesh's economy and
plays an indispensable role for the social stability of the country.

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2.2 Backward Linkage

Backward linkage means the use by one firm or industry of produced inputs
from another firm or industry . That means the finished garment relies on three
steps; first level for converting fibers/cotton to yarns, second step for
converting yarns to grey fabrics and the final step for converting gray fabrics to dyed,
printed of other finished fabrics. These three steps are integrated into each other.

Out of three steps, Bangladesh is only capable of knitting, finishing in

knitwear sectors but far behind in producing yarn, fabrics which is a major
factor for woven section. Only success came to accessories where 80% demand
of our country was fulfilled. The success of the garment industry very much
depends on how effectively RMG sector linkages may operate backward and
forward. If the manufacturer has effective control over the supply of raw
materials, components and ancillary services needed to produce final product, then
the production flow is likely to be interrupted. If the company develops an
effective marketing service strategies that provide right signal, and if marketing
and distributing systems as a whole are effective for having the products reach the
target markets, then the sales revenue for the company is likely to be
maximized. It means that to minimize cost of production and maximize sales
revenues both backward and forward linkages need to be integrated. Here the issue
of developing backward linkages is discussed with reference to the
desirability of having control over the supply of inputs of RMG industry, mainly,
fabric, yarn and processing status [11]

2.3 Need for Strong Backward Linkage

After abolition of quota in 2005, RMG sector in Bangladesh is facing stiff

competition in global apparel export market. Moreover, increased competitions have
been felt from neighboring countries including India, Pakistan, China and
Thailand from where Bangladesh imports fabrics to meet the fabric demands of its
RMG sector. These countries have stronger backward linkage support as they are
able to utilize their locally produced yarns and fabric internally, resulting in
higher prices in the export market, putting pressure on the Bangladesh garment

9
sectors. Particularly India, Pakistan, China and Thailand which are at a
relatively higher stage of development and are richer compared to Bangladesh
will in the near future move to the production of high-technology higher-value
items (technical fabrics like tire cord, medical fabrics, air bag etc.) where return on
investment will be much higher than that in RGM.

Bangladesh RMG sector, therefore, needs to develop the backward linkage sub-
sectors further in order to reduce dependency on imported raw materials and
intermediate goods if she is to meet the export target in the global market.
Again, competitive pricing is vital with this backward linkage support. Otherwise,
it is not possible to survive in the world apparel market in the post MFA era.
Faced with the quota-free global apparel trade, Bangladesh RMG sector must
not only be competitive in product price but also in the lead time. Development and
growth of backward linkage industries will reduce price ranges and lead-time in the
long run. As the backward integration is needed for composite, spinning,
weaving, finishing, dying and processing, all steps beginning with raw materials
and ending with finished products must constitute backward linkages sub-sectors.
The RMG sector then will be faced with more challenges in meeting these goals.
Moreover, Bangladesh RMG sector has great advantages in terms of the lower in
producing the fabric. The labor cost in Bangladesh, as shown in Table 2, is
one of the lowest. The table compares average hourly wages (including fringe
benefits)

With cheap labor advantage, Bangladesh garment industry is still holding competitive
position in the global apparel market. Overall percentage of RMG sector growth
has been steady although the sector has been affected by the USA market. This
industry contributed 78% share of total trade of goods in Bangladesh, compared
to the other South Asian countries like India 14%, Pakistan 23%, Sri Lanka
50% and Nepal 40%.

10
 Table 1.1: Average Hourly Labor Cost in Textile and Apparel Manufacturing

(Current U.S. Dollars, Including all benefits and/or social charges)

Country Apparel Textile

2002 Data 2004 Data
Indonesia 0.27 0.55
Madagascar 0.33 Na
Kenya 0.38 0.67
India 0.38 0.67
Bangladesh 0.39 0.28
Pakistan 0.41 0.37
Sri Lanka 0.48 0.46
Haiti 0.49 Na
China - Inland 0.68 0.48
Philippines 0.76 Na
Egypt 0.77 0.82
Jordan 0.81 na
China - Coastal 0.88 0.76
Thailand 0.91 1.29
Nicaragua 0.92 Na
Colombia 0.98 1.97
Mauritius 1.25 1.57
South Africa 1.38 3.80
Malaysia 1.41 1.18
Honduras 1.48 na
Guatemala 1.49 na
El Salvador 1.58 na
Dominican Republic 1.65 na
Mexico 2.45 2.19
Costa Rica 2.70 na
Peru na 1.93
Turkey na 2.88
Hong Kong na 6.21
Korea na 7.10
Taiwan na 7.58
Israel na 9.35
United States 8.89 15.78

Source : Data for the textile industries compiled from Werner International
Management Consultants, Primary Textiles Labor Cost Comparison, Winter
2004/2005 Reston, VA; data for the apparel industries compiled from Jassin-
ORourke Group, Global Competitiveness Report: Selling to Full Package
Providers (New York, NY), Nov. 2002.

11
In general, backward integration adds value and at the same time increases
employment. Contribution of RMG sector in Bangladesh manufacturing can be
measured by the increase in value-added (MVA) from 6.5 per cent in 1993-94 to
30% in 1998-99. Garment sector value added is only 25% and is much lower
compare to other exported items which were contributed 60% to 70% in some
cases[12]. Two-third of garments export earnings is for the labor fabric
purposes. To add more value it is imperative necessary to build and develop
more backward linkages industries from yarn to finishing fabric process in
Bangladesh.

2.4 The Condition for Backward Linkage

Although the RMG industry in Bangladesh flourishes in the 80s and 90s, there
has been little development in the backward linkage sector [13]. RMG
manufacturers usually import fabric from different countries as locally produced
raw materials cannot compete with imported materials in terms of price or in
terms of quality. At present, only 25%-30% value addition takes place to the
RMG products as manufacturer import bulk of the raw materials. On the
contrary, almost 70% value addition takes place to the jute products exported
to different countries. The garment industry should need to increase at least 50%
value addition through enhancement of backward integration in the RMG market.
Backward linkages sub-sector for RMG industry includes cotton production,
spinning (cotton and synthetic yarn), weaving and knitting, dyeing and
painting, and accessories and all of the above sub-sectors reflect the present
condition of the backward integration in the RMG in Bangladesh.

2.4.1 Cotton

Cotton is the main raw material for yarn production while production of cotton
in Bangladesh has very limited profit margin. Hence, Bangladeshi spinning mills
depends on imported cotton from international markets. India, Pakistan,
Turkey, China, Uzbekistan, USA are the main production sources where Bangladesh
largely dependent on. Bangladesh Cotton Development Board (BCDB) undertakes

12
cotton promotions activities but achievement is not satisfactory. BCDB is striving
for higher production of cotton with a production range of 1,03,620 bales in four
cultivating zones in south- western part of the country. Cotton production
requires vast land areas whereas in Bangladesh the land is in scarcity at only 144,000
square kilometers. Farmers prefer agriculture products that are more profitable than
cotton. So in the context of cotton production, Bangladesh is in a dreadful situation.
This implies that Bangladesh has to depend on imported cotton which involving
large amount of foreign exchange. Bangladesh is not even in a position to move
towards synthetic fiber production as it is capital intensive.

2.4.2 Spinning

The total demand for yarn by RMG producers and producers operating in the
local market are more than the existing production capacity and there is
requirement for an enormous increase in capacity if Bangladesh wants to ensure
adequate supply of yarn locally.

Handloom products may be suitable for the domestic market, but RMG
producers cannot consider handloom as competitive because of consistent and
large quantity demanded by quality fabric markets. On the other hand, power
looms were originally targeted to serve the domestic market but to upgrade them
for export quality is very difficult and costly.

2.4.3 Weaving and Knitting

The next stage is weaving and knitting where yarn are converted to fabrics.
Fabric is main raw material for making garment and accounts for 75 percent of
the garment cost. Both hand looms and power looms are suitable for the domestic
market, but a large demand of quality fabrics cannot be met by hand loom production.
But in case of power looms, they may increase the production capacity to satisfy part
of the RMG sector demand with a large investment.

13
In the long run, Bangladesh weaving mills need a high volume of yarn
production to fulfill the demand for domestic and export markets. In year 2000,
fabric demand was 830 million meters, and soon after in year 2005 the demand almost
doubled. In about 5 years of time, the demand would increase to 1600 million meters.
To fill these huge demands and the fabric shortfall, the weaving industry needs
to increase the production capacity by developing number of new weaving
industries. Both new and reconditioned machines must be added in this sector. The
associated large involvement required is almost $ 3.9 billon, $ 2.7 billion for new
machines and $ 1.2 billion for reconditioned loom.

2.4.4 Dying, Printing and Finishing

This is the final stage where the fabric either can be used for domestic market or
RMG sector for export purposes. Dyeing, printing and finishing units in
Bangladesh are currently able to process all of the locally produced grey. Existing
knitting, knit dyeing and finishing sub-sectors cover the local demand and the major
portion of the export RMG sector in Bangladesh.

2.5 Prospect of Weaving

The fate of the textile industry is closely tied to apparel. The analysis in the paper
spells out number of points. It is noted that weaving sector is the largest
component of the backward integration, where the import accounts almost
75% of the total export garment value. Bangladesh is only 20% self-
sufficient in weaving input supply. Bangladesh weaving mills constantly
fall short of production owing to chain link shortage of yarn production in
spinning sub- sector. As a result, the country has to import 3.15 billion meters of grey
fabrics per year. Shortfall 200 weaving mills amounts to 10 million meters of fabric
[14] and it could attain the self sufficiency in yarn to fulfill the domestic and
export needs in year 2005, which cost TK 50 each, amounting to TK 100 or
equivalent to USD $1.43 billion (US $1 = Taka 70 approx. in 2008). The
knitting segment of Bangladesh is better and the grey fabric demand is met by the
domestic production. For the export market, around 85% the total woven fabric

14
demand and about 35% of the total knit fabric demand are imported. Due to large
demand- supply gap, the weaving and knitted sub- sectors require expansion at
a rapid rate. Soon after the MFA phase-out, demand for fabric has risen making
it imperative to increase the investment and modernized the machinery.

Another good news for Bangladesh is the labor cost in China has been increasing for
last few years. As costs have risen in China, long the worlds shop floor, it is slowly
losing work to countries like Bangladesh, Vietnam and Cambodia at least for
cheaper, labor-intensive goods like casual clothes, toys and simple electronics that do
not necessarily require literate workers and can tolerate unreliable transportation
systems and electrical grids.

Li & Fung, a Hong Kong company that handles sourcing and apparel manufacturing
for companies like Wal-Mart and Liz Claiborne, reported that its production in
Bangladesh jumped 20 percent last year, while China, its biggest supplier, slid 5
percent.

This is an example of an historically common phenomenonan economy built on

low-wage manufacturing moves its way up the skill and wage ladder, progressing
from cheap emerging market to rich developed nation. [15]

15
 CHAPTR 3

PROCESS DESCRIPTION

3.1 Yarn Dyed Weaving Process

The textile industry is comprised of a diverse, fragmented group of establishments

that produce and or process textile-related products (fiber, yarn, fabric) for further
processing into apparel, home furnishings, and industrial goods. Textile
establishments receive and prepare fibers; transform fibers into yarn, thread, or
webbing; convert the yarn into fabric or related products; and dye and finish these
materials at various stages of production. The process of converting raw fibers into
finished apparel and non apparel textile products is complex; thus, most textile mills
specialize. Little overlap occurs between knitting and weaving, or among production
of manmade, cotton, and wool fabrics. The primary focus of this section is on
weaving operation. In its broadest sense, the textile industry includes the production
of yarn, fabric, and finished goods. This section focuses on the following four
production stages:

Yarn formation
Yarn Dying
Fabric formation
Wet processing
Finishing
Fabrication

These stages are highlighted in the process flow chart shown in Figure 3.1 and are
discussed in more detail in the following sections.

16
 Spinning Yarn Yarn Dyed Yarn Weaving
Dying

Fabric
Finishing Wet
Processing

Figure 3.1: Yarn Dyed Weaving Process

3.2 Yarn Formation

Textile fibers are converted into yarn by grouping and twisting operations used to
bind them together. Although most textile fibers are processed using spinning
operations, the processes leading to spinning vary depending on whether the fibers are
natural or manmade. Figure 3.2 shows the different steps used to form yarn for natural
fiber. Note that some of these steps may be optional depending on the type of yarn
and spinning equipment used. Natural fibers, known as staple when harvested, include
animal and plant fibers, such as cotton and wool. These fibers must go through a
series of preparation steps before they can be spun into yarn, including opening,
blending, carding, combing, and drafting. Manmade fibers may be processed into
filament yarn or staple-length fibers (similar in length to natural fibers) so that they
can be spun. Filament yarn may be used directly or following further shaping and
texturizing. The main steps used for processing natural and manmade fibers into yarn
are below.

Opening/ Carding Combing

Blending

Spinning Drafting Drawing

Figure 3.2: Yarn formation Process for Natural Fibers

17
3.2.1 Natural Fiber

Yarn formation can be performed once textile fibers are uniform and have cohesive
surfaces. To achieve this, natural fibers are first cleaned to remove impurities and are
then subjected to a series of brushing and drawing steps designed to soften and align
the fibers. The following describes the main steps used for processing wool and
cotton. Although equipment used for cotton is designed somewhat differently from
that used for wool, the machinery operates in essentially the same fashion.

3.2.1.1 Opening/Blending

Opening of bales sometimes occurs in conjunction with the blending of fibers.

Suppliers deliver natural fibers to the spinning mill in compressed bales. The fibers
must be sorted based on grade, cleaned to remove particles of dirt, twigs, and leaves,
and blended with fibers from different bales to improve the consistency of the fiber
mix. Sorting and cleaning is performed in machines known as openers. The opener
consists of a rotating cylinder equipped with spiked teeth or a set of toothed bars.
These teeth pull the unbaled fibers apart, fluffing them while loosening impurities.
Because the feed for the opener comes from multiple bales, the opener blends the
fibers as it cleans and opens them.

3.2.1.2 Carding

Tufts of fiber are conveyed by air stream to a carding machine, which transports the
fibers over a belt equipped with wire needles. A series of rotating brushes rests on top
of the belt. The different rotation speeds of the belt and the brushes cause the fibers to
tease out and align into thin, parallel sheets. Many shorter fibers, which would
weaken the yarn, are separated out and removed. A further objective of carding is to
better align the fibers to prepare them for spinning. The sheet of carded fibers is
removed through a funnel into a loose ropelike strand called a sliver. Opening,
blending, and carding are sometimes performed in integrated carders that accept raw
fiber and output carded sliver.

18
3.2.1.3 Combing

Combing is similar to carding except that the brushes and needles are finer and more
closely spaced. Several card slivers are fed to the combing machine and removed as a
finer, cleaner, and more aligned comb sliver. In the wool system, combed sliver is
used to make worsted yarn, whereas carded sliver is used for woolen yarn. In the
cotton system, the term combed cotton applies to the yarn made from combed sliver.
Worsted wool and combed cotton yarns are finer (smaller) than yarn that has not been
combed because of the higher degree of fiber alignment and further removal of short
fibers.

3.2.1.4 Drawing

Several slivers are combined into a continuous, ropelike strand and fed to a machine
known as a drawing frame (Wingate, 1979). The drawing frame contains several sets
of rollers that rotate at successively faster speeds. As the slivers pass through, they are
further drawn out and lengthened, to the point where they may be five to six times as
long as they were originally. During drawing, slivers from different types of fibers
(e.g., cotton and polyester) may be combined to form blends. Once a sliver has been
drawn, it is termed a roving.

3.2.1.5 Drafting

Drafting is a process that uses a frame to stretch the yarn further. This process imparts
a slight twist as it removes the yarn and winds it onto a rotating spindle. The yarn,
now termed a roving in ring spinning operations, is made up of a loose assemblage of
fibers drawn into a single strand and is about eight times the length and one-eighth the
diameter of the sliver, or approximately as wide as a pencil. Following drafting, the
rovings may be blended with other fibers before being processed into woven, knitted,
or nonwoven textiles.

19
3.2.1.6 Spinning

The fibers are now spun together into either spun yarns or filament yarns. Filament
yarns are made from continuous fine strands of manmade fiber (e.g. not staple length
fibers). Spun yarns are composed of overlapping staple length fibers that are bound
together by twist. Methods used to produce spun yarns, rather than filament yarns, are
discussed in this section. The rovings produced in the drafting step are mounted onto
the spinning frame, where they are set for spinning. The yarn is first fed through
another set of drawing or delivery rollers, which lengthen and stretch it still further. It
is then fed onto a high-speed spindle by a yarn guide that travels up and down the
spindle. The difference in speed of travel between the guide and the spindle
determines the amount of twist imparted to the yarn. The yarn is collected on a
bobbin. In ring spinning, the sliver is fed from delivery rollers through a traveler, or
wire loop, located on a ring. The rotation of the spindle around the ring adds twist to
the yarn. In this method, sliver passes through rollers into a rotating funnel-shaped
rotor. The sliver hits the inside of the rotor and rebounds to the left side of the rotor,
causing the sliver to twist. Open-end spinning does not use rotating spindles since the
yarn is twisted during passage through the rotor. Yarn spinning is basically an
extension of the preparation steps described

above for natural fibers. Additional twisting of the yarn may occur, or multiple yarns
may be twisted together to form plied yarns. Plying takes place on a machine similar
to a spinning frame. Two or more yarns pass through a pair of rollers and onto a
rotating spindle. The yarn guide positions the yarn onto the spindle and assists in
applying twist. Plied yarns may be plied again to form thicker cords, ropes, and
cables.

3.2.2 Manmade Fibers

Although not classified under SIC 22, manmade fiber production is briefly discussed
in the following paragraphs to describe the upstream processing of textiles. Manmade
fibers include a) cellulosic fibers, such as rayon and acetate, which are created by
reacting chemicals with wood pulp; and b) synthetic fibers, such as polyester and
nylon, which are synthesized from organic chemicals. Since manmade fibers are

20
synthesized from organic chemicals, yarn formation of manmade fibers does not
involve the extensive cleaning and combing procedures associated with natural fibers.
Manmade fibers, both synthetic and cellulosic, are manufactured using spinning
processes that simulate or resemble the manufacture of silk. Spinning, in terms of
manmade fiber production, is the process of forming fibers by forcing a liquid through
a small opening beyond which the extruded liquid solidifies to form a continuous
filament. Following spinning, the manmade fibers are drawn, or stretched, to align the
polymer molecules and strengthen the filament. Manmade filaments may then be
texturized or otherwise treated to simulate physical characteristics of spun natural
fibers. Texturizing is often used to curl or crimp straight rod-like filament fibers to
simulate the Spun yarns are created using manmade fibers that have been cut into
staple length fibers. Staple-length fibers are then used to process fibers on wool or
cotton-system machinery. Methods for making spun yarn from manmade fibers are
similar to those used for natural fibers. Some fibers are processed as tow, or bundles
of staple fibers.

Fibers can also be produced as filament yarn, which consists of filament strands
twisted together slightly. In mills, filament fibers are wound onto bobbins and placed
on a twisting machine to make yarn. Filament yarns may be used directly to make
fabric or further twisted to the desired consistency. Manmade filaments often require
additional drawing and are processed in an integrated drawing/twisting machine.
Manmade filaments are typically texturized using mechanical or chemical treatments
to impart characteristics similar to those of yarns made from natural fibers.
appearance, structure, and feel of natural fibers.

3.3 Dyeing

Dyeing operations are used at various stages of production to add color and intricacy
to textiles and increase product value. Most dyeing is performed either by the
finishing division of vertically integrated textile companies, or by specialty dye
houses. Specialty dye houses operate either on a commission basis or purchase greige
goods and finish them before selling them to apparel done after the yarn has been
constructed into fabric, are discussed in more detail below.

21
3.3.1 Methods of Dyeing

Dyeing can be performed using continuous or batch processes. In batch dyeing, a

certain amount of textile substrate, usually 100 to 1,000 kilograms, is loaded into a
dyeing machine and brought to equilibrium, or near equilibrium, with a solution
containing the dye. Because the dyes have an affinity for the fibers, the dye molecules
leave the dye solution and enter the fibers over a period of minutes to hours,
depending on the type of dye and fabric used. Auxiliary chemicals and controlled dye
bath conditions (mainly temperature) accelerate and optimize the action. The dye is
fixed in the fiber using heat and/or chemicals, and the tinted textile substrate is
washed to remove unfixed dyes and chemicals. Common methods of batch, or
exhaust, dyeing include beam, beck, jet, and jig processing. Pad dyeing can be
performed by either batch or continuous processes. In continuous dyeing processes,
textiles are fed continuously into a dye range at speeds usually between 50 and 250
meters per minute. Continuous dyeing accounts for about 60 percent of total yardage
of product dyed in the industry. To be economical, this may require the dyer to
process 10,000 meters of textiles or more per color, although specialty ranges are now
being designed to run as little as 2,000 meters economically.

Continuous dyeing processes typically consist of dye application, dye fixation with
chemicals or heat, and washing. Dye fixation is a measure of the amount of the
percentage of dye in a bath that will fix to the fibers of the textile material. Dye
fixation on the fiber occurs much more rapidly in continuous dying than in batch
dyeing. Each dyeing process requires different amounts of dye per unit of fabric to be
dyed. This is significant since color and salts in wastewater from spent dyes are often
a pollution concern for textile facilities. In addition, less dye used results in energy
conservation and chemical savings. The amounts of dye used depends on the dye is
exhausted from the dye baths which determines the required dye bath ratio. The dye
bath ratio is the ratio of the units of dye required per unit of fabric and typically
ranges from 5 to 50 depending on the type of dye, dyeing system, and affinity of the
dyes for the fibers. Dyeing processes may take place at any of several stages of the
manufacturing process (fibers, yarn, piece-dyeing). Stock dyeing is used to dye fibers.
Top dyeing is used to dye combed wool sliver. Yarn dyeing and piece dyeing, done
after the yarn has been constructed into fabric, are discussed in more detail below:

22
3.3.2 Yarn Dyeing

Yarn dyeing is used to create interesting checks, stripes, and plaids with different-
colored yarns in the weaving process. In yarn dyeing, dyestuff penetrates the fibers in
the core of the yarn. Some methods of yarn dyeing are stock, package, and skein
dyeing. Stock dyeing dyes fiber using perforated tubes. In package dyeing spools of
yarn are stacked on perforated rods in a rack and immersed in a tank where dye is
then forced outward from the rods under pressure. The dye is then pressured back
through the packages toward the center to fully penetrate the entire yarn. Most carded
and combed cotton used for knitted outerwear is package-dyed. In skein dyeing, yarn
is loosely coiled on a reel and then dyed. The coils, or skeins, are hung over a rung
and immersed in a dye bath [16]. Skein-dyed yarn is used for bulky acrylic and wool
yarns. Typical capacity for package dyeing equipment is 1,210 pounds (550 kg) and
for skein dyeing equipment is 220 pounds (100 kg).

3.3.3 Types of Dyes

Dyes may be classified in several ways (e.g., according to chemical constitution,

application class, end-use). The primary classification of dyes is based on the fibers to
which they can be applied and the chemical nature of each dye. Table 6 lists the major
dye classes, fixation rates, and the types of fibers for which they have an affinity.
Factors that companies consider when selecting a dye include the type of fibers being
dyed, desired shade, dyeing uniformity, and fastness.

Most commonly in use today are the reactive and direct types for cotton dyeing, and
disperse types for polyester dyeing. Reactive dyes react with fiber molecules to form
chemical bonds. Direct dyes can color fabric directly with one operation and without
the aid of an affixing agent. Direct dyes are the simplest dyes to apply and the
cheapest in their initial and application costs although there are tradeoffs in the dyes
shade range and wet fastness[16]. Direct and reactive dyes have a fixation rate of 90
to 95 percent and 60 to 90 percent, respectively. A variety of auxiliary chemicals may
be used during dyeing to assist in dye absorption and fixation into the fibers. Disperse
dyes, with fixation rates of 80 to 90 percent, require additional factors, such as dye
carriers, pressure, and heat, to penetrate synthetic fibers (Snowden-Swan, 1995;

23
ATMI, 1997). Disperse dyes are dispersed in water where the dyes are dissolved into
fibers. Vat dyes, such as indigo, are also commonly used for cotton and other
cellulosic fibers.

3.4 Fabric Formation

The major methods for fabric manufacture are weaving and knitting. Figure 5 shows
fabric formation processes for flat fabrics, such as sheets and apparel. Weaving, or
interlacing yarns, is the most common process used to create fabrics. Weaving mills
classified as broad woven mills consume the largest portion of textile fiber and
produce the raw textile material from which most textile products are made. Narrow
wovens, nonwovens, and rope are also produced primarily for use in industrial
applications. Narrow wovens include fabrics less than 12 inches in width, and
nonwovens include fabrics bonded by mechanical, chemical, or other means. Knitting
is the second most frequently used method of fabric construction. The popularity of
knitting has increased in use due to the increased versatility of techniques, the
adaptability of manmade fibers, and the growth in consumer demand for wrinkle-
resistant, stretchable, snug-fitting fabrics. Manufacturers of knit fabrics also consume
a sizable amount of textile fibers. Knit fabrics are generally classified as either weft
knit (circular-knit goods) or warp knit (flat-knit goods). Tufting is a process used to
make most carpets.

3.4.1 Weaving

Weaving is performed on modern looms, which contain similar parts and perform
similar operations to simple hand-operated looms. Fabrics are formed from weaving
by interlacing one set of yarns with another set oriented crosswise. Figure 6 shows an
example of satin weave patterns. Satin, plain, and twill weaves are the most
commonly used weave patterns. In the weaving operation, the length-wise yarns that
form the basic structure of the fabric are called the warp and the crosswise yarns are
called the filling, also referred to as the weft. While the filling yarns undergo little
strain in the weaving process, warp yarns undergo much strain during weaving and
must be processed to prepare them to withstand the strain.

24
Before weaving, warp yarns are first wound on large spools, or cones, which are
placed on a rack called a creel. The warp yarns are then unwound and passed through
a size solution (sizing/slashing) before being wound onto a warp beam in a process
known as beaming. The size solution forms a coating that protects the yarn against
snagging or abrasion during weaving. Slashing, or applying size to the warp yarn,
uses pad/dry techniques in a large range called a slasher. The slasher is made up of the
following: a yarn creel with very precise tension controls; a yarn guidance system;
and a sizing delivery system, which usually involves tank storage and piping to the
size vessels. The yarn sheet is dipped one or more times in size solution and dried on
hot cans or in an oven. A devise called a lease is then used to separate yarns from a
solid sheet back into individual ends for weaving. Starch, the most common primary
size component, accounts for roughly two thirds of all size chemicals used in the U.S.
(130 million pounds per year). Starch is used primarily on natural fibers and in a
blend with synthetic sizes for coating natural and synthetic yarns. Polyvinyl alcohol
(PVA), the leading synthetic size, accounts for much of the remaining size consumed
in the U.S. (70 million pounds per year). PVA is increasing in use since it can be
recycled, unlike starch. PVA is used with polyester/cotton yarns and pure cotton yarns
either in a pure form or in blends with natural and other synthetic sizes. Other
synthetic sizes contain acrylic and acrylic copolymer components. Semisynthetic
sizes, such as carboxy methyl cellulose (CMC) and modified starches, are also used.
Oils, waxes, and other additives are often used in conjunction with sizing agents to
increase the softness and pliability of the yarns. About 10 to 15 percent of the weight
of goods is added as size to cotton warp yarns, compared to about 3 to 5 percent for
filament synthetics.

Once size is applied, the wound beam is mounted in a loom. Shuttle looms are rapidly
being replaced by shuttleless looms, which have the ability to weave at higher speeds
and with less noise. The major components of the loom are the warp beam, heddles,
harnesses, shuttle, reed, and takeup roll. In the loom, yarn processing includes
shedding, picking, battening, and taking up operations. These steps are discussed
below:

25
3.4.1.1 Shedding

Shedding is the raising of the warp yarns to form a shed through which the filling
yarn, carried by the shuttle, can be inserted. The shed is the vertical space between the
raised and unraised warp yarns. On the modern loom, simple and intricate shedding
operations are performed automatically by the heddle frame, also known as a harness.
This is a rectangular frame to which a series of wires, called heddles, are attached.
The yarns are passed through the eye holes of the heddles, which hang vertically from
the harnesses. The weave pattern determines which harness controls which warp
yarns, and the number of harnesses used depends on the complexity of the weave

3.4.1.2 Picking

As the harnesses raise the heddles, which raise the warp yarns, the shed is created.
The filling yarn in inserted through the shed by a small carrier device called a shuttle.
The shuttle is normally pointed at each end to allow passage through the shed. In a
traditional shuttle loom, the filling yarn is wound onto a quill, which in turn is
mounted in the shuttle. The filling yarn emerges through a hole in the shuttle as it
moves across the loom. A single crossing of the shuttle from one side of the loom to
the other is known as a pick. As the shuttle moves back and forth across the shed, it
weaves an edge, or selvage, on each side of the fabric to prevent the fabric from
raveling.

3.4.1.3 Battening

As the shuttle moves across the loom laying down the fill yarn, it also passes through
openings in another frame called a reed (which resembles a comb). With each picking
operation, the reed presses or battens each filling yarn against the portion of the fabric
that has already been formed. Conventional shuttle looms can operate at speeds of
about 150 to 160 picks per minute.

26
3.4.1.4 Taking up and letting off

With each weaving operation, the newly constructed fabric must be wound on a cloth
beam. This process is called taking up. At the same time, the warp yarns must be let
off or released from the warp beams. [16].

3.4.1.5 Shuttle Less Loom

Because the shuttle can cause yarns to splinter and catch, several types of shuttleless
looms have been developed. These operate at higher speeds and reduced noise levels.
By the end of 1989, shuttleless looms represented 54 percent of all looms installed, up
from 15 percent in 1980. Shuttleless looms use different techniques to transport cut
pieces of fill yarn across the shed, as opposed to the continuous yarn used in shuttle
looms. Some of the common shuttleless looms include water-jet looms, air-jet looms,
rapier looms, and projectile looms. Water-jet looms transport the fill yarn in a high-
speed jet of water and can achieve speeds of 400 to 600 picks per minute. Water jets
can handle a wide variety of fiber and yarn types and are widely used for apparel
fabrics. Air-jet looms use a blast of air to move the fill yarn and can operate at speeds
of 800 to 1200 picks per minute. Rapier looms use two thin wire rods to carry the fill
yarn and can operate at a speed of 700 picks per minute. Rapiers are used mostly for
spun yarns to make cotton and woolen/worsted fabrics. In a double rapier loom, two
rods move from each side and meet in the middle. The fill yarn is carried from the rod
on the fill side and handed off to the rod on the finish side of the loom. Projectile
looms use a projectile to carry the fill yarn across the weave. Shuttleless looms have
been replacing the traditional fly-shuttle loom in recent years. Airjet, rapier and
projectile looms are now prevailed in the market.

3.5 Wet Processing

Woven and knit fabrics cannot be processed into apparel and other finished goods
until the fabrics have passed through several water-intensive wet processing stages.
Wet processing enhances the appearance, durability, and serviceability of fabrics by
converting undyed and unfinished goods, known as gray or greige goods, into finished

27
consumers goods. Also collectively known as finishing, wet processing has been
broken down into four stages in this section for simplification: fabric preparation,
dyeing, printing, and finishing. These stages, shown in Figure 10, involve treating
gray goods with chemical baths and often require additional washing, rinsing, and
drying steps. Note that some of these steps may be optional depending on the style of
fabric being manufactured. In terms of waste generation and environmental impacts,
wet processing is the most significant textile operation. Methods used vary greatly
depending on end-products and applications, site-specific manufacturing practices,
and fiber type. Natural fibers typically require more processing steps than manmade
fibers. For most wool products and some manmade and cotton products, the yarn is
dyed before weaving; thus, the pattern is woven into the fabric. Processing methods
may also differ based on the final properties desired, such as tensile strength,
flexibility, uniformity, and luster [17].

Most manufactured textiles are shipped from textile mills to commission dyeing and
finishing shops for wet processing, although some firms have integrated wet
processing into their operations. A wide range of equipment is used for textile dyeing
and finishing. Much of the waste generated from the industry is produced during the
wet processing stages. Relatively large volumes of wastewater are generated,
containing a wide range of contaminants that must be treated prior to disposal.
Significant quantities of energy are spent heating and cooling chemical baths and
drying fabrics and yarns.

Most fabric that is dyed, printed, or finished must first be prepared, with the exception
of denim and certain knit styles. Preparation, also known as pretreatment, consists of a
series of various treatment and rinsing steps critical to obtaining good results in
subsequent textile finishing processes. . In preparation, the mill removes natural
impurities or processing chemicals that interfere with dyeing, printing, and finishing.
Typical preparation treatments include desizing, scouring, and bleaching. Preparation
steps can also include processes, such as singeing and mercerizing, designed to
chemically or physically alter the fabric. For instance, the mercerizing stage
chemically treats the fabric to increase fiber strength and dye affinity, or ability to
pick up dyes. This, in turn, increases the longevity of fabric finishes applied during
finishing. Many of the pollutants from preparation result from the removal of
previously applied processing chemicals and agricultural residues. These chemical

28
residues can be passed on to subsequent stages with improper preparation. Most mills
can use the same preparation equipment for the entire range of products they produce.
In most cases, facilities favor continuous rather than batch preparation processes for
economic and pollution control reasons. A number of mills, however, prepare goods,
particularly knits, batch wise on dyeing machines to simplify scheduling and
handling. Sometimes, facilities operate batch wise to reduce high capital costs
required for high productivity and the complexity of storing and tracking goods
through continuous wet processing operations. Because preparation is relatively
uniform across most of a mill's production, preparation is usually the highest-volume
process in a mill and hence an important area for pollution prevention. If fabrics
contained no contamination upon arrival for wet processing, preparation processes
would be unnecessary, eliminating about half the pollution outputs from wet
processing and a significant amount of wastewater. The primary pollutants from
preparation is wastewater containing alkalinity, BOD, COD, and relatively small
amounts of other contaminants such as metals and surfactants. There are many
preparation techniques, some of which are described below.

3.5.1 Singeing

If a fabric is to have a smooth finish, singeing is essential. Singeing is a dry process

used on woven goods that removes fibers protruding from yarns or fabrics. These are
burned off by passing the fibers over a flame or heated copper plates. Singeing
improves the surface appearance of woven goods and reduces pilling. It is especially
useful for fabrics that are to be printed or where a smooth finish is desired. Pollutant
outputs associated with singeing include relatively small amounts of exhaust gases
from the burners.

3.5.2 Desizing

Desizing is an important preparation step used to remove size materials applied prior
to weaving. Manmade fibers are generally sized with water-soluble sizes that are
easily removed by a hot-water wash or in the scouring process. Natural fibers such as
cotton are most often sized with water-insoluble starches or mixtures of starch and

29
other materials. Enzymes are used to break these starches into water-soluble sugars,
which are then removed by washing before the cloth is scoured. Removing starches
before scouring is necessary because they can react and cause color changes when
exposed to sodium hydroxide in scouring.

3.5.3 Scouring

Scouring is a cleaning process that removes impurities from fibers, yarns, or cloth
through washing. Alkaline solutions are typically used for scouring; however, in some
cases solvent solutions may also be used. Scouring uses alkali, typically sodium
hydroxide, to break down natural oils and surfactants and to emulsify and suspend
remaining impurities in the scouring bath. The specific scouring procedures,
chemicals, temperature, and time vary with the type of fiber, yarn, and cloth
construction. Impurities may include lubricants, dirt and other natural materials,
water-soluble sizes, antistatic agents, and residual tints used for yarn identification.
Typically, scouring wastes contribute a large portion of biological oxygen demand
(BOD) loads from preparation processes.

3.5.4 Bleaching

Bleaching is a chemical process that eliminates unwanted colored matter from fibers,
yarns, or cloth. Bleaching decolorizes colored impurities that are not removed by
scouring and prepares the cloth for further finishing processes such as dyeing or
printing. Several different types of chemicals are used as bleaching agents, and
selection depends on the type of fiber present in the yarn, cloth, or finished product
and the subsequent finishing that the product will receive. The most common
bleaching agents include hydrogen peroxide, sodium hypochlorite, sodium chlorite,
and sulfur dioxide gas. Hydrogen peroxide is by far the most commonly used
bleaching agent for cotton and cotton blends, accounting for over 90 percent of the
bleach used in textile operations, and is typically used with caustic solutions.
Bleaching contributes less than 5 percent of the total textile mill BOD load.

30
The bleaching process involves several steps: a) The cloth is saturated with the
bleaching agent, activator, stabilizer, and other necessary chemicals; b) the
temperature is raised to the recommended level for that particular fiber or blend and
held for the amount of time needed to complete the bleaching action; and c) the cloth
is thoroughly washed and dried. Peroxide bleaching can be responsible for wastewater
with high pH levels. Because peroxide bleaching typically produces wastewater with
few contaminants, water conservation and chemical handling issues are the primary
pollution concerns.

3.5.5 Mercerizing

Mercerization is a continuous chemical process used for cotton and cotton/polyester

goods to increase dye ability, luster, and appearance. This process, which is carried
out at room temperature, causes the flat, twisted ribbon-like cotton fiber to swell into
a round shape and to contract in length. This causes the fiber to become more lustrous
than the original fiber, increase in strength by as much as 20 percent, and increase its
affinity for dyes. Mercerizing typically follows singeing and may either precede or
follow bleaching.

During mercerizing, the fabric is passed through a cold 15 to 20 percent solution of

caustic soda and then stretched out on a tenter frame where hot-water sprays remove
most of the caustic solution [16].

After treatment, the caustic is removed by several washes under tension. Remaining
caustic may be neutralized with a cold acid treatment followed by several more rinses
to remove the acid. Wastewater from mercerizing can contain substantial amounts of
high pH alkali, accounting for about 20 percent of the weight of goods.

3.6 Finishing

Finishing encompasses chemical or mechanical treatments performed on fiber, yarn,

or fabric to improve appearance, texture, or performance. Mechanical finishes can
involve brushing, ironing or other physical treatments used to increase the luster and
feel of textiles. Application of chemical finishes to textiles can impart a variety of

31
properties ranging from decreasing static cling to increasing flame resistance. The
most common chemical finishes are those that ease fabric care, such as the
permanent-press, soil-release, and stain resistant finishes. Chemical finishes are
usually followed by drying, curing, and cooling steps. Application of chemical
finishes are often done in conjunction with mechanical finishing steps [17]. Selected
mechanical and chemical finishing techniques are described below.

3.6.1 Mechanical Treatments

3.6.1.1 Heat Setting

Heat setting is a dry process used to stabilize and impart textural properties to
synthetic fabrics and fabrics containing high concentrations of synthetics. When
manmade fibers are heat set, the cloth maintains its shape and size in subsequent
finishing operations and is - stabilized in the form in which it is held during heat
setting (e.g., smooth, creased, uneven). Textural properties may include interesting
and durable surface effects such as pleating, creasing, puckering, and embossing.

Heat setting can also give cloth resistance to wrinkling during wear and ease-of-care
properties attributed to improvements in resiliency and in elasticity. Pollution outputs
may include volatile components of spin finishes if heat setting is performed before
scouring and bleaching processes. These components are introduced to the fabrics
during the manufacture of synthetic fibers, when proprietary spin finishes are applied
to provide lubrication and impart special properties, such as antistatic, to the fiber.

3.6.1.2 Brushing and napping

Brushing and napping decrease the luster of fabrics by roughening or raising the fiber
surface and change the feel or texture of the fabric. These processes involve the use of

wires or brushes that pull individual fibers.

32
3.6.1.3 Softening

Calendaring or ironing can be used to reduce surface friction between individual

fibers, thereby softening the fabric structure and increasing its sheen. In calendaring,
the fabric passes through two or more rolls. Typically, one roll is made of chilled
steel, while the other is made of a softer material like cotton fibers. The steel roll may
also be heated using gas or steam. Once goods pass through the machine they are
wound up at the back of the machine.

3.6.1.4 Optical finishing

Luster can be added to yarns by flattening or smoothing the surfaces under pressure.
This can be achieved by beating the fabric surface or passing the fabric between
calendaring rolls. The luster can be further increased if the rolls are scribed with
closely spaced lines.

3.6.1.5 Shearing

Shearing is a process that removes surface fibers by passing the fabric over a cutting
blade.

3.6.1.6 Compacting

Compacting, which includes the Sanforizing process, compresses the fabric structure
to reduce stresses in the fabric.

The Sanforizing process reduces residual shrinkage of fabrics after repeated

laundering. The fabric and backing blanket are fed between a roller and a curved
braking shoe, with the blanket under tension. The tension on the blanket is released
after the fabric and blanket pass the braking shoe. Compacting reduces the potential
for excessive shrinkage during laundering.

33
3.6.2 Chemical Treatments

3.6.2.1 Optical finishes

Optical finishes added to either brighten or deluster the textile.

3.6.2.2 Absorbent and soil release finishes

These finishes that alter surface tension and other properties to increase water
absorbency or improve soil release.

3.6.2.3 Softeners and abrasion-resistant finishes

Softeners and abrasion-resistant finishes are added to improve feel or to increase the
ability of the textile to resist abrasion and tearing.

3.6.2.4 Physical stabilization and crease-resistant finishes

These finishes, which may include formaldehyde-based resin finishes, stabilize

cellulosic fibers to laundering and shrinkage, imparting permanent press properties to
fabrics.

3.7 Fabrication

Finished cloth is fabricated into a variety of apparel and household and industrial
products. The simpler of these products, such as bags, sheets, towels, blankets, and
draperies, often are produced by the textile mills themselves. Apparel and more
complex house wares are usually fabricated by the cutting trades. Before cutting,
fabrics must be carefully laid out. Accuracy in cutting the lay fabric is important since
any defects created at this point may be carried through other operations and end up in
the final product. For simple household and industrial products, sewing is relatively
straightforward. The product may then be pressed to flatten the fabric and create crisp
edges.

34
 CHAPTER 4

TECHNICAL APPRISAL

4.1 Basic Design of the Project

The project envisages for a composite weaving factory aimed at producing yarn dyed
fabric. The main raw material is yarn, which will be dyed and woven into fabric. In
the previous chapter process details has been discussed.

Weaving machines aimed to be procured for the project are fully automated with on
board microprocessors. This facilitates correct beat-up positioning and accurate
control of other such properties to minimize wastage and amplify efficiency. Also,
there will be management software to monitor shift output and individual machine
performance centrally. The yarn dyeing and finishing machines will also be equipped
with microprocessors and LCD displays. The dyestuff and chemicals have to be
weighed, mixed and prepared manually. But, the dyeing process parameters are
controlled automatically in real time as per recipe input.

4.2 End Product, Capacity Utilization, Efficiency and Wastage

4.2.1 End Product

The project will be capable of producing fabric for both shirts and trousers. However,
it will mostly concentrate in yarn dyed fabrics with shirt manufacturers as its primary
customers. In this report, calculations for production output and raw materials
requirements have been based upon following assumptions:

Working Time : 24 hours in a day

300 days in a year

35
 Table 4.1: Loom Speed for Different Fabric Construction

For poplin (1/1) fabrics For dobby design fabrics

700~800 rpm 750 rpm

Loom speed

The running speeds of weaving machines vary with complicacy in fabric design
pattern and quality of yarn preparation.

4.2.2 Capacity Utilization

It has been calculated on the basis of factory efficiency as follows:

Table 4.2: Capacity Utilization (Weaving)

Year-1 Year-2 Year-3 Year-4 Year-5 Year-6 Year-7 Year-8

Utilization 48% 73% 77% 81% 84% 86% 88% 90%

4.2.3 Calculation of Weaving Efficiency

Capacity utilization of 100% in the weaving plant has been assumed to be equivalent
of 180 weaving machines operating continually for 24 hours without stoppages.
Forecasts for weaving efficiencies have been based upon following hypothetical
environment:

At any given time, number of looms (weaving machines) stopped owing to style/yarn
beam change 18 machines. Down time required for a style change is approximately 4
hours for a loom. This equates to all machines being at halt for 24 min. every day.

Total production time of the weaving room lost everyday owing to warp/weft yarn
breakages and other minor technical faults 1 hour 30 minutes. Looms assumed to be
out of service throughout the month because of from major technical hindrances 3.5

36
numbers. This equates to total plant time wastage of half an hour per day. A total of
2.4 hours are deemed to be lost each day from 24 hours of continual operation. As a
result, the efficiency is reduced by (100 x 2.4/24) = 10%.

As seen above, it is possible to run the plant at 90% of its full productive capacity.

4.2.4 Wastage Calculation

Throughout the full manufacturing process, wastages of raw materials have been
considered as follows:

Yarn Dyeing- 6% of materials in terms of yarn and dyes-chemicals.

Weaving- 2% of the fabric woven. These will be sorted out at the
inspection section. Cost of this wastage will consist of expenses for grey yarn,
price of yarn dyeing and sizing chemicals and manufacturing overhead for
yarn dyeing and weaving.
Finishing- 2% of total fabric fed into the finishing process. Cost
parameters of wastage will be same as given just above.

An allowance for these wastages mentioned has been catered for in the calculations of
COGS.

4.3 Product Types and Quantity

4.3.1 Product Types

As conceived from ongoing demand trends, five types of fabrics have been considered
as the range of products for this project. The following table shows these five types
of products:

37
 Table 4.3: Fabric Types and Their Construction

Product Type Construction Description

Product Type - A 100% Cotton 3 colour (1/1) poplin check or stripe

fabric

Product Type - B 100% Cotton 4 colour dobby design check or

stripe fabric [with Combed Cotton Yarn]

Product Type - C 100% Cotton 4 colour poplin check or stripe

fabric [with Compact Cotton Yarn]

Product Type - D 100% Cotton 3 colour poplin check or stripe

fabric

Product Type - E 100% Cotton 2 colour poplin check or stripe

fabric

Product types A, C, D and E are basic plain weave fabrics that have a simple
manufacturing technique. They also make up for most of the market demand. Fabric
type B consists of difficult weave pattern and has an added value in the market.
These fabrics will have a width of 63~64 inches upon completion of weaving. After
finishing process, however, the final width prior to delivery will be 58~59 inches.

Fabrics discussed so far are meant to produce shirting articles. Accordingly, all
products are made of finer yarns. But, the project shall also be very well capable of
producing fabrics of coarse yarns. Hence, it can also provide fabrics to manufacture
bottom or trouser apparels. However, this feasibility study focuses upon fabrics for
shirting as the primary product.

4.3.2 Production Quantity

Detail calculations of production are shown in Annexure A to this report. Summary

of production data at 100% capacity utilization are being given in the following table.
38
 Table 4.4: Monthly and Annual Production of Different Products (100% Capacity)

Product Machine Looms Production/Month Production/Annum

Type Speed Assigned (yds) (yds)

A 800 40 400,000 4,800,000

B 750 50 468,750 5,625,000

C 700 20 184,211 2,210,526

D 800 50 555,556 6,666,667

E 750 20 214,286 2,571,429

Total 180 1,822,802 21,873,622

At various capacity utilizations, production quantity is:

Table 4.5: Total Monthly and Annual production (In 000 Yards)

Year- Year- Year- Year- Year- Year- Year- Year-

1 2 3 4 5 6 7 8

Cap. Util. 48% 73% 77% 81% 84% 86% 88% 90%

Monthly 875 1331 1404 1476 1531 1568 1604 1641

Prod.

Prod. p. a. 10499 15968 16843 17718 18374 18811 19249 19686

As per these tables, production quantity is not alike for all product types. The
quantity for each type has been determined in accordance with their respective market
demands. Thus, all do not get equal share of weaving looms assigned to them.
Furthermore, machine speed is stated to be unique for each type of fabric. This is
done so because a loom can operate at faster speed while weaving a simpler article;
.g. 1/1 plain weave fabric. While with rising difficulty in warp design patterns and
weft insertion variations, the speed has to be lowered down.

39
4.4 Requirement of Raw Materials

4.4.1 Yarn and size chemicals

Yarn: There are a good number of local spinning mills capable to supply yarn
as per quality requirements of Air-jet looms. It would be better to establish a
contractual sourcing program with 2~3 spinning authorities for regular yarn
shipment. However, there is quite a large necessity for good combed yarns
too. This will have to be sourced from local parties as well as from abroad.
There are trading houses here that deal in these items.

Size Chemicals: High quality chemicals are needed to size the dyed yarn.
Presently, three different brands from Holland, Germany and Italy are widely
accepted here for this purpose.

Summary of quantities of raw materials requirements:

Table 4.6: Yarn and Sizing Chemical Requirement

Yarn (kg) Year to be Dyed (kg) Size Chemicals (liter)

Monthly Yearly Monthly Yearly Monthly Yearly
100% 372047 4464564 349724 4196690
Cap.
Year-1 178583 2142991 167868 2014411 137371 1648454
Year-2 271594 3259132 255299 3063584 208919 2507024
Year-3 286476 3437714 269288 3231451 220366 2644396
Year-4 301358 3616297 283277 3399319 231814 2781767
Year-5 312519 3750233 293768 3525220 240400 2884795
Year-6 319960 3839525 300763 3609154 246123 2953481
Year-7 327401 3928816 307757 3693087 251847 3022166
Year-8 334842 4018108 314752 3777021 257571 3090852

Note: Amount of grey yarn shown in the table is 6% higher than the quantity of yarn
that is dyed. This is owing to the 6% of assumed wastage during yarn dyeing.

40
4.5 Brief Description of the Project

4.5.1 Land

Total 25 bighas of land will be required for this project.

4.5.2 Location

The project shall have its premises at Bishaiya Kuri Bari Mouja in Rajendrapur area.
Its situated about 45 km north of Dhaka just adjacent to the Dhaka-Mymensingh
highway. Its located on the west side of the highway and is 1 km north of
Rajendrapur tri-junction. The place is locally known as Dogri.

4.5.3 Land Requirement

Covered area: 250,940 sq ft

Area needed for internal roads, drainage, pipe & cable laying: 25,000 sq ft
Area needed for Water and Effluent Treatment Plants: 11,700 sq ft
Area needed for vehicle parking, unloading and turn-about: 10,000 sq ft

4.6 Civil Works for Factory Premises

This complex will consist of separate buildings for different machinery and purposes.
They would be as under:-

4.6.1 Weaving Building

Dimensions: 2100 x 3050, eave height 180.

Structure: Concrete columns and single span pre-fabricated I-shaped steel
girders.

41
 Roof: Zinc Aluminium or coated CGI sheets along with 2 glass wool
(density 10 kg/m3) insulation.
Cladding: 10 brick walls with fixed windows of double glass panes placed in
between every two columns.
Floor: 10 RCC casting with mosaic finish.
Special Features: The room will have false ceiling. Also, there will be a grid
of underground ducts beneath the floor to carry the return air to the AHU (air
conditioning plant). There will be 60 feet long verandas adjacent to the north
and south walls.

4.6.2 Sizing and Warping Building

This is a 2300 x 3500 (eave height 210) building. In addition to housing the
Sizing machine, its space would also be used for other facilities mentioned below:

Warping space
Yarn drawing area
Passage area for WIP materials
Workshop & spares store
Precision Package Winding
Laboratory area
Structure: Same as above.
Roof: Same as above.
Claddings: 10 brick walls with open windows.
Floor: 5 CC casting with net finish.
Special Features: Under ground drainage beneath size box.

4.6.3 Air Compressor Shed

Dimensions: 350 x 600, eave height 149.

Structure: Concrete columns and single span trusses.
Roof: Coated CGI sheets.

42
 Claddings: It will mostly be open at all sides with 10 brick masonry in places
as necessary.
Floor: 5 CC casting with net finish.

4.6.4 Generator and LT Switchgear Shed

Dimensions: 750 x 750 , eave height 210

Structure: Concrete columns and single span trusses.
Roof: Coated CGI sheets along with 2 glass wool insulation.
Claddings: All the sides shall be mostly open. It will have 5 ft drop walls
along the eave to keep out rain droplets. There will also be net claddings all
around.
Floor: 5 CC casting with net finish.
Special Features: The generator itself will have RCC foundations placed in
the floor according to its footing design. There will be an open running duct
along a side to serve as cable trench.

4.6.5 Boiler Shed

Dimensions: 600 x 500, eave height 259.

Structure: Concrete columns and single span trusses.
Roof: Coated CGI sheets.
Claddings: It will mostly be open at all sides with 10 brick masonry in places
as necessary.
Floor: 5 CC casting with net finish and RCC foundation wherever necessary.

4.6.6 Shed for Electric Chiller

Its 350 x 250 room that will be situated adjacent to Air Conditioning plant
room. It will be an extension of the said plant room.

43
4.6.7 Plant Room for Air Handling Unit

It is a 2 storied building.

Dimensions: 300 x 3050, heights 130 & 123 for

Structure: RCC frame, concrete and brickworks.
Roof and Ceiling: RCC
Claddings: Concrete claddings where axial fans need to be mounted and 10
masonry at other sides.
Floors: RCC with drainage provision.

4.6.8 Yarn Dyeing Building

Dimensions: 1500 x 1000, eave height 259.

Structure: Concrete columns and single span trusses.
Roo:. Coated CGI sheets with glass wool insulation.
Claddings: 10 brick masonry with necessary windows up to 5 metres. Then,
2 metre high windows all along the north and south wall.
Floor: 4 CC casting with necessary RCC foundation underneath dyeing kiers.
The surface of floor area shall be covered with dye stain removable tiles.
Special Features: The columns would have to have support rails fixed to them
along the length at 6.6 metres height. The rails are placed in order to bear the
bridge beam which shall hoist the crane. Also, beneath the floor, there will be
an underground drainage grid.

4.6.9 Rooms for Cone to Cone Re-winders

Dimensions: 1200 x 500, eave height 100.

Structure: Concrete columns and single span trusses.
Roof: Coated CGI sheets with glass wool insulation.
Claddings: 10 brick walls with open windows.
Special Features: It should be well ventilated.

44
4.6.10 Rooms for Precision Package Winders & Dyeing Laboratory

This will be located in the Sizing Building.

Some other salient features of above construction works are:

Instead of brick walls, prefabricated steel sheet claddings (with insulation) will be
used in case the wall needs to be shifted in near future owing to possible expansion
works.

There will be provisions for attached rest rooms with every building. Dining facilities
will be available in the living area.

4.7 Civil Works for Other Buildings

Apart from the main buildings related to factory functions, there will be some
building works to meet mostly logistic requirements.

4.7.1 Three Storied Building

Two three storied building each of 1896 x 263 size are attributed to following
purposes respectively:

Offices and store for yarn, size chemicals etc.

Fabric inspection and storage.
Living accommodations for on duty and resident executives.

4.7.2 Civil Works for Effluent Treatment Plant

This shall involve constructing circular and elliptical shaped water tanks made from a
combination of RCC and CC. Their combined capacity will be approximately 1500
metre3. Also, there will be some concrete framework structures to serve as stages and
canopies for plant equipments.

45
4.7.3 Deep Tube Well and RMS Room

A (300 x 240) room with RCC roof and masonry columns to house the
deep tube well.
Similar building with dimensions of (180 x 120) to provide space for the
gas connection regulator and a security guard station. It will be located at the
entry point of project site.

4.8 Auxiliary Civil Works

4.8.1 Underground Ducting

Ten of it has to be constructed in the weaving building and three in the warping room.
Its purpose is to carry return air from those rooms to the air conditioning plant. The
underground ducts will be about 6 feet deep and 3 feet wide in average. Their total
lengths will be 2100 feet in the weaving room and 690 feet in the warping room. The
ducts will be constructed of brick work and concrete.

4.8.2 Civil Works for Water Treatment Plant

It involves the construction of a few water holding houses and some concrete stages
for plant equipments.

4.8.3 Underground Water Reservoir

It will be made flushed with the ground having a depth of 5 metres. The tentative
capacity is 180 metre3. It will be fully concrete cast with brick soling provided
beneath the floor. There will be no overhead water tanks. This is because feed tanks
at the user ends will receive water supply through booster pumps of sufficient
pressure head.

46
4.8.4 Surface Drainage

It will have brick works at sides and a concrete floor. The cross sectional area will be
6 feet2. Approximate length of drainage work will be 1850 feet. Its purpose will be
to carry effluent from sizing and yarn dyeing plants up to the effluent treatment plant.

4.8.5 Inner Roads, Parking and Unloading Area

The inner road will stretch from entry gate to the factory premises and go around the
entire perimeter of building area. It will be 12 ~ 18 feet wide and made of tar bound
macadam with 6 thick brick soling as a sub-base layer. The total length will be near
about 2000 feet. There will be space for vehicle parking and unloading.

4.8.6 Electric Works

It is estimated as 5% of the major civil works cost likely to be incurred. It consists of

Power transmission expenses (mostly cable costs) from LT Panel to MDBs

and SDBs. Expenses for regular electric wiring (for lights, fans and plug
sockets) of buildings.
Costs for earthing work of generator room, LT panel and MDBs.

4.8.7 Plumbing Works and Others

It is estimated as 3% of the major civil works cost likely to be incurred. It consists of

installation costs of pipe lines for following water flow circuits

Feed water line from reservoir to feed tanks of Boiler and of Yarn Dyeing
vessels.
Make up water line from reservoir to cooling towers.
Plumbing works from Deep Tube Well to Water Treatment unit and from
there to underground Reservoir.

47
 General plumbing and sanitary works in toilets, kitchens etc.
Construction of septic tank and boundary fencing along full perimeter of the
land available.

4.9 Imported Machinery

Most of the machinery selection for the project has almost been finalised. Thus, only
two to three contenders are left as suitable suppliers of the machinery. List of
machines, their brief description and names of prospective machine manufacturers are
being given below:

4.9.1 Air-jet Weaving Looms

Fully automatic weaving machines with reed space of 190 cm and installed
mechanical speed of 1200 rpm. The claimed operating speed is 900 rpm. The
machines will come from Japan or Belgium, and belong to the brand name of
TOYOTA or PICANOL respectively. There will be total 180 machines of the
following specifications:

Table 4.7: Weaving Machine Details

Type of Machines Number of Machines

4 Colour Weft Insertion with 16 shaft Dobby Shedding 50

2 Colour Weft Insertion with 7 shafts Cam Shedding 20

4 Colour Weft Insertion with 7 shafts Cam Shedding 70

6 Colour Weft Insertion with 4 shafts Cam /Crank Shedding 40

Total 180

48
4.9.2 Sizing Machine

High performance sizing machine that with ability to run at 60~80 metres/minute
speed. Headstock working width 2400 mm; Cylinder Drier, Sizing centre and Beam
creel working width 2200 mm. One pair of beam creel (unwinding frame), 4 teflon-
coated cylinders of 800 mm diameter for pre-drying. In the final drier 4 stainless
steel cylinders of which 2 are partially teflon-coated. Both drying units are designed
to work on 3.5 bars saturated steam at a maximum temperature of 1470C. The drying
units are equipped with 4 sets of PT 100 sensors to record and control temperature.
Sizing centre with double-dip and double-nip size box. 1200 litres capacity cooking
kitchen with direct steam heating and a storage tank of 1300 litres. All functions of
the entire process are automated to allow for synchronized control. The speed of
machine is automatically maintained in accordance with the preset moisture level as
per recipe and the temperature in drying units. Two machines are necessary which
will be either Karl Mayer of Switzerland or Panon of Taiwan.

4.9.3 Warping Machine

One Sectional warping machine with 2200 mm useful width and powered mechanical
leasing device would be bought. Maximum section warping speed 800 metres/minute
and maximum beaming speed 200 metres/minute. There will be total 560 creels with
thread tensioner to maintain uniform warp tension across entire width. The creels can
self clean themselves by blowing occasionally from built-in nozzles. This item will
come either from UK-IL of South Korea or from Karl Mayer of Germany.

4.9.4 Air Handling Unit -AHU

Only one set will have to be installed. Likely contenders are LTG from Germany and
Luwa from Switzerland. This unit shall condition the air of Weaving room and
Warping room to maintain the required humidity. Total air circulated in the weaving
room will be 148,000 metre3/hour with an air exchange rate of 25 times/hour. In the
machine zone; i.e. above the looms, a volume of 135,300 metre3 of air will be

49
circulated per hour with an exchange rate of 43 times/ hour. The warping room will
have an air flow of 50,200 metre3/ hour with air exchanges occurring 17 times in an
hour. Temperatures in the rooms will be maintained at 240C and 260C respectively.
However, this temperature control is beyond the scope of the AHU. It will be have to
be done by an industrial chiller bought separately. The chiller will supply water at
90C to the air washer component of the AHU, where it shall be sprayed as mists into
the supply air going to the rooms.

4.9.5 Air Compressors

Five compressors will be bought. The capacity of total air flow per machine will be
about 38 metre3 per minute at 8.5 bar pressure head. The compressors will be of
screw type with 3 filters to remove oil from delivery air. There will also be
refrigerant drier units functioning at 30C PDP to drain out the water from compressed
air. Likely contenders are; Worthington-Creyssensac (brand name Rollair) of
France, Kaeser of Germany and Ingersol-Rand of U.S.A.

4.9.6 Electric Industrial Chiller

It will be a screw type chiller with 320 RT (refrigerant tonnage) capacity. Its purpose
will be to deliver 208 metre3 of chilled water (at 90C) per hour to the air washer.
Temperature of water returning from the air washer will be around 12 ~ 130C which
will be chilled again. The unit will be provided by either York or Carrier or McQuay
all from U.S.A.

4.9.7 Overhead Travelling Cleaners

These units will travel over the rows of weaving machine by being mounted upon
steel rails. They are basically industrial grade vacuum cleaners having both blowing
and suction nozzles. Purpose of installing these is to keep the machines less
contaminated from yarn fluffs and dusts. Manufacturers in consideration for it are
Electrojet from Spain and Sohler from Germany. Required number of units will be
11.

50
4.9.8 Hydraulic Beam Lifters

Four lifters of different sizes will be bought from Genkinger Company of Germany.
One will be used to carry warped yarn beam from warping machine to sizing room.
The other will be used to transport sized and prepared yarn beam from drawing-in
room to the weaving machine and mount it on the machine.

4.9.9 Yarn Dyeing Vessels

These dyeing machines are likely to be chosen from any of these three Theis of
Germany, Lab Pro of Switzerland or Noseda of Italy. There will one sample dyeing
vessel and four main dyeing vessels. These vessels are capable of directing the
dyeing process on their own as per recipe input. The recipe is fed to the machines
program via LCD displays. All process parameters like rate of heating or cooling,
timings of various steps of the process, flow control etc. are controlled up to a highly
finite level of accuracy by these machines. Each vessel comes along with three
different sizes of cylindrical tanks set in vertical fashion with inlet/outlet for steam,
hot water and cooling water located below. The main tank performs the dyeing job.
The smallest one is for preparing dye liquor and chemical solutions. The other tank is
used to prepare heated solutions of liquor or chemical solutions and keep them ready
to be fed into the main tank as soon as the ongoing batch is done. This increases
process efficiency by performing the preparatory processes beforehand. The sizes of
vessels to be acquired are determined on the basis of likely job order sizes that might
be received. The sizes are:

1x 20.9 kg (for sample dyeing)

1x 252.2 kg

1x 408.8 kg

1x 613.2 kg

1x 843.7 kg

1x 1543.7 kg

51
 1x 1543.7 kg

1x 1663.7 kg

Heights of these vessels are about 3900 mm. Their diameter increases with their
capacity.

4.9.10 Precision Package Winders

This item does the back processing job and plays the utmost important role in
achieving uniformity and shade consistency for the dyeing job. The machine wounds
a soft package from the commercially available yarn bobbin. While doing so, it
maintains an accurate desired density of the package and a required winding angle for
the yarn. The project shall need 280 numbers of spindles manufactured by SSM
(Scharer Schweiter Mettler) of Switzerland.

4.9.11 Hydro Extractor

After being unloaded from dyeing kiers, the yarn packages have very high water
content (almost 180% of water by weight). The Hydro Extractor reduces this to 50%
by spinning the packages at 5500~6500 rpm in a centrifuged platform. The machine
can take in 6 packages or heads at a time. It will be purchased either from Frauchiger
of Switzerland or from Dettin of Italy.

4.9.12 Radio Frequency Dryer

This machine will be supplied by Stalam from Italy or by Strayfield from U.K.
Function of this unit is to dry the packages to a desired water content of 8% (by
weight) after hydro-extraction. It emits high frequency short waves via electrodes to
agitate water molecules within the packages. As a result, the H 2 O molecules
evaporate from packages.

52
4.9.13 Cone to Cone Re-winders

These are random winding machines used to rewind yarn dyed packages into standard
bobbins suitable to undergo the weaving process. The project would require 300
spindles of winders. They will come in 2 sets of 150 spindles each. Likely
contenders are SSMs Chinese subsidiary or Motocono from Spain.

4.9.14 Knot Tying Machine

Preferred brands are Staubli from Switzlerland and Fischer Poege form Germany.
This machine reduces the down time for mounting new yarn beam on the loom. It
does so by tying the yarns of new warp beam to the warp yarns left out after the
previous beam had been woven. Although this machine is needed in the loom section
it will be bought along with the yarn dyeing equipment. This is because, the knot
tying machine is optimally useful when the weaving house runs at high efficiencies,
which is not likely to occur in the first six months of operations. Only a single
machine along with two frames are required.

4.9.15 Inspection and Folding Machine

This machine carries out simultaneous inspection of the fabric as well as measuring
the length while it is being plate-folded. Contenders are Nazer from Pakistan and
PLM from Italy. Two units will be required for the project. However, one will be
bought at phase-I and the other at phase-II to split initial costs.

4.9.16 Gas Generator with Cooling Tower

Four generator of 1 MW output each will be purchased. The generator sets will be
procured from

Caterpillar of U.S.A.

Jenbacher of Austria -any of the two.

53
4.9.17 Gas Fired Steam Generating Boiler

Two 3.0 tons per hour capacity boiler will be purchased either from Fulton of China
(An American joint venture) or from Long Chuan Machinery Works of Taiwan or
Cleaver Brooks of U.S.A.

4.9.18 Water Treatment Plant

The in feed water for Boiler, Sizing and Yarn Dyeing and the make-up water for Air
Conditioning plant and Cooling towers require certain quality parameters. To meet
that requirement, raw water pumped up from under ground needs to be treated. The
plant procured to satisfy this purpose usually consists of an alkali dosing station, an
aeration and oxidation unit, a multi-media filter of pebbles, green sand and Anthracite
to trap iron and a tank of raisins to remove hardness. This plant would be sourced
from India.

4.9.19 Effluent Treatment Plant

This plant treats effluents generated by sizing and yarn dyeing machines. The plant
will be installed within the first few days of Phase-II. Most important part of this
system is the proper design of tank sizes and dosing rates based upon correct analysis
of effluent. The plant capacity would be about 50 metre3 per hour. It will work with
bacterial components to culture the effluent after aerating it vigorously with
compressed air.

4.10 Local Machinery

Hardware components and equipments which are to be purchased from local whole
sellers and mechanical systems/circuits that are to be fabricated locally fall in this
category. The list goes as follows:

54
4.10.1 Fabrication of Compressed Air Line

From compressor to the weaving machines, warping machine and yarn dyeing vessels
compress air lines will be fabricated. It will be put together using imported MS pipes.
Also needed are elbows, reducers, T-joints and some valves.

4.10.2 Piping and Other Works to Transport Steam

Using seamless schedule 40 MS piping, the sizing and yarn dyeing machines will be
connected to a steam header located near the boiler outlet. The header itself will be
made from a 10 diameter MS pipe and blank flanges. Pipe diameter at machine
connection point will be 3. The complete design of this pipeline also includes
condensate recovery tank and piping, steam traps, valves etc. Another component to
be fabricated for the boiler system is the feed water tank and required connecting
pipes.

4.10.3 Overhead Air Supply Duct

It will be made by folding and joining GI sheets. They will then be covered with 1
glass wool insulation. These ducts will carry supply air from the air conditioning
plant and will be connected straight up to the supply air fans in the plant room. Sizes
of ducts are

For the weaving room 11ducts along the length of the room each 205 feet
long. For the warping room Three 210 feet long stretched over the creel.
The size of all of them is 3-11 x 4-10.
For the machine zone over weaving looms 22 ducts each 2-2x 2-2 in
size and 205 feet in length.

4.10.4 Electric Components and Cables

They comprise of the following:

55
 LT panel and switch gears. LT cable from Alternator to LT panel.
Moulded case circuit breakers (MCCB) and miniature circuit breakers (MCB)
for Main Distribution Boards (MDB) and Sub-distribution Boards (SDB).
Machinery cable from distribution boards to machines.

4.10.5 Conduits and Pumps for Water Circuits

Pumps will be needed for following circuits:

Circulate water of the cooling tower circuit. And supply water to the make up
tank for cooling tower.
Supply water to the feed tanks for yarn dyeing vessels, boiler and chiller.
Circulate chilled water from chiller to the tank.
Lift the effluent from central effluent reservoir to the in-feed of treatment
plant.
Pump up condensate to the boiler feed tank.
Booster pumps to feed water onto WTP.

Conduit networks will be necessary for all these circuits. They will be fabricated with
MS and GI pipes as necessary.

4.10.6 Indoor Lighting and Exterior Security Lights

For internal lighting, 400 watt metal halite fluorescents will be used [60 nos.]. For
outdoor use, 70 watt high pressure sodium lights [60 nos.] will be used. These will
most probably be sourced from Belgium. Also, 360 twin tube light shades will be
used for rooms where metal hyalites are not used.

4.10.7 Workshop Machinery

The workshop will constitute of following machines:

One 6 and one 8 German made lathe with 3 sets of tip tools.

56
 One German shaper machine with a set of tip tools.
Five hand grinders and one table grinder (Chinese).
One platform drill (Chinese) and two hand drills (Black & Decker).

4.10.8 Other accessories

Pipe line construction for Gas connection.

Deep Tube Well 220 metre3 per hour capacity.
Chimney for Boiler.
Fire Fighting Equipment mostly fire extinguishers.
Other Miscellaneous Items These are :

Weighing scales 4,

Yarn drawing stands 5,

Trolleys (for cloth rollers and bobbins) 6, etc

4.11 Utility Services

The project will run in island condition without using the grid as its power source.
Hence, source of power will be gas generators operating incessantly at base load. The
gas connection would have to be taken from TITAS which has a high pressure pipe
line running north to south just 120 feet away from the entry point of the project site.
For the connection, a security deposit equivalent of 3 months estimated gas bill will
have to be deposited to TITAS. One third of it has to be given in cash and the rest has
to be covered by Bank Guarantee. Apart from running the gensets, gas connection
also has to be taken to run the boiler. The power and steam requirements of the
project are being discussed below:

57
4.11.1 Electric Power

Installed load of the machines are given in the next table.

Table 4.8: Electric Load

Connected Load Average Load

Weaving looms (3 kW each) 210 168

Sizing machine 120 80

Warping machine 80 40

Air handling unit (installed) 400 320

Air compressors 900 630

Electric chiller 280 196

Overhead cleaner (4.5 kW each) 49.5 45

Yarn dyeing plant 540 400

Precision package winder 120 90

Hydro extractor 90 70

Radio frequency dryer 480 336

Cone to cone re-winders 75 60

Inspection / folding machine 30 24

Boiler 120 90

Cooling tower 48 34

Water treatment plant 180 126

58
 Table 4.8: Electric Load

Connected Load Average Load

Effluent treatment plant 240 168

Sizing & De-sizing Machine 63 55

Scouring & bleaching Machine 132 120

Mercerizing machine 100 90

Stenter Machine 175 155

Sanforizing Machine 50 45

Brushing & Emerizing Machine 60 54

Pumps 150 105

Lights (400 watts each) 60 60

Exterior security lights 18 18

Tube lights 60 60

Total ( in kW-hour/hour) 4835 3639

Three 1600 ekW or 2000 kVA diesel generators or three 1555 ekW or 1944 kVA gas
generators would be used which shall roughly operate at 83~87%. All the generator
sets will be synchronized with one another.

4.11.2 Steam Requirement

For sizing machine, yarn dyeing and finishing range 6000 kg/hr steam is needed.

59
4.11.3 Water

It will be required to prepare size chemicals, make-up evaporation loss at the cooling
tower, feed the air washer of AHU, make-up chilled water deficiency, prepare dyes
and chemicals solution for yarn dyeing and to produce steam. Water required will be
provided from the projects own deep tube well.

4.12 Operative Life and Implementation Schedule

4.12.1 Operative Life

Being set up with all brand new machinery, the project expects to run for an
uninterrupted time of 15 years before any major overhaul is imposed. The
depreciation has been calculated at 7.5% (considering life of machines to be more
than thirteen years).

4.12.2 Implementation Schedule

Based upon common experience, it has been estimated that it would take about 5~6
months to complete erection of machines and commission them. Then, it would take
almost 6 months more for weaving and yarn dyeing each to run trials and achieve full
swing operational ability without alarming quantities of wastages.

60
 CHAPTER 5

FINANCIAL APPRAISAL

5.1 Introduction

Financial appraisal is a method used to evaluate the viability of a proposed project by

assessing the value of net cash flows that result from its implementation. Financial
appraisals differ from economic appraisals in the scope of their investigation, the
range of impacts analyzed and the methodology used. A financial appraisal essentially
views investment decisions from the perspective of the organization undertaking the
investment. It therefore measures only the direct effects on the cash flow of the
organization of an investment decision.

By contrast, an economic appraisal considers not only the impact of a project on the
organization sponsoring the project, but also considers the external benefits and costs
of the project for other government agencies, private sector enterprises and
individuals-regardless of whether or not such impacts are matched by monetary
payments.

Financial appraisals also differ from economic appraisals in that:

market prices and valuations are used in assessing benefits and costs, instead
of measures such as willingness to pay and opportunity cost
the discount rate used represents the weighted average cost of debt and equity
capital, rather than the estimated social opportunity cost of capital; and
the discount rate and the cash flows to which it is applied are usually specified
on a nominal basis as the cost of debt and cost of equity are observed only in
nominal terms.

61
5.1.1 Cash Flow

Cash flow is a revenue or expenses stream that changes a cash account over a given
period. Cash inflows usually arise from one of the three activities- financing,
operations or investing, though they also occur as a result of donations or gifts in the
case of personal finance. Cash out flows result from expenses or investments. This
holds true for both business and personal finance. An accounting statement, the
statement of cash flows that shows the amount of cash generated and used by a
company in a given period, calculated by adding noncash charges (such as
depreciation) to net income after taxes. Cash flow can be attributed to a specific
project or to a business as a whole. Cash flow can be used indication of companys
financial strength.

In business as in personal finance, cash flows are essential to solvency. They can be
presented as a record of something that has happened in past, such as the sale of a
particular product, or forecasted into the future, representing what a business or a
person expects to take in and to spend. Cash flow is crucial to an entitys survival.
Having ample of cash on hand will ensure that creditors, employees and others can be
paid on time. If a business or person does not have enough cash to support its
operations, it is said to be a gauge financial performance often use the statement of a
businesss cash flows. Companies with ample of cash on hand are able to invest the
cash back into the business in order to generate more cah and profit.

Net Cash Flow (NSF) = Cash Inflow Cash Outflow--------------------------------- (5.1)

5.1.2 Discount Rate

Discount rate is the interest rate that an eligible depository institute is charged to
borrow short- term funds directly from a Federal Reserve Bank. The interest rate used
in determining the present value of future cash flows. This type of borrowing from the
Fed is fairly limited. Institutions will often seek other means of meeting short term
liquidity needs. The federal funds discount rate is one of two interest rates the Fed
sets, the other being the overnight lending rate, or the Federal funds rate.

62
5.1.3 Profitability Index

Profitability Index is an index that attempts to identify the relationship between the
costs and benefits of a proposed project through the use of a ratio calculated as:

Profitability Index = ------------------------------------- (5.2)

A ratio of 1.0 is logically the lowest acceptable measure on the index. Any value less
than 1.0 would indicate that the projects PV is less than initial investment. As values
on the profitability index increase, so does the financial attractiveness of the proposed
project.

5.1.4 Pay Back Period

Pay Back Period is the length of time required to recover the cost of an investment.
Calculated as:

Pay Back Period= -------------------------------- ( 5.3)

All other things being equal, the better investment is the one with the shorter payback
period. There are two main problems with the payback period method:

It ignores benefits that occur after payback period and therefore does not
measure profitability.
It ignores the time value of money.

Because of these reasons, other methods of capital budgeting like net present value,
internal rate of return are generally preferred.

63
5.1.5 Discounted Pay Back Period

Here the time value of money is considered. In this method, an appropriate interest
rate is chosen representing the minimum acceptable rate of return (MARR). The
annual cash flows to the project during the estimated life are discounted at the
designated interest rate to permit computation of an average annual figure for profit
plus depreciation which reflects the time value of money. The time to recover the
fixed capital investment plus compounded interest on the total capital investment
during the estimated life by means of the average annual cash flow is the payout
period including interest or discounted payback period.

5.1.6 Internal Rate of Return (IRR)

The discount rate often used in capital budgeting that makes the net present value of
all cash flows from a particular project equal to zero. Generally speaking, the higher a
project's internal rate of return, the more desirable it is to undertake the project. As
such, IRR can be used to rank several prospective projects a firm is considering.
Assuming all other factors are equal among the various projects, the project with the
highest IRR would probably be considered the best and undertaken first.

Internal Rate of Return provides a simple hurdle rate whereby any project should be
avoided if the cost of capital exceeds this rate. Usually a financial calculator has to be
used to calculate this IRR, though it can also be mathematically calculated using the
following formula:

-------------- (5.4)

In the above equation, CF is the Cash Flow generated in specific period. IRR denoted
by r is to be calculated by trial and error method.

5.1.7 Net Present Value (NPV)

64
The difference between the present value of cash inflows and the present value of
cash outflows. NPV is used in capital budgeting to analyze the profitability of an
investment or project.
NPV analysis is sensitive to the reliability of future cash inflows that an investment or
project will yield. The project is feasible when NPV is positive.

Formula:

5.1.8 Benefit Cost Ratio (BCR)

It is the ratio of present worth of benefit stream to present worth of cost stream. i. e:

BCR= ---------------------------------- (5.5)

The investment is said to be profitable when the BCR is greater than 1.

5.2 Criteria Fixation

5.2.1 Assumption

Following assumptions have been abided by:

Costs of raw materials and selling prices of finished goods have been assumed
at current average prices.

Raw materials and output prices will remain constant throughout the projects
years of operations. This assumption implied that any increase in output
prices will be offset by similar increase in input prices.

Wages and salaries have been increased @ of 5% per annum.

65
 Stores and Spares costs have been considered as ratios to the price of Imported
Machinery including duty and other charges.

Year-1 Year2 Year3 Year4 Year5 Year-6 Year-7 Year-8

0.0% 0.0% 0.0% 0.3% 0.6% 0.9% 1.2% 1.5%

Repair and Maintenance costs have been assumed as ratios to the costs of Imported
and Local Machinery, Major and Auxiliary Civil Construction Works.

Year-1 Year2 Year3 Year4 Year5 Year-6 Year-7 Year-8

0.0% 0.0% 0.25% 0.50% 0.75% 1.00% 1.25% 1.50%

Repair and maintenance for Furniture, Office Equipment and Vehicles has been
considered as 5% per annum.

Insurance and Taxes: At an annual rate of 0.25% of the total Project Cost less
expenses incurred from Land, Preliminary & Pre-operating expenses and
IDCP. It has been considered to be effective from start of moratorium period.

Depreciation: At an annual rate of 0.40% of the total Major and Auxiliary

Civil Works Cost (including contingency provisions). And At an annual rate
of 7.50% of the total Imported and Local Machinery Cost (including Duty &
charges, Erection & installation expenses and Contingency provisions).
Depreciations for both Civil Construction Costs and Machinery Costs have
been considered to be effective from the start of moratorium period.
Similarly, depreciation for Furniture, Office Equipment and Vehicles has been
considered as 20% per annum (p.a.).

Interest Rate: Interest rate of bank has been assumed 13%.

Discount rate has been considered 15%, otherwise not specified.

Interest during Construction Period: Six months from the time of

disbursement followed by a year of moratorium. Interest incurred in
moratorium period will be serviced within that year.

Amortization of Expenses: Preliminary and pre-operating expenses incurred

during implementation and trial running has been amortized at 20% p.a.

5.2.2 Exchange Rates

66
 1 U.S. $ = 75.00 Taka
1 Euro () = 104.00 Taka
1 Swiss Franc (CHF) = 84.2 Taka

5.2.3 Project Finance

It is assumed that, this is a private project owned by some share holders (owners) and
financed by the owners and bank loan. The major (90%) portion of the imported
machinery and a portion (13%) of civil work assumed to be financed by the bank in
form of debt (Table 5.2). The rest will be borne by the owners in form of equity. Here
equity is found 39.74% and bank debt is 60.26% for the project run by gas (Table
5.2.1). And equity is found 40.21% and bank debt is 59.79% for the project run by
fuel oil (Table 5.2.2).

5.2.4 Moratorium Period

A grace period (Moratorium) is offered to the beneficiary for stabilizing the business
activity financed under bank or financial institutions loaning. During this period, it is
expected that the turnover of the business would gradually increase to a sustainable
level when the business is able to generate sufficient surplus, for repayment of the
loan. During the moratorium period the beneficiary is required to repay only the
interest on the credit availed and the recovery of principal along with the interest
begins after the expiry of moratorium period. The moratorium period depends on the
nature of the scheme and thus varies from scheme to scheme usually of 6-12 months.
Here moratorium period has been considered one year.

5.3 Financial Appraisal

IRR and NPV have been shown on Table 5.17.1 and Table 5.17.2

Cost Benefit Analysis has been shown on Table 5.18.1 and Table 5.18.2

Discounted Pay Back period has been shown on Table 5.19.1 and Table 5.19.2

67
 Table 5.1.1: Cost of the Project (Natural Gas)

(Fig in Tk. '000)

Currency
SER COST COMPONENT Total
Local Foreign

1. Land (25 Bigha) 250,000 250,000

2. Land Development 20,000 20,000
3. Major Civil Works 289,490 289,490
4. Other Civil Works 41,614 41,614
5. Imported Machinery (C & F value) 1,977,894 1,977,894
6. Duty and Other Charges
@ 4.75% of Imported Machinery Cost 93,950 93,950
-
7. Local Machinery Cost 57,120 57,120
8. Internal Freight 2,250 2,250
9. Office Stup and IT
a. Furniture Fixture, Equipments and Vehicl 14,750 14,750
b. IT (ERP Software) 50,000 50,000
10. Erection and Installation Costs
a. Foundation works & parts 34,613 34,613
b. Expenses for erectors 2,775 2,775

11. Security Deposite for Gas 2,949 2,949

12. Development Costs
a. Premilinary & Pre-Operating Cost 30,610 30,610
b. Interest During Construction Period 89,343 89,343

13. Contingencies
a. For Imported Machinery (2.5%) 49,447 49,447
b. For Civil Construction (3%) 9,933 9,933

Total in Tk. '000 989,397 2,027,342 3,016,739

The exchange rate of foreign currency is assumed as follows:

Taka
1 Euro 104
1 U. S. $ 75
1 CHF 84.2

68
 Table 5.1.2: Cost of the Project (Fuel Oil)

(Fig in Tk. '000)

Currency
SER COST COMPONENT Total
Local Foreign

1. Land (25 Bigha) 250,000 250,000

2. Land Development 20,000 20,000
3. Major Civil Works 289,490 289,490
4. Other Civil Works 41,614 41,614
5. Imported Machinery (C & F value) 1,980,144 1,980,144
6. Duty and Other Charges
@ 4.75% of Imported Machinery Cost 94,057 94,057
-
7. Local Machinery Cost 57,120 57,120
8. Internal Freight 2,250 2,250
9. Office Setup and IT
a. Furniture Fixture, Equipments and Vehicle 14,750 14,750
b. IT (ERP software) 50,000 50,000
10. Erection and Installation Costs
a. Foundation works & parts 34,653 34,653
b. Expenses for erectors 2,775 2,775

11. Security Deposite for Gas 27,434 27,434

12. Development Costs
a. Premilinary & Pre-Operating Cost 30,610 30,610
b. Interest During Construction Period 89,459 89,459

13. Contingencies
a. For Imported Machinery (2.5%) 49,504 49,504
b. For Civil Construction (3%) 9,933 9,933

Total in Tk. '000 1,014,145 2,029,648 3,043,793

The exchange rate of foreign currency is assumed as follows:

Taka
1 Euro 104
1 U. S. $ 75
1 CHF 84.2

69
 Table 5.2.1: Means of Finance (Natural Gas)
(Fig in Tk. '000)

SER COST COMPONENT Equity Bank Total

1. Land (25 Bigha) 250,000 - 250,000

2. Land Development 20,000 - 20,000
3. Major Civil Works -- 251,856 37,634 289,490
Factory Premises & Other Buildings
4. Auxiliary Civil Works 41,614 - 41,614
5. Imported Machinery (C & F value) 197,789 1,780,105 1,977,894
6. Duty and Other Charges
@ 4.75% of Imported Machinery Cost 93,950 93,950

7. Local Machinery Cost 57,120 - 57,120

8. Internal Freight 2,250 - 2,250
9. Office Setup and IT
a. Furniture Fixture, Equipments and Vehicle 14,750 - 14,750
b. IT (ERP software) 50,000 50,000
10 Erection and Installation Costs
a. Foundation works & parts 34,613 - 34,613
b. Expenses for erectors 2,775 - 2,775

11. Security Deposite for Gas 2,949 - 2,949

12. Development Costs
a. Premilinary & Pre-Operating Cost 30,610 - 30,610
b. Interest During Construction Period 89,343 - 89,343

13. Contingencies
a. For Imported Machinery - 2.5% 49,447 - 49,447
b. For Civil Construction - 3.0% 9,933 - 9,933

Total in Tk. '000 1,199,000 1,817,739 3,016,739

Total Equity in Tk. 000 1,199,000

Total Bank Debt in Tk. 000 1,817,739
Total Project Cost 3,016,739
Equity% 39.74%
Debt% 60.26%

70
Table 5.2.2: Means of Finance (Fuel Oil)
(Fig in Tk. '000)

SER COST COMPONENT Equity Bank Total

1. Land (25 Bigha) 250,000 - 250,000

2. Land Development 20,000 - 20,000
3. Major Civil Works -- 251,856 37,634 289,490
Factory Premises & Other Buildings
4. Auxiliary Civil Works 41,614 - 41,614
5. Imported Machinery (C & F value) 198,014 1,782,130 1,980,144
6. Duty and Other Charges
@ 4.75% of Imported Machinery Cost 94,057 94,057

7. Local Machinery Cost 57,120 - 57,120

8. Internal Freight 2,250 - 2,250
9. Office Setup and IT
a. Furniture Fixture, Equipments and Vehicle 14,750 14,750
b. IT (ERP software) 50,000 - 50,000
10 Erection and Installation Costs
a. Foundation works & parts 34,653 - 34,653
b. Expenses for erectors 2,775 - 2,775

11. Security Deposite for Gas 27,434 - 27,434

12. Development Costs
a. Premilinary & Pre-Operating Cost 30,610 - 30,610
b. Interest During Construction Period 89,459 - 89,459

13. Contingencies
a. For Imported Machinery - 2.5% 49,504 - 49,504
b. For Civil Construction - 3.0% 9,933 - 9,933

Total in Tk. '000 1,224,030 1,819,764 3,043,793

Total Equity in Tk. 000 1,224,030

Total Bank Debt in Tk. 000 1,819,764
Total Project Cost 3,043,793
Equity% 40.21%
Debt% 59.79%

71
 Table 5.3.1: Working Capital Assessment (Natural Gas)

Tied -up Year-1 Year - 2 Year - 3 Year - 4 Year - 5

Particulars
Period

Local Raw Materials (mostly Yarn & few Chemicals) 21 Days 30,382 46,206 48,738 51,270 53,169
Imported Raw Materials (Dye stuff & Chemicals) 75 Days 140,256 213,306 224,994 236,682 245,448
Work - In - Process (at cost) 7 Days 32,680 47,036 49,655 52,272 54,325
Finished goods inventory (at cost) 10 Days 46,686 67,195 70,935 74,675 77,607
Bill Receivable (at cost) 20 Days 93,372 134,390 141,871 149,349 155,214
Store - Spares and Repair - Maintenance 60 Days - 1,183 3,609 6,035 8,462
Less Depriciation Included in WIP & IFG (10,190) (10,190) (10,190) (10,190) (10,190)
Cash in Hand L.S 215 330 450.0 600 870
Working capital requirement 333,401 499,456 530,062 560,693 584,904

Owner's Equity (20%) 20% 66,680 99,891 106,012 112,139 116,981

Bank Debt (80%) 266,720 399,565 424,049 448,554 467,923
Interest on Bank Debt @ 13% per annum 13% 34,674 51,943 55,126 58,312 60,830
LC Commission for Imported Items @ 0.75% 0.75% 1,052 1,600 1,687 1,775 1,841

72
 Table 5.3.2: Working Capital Assessment (Fuel Oil)

Tied -up Year-1 Year - 2 Year - 3 Year - 4 Year - 5 Year-6 Year-7 Year-8
Particulars
Period

Local Raw Materials (mostly Yarn & few Chemicals) 21 Days 30,382 46,206 48,738 51,270 53,169 55,068 56,334 57,599
Imported Raw Materials (Dye stuff & Chemicals) 75 Days 140,256 213,306 224,994 236,682 245,448 254,214 260,058 265,902
Work - In - Process (at cost) 7 Days 37,194 53,723 56,573 59,569 61,909 64,178 65,822 67,510
Finished goods inventory (at cost) 10 Days 53,134 76,747 80,819 85,098 88,442 91,683 94,032 96,442
Bill Receivable (at cost) 20 Days 106,268 153,494 161,637 170,197 176,884 183,366 188,064 192,885
Store - Spares and Repair - Maintenance 60 Days - - 1,184 3,613 6,042 8,470 10,899 13,328
Less Depriciation Included in WIP & IFG (10,201) (10,201) (10,201) (10,201) (10,201) (10,201) (10,201) (10,201)
Cash in Hand L.S 215 330 450 600 870 950 1100 1300
Working capital requirement 357,249 533,605 564,194 596,828 622,563 647,728 666,108 684,765

Owner's Equity (20%) ### 71,450 106,721 112,839 119,366 124,513 129,546 133,222 136,953
Bank Debt (80%) 285,799 426,884 451,355 477,462 498,050 518,182 532,886 547,812
Interest on Bank Debt @ 13% per annum ### 37,154 55,495 58,676 62,070 64,747 67,364 69,275 71,216
LC Commission for Imported Items @ 0.75% ### 1,052 1,600 1,687 1,775 1,841 1,907 1,950 1,994

73
 Table 5.4.1: Planned Production & Estimated Sales p.a. (Natural Gas)

Fabric Types A B C D E Total

Production at --- First Year ( In yards) 2,304,000 2,700,000 1,061,053 3,200,000 1,234,286 10,499,338
Second Year " 3,504,000 4,106,250 1,613,684 4,866,667 1,877,143 15,967,744
Third Year " 3,696,000 4,331,250 1,702,105 5,133,333 1,980,000 16,842,689
Fourth Year " 3,888,000 4,556,250 1,790,526 5,400,000 2,082,857 17,717,633
Fifth Year " 4,032,000 4,725,000 1,856,842 5,600,000 2,160,000 18,373,842
Rate of fabric (in $ per yard) 2.30 2.70 2.50 2.20 2.00
Estimate Sales at --First Year ( In Taka'000) 392,141 539,460 196,295 520,960 182,674 1,831,530
Second Year " 596,381 820,429 298,532 792,293 277,817 2,785,452
Third Year " 629,059 865,384 314,889 835,707 293,040 2,938,079
Fourth Year " 661,738 910,339 331,247 879,120 308,263 3,090,707
Fifth Year " 686,246 944,055 343,516 911,680 319,680 3,205,177

74
 Table 5.4.2: Planned Production & Estimated Sales p.a. (Fuel Oil)

Fabric Types A B C D E Total

Production at --- First Year( In yards) 2,304,000 2,700,000 1,061,053 3,200,000 1,234,286 10,499,338
Second Year " 3,504,000 4,106,250 1,613,684 4,866,667 1,877,143 15,967,744
Third Year " 3,696,000 4,331,250 1,702,105 5,133,333 1,980,000 16,842,689
Fourth Year " 3,888,000 4,556,250 1,790,526 5,400,000 2,082,857 17,717,633
Fifth Year " 4,032,000 4,725,000 1,856,842 5,600,000 2,160,000 18,373,842
Sixth Year 4,128,000 4,837,500 1,901,053 5,733,333 2,211,429 18,811,315
Seventh Year 4,224,000 4,950,000 1,945,263 5,866,667 2,262,857 19,248,787
Eighth Year 4,320,000 5,062,500 1,989,474 6,000,000 2,314,286 19,686,259
Rate of fabric (in $ per yard) 2.30 2.70 2.50 2.20 2.00
Estimate Sales at --First Year ( In Taka'000) 392,141 539,460 196,295 520,960 182,674 1,831,530
Second Year " 596,381 820,429 298,532 792,293 277,817 2,785,452
Third Year " 629,059 865,384 314,889 835,707 293,040 2,938,079
Fourth Year " 661,738 910,339 331,247 879,120 308,263 3,090,707
Fifth Year " 686,246 944,055 343,516 911,680 319,680 3,205,177
Sixth Year 702,586 966,533 351,695 933,387 327,291 3,281,491
Seventh Year 718,925 989,010 359,874 955,093 334,903 3,357,805
Eighth Year 735,264 1,011,488 368,053 976,800 342,514 3,434,118

75
 Table 5.5.1: Raw Material Costs at 100% Capacity Utilizations (Natural Gas)

(Fig in Tk. ' 000)

a. Yarn 1,519,017
b. Warp Yarn Sizing 48,534
d. Dyes & Chemicals for Yarn Dyeing 505,478
e. Fabric Finishing 306,231

At different capacity utilizations, the costs are:

Capacity utilization (%) Year-1 Year - 2 Year - 3 Year - 4 Year - 5

48.0% 73.0% 77.0% 81.0% 84.0%

Year-1 Year - 2 Year - 3 Year - 4 Year - 5

a. Yarn 729,128 1,108,882 1,169,643 1,230,404 1,275,974

b. Warp Yarn Sizing 23,296 35,430 37,371 39,313 40,769
c. Dyes & Chemicals - Yarn Dyeing 242,629 368,999 389,218 409,437 424,601
d. Fabric Finishing 146,991 223,548 235,798 248,047 257,234

76
 Table 5.5.2: Raw Material Costs at 100% Capacity Utilizations (Fuel Oil)

(Fig in Tk. ' 000)

a. Yarn 1,519,017
b. Warp Yarn Sizing 48,534
d. Dyes & Chemicals for Yarn Dyeing 505,478
e. Fabric Finishing 306,231

At different capacity utilizations, the costs are:

Capacity utilization (%) Year-1 Year - 2 Year - 3 Year - 4 Year - 5 Year-6 Year-7 Year-8
48.0% 73.0% 77.0% 81.0% 84.0% 86.0% 88.0% 90.0%

Year-1 Year - 2 Year - 3 Year - 4 Year - 5 Year-6 Year-7 Year-8

a. Yarn 729,128 1,108,882 1,169,643 1,230,404 1,275,974 1,306,355 1,336,735 1,367,115

b. Warp Yarn Sizing 23,296 35,430 37,371 39,313 40,769 41,739 42,710 43,681
c. Dyes & Chemicals - Yarn Dyeing 242,629 368,999 389,218 409,437 424,601 434,711 444,821 454,930
d. Fabric Finishing 146,991 223,548 235,798 248,047 257,234 263,358 269,483 275,608

77
 Table 5.6.1: Cost of Goods Sold (Natural Gas)
(Fig in Tk. ' 000)

Particulars Year-1 Year - 2 Year - 3 Year - 4 Year - 5

Raw materials, Yarn dyeing & Fininshing Cost 1,142,045 1,736,860 1,832,030 1,927,200 1,998,578
Factory wages and Salary 46,217 46,438 48,760 51,198 53,758
Stores and Spares - - 6,216 12,431 18,647
Repair and Maintenance - 5,915 11,831 17,746 23,661
Insurance and Taxs 6,617 6,617 6,617 6,617 6,617
Depreciation 179,826 179,826 179,826 179,826 179,826
Utilities 24,871 38,992 41,281 43,520 45,125
Other Overheads 1,000 1,200 1,500 1,700 2,000

Total Manufacturing Cost 1,400,576 2,015,848 2,128,060 2,240,239 2,328,212

Inventory Adjustments

a) Opening Stock of Work-in-process ( 7 days) : - 32,680 47,799 50,770 53,457

b) Closing Stock of Work-in-process ( 7 days) : 32,680 47,799 50,770 53,457 55,572
c) Opening Stock of Finished Goods ( 10 days) : - 45,597 68,211 73,110 77,022
d) Closing Stock of Finished Goods ( 10 days) : 45,597 68,211 73,110 77,022 80,104

Total Inventory Adjustment (a-b+c-d) : (78,277) (37,733) (7,870) (6,599) (5,197)

Cost of Goods Sold 1,322,300 1,978,115 2,120,190 2,233,640 2,323,015

78
 Table 5.6.2: Cost of Goods Sold (Fuel Oil)
(Fig in Tk. ' 000)

Particulars Year-1 Year - 2 Year - 3 Year - 4 Year - 5 Year-6 Year-7 Year-8

Raw materials, Yarn dyeing & Fininshing Cost 1,142,045 1,736,860 1,832,030 1,927,200 1,998,578 2,046,163 2,093,748 2,141,334
Factory wages and Salary 46,217 46,438 48,760 51,198 53,758 56,446 59,268 62,231
Stores and Spares - - - 6,223 12,445 18,668 24,890 31,113
Repair and Maintenance - 5,921 11,842 17,763 23,684 29,605 35,526
Insurance and Taxs 6,684 6,684 6,684 6,684 6,684 6,684 6,684 6,684
Depreciation 180,010 180,010 180,010 180,010 180,010 180,010 180,010 180,010
Utilities 218,069 331,214 349,653 368,092 382,021 392,841 400,460 409,880
Other Overheads 1,000 1,200 1,500 1,700 2,000 2,200 2,500 2,700

Total Manufacturing Cost 1,594,026 2,302,406 2,424,558 2,552,949 2,653,260 2,726,696 2,797,167 2,869,478

Inventory Adjustments

a) Opening Stock of Work-in-process ( 7 days) - 37,194 54,591 57,847 60,919 63,331 65,101 66,786
b) Closing Stock of Work-in-process ( 7 days) 37,194 54,591 57,847 60,919 63,331 65,101 66,786 68,513
c) Opening Stock of Finished Goods ( 10 days) - 51,894 77,897 83,307 87,773 91,287 93,874 96,312
d) Closing Stock of Finished Goods ( 10 days) 51,894 77,897 83,307 87,773 91,287 93,874 96,312 98,802

Total Inventory Adjustment (a-b+c-d) : (89,088) (43,399) (8,666) (7,538) (5,927) (4,356) (4,124) (4,217)

Cost of Goods Sold 1,504,937 2,259,007 2,415,892 2,545,411 2,647,333 2,722,340 2,793,043 2,865,261

79
 Table 5.7.1: Factory Wages and Salaries (Natural Gas)

(Fig in Tk. ' 000)

Operational Management Team Year-1 Year - 2 Year - 3 Year - 4 Year - 5

Basic Salary 11,460 12,033 12,635 13,266 13,930

Annual Increment 5% 573 602 632 663 696
Yearly Bonuses 955 1,003 1,053 1,106 1,161
Others 318 334 351 369 387
Sub Total 13,306 13,370 14,039 14,740 15,477
People Related to Productivity

Basic Salary 28,344 29,761 31,249 32,812 34,452

Annual Increment 5% 1,417 1,488 1,562 1,641 1,723
Yearly Bonuses 2,362 2,480 2,604 2,734 2,871
Others 787 827 868 911 957
Sub Total 32,911 33,068 34,721 36,457 38,280
Total 46,217 46,438 48,760 51,198 53,758

Total 46,217 46,438 48,760 51,198 53,758

80
 Table 5.7.2: Factory Wages and Salaries (Fuel Oil)

(Fig in Tk. ' 000)

Operational Management Team Year-1 Year - 2 Year - 3 Year - 4 Year - 5 Year-6 Year-7 Year-8

Basic Salary 11,460 12,033 12,635 13,266 13,930 14,626 15,357 16,125
Annual Increment 5% 573 602 632 663 696 731 768 806
Yearly Bonuses 955 1,003 1,053 1,106 1,161 1,219 1,280 1,344
Others 318 334 351 369 387 406 427 448
Sub Total 13,306 13,370 14,039 14,740 15,477 16,251 17,064 17,917
People Related to Productivity

Basic Salary 28,344 29,761 31,249 32,812 34,452 36,175 37,984 39,883
Annual Increment 5% 1,417 1,488 1,562 1,641 1,723 1,809 1,899 1,994
Yearly Bonuses 2,362 2,480 2,604 2,734 2,871 3,015 3,165 3,324
Others 787 827 868 911 957 1,005 1,055 1,108
Sub Total 32,911 33,068 34,721 36,457 38,280 40,194 42,204 44,314
Total 46,217 46,438 48,760 51,198 53,758 56,446 59,268 62,231

Total 46,217 46,438 48,760 51,198 53,758 56,446 59,268 62,231

81
 Table 5.8.1: Power Requirement & Utility Costs (Natural Gas)

ELECTRICITY STEAM

Requirement (kW-hour) 3640 In Tons per day 144.00

Fuel Consumption 0.26 Fuel Consumption 79

3
(in m3 per kW-hour) (in m per Ton per hour)

Cost of Fuel (NATURAL GAS) 4.18 Cost of Fuel (NATURAL GAS) 5.86
(In Taka per m3) (In Taka per m3)

Cost of Fuel in Tk. per Hour Cost of Fuel in Tk. per Hour
3956 2778

Total Fuel Cost for Electricity & Steam at 100% Capacity:

Per Day Per Month Per Annum
(In Taka) 161,606 4,040,155 48,481,862

(Fig in Tk. ' 000)

At Different Capacity Utilizations:
Year-1 Year - 2 Year - 3 Year - 4 Year - 5
Fuel Cost 23,271 35,392 37,331 39,270 40,725

Maintenance Costs 1,600 3,600 3,950 4,250 4,400

Total Utility Cost 24,871 38,992 41,281 43,520 45,125

Year-1 Year - 2 Year - 3 Year - 4 Year - 5

Capacity utilization (%) 48% 73% 77% 81% 84%

82
 Table 5.8.2: Power Requirement & Utility Costs (Fuel Oil)

ELECTRICITY STEAM

Requirement (kW-hour) 3640 In Tons per day 144.00

Fuel Consumption 0.22 Fuel Consumption 72.65
(in Liter per kW-hour) (in Liter per Ton per hour)
Cost of Fuel (Disel) 51 Cost of Fuel (Furnace Oil) 50
(In Taka per Liter) (In Taka per Liter)
Cost of Fuel in Tk. per Hour Cost of Fuel in Tk. per Hour
40841 21795

Total Fuel Cost for Electricity & Steam at 100% Capacity:

Per Day Per Month Per Annum
(In Taka) 1,503,259 37,581,480 450,977,760

At Different Capacity Utilizations: (Fig in Tk. ' 000)

Year-1 Year - 2 Year - 3 Year - 4 Year - 5 Year-6 Year-7 Year-8
Fuel Cost 216,469 329,214 347,253 365,292 378,821 387,841 396,860 405,880

Maintenance Costs 1,600 2,000 2,400 2,800 3,200 5,000 3,600 4,000

Total Utility Cost 218,069 331,214 349,653 368,092 382,021 392,841 400,460 409,880

Year-1 Year - 2 Year - 3 Year - 4 Year - 5 Year-6 Year-7 Year-8

Capacity utilization (%) 48% 73% 77% 81% 84% 86% 88% 90%

83
 Table 5.9.1: General, Administrative & Selling Expenses (Natural Gas)

(Fig in Tk. ' 000)

Ser Description Year-1 Year - 2 Year - 3 Year - 4 Year - 5

1. Directors' Remuneration - 1,200 1,200 1,200 1,200

2. Administrative Salary 6,373 6,533 6,699 6,358 7,041
3. Postage, Telephone, Telex & Fax 230 240 250 260 270
4. Stationery & Printing 30 36 42 48 54
5. Travelling & Conveyance 115 120 125 130 135
6. Selling Expenses* 4,579 6,964 7,345 7,727 8,013
7. Depreciation: Furniture, Vehicles etc. 12,950 12,950 12,950 12,950 12,950
8. Amortization of Preliminary Expenses 3,061 6,122 6,122 6,122 6,122
9. Audit & Miscellaneous Expenses 25 30 35 40 45
10. Insurance Premium for Vehicles 180 180 180 180 180
11. Repair & Maintenance for Office Items
Vehicles (not required in moratorium) - 1,619 3,238 3,238 3,238
12. Head Office Rent 240 264 288 312 336
13. Other Administrative Expenses 150 166 186 206 220

Total 27,933 36,423 38,660 38,770 39,804

84
 Table 5.9.2: General, Administrative & Selling Expenses (Fuel Oil)

(Fig in Tk. ' 000)

Ser Description Year-1 Year - 2 Year - 3 Year - 4 Year - 5 Year-6 Year-7 Year-8

1. Directors' Remuneration - 1,200 1,200 1,200 1,200 1,200 1,200 1,200

2. Administrative Salary 6,373 6,533 6,697 6,356 7,039 7,215 7,395 7,580
3. Postage, Telephone, Telex & Fax 230 240 250 260 270 280 290 300
4. Stationery & Printing 30 36 42 48 54 60 66 72
5. Travelling & Conveyance 115 120 125 130 135 140 145 150
6. Selling Expenses* 4,579 6,964 7,345 7,727 8,013 8,204 8,395 8,585
7. Depreciation: Furniture, Vehicles etc. 1,844 1,844 1,844 1,844 1,844 1,844 1,844 1,844
8. Amortization of Preliminary Expenses 3,826 3,826 3,826 3,826 3,826 3,826 3,826 3,826
9. Audit & Miscellaneous Expenses 25 30 35 40 45 50 55 60
10. Insurance Premium for Vehicles 180 180 180 180 180 180 180 180
11. Repair & Maintenance for Office Items
Vehicles (not required in moratorium) - 1,250 2,500 2,500 2,500 2,500 2,500 2,500
12. Head Office Rent 240 264 288 312 336 360 384 408
13. Other Administrative Expenses 150 166 186 206 220 240 260 280

Total 17,592 22,652 24,518 24,629 25,662 26,099 26,540 26,985

85
 Table 5.10.1: Estimated Financial Expenses (Natural Gas)

(Fig in Tk. ' 000)

Ser Description Year-1 Year - 2 Year - 3 Year - 4 Year - 5

1. Interest on Term Loan - 214,997 187,114 155,426 119,414

2. Interest of Moratorium Period 118,153 - - - -
3. Installment of IDCP - 17,869 17,869 17,869 17,869
4. Interest on Working Capital Loan 34,674 51,943 55,126 58,312 60,830
5. LC Commission on Imported Items 1,052 1,600 1,687 1,775 1,841

Total 153,879 286,409 261,797 233,382 199,953

Table 5.10.2: Estimated Financial Expenses (Fuel Oil)

(Fig in Tk. ' 000)

Ser Description Year-1 Year - 2 Year - 3 Year - 4 Year - 5 Year-6 Year-7 Year-8

1. Interest on Term Loan - 110,887 201,724 171,967 138,148 99,714 56,035 9,806
2. Interest of Moratorium Period 236,569 - - - -
3. Installment of IDCP - 8,946 17,892 17,892 17,892 17,892 17,892 -
4. Interest on Working Capital Loan 37,154 55,495 58,676 62,070 64,747 66,689 68,600 70,541
5. LC Commission on Imported Items 1,052 1,600 1,687 1,775 1,841 1,885 1,929 1,972

Total 274,775 176,927 279,979 253,704 222,627 186,180 144,456 82,319

86
 Table 5.11.1: Projected Income Statement (Natural Gas)

(Fig in Tk. ' 000)

Description Year-1 Year - 2 Year - 3 Year - 4 Year - 5

Sales revenue 1,831,530 2,785,452 2,938,079 3,090,707 3,205,177

Cost of Good Sold 1,400,576 1,978,115 2,120,190 2,233,640 2,323,015

Gross Profit 430,954 807,337 817,889 857,067 882,163

Operating Expenses 27,933 36,423 38,660 38,770 39,804

Operating Profit 403,020 770,914 779,229 818,296 842,359

Financial Expenses 153,879 286,409 261,797 233,382 199,953

Net Profit before Tax 249,142 484,505 517,432 584,914 642,406

Tax Holiday

Tax Holiday Reserve - 15% - 72,676 77,615 87,737 96,361

Net Income 249,142 411,829 439,817 497,177 546,045

Dividends - - - - -

Retained Earnings 249,142 411,829 439,817 497,177 546,045

Cumulative Retained Earnings 249,142 660,971 1,100,788 1,597,965 2,144,010

Key Ratios:
Gross Profit to Sales 23.53% 28.98% 27.84% 27.73% 27.52%
Operating Profit to Sales 22.00% 27.68% 26.52% 26.48% 26.28%
87
 Table 5.11.2: Projected Income Statement (Fuel Oil)

(Fig in Tk. ' 000)

Description Year-1 Year - 2 Year - 3 Year - 4 Year - 5 Year-6 Year-7 Year-8

Sales revenue 1,831,530 2,785,452 2,938,079 3,090,707 3,205,177 3,281,491 3,357,805 3,434,118
Cost of Good Sold 1,594,026 2,259,007 2,415,892 2,545,411 2,647,333 2,722,340 2,793,043 2,865,261

Gross Profit 237,504 526,445 522,187 545,295 557,844 559,151 564,762 568,857
Operating Expenses 17,592 22,652 24,518 24,629 25,662 26,099 26,540 26,985

Operating Profit 219,912 503,792 497,669 520,666 532,182 533,053 538,222 541,872
Financial Expenses 274,775 176,927 279,979 253,704 222,627 186,180 144,456 82,319

Net Profit before Tax (54,863) 326,865 217,689 266,963 309,555 346,873 393,766 459,553

Tax Holiday

Tax Holiday Reserve - 15% - 49,030 32,653 40,044 46,433 52,031 59,065 68,933

Net Income (54,863) 277,835 185,036 226,918 263,121 294,842 334,701 390,620

Dividends - - - - - - - -

Retained Earnings (54,863) 277,835 185,036 226,918 263,121 294,842 334,701 390,620

Cumulative Retained Earnings (54,863) 222,972 408,008 634,926 898,048 1,192,890 1,527,591 1,918,211

Key Ratios:
Gross Profit to Sales 12.97% 18.90% 17.77% 17.64% 17.40% 17.04% 16.82% 16.56%
Operating Profit to Sales 12.01% 18.09% 16.94% 16.85% 16.60% 16.24% 16.03% 15.78%

88
 Table 5.12.1: Projected Balance Sheet (Natural Gas)

(Fig in Tk. ' 000)

Particulars Year-1 Year-2 Year-3 Year-4 Year-5

Property And Assets:

a. Current Assets:

Cash & Bank Balances 57,317 566,272 982,619 1,429,850 1,887,368

Accounts Receivables 93,372 134,390 141,871 149,349 155,214
Raw Materials Inventory 170,638 259,512 273,732 287,952 298,616
Goods & Spares Inventory 79,366 115,414 124,199 132,982 140,394
Other Current Assets (10,190) (10,190) (10,190) (10,190) (10,190)

Total Current Assets 390,503 1,065,398 1,512,230 1,989,943 2,471,402

b. Fixed Assets:

Fixed Assets 3,016,739 2,820,902 2,622,003 2,423,105 2,224,206

Preliminary Expenses
Less Depreciation & Amortization 195,837 198,898 198,898 198,898 198,898

Net Fixed Assets - 2,820,902 2,622,003 2,423,105 2,224,206 2,025,308

Total Assets - 3,211,404 3,687,401 3,935,335 4,214,149 4,496,710

89
 Table 5.12.1: Projected Balance Sheet (Natural Gas)

(Fig in Tk. ' 000)

Particulars Year-1 Year-2 Year-3 Year-4 Year-5

Equity & Liabilities

a. Current Liabilities:

*Accounts Payable 57,102 86,843 91,601 96,360 99,929

Dividend Payable - - - - -
Tax Payable - - - - -
Bank Borrowings (Short Term) 266,720 399,565 424,049 448,554 467,923

Total Current Liabilities - 323,823 486,408 515,651 544,914 567,852

b. Long Term Liabilities

Term loan 1,817,739 1,629,510 1,411,710 1,164,186 882,880

Total Long Term Liabilities - 1,817,739 1,629,510 1,411,710 1,164,186 882,880

c. Equity:

Paid up Capital 1,199,000 1,199,000 1,199,000 1,199,000 1,199,000

Equity of Working Capital 66,680 99,891 106,012 112,139 116,981
Tax Holiday Reserve - 72,676 77,615 87,737 96,361
Cumulative Retained Earnings 249,142 660,971 1,100,788 1,597,965 2,144,010

Total Equity - 1,514,822 2,032,538 2,483,416 2,996,841 3,556,352

Total Equity & Liabilities - 3,656,384 4,148,456 4,410,777 4,705,942 5,007,084

*15 days Raw Materials

90
 Table 5.12.2: Projected Balance Sheet (Fuel Oil)

(Fig in Tk. ' 000)

Particulars Year-1 Year-2 Year-3 Year-4 Year-5 Year-6 Year-7 Year-8

Property And Assets:

a. Current Assets:

Cash & Bank Balances 188,135 631,541 772,719 949,819 1,127,233 1,295,762 1,461,978 1,850,649
Accounts Receivables 106,268 153,494 161,637 170,197 176,884 181,780 186,478 191,299
Raw Materials Inventory 170,638 259,512 273,732 287,952 298,616 305,726 312,836 319,946
Goods & Spares Inventory 90,328 130,470 138,576 148,280 156,393 162,983 169,405 175,931
Other Current Assets (10,201) (10,201) (10,201) (10,201) (10,201) (10,201) (10,201) (10,201)

Total Current Assets 545,169 1,164,815 1,336,463 1,546,047 1,748,926 1,936,051 2,120,497 2,527,625

b. Fixed Assets:

Fixed Assets 3,043,793 2,858,113 2,672,432 2,486,752 2,301,071 2,115,391 1,929,711 1,744,030
Less Depreciation &
Amortization 185,680 185,680 185,680 185,680 185,680 185,680 185,680 185,680

Net Fixed Assets 2,858,113 2,672,432 2,486,752 2,301,071 2,115,391 1,929,711 1,744,030 1,558,350

Total Assets 3,403,281 3,837,248 3,823,215 3,847,118 3,864,317 3,865,761 3,864,527 4,085,975

91
 Table 5.12.2: Projected Balance Sheet (Fuel Oil)

Particulars Year-1 Year-2 Year-3 Year-4 Year-5 Year-6 Year-7 Year-8

Equity & Liabilities

a. Current Liabilities:
*Accounts Payable 57,102 86,843 91,601 96,360 99,929 102,308 104,687 107,067
Dividend Payable - - - - - - - -
Tax Payable - - - - - - - -
Bank Borrowings (Short Term) 285,799 426,884 451,355 477,462 498,050 512,991 527,695 542,621
Total Current Liabilities 342,901 513,727 542,957 573,822 597,979 615,299 632,382 649,687

b. Long Term Liabilities

Term loan 1,819,764 1,631,309 1,413,269 1,165,471 883,855 563,805 200,076 (0)
Total Long Term Liabilities 1,819,764 1,631,309 1,413,269 1,165,471 883,855 563,805 200,076 (0)

c. Equity:
Paid up Capital 1,224,030 1,224,030 1,224,030 1,224,030 1,224,030 1,224,030 1,224,030 1,224,030
Equity of Working Capital 71,450 106,721 112,839 119,366 124,513 128,248 131,924 135,655
Tax Holiday Reserve - 49,030 32,653 40,044 46,433 52,031 59,065 68,933
Cumulative Retained Earnings (54,863) 222,972 408,008 634,926 898,048 1,192,890 1,527,591 1,918,211
Total Equity 1,240,616 1,602,753 1,777,530 2,018,366 2,293,023 2,597,198 2,942,609 3,346,829

Total Equity & Liabilities 3,403,281 3,747,788 3,733,756 3,757,659 3,774,858 3,776,302 3,775,068 3,996,516
*15 days Raw Materials

92
 Table 5.13.1: Cash Flow Statement (Natural Gas)
(Fig in Tk. ' 000)
Particulars Year-1 Year - 2 Year - 3 Year - 4 Year - 5

Cash From Operations

Net Profit before Tax 249,142 484,505 517,432 584,914 642,406
Add - Depreciation & Amortization - 198,898 198,898 198,898 198,898
Cash from Operations - 683,403 716,331 783,812 841,304

Cash Provided (Used) by Operating Activities

Accounts Receivables (93,372) (41,018) (7,481) (7,479) (5,865)
Raw Material and Inventory (239,814) (124,922) (23,005) (23,003) (18,076)
Accounts Payables 57,102 29,741 4,759 4,759 3,569
Dividend Paid - - - - -
Tax Holiday Reserves - (72,676) (77,615) (87,737)
Net Cash from Operations (276,083) (136,200) (98,403) (103,338) (108,109)

Investment increases (decreases)

Investment in Fixed Assets (3,016,739) -
Net cash from Investments - (3,016,739) -

Financing Transactions Increases (decreases)

Short Term Borrowing 266,720 132,844 24,484 24,505 19,369
Term Loan - 1,817,739
Term Loan Payment (204,304) (232,187) (263,875) (299,887)
Capital Investment - 1,199,000 - - -
Capital in Stock 66,680 33,211 6,121 6,126 4,842
Net Cash from financing - 3,350,140 (38,249) (201,581) (233,243) (275,676)

Net increase (decrease) in cash - 57,317 508,955 416,347 447,231 457,518

Cash at beginning of period - - 57,317 566,272 982,619 1,429,850

Cash at end of period - 57,317 566,272 982,619 1,429,850 1,887,368

93
 Table 5.13.2: Cash Flow Statement (Fuel Oil)
(Fig in Tk. ' 000)
Particulars Year-1 Year - 2 Year - 3 Year - 4 Year - 5 Year-6 Year-7 Year-8

Cash From Operations

Net Profit before Tax (54,863) 326,865 217,689 266,963 309,555 346,873 393,766 459,553
Depreciation & Amortization 185,680 185,680 185,680 185,680 185,680 185,680 185,680 185,680
Cash from Operations 130,817 512,545 403,370 452,643 495,235 532,553 579,446 645,234

Cash Provided
Accounts Receivables (106,268) (47,225) (8,143) (8,559) (6,687) (4,896) (4,698) (4,821)
Raw Material and Inventory (250,766) (129,016) (22,326) (23,924) (18,778) (13,700) (13,532) (13,636)
Accounts Payables 57,102 29,741 4,759 4,759 3,569 2,379 2,379 2,379
Dividend Paid - - - - -
Tax Holiday Reserves - (49,030) (32,653) (40,044) (46,433) (52,031) (59,065)
Net Cash from Operations (299,932) (146,500) (74,741) (60,378) (61,941) (62,650) (67,882) (75,143)

Investment
Investment in Fixed Assets (3,043,793) -
Net cash from Investments (3,043,793) -

Financial Transactions
Short Term Borrowing 285,799 141,085 24,472 26,107 20,588 14,941 14,704 14,926
Term Loan 1,819,764
Term Loan Payment (98,995) (218,040) (247,798) (281,616) (320,050) (363,729) (200,076)
Capital Investment 1,224,030 - - -
Capital in Stock 71,450 35,271 6,118 6,527 5,147 3,735 3,676 3,731
Net Cash from financing 3,401,042 77,361 (187,451) (215,164) (255,881) (301,374) (345,349) (181,419)

Net increase (decrease) in cash 188,135 443,406 141,178 177,101 177,414 168,529 166,216 388,671

Cash at beginning of period - 188,135 631,541 772,719 949,819 1,127,233 1,295,762 1,461,978

Cash at end of period 188,135 631,541 772,719 949,819 1,127,233 1,295,762 1,461,978 1,850,649
94
 Table 5.14.1: Schedule of Long Term Loan Payback Installments (Natural Gas)

a. Rate of Interest : 13.0%

b. Construction Period : 6 months
d. Principal Borrowed Amount (In Taka '000) 1,817,739
e. Interest during construction period (In Taka '000) 89,343
f. Mode of Repayment 24
g. Capital Recovery Factor 0.06064891 0.0325

(Fig in Tk. '000)

st
Quarterly Months after 1 Residual Principal Payment of Total Installment of Grand Total
Installment Disbursement Principal Repayment Interest Installment IDCP of Installment

Y-2; Q-2 1,728,396

st
1 Q-3 1,679,743 48,652 56,173 104,825 4,467 109,292
2nd Q-4 1,629,510 50,234 54,592 104,825 4,467 109,292
rd
3 Y-3; Q-1 1,577,644 51,866 52,959 104,825 4,467 109,292
4th Q-2 1,524,092 53,552 51,273 104,825 4,467 109,292
th
5 Q-3 1,468,799 55,292 49,533 104,825 4,467 109,292
6th Q-4 1,411,710 57,089 47,736 104,825 4,467 109,292
th
7 Y-4; Q-1 1,352,765 58,945 45,881 104,825 4,467 109,292
8th Q-2 1,291,905 60,860 43,965 104,825 4,467 109,292
9th Q-3 1,229,066 62,838 41,987 104,825 4,467 109,292
10th Q-4 1,164,186 64,881 39,945 104,825 4,467 109,292
th
11 Y-5; Q-1 1,097,196 66,989 37,836 104,825 4,467 109,292
12th Q-2 1,028,030 69,166 35,659 104,825 4,467 109,292
13th Q-3 956,616 71,414 33,411 104,825 4,467 109,292
th
14 Q-4 882,880 73,735 31,090 104,825 4,467 109,292
th
15 Y-6; Q-1 806,749 76,132 28,694 104,825 4,467 109,292
th
16 Q-2 728,143 78,606 26,219 104,825 4,467 109,292
th
17 Q-3 646,982 81,161 23,665 104,825 4,467 109,292
th
18 Q-4 563,183 83,798 21,027 104,825 4,467 109,292
19th Y-7; Q-1 476,662 86,522 18,303 104,825 4,467 109,292
th
20 Q-2 387,328 89,334 15,492 104,825 4,467 109,292
st
21 Q-3 295,091 92,237 12,588 104,825 4,467 109,292
22nd Q-4 199,856 95,235 9,590 104,825 4,467 109,292
rd
23 Y-8; Q-1 101,526 98,330 6,495 104,825 104,825
24th Q-2 (0) 101,526 3,300 104,825 104,825

95
 Table 5.14.2: Schedule of Long Term Loan Payback Installments (Fuel Oil)

a. Rate of Interest : 13.0%

b. Construction Period : 6 months
d. Principal Borrowed Amount (In Taka '000) 1,819,764
e. Interest during construction period (In Taka '000) 89,459
f. Mode of Repayment 24
g. Capital Recovery Factor 0.06064891 0.0325

(Fig in Tk. '000)

st
Quarterly Months after 1 Residual Principal Payment of Total Installment of Grand Total
Installment Disbursement Principal Repayment Interest Installment IDCP of Installment

Y-2; Q-2 1,730,304

st
1 Q-3 1,681,598 48,706 56,235 104,941 4,473 109,414
2nd Q-4 1,631,309 50,289 54,652 104,941 4,473 109,414
rd
3 Y-3; Q-1 1,579,386 51,924 53,018 104,941 4,473 109,414
4th Q-2 1,525,775 53,611 51,330 104,941 4,473 109,414
th
5 Q-3 1,470,421 55,353 49,588 104,941 4,473 109,414
6th Q-4 1,413,269 57,152 47,789 104,941 4,473 109,414
th
7 Y-4; Q-1 1,354,259 59,010 45,931 104,941 4,473 109,414
8th Q-2 1,293,331 60,928 44,013 104,941 4,473 109,414
9th Q-3 1,230,424 62,908 42,033 104,941 4,473 109,414
10th Q-4 1,165,471 64,952 39,989 104,941 4,473 109,414
th
11 Y-5; Q-1 1,098,408 67,063 37,878 104,941 4,473 109,414
12th Q-2 1,029,165 69,243 35,698 104,941 4,473 109,414
13th Q-3 957,672 71,493 33,448 104,941 4,473 109,414
th
14 Q-4 883,855 73,817 31,124 104,941 4,473 109,414
th
15 Y-6; Q-1 807,639 76,216 28,725 104,941 4,473 109,414
th
16 Q-2 728,947 78,693 26,248 104,941 4,473 109,414
th
17 Q-3 647,696 81,250 23,691 104,941 4,473 109,414
th
18 Q-4 563,805 83,891 21,050 104,941 4,473 109,414
19th Y-7; Q-1 477,188 86,617 18,324 104,941 4,473 109,414
th
20 Q-2 387,755 89,432 15,509 104,941 4,473 109,414
st
21 Q-3 295,416 92,339 12,602 104,941 4,473 109,414
22nd Q-4 200,076 95,340 9,601 104,941 4,473 109,414
rd
23 Y-8; Q-1 101,638 98,439 6,502 104,941 104,941
24th Q-2 (0) 101,638 3,303 104,941 104,941

96
 Table 5.15.1: Expected Key Ratios (Natural Gas)

Particulars Year-1 Year-2 Year-3 Year-4 Year-5

Profitability Ratios

Gross Profit/ Sales Ratio 23.53% 28.98% 27.84% 27.73% 27.52%

Operating Profit/ Sales Ratio 22.00% 27.68% 26.52% 26.48% 26.28%

Net Profit on Sales Ratio 13.60% 17.39% 17.61% 18.92% 20.04%

Net Return on Avg. Assets 15.52% 14.05% 13.58% 14.35% 14.75%

Net Return on Avg. Equity 32.89% 27.32% 22.92% 21.35% 19.61%

Liquidity & Leverage Ratio

Current (Asset/Liability) Ratio 1.21 2.19 2.93 3.65 4.35

Long Term Debt/ Equity 1.20 0.80 0.57 0.39 0.25

Total Liability / Equity 1.41 1.04 0.78 0.57 0.41

Total Liability / Total Assets 0.67 0.57 0.49 0.41 0.32

Investment - Service Coverage Ratio

Income
Operating Profit 403,020 770,914 779,229 818,296 842,359
Depreciation & Amortization 195,837 198,898 198,898 198,898 198,898
Total Income 598,858 969,812 978,127 1,017,195 1,041,257

Liabilities
Installment of Long Term Loan 204,304 232,187 263,875 299,887
Financial Expenses 153,879 286,409 261,797 233,382 199,953
Total Liabilities for Repayment 153,879 490,713 493,984 497,257 499,841

Debt Service Coverage Ratio 3.89 1.9763 1.9801 2.0456 2.0832

Interest Coverage Ratio 3.89 3.39 3.74 4.36 5.21

97
 Table 5.15.2: Expected Key Ratios (Fuel Oil)

Particulars Year-1 Year-2 Year-3 Year-4 Year-5 Year-6 Year-7 Year-8

Profitability Ratios

Gross Profit/ Sales Ratio 12.97% 18.90% 17.77% 17.64% 17.40% 17.04% 16.82% 16.56%

Operating Profit/ Sales Ratio 12.01% 18.09% 16.94% 16.85% 16.60% 16.24% 16.03% 15.78%

Net Profit on Sales Ratio -3.00% 11.73% 7.41% 8.64% 9.66% 10.57% 11.73% 13.38%

Net Return on Avg. Assets -3.22% 9.03% 5.68% 6.96% 8.03% 8.97% 10.19% 11.56%

Net Return on Avg. Equity -8.84% 22.99% 12.88% 14.07% 14.36% 14.19% 14.22% 14.61%

Liquidity & Leverage Ratio

Current (Asset/Liability) Ratio 1.59 2.27 2.46 2.69 2.92 3.15 3.35 3.89

Long Term Debt/ Equity 1.47 1.02 0.80 0.58 0.39 0.22 0.07 (0.00)

Total Liability / Equity 1.74 1.34 1.10 0.86 0.65 0.45 0.28 0.19

Total Liability / Total Assets 0.64 0.56 0.51 0.45 0.38 0.31 0.22 0.16

Investment - Service Coverage Ratio

Income
Operating Profit 219,912 503,792 497,669 520,666 532,182 533,053 538,222 541,872
Depreciation & Amortization 185,680 185,680 185,680 185,680 185,680 185,680 185,680 185,680
Total Income 405,593 689,473 683,349 706,347 717,863 718,733 723,903 727,552

Liabilities
Installment of Long Term Loan 98,995 218,040 247,798 281,616 320,050 363,729 200,076
Financial Expenses 274,775 176,927 279,979 253,704 222,627 186,180 144,456 82,319
Total Liabilities for Repayment 274,775 275,923 498,020 501,501 504,244 506,230 508,185 282,395

Debt Service Coverage Ratio 1.48 2.4988 1.3721 1.4085 1.4236 1.4198 1.4245 2.5764

Interest Coverage Ratio 1.48 3.90 2.44 2.78 3.22 3.86 5.01 8.84

98
 Table 5.16: Break - Even Analysis

Particulars Year-1 Year-2 Year-3 Year-4 Year-5

Production Quantity in Yds 10,499,338 15,967,744 16,842,689 17,717,633 18,373,842

Capacity Utilization (Weaving) 48.0% 73.0% 77.0% 81.0% 84.0%

Sales Revenue @ Capacity Utilization 1,831,530 2,785,452 2,938,079 3,090,707 3,205,177

Variable Costs

Raw Materials & Service Charges 1,143,045 1,738,060 1,833,530 1,928,900 2,000,578
Wages, Utility and Others 50,320 69,140 71,152 75,128 78,555
Repair-maintenance & Spares - 2,958 9,023 15,088 21,154
Insurances & Taxes 1,985 1,985 1,985 1,985 1,985
Financial Charges 35,726 53,543 56,814 60,087 62,671
Administrative Expenses 4,769 6,940 7,835 7,879 8,293
Total Variable Cost 1,235,845 1,872,626 1,980,340 2,089,068 2,173,236

Fixed Costs

Wages, Utility and Others 13,370 16,290 18,889 19,590 20,327

Repair-maintenance & Spares - 2,958 9,023 15,088 21,154
Insurances & Taxes 4,632 4,632 4,632 4,632 4,632
Financial Charges 118,153 232,866 204,983 173,295 137,282
Depreciation 179,826 179,826 179,826 179,826 179,826
Administrative Expenses 23,164 29,483 30,825 30,891 31,511
Total Fixed Costs 339,146 466,054 448,178 423,323 394,733

Contribution Margin (Sales-Fixed Cost) 595,685 912,826 957,740 1,001,638 1,031,941

Contribution Margin/ Yard of Fabric 0.0567 0.0572 0.0569 0.0565 0.0562

BEP (in yard of fabric) 5,977,662 8,152,522 7,881,595 7,488,018 7,028,272

BE Sales 1,042,758 1,422,146 1,374,884 1,306,228 1,226,029

BEP of Capacity Utilization 27.33% 37.27% 36.03% 34.23% 32.13%
BEP @ Rated Capacity 13.12% 27.21% 27.74% 27.73% 26.99%

99
 Table 5.17.1: IRR and NPV (Natural Gas)

(All figures in Tk. '000)

Capital Operating Dpreciation Net Cash
Year
Outlay Profit & Ammortization Inflow/Outflow

1st (3,016,739) 403,020 - (2,613,719)

2nd 770,914 192,776 963,690
rd
3 779,229 192,776 972,005
4th 818,296 192,776 1,011,073
th
5 842,359 192,776 1,035,135

IRR for five years: 18.97%

NPV considering Five years Project Cycle,

7% NPV at 7% 701,822
11% NPV at 11% 418,501
15% NPV at 15% 187,728

100
 Table 5.17.2: IRR and NPV (Fuel Oil)

(All figures in Tk. '000)

Capital Operating Dpreciation Net Cash
Year
Outlay Profit & Ammortization Inflow/Outflow

1st (3,043,793) 219,912 - (2,823,881)

2nd 503,792 181,854 685,647
3rd 497,669 181,854 679,523
4th 520,666 181,854 702,521
5th 532,182 181,854 714,036
6th 533,053 181,854 714,907
7th 538,222 181,854 720,076
8th 541,872 181,854 723,726

IRR for five years: 7.50%

IRR for eight year: 16.10%

NPV considering Five years Project Cycle,

7% NPV at 7% 35,842
11% NPV at 11% (221,953)
15% NPV at 15% (424,560)

NPV considering Eight years Project Cycle,

11% NPV at 11% 438,921
15% NPV at 15% 82,731
17% NPV at 17% (63,117)

101
 Table 5.18.1: Cost - Benefit Analysis (Natural Gas)

Cash Outflow Cash Inflow

Year
P.V. @ 15% P.V. @ 15%

st
1 4,237,489 1,831,530
2nd 1 1,584,140 2,422,132
rd
3 2 1,486,634 2,221,610
th
4 3 1,367,393 2,032,190
5th 4 1,240,728 1,832,570

Benefit Cost ( at 15% P.V.) 1.0427

Table 5.18.2: Cost - Benefit Analysis (Fuel Oil)

Cash Outflow Cash Inflow

Year
P.V. @ 15% P.V. @ 15%

1st 4,457,808 1,831,530

nd
2 1 1,825,917 2,422,132
3rd 2 1,707,793 2,221,610
4th 3 1,570,271 2,032,190
5th 4 1,424,318 1,832,570
6th 5 1,238,537 1,593,540
7th 6 1,076,989 1,385,687
8th 7 936,512 1,204,945

Benefit Cost ( at 15% P.V.) 1.0201

102
 Table 5.19.1: Discounted Pay Back Period (Natural Gas)

(All figures in Tk. '000)

Year Net Cash Flow PVIF (15%) CFPVIF DCF Cummulative DCF

1st (2,613,719) 1 (2613719) X 1 (2,613,719) (2,613,719)

2nd 963,690 0.86957 963690 X 0.87 837,996 (1,775,722)
rd
3 972,005 0.75614 972005 X 0.76 734,972 (1,040,750)
4th 1,011,073 0.65752 1011073X 0.66 664,801 (375,950)
th
5 1,035,135 0.57175 1035135X 0.57 591,839 215,889

Year before recovery = 5

Remaining yerars = 0.64
Pay back period = 5.64 years

Table 5.19.2: Discounted Pay Back Period (Fuel Oil)

(All figures in Tk. '000)

Year Net Cash Flow PVIF (15%) CFPVIF DCF Cummulative DCF

st
1 (2,823,881) 1 (2823881) X 1 (2,823,881) (2,823,881)
2nd 685,647 0.86957 685647 X 0.87 596,218 (2,227,663)
3rd 679,523 0.75614 679523X 0.76 513,814 (1,713,849)
4th 702,521 0.65752 702521X 0.66 461,921 (1,251,928)
th
5 714,036 0.57175 714036X 0.57 408,250 (843,677)
th
6 714,907 0.49718 714907 X 0.50 355,437 (488,240)
7th 720,076 0.43232 720076X 0.43 311303 (176,937)
8th 723,726 0.37593 723726X0.38 272070 95,134

Year before recovery = 8

Remaining yerars = 0.65
Pay back period = 8.65 years

103
 CHAPTER 6

CONCLUSIONS AND RECOMMENDATIONS

6.1 Conclusions

The economy of Bangladesh is mostly depends on our RMG sector. In knitting we have a
strong position in the world, the main reason is knitting has a very good backward linkage.
But regarding the woven garments the scenario is different. Most of the fabrics are coming
from abroad, mostly from our competitors. As a result it is very difficult to survive. In this
study feasibility of one of the backward linkage for woven textiles: yarn dyed fabric
production has been studied and found this project is technically and financially feasible.

In respect of technical feasibility, the project can be said feasible. Because technology is
available, experienced man power can be found easily though at the beginning we were
dependent on the Indians and Pakistanis. Now a good nos. of woven textile industries are
operating in Bangladesh. After detail financial appraisal the project can be said feasible in all
respect if it is run by natural gas. IRR and NPV are calculated on different time periods and
different discount rates (Table 5.17.1). Standard discount rate or present value interest factor
is considered as 15%. IRR for five years has been found 18.97% which is greater than the
discount rate 15%. So project is feasible in respect of IRR. Considering five year project
cycle and 15% PVIF, NPV has been found 187728000 Tk. which is positive. So project is
feasible. Benefit cost ratio has been found 1.0427 which is also positive. It is in favor of the
project. Discounted payback period has been found 5.64 years. But if the project is run by
fuel oil (diesel for generators and furnace oil for boilers) then it would be less feasible. IRR
for eight years has been found 16.10%. Discounted payback period has been found 8.65
years. Benefit cost ratio has been found 1.0201 at 15% PVIF.

104
6.2 Recommendations

In this study all the imported machineries have been considered from Japan. USA and
Europe. Same machines can be found from China, Taiwan etc. certainly with lower
price and lower quality. Doing optimization on price and quality feasibility could be
studied.

Airjet jet looms need air; i.e. compressors and piping (extra cost and power) but these
machines have higher speed. On the other hand rapier looms do not need air but
consume little more power than the airjet looms and have less speed (200 rpm
differences). Taking these points into account financial feasibility study can be done
and be compared.

Technical fabric (tire cord, air bag etc.) is more profitable than the usual one. This
market segment is dominated by Europe, USA and China. India has just started this
business but in Bangladesh not yet started. So there is a scope of analyzing feasibility
of technical textile.

105
 REFERENCES

[1] David. J (2003), The Cambridge History of Western Textiles, Cambridge

University Press, pp. 16

[2] Neefus. J D (1982) Textile Industrial Processes: In Industrial Hygiene Aspects of

Plant Operation. Volume 1, Edited by Cralley ,LV, Cralley, LJ. MacMillan
Publishing Co, Inc., New York, pp. 554-611.

[3] Frederick. H., Volpe. A and David.W, (December, 2006) The Apparel and Textile
Industries After 2005: Prospects and Choices. Environment and Planning, Vol. 38,
pp. 2207-2232

[4] Khondaker.G M, (November. 2009)Export Competitiveness of Bangladesh Apparels

in Japanese Market Constraints, Opportunities and Challenges in view of Changing
Market Dynamics A Key note presentation in CPD dialogue In Search of New
Markets, New Products : Bangladeshs Apparels Export to Japan

[5] Mustafizur. R, Debapriya. B and Khondaker G M, (October, 2007) Bangladeshs

Apparel Sector in Post-MFA Period A Benchmarking Study on the Ongoing
Restructuring Process. A CPD study- report.

[6] Selim.R, Ayesha. B and Rehman. S (Decembe,1999) The Textile and Clothing
Industry of Bangladesh: In a changing World Economy Report no 18, published by
CPD

[7] Kinari Toshiyasu, (2007) Weaving Machinery and Its Relevant Technologies.
Journal of Textile Engineering, Vol.53, No.2, pp. 43-52

[8] Blackburn. K, Brighton. J, James. I, Riddlestone. S, Stott. E., (2004) Feasibility of

Hemp Textile in the UK. Research study for Bio Regional Development Group.

[9] Meredith, J R & Mantel Jr., S J (2004) Project Management: A Managerial

Approach, 5th Edition, John Wiley & Sons.

[10] Rakib. I H, (Fall, 2009) Backward Linkages in Readymade Garment Industry of

Bangladesh: Appraisal and Policy Implications Journal of Textile and Apparel,
Technology and Management, Vol. 6, Issue 2, pp 5-11

[11] Hafiz. G A S (2004) The development of backward linkages, The Readymade

st
Garment Industry of Bangladesh (1 Ed.), Bangladesh: The University Press
Limited.

106
[12] Mustafizur. R, & Asif. A (September 2006), Bangladesh Appeals export to
the US Market: An examination of Her Competitive vis--vis China Central for
Policy Dialogue (CPD), paper no. 62.

[13] Ahmed. K H (2002), Textile and clothing: Experience of contemporary leading

countries, Backward Linkage to Ready Made Garments Bangladesh
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Perspective (1 Ed.), Bangladesh: Academic Press and Publishers Limited.

[14] Hafiz, G. A. S (2000), Beyond 2004: Impact of MFA Phase-out on the Apparel
Industry of Bangladesh Keynote Paper presented at the BATEXPO 2000,
sponsored by BGMEA, Dhaka.

[15] R.A. (July, 18 2010), China: The end of cheap Chinese labour? The Economist

[16] Corbman, B.P. (1975) Textiles: Fiber to Fabric, 5th edition, McGraw-Hill, Inc., New
York

[17] Snowden-Swan, L.J.(1995) Pollution Prevention in the Textile Industries, in

Industrial Pollution Prevention Handbook, Freeman, H.M. (Ed.), McGraw-Hill, Inc.,
New York

107
 APPENDIX: A

DETAILS OF FIXED COST

 Table A.1.1: Costs of Major Civil Works

Dimension Area Rate Cost in

Ser Work Item 2
(ft )
(ft x ft) Tk./sft Tk. '000.

i. Weaving Building 210x305 64,050 1,380 88,389

ii. Sizing and Warping Building

(Contains:Sizing space, Yarn drawing area 230x350 80,500 970 78,085
and Yarn dyeing Laboratory)

iii. Yarn Dyeing Building 150x100 15,000 970 14,550

iv. Cone to Cone Rewinding 120x50 6,000 970 5,820

v. Finishing Building 140x270 37,800 970 36,666

vi. Plant room for Air Handling Unit 30x305 9,150 1,450 26,535
and Electric Chiller

vii. W.T.P and E.T.P 130x90 11,700 740 17,316

v. Air Compressor Shed 35x60 2,100 820 1,722

vi. Generator Shed 75x75 5,625 820 4,613

vii. Boiler Shed 60x50 3,000 820 2,460

viii. Office Space and Store: 189x26 4,914 900 4,423

One floor of 3 Storied RCC frame Building

ix. Fabric Inspection & Mending Room: 189x26 4,914 650 3,194
One floor of 3 Storied RCC frame Building

x. Residential Area for Managerial Staff: 189x26 5,250 1,000 5,250

Top floor of 3 Storied RCC frame Building

xi. Deep Tube Well House 30x24 720 500 360

xii. Security Guard Room 18x12 216 500 108

Total in '000 Taka 250,939 289,490

108
 Table A.1.2: Costs for Auxiliary Civil Works

Ser. Work Item Cost in Tk. '000.

i. Underground ducting for Air conditioning 5,080

ii. Civil works for Water treatment plant 1,080
iii. Underground Water reservoir 970
iv. Surface drainage 710
v. Inner roads (rate 100 taka per sft) 960
vi. Electric works @ 5% of main civil work 14,475
vii. Plumbing works @ 3% of main civil work 8,685
viii. Sanitary wirks @ 3% of main civil work 8,685
ix. Boundary fencing 970
Total in '000 Taka 41,614

Table A.1.3: Land and Land Development Costs

Area Rate in Tk. Per Cost in

Description
in Decimal Decimal Tk. 000

Land required 825 303,030 250,000

Land Development 20,000

Total in '000 Taka 270,000

109
 Table A.1.4.1: List of Imported Machinery (Natural Gas)

COST
NAME Quantity FOREIGN IN
CURRENCY Tk. '000

Automatic Airjet Weaving Looms 180 Nos. 8,000,000 832,000

High Performance Sizing Machine 2 Nos. 720,000 74,880
High Performance Sectional Warping 2 Nos. 370,200 38,501
Humidity & Temperatur Control Plant 1 Set 435,000 45,240
Air Compressor, Dryer & Resevoir 6 Unit 480,000 49,920
Electric Industrial Chiller & Cooling Tower 3 Unit $ 350,000 25,900
Over Head Travelling Cleaner 11 Units 220,000 22,880
Hydraulic Beam Lifter 4 Nos. 36,670 3,814
Inspection, Measuring & Folding Machine 6 Nos. $ 60,000 4,440
Gas Generator with Cooling Tower 3 Unit $ 1,260,000 93,240
Gas Fired Boiler 2 Nos. $ 190,000 14,060
Raw Water Treatment Plant 1 Unit $ 100,500 7,437
High Temperature Yarn Dyeing Vessels 8 Nos. CHF 1,450,550 125,037
Precision Package Winding Machine 280 Heads CHF 1,183,266 101,998
Cone to Cone Random Rewinding Machine 300 Heads $ 210,000 15,540
Centrifugal Hydro Extractor 4 Nos. CHF 320,000 27,584
Radio Frequency Dryer 4 Nos. 420,000 43,680
Lab Equipment 1 Set $ 120,000 8,880
Knot Tyeing Machine 3 Nos. 60,000 6,240
Effluent Treatment Plant 1 Unit 152,000 15,808
Sinzing & Desizing Machine 1 No. 370,000 38,480
Scouring & Bleaching Machine 1 No. CHF 2,250,000 193,950
Mercerizing Machine 1 No. CHF 1,275,000 109,905
Stenter Machine 1 No. 420,000 43,680
Brushing & Emerizing Machine 1 No. 120,000 10,344
Sanforizing Machine 1 No. 420,000 36,204
Total 1,989,641

110
 Table A.1.4.2: List of Imported Machinery (Fuel Oil)

COST
NAME Quantity FOREIGN IN
CURRENCY Tk. '000

Automatic Airjet Weaving Looms 180 Nos. 8,000,000 832,000

High Performance Sizing Machine 2 Nos. 720,000 74,880
High Performance Sectional Warping 2 Nos. 370,200 38,501
Humidity & Temperatur Control Plant 1 Set 435,000 45,240
Air Compressor, Dryer & Resevoir 6 Unit 480,000 49,920
Electric Industrial Chiller & Cooling Tower 3 Unit $ 350,000 25,900
Over Head Travelling Cleaner 11 Units 220,000 22,880
Hydraulic Beam Lifter 4 Nos. 36,670 3,814
Inspection, Measuring & Folding Machine 6 Nos. $ 60,000 4,440
Diesel Generator with Cooling Tower 3 Unit $ 1,280,000 94,720
Furnace oil Fired Boiler 3 Nos. $ 200,000 14,800
Raw Water Treatment Plant 1 Unit $ 100,500 7,437
High Temperature Yarn Dyeing Vessels 8 Nos. CHF 1,450,550 125,037
Precision Package Winding Machine 280 Heads CHF 1,183,266 101,998
Cone to Cone Random Rewinding Machine 300 Heads $ 210,000 15,540
Centrifugal Hydro Extractor 4 Nos. CHF 320,000 27,584
Radio Frequency Dryer 4 Nos. 420,000 43,680
Lab Equipment 1 Set $ 120,000 8,880
Knot Tyeing Machine 3 Nos. 60,000 6,240
Effluent Treatment Plant 1 Unit 152,000 15,808
Sinzing & Desizing Machine 1 No. 370,000 38,480
Scouring & Bleaching Machine 1 No. CHF 2,250,000 193,950
Mercerizing Machine 1 No. CHF 1,275,000 109,905
Stenter Machine 1 No. 420,000 43,680
Brushing & Emerizing Machine 1 No. 120,000 10,344
Sanforizing Machine 1 No. 420,000 36,204
Total 1,991,861

111
 Table A.1.5: Requirement of Locally Available Machinery & Fittings

Ser. Machinery Description COST IN TK. '000

i. MS Pipe, Elbows, T-joints & Reducers for Fabrication 11,020

of Compressed Air Line

ii. Seamless Piping & Other Works (Insulation, Fittings etc.) 5,500
for Steam Transportation

iii. Overhead Air Supply Duct to Weaving 10,300

iv. Electric Components and Cables for Machinery 8,500

v. Conduits & Fittings for Water Line and Pumps 1,250

vi. Indoor Lighting Equipments & Exterior Security Lights 4,100

vii. Workshop machinery 5,400

viii. Pipeline for Gas Connection 4,500

ix. Deep Tube Well 3,000

x. Chimney for Boiler 50

xi. Fire Fighting Equipments 2,000

xii. Other Miscellaneous Items 1,500

Total Cost 57,120

112
 Table A.1.6: Charges

In Tk '000
Pre-shipment Inspection (PSI) 0.75% 14,922
Marine Insurance (upto Chittagong Port) 1.25% 24,871
Freight Forwarding Charges 2.00% 39,793
L. C. Commission 0.75% 14,922

Total 4.75% 94,508

Table A.1.7: Internal Freight

Approximate Number of 40 ft Containers 75

Fare of Container Trailer from Port to Site (in Tk.) 30,000
Total Freight Charges Incurred (in Tk. '000) 2,250

Table A.1.8: Office Setup and IT

Ser. Description Quantity COST IN TK. '000

i. Various Fixtures to Set-up Head Office 01 lot 1,000

ii. Various Fixtures to Set-up Factory Office 01 lot 2,500
iii. Furnitures for Top Executives 01 lot 500
iv. Furnitures for Other Office Employees 30 sets 600
v. Computers and Printers 10sets 400
vi. Laying out ISD Telephone line with Set 02 sets 50
vii. Window type A.C 10 sets 500
viii. File Cabinates 20 sets 200
ix. Re-conditioned AC Micro Bus 02 nos 4,000
x. 3000 kg capacity Covered Van 02 nos 5,000
ERP Software 01 no 50,000
Total Cost 64,750

113
 Table A.1.9: Erection & Installation Costs
(All figures in Tk. '000)
Erectors' Allowances. (Pocket money & lodging for Foreign Erectors, pocket money for Local Erectors):
Approximate number of employment days for foreign erector 180
Amount of Pocket Money and Lodging expenses per day 10,000
Approximate number of employment days for local erector 270
Daily allowance amount 2,500
Return air Ticket for foreign erectors (Say, Tk. 60,000 per Ticket) 300,000
2,775
Installation Costs. This includes:-
(1) Foundation works for Generator, Looms and others heavy machinary.
(2) Miscellaneous tools, consumables & fittings required during erection.
The cost is assumed at-- 1.75% of Imported Machinery value which is:
34,819

Table A.1.10: Security Deposit for Gas Connection

Amount to be deposited is 3 months of expected gas bill, of which two thirds are covered by Bank
Guarantee. Remaining one third amount is 2,828

Table A.1.12: Interest During Construction Period

Borrowing will first occur with LC negotiation for Humidification and Temperature Control Plant
IDCP will be effective from that period for a time span of 6 months or 26 weeks. Other LC will be
opened subsequently.
Weeks Effective for IDCP Weeks Effective for IDCP

Airjet Weaving Looms 18 33,696 Yarn Dyeing Vessels 26 7,315

Sizing Machine 20 3,370 Precision Package Winder 26 5,967
Sectional Warping Machine 21 1,819 Cone to Cone Rewinder 25
Humidity Control Plant 26 2,647 Centrifugal Hydro Extractor 25 1,552
Air Compressors 21 2,359 Radio Frequency Dryer 25 2,457
Electric Industrial Chiller 21 1,224 Lab Equipment 24 480
Over Head Cleaners 14 721 Knot Tyeing Machine 26 365
Hydraulic Beam Lifters 18 154 Effluent Treatment Plant 23 818
Fabric Inspection Machine 16 160 Sinzing & Desizing Machie 24 2,078
Gas Generators 25 5,245 Scouring & Bleaching Machine 24 10,473
Gas Fired Boiler 19 601 Mercerizing Machine 25 6,182
Water Treatment Plant 17 284 Stenter machine 22 2,162
Sanforizing Machine 18 1,466 Brushing & Emerizing Mahine 21 489
52,279 37,686

Total 89,965

114
 APPENDIX: B

PRODUCTION CALCULATION
 PRODUCTION CALCULATION

Production and sales estimate are done on the basis of following five types of fabrics:

TYPE Description of Product Construction

A Cotton 3 Colour Check Poplin Fabric [120 X 80 / 40 x 40]
B Cotton 4 Colour Check Dobby Fabric (compact yarn) [120 X 80 / 40 x 40]
C Cotton 4 Colour Check Poplin Fabric (combed yarn) [152 X 76 / 50 x 50]
D Cotton 3 Colour Check Poplin Fabric [108 X 72 / 30 x 30]
E Cotton 2 Colour Check Poplin Fabric [110 X 70 / 40 x 40]

Calculation of Production
R P M x 60
Fabric produced by 1 loom per hour = yards
P P I x 36

Fabric TYPE A B C D E
Picks per inch (PPI) 80 80 76 72 70
Loom speed (RPM) 800 750 700 800 750

Production from 1 Loom (in Yards):

Per Hour 16.67 15.63 15.35 18.52 17.86

Per Day 400 375 368 444 429
Per Annum 120000 112500 110526 133333 128571

Looms Employed 40 50 20 50 20

Productioh per Month 400,000 468,750 184,211 555,556 214,286

Total Sum of Monthly Production at 100% Capacity 1822802

Productioh per Annum 4,800,000 5,625,000 2,210,526 6,666,667 2,571,429

Total Sum of Annual Production at 100% Capacity 21,873,622

115
Annaul Revenue Generation as per Product:

A B C D E

Product Rate in U.S. $ 2.30 2.70 2.50 2.20 2.00

Product Rate in Taka 170.20 199.80 185.00 162.80 148.00
Sales in Tk. '000 816,960 1,123,875 408,947 1,085,333 380,571

Assuming 1 $ = Taka 74.0

TOTAL Sales Value at 100% Capacity p. a. 3,624,903

(In Taka '000)

Calculation of Yarn Requirement:

Quantity of yarn (in kg) for 1 yard of FABRIC ---

Total Warp Ends

Warp Yarn = x Warp Cotraction
840 x N e x 2.2046

Reed Width x PPI

Weft Yarn =
840 x N e x 2.2046

Here, Reed Width = Total travel length of weft yarn along reed space
Ne= Yarn Count (English standard)

Warp Yarn + Weft Yarn

Total Yarn =
(100 - Wastage)%

Wastage Assumed:

At yarn dyeing 6%
Fabric rejected for weaving fault 2% Total 10% 10%
Fabric wasted at finishing process 2% 4%

116
FABRIC TYPE A B C D E
Cotton Cotton Cotton Cotton Cotton
Ne (Warp) 40 40 50 30 40
Ne (Weft) 40 40 50 30 40

Warp Ends/Inch (a) 120 120 152 108 110

Finished Width (b) 57 / 58 " 57 / 58 " 57 / 58 " 57 / 58 " 57 / 58 "
Warp Ends (a x b) 6924 6924 8770.4 6231.6 6347
Selvedge Ends 96 96 122 86.4 88
Extra Yarns 7 9 8 7 7
Total Warp Ends 7027 7029 8900 6325 6442
Warp Contraction 12% 12.00% 10% 9% 9.00%

Warp yarn (Kg/Yd) 0.1062 0.1063 0.1057 0.1241 0.0948

Weft Pick Per Inch 80 80 76 72 70

Effective Reed Width 66.5 66.5 66.5 66.5 66.5

Weft yarn (Kg/Yd) 0.0718 0.0718 0.0546 0.0862 0.0628

Total yarn weight

0.1979 0.1979 0.1781 0.2336 0.1752
in Kg /Yds of Fabric

Sizing Material
Cost / kg of Yarn ( c) 20.0 19.0 19.0 19.0 20.0
Yarn to be Sized (d) 0.1107 0.1107 0.1101 0.1293 0.0987
Cost incurred = (cxd)
2.21 2.10 2.09 2.46 1.97
(Taka / yd of fabric)

* Kg of warp yarn needed to weave 1 yard of fabric including (2+2)% wastage

117
Calculation of Yarn Dyeing Raw Materials:

The entire process requires following dye-stuff, chemicals etc.:

Basic dye-5%, Acetic acid-5%, Sodium Sulphate-3%, Sodium Chloride-2%, Retarder and
Sequestering Agent-2% etc. On an average basis, the total cost incurred is:

C & F value of dye stuff and chemicals in U.S. $ 1.500 (per kg of yarn)
Freight forwarding charges @ 2% of C&F value 0.030

Total landed value in U.S. $ 1.530 (per kg of yarn)

In Taka * 113.22 (per kg of yarn)

118
 BREAKDOWN OF ANNUAL RAW MATERIAL REQUIREMENT

1. Yarn Consumption: (At 100% Capacity)

Rate per Requirement in KG

English Count of Yarn (Ne)
KG in $ Per Month Per Annum

40 Single Carded (40/1) - 100% Cotton 4.50 79,141 949,691

40 Single Combed (40/1) - 100% Cotton 4.80 92,759 1,113,108
50 Single Combed (50/1) - 100% Cotton 5.75 32,813 393,754
30 Single Carded (30/1) - 100% Cotton 4.25 129,802 1,557,623
40 Single Carded (40/1) - 100% Cotton 4.50 37,532 450,387

Total Requirement of Yarn in Tons 372.047 4464.564

Cost Incurred in U.S. $ 1,710,605 20,527,255

Cost Incurred in Taka '000 126,585 1,519,017

2. Sizing Raw Materials: (At 100% Capacity)

Yarn & Fabric TYPE Rate/yard Cost per Cost p.a.

of Fabric Month (Tk.) (in Tk. '000)
A Cotton 3 Colour Check Poplin Fabric 2.21 885,396 10,625
B Cotton 4 Colour Check Dobby Fabric 2.10 985,976 11,832
C Cotton 4 Colour Poplin Fabric 2.09 385,479 4,626
D Cotton 3 Colour Check Fabric 2.46 1,364,478 16,374
E Cotton 2 Colour Check Fabric 1.97 423,185 5,078
Total 4,044,513 48,534

3. Yarn Dyeing Raw Materials : (At 100% Capacity)

Monthly Requirement of Yarn in KG 372,047

Annual Requirement of Yarn in KG 4,464,564

Average raw material expenses per kg of Yarn Dyeing 113.22

Monthly Raw Material Expenses in Yarn Dyeing in Tk. 42,123,157

Annual Raw Material Expenses in Yarn Dyeing in Tk. '000 505,478

4. Fabric Finishing Cost: (At 100% Capacity)

Monthly Production of Fabric in Yards 1,822,802

Annual Production of Fabric in Yards 21,873,622

Average Fabric Finishing Charges in Tk. per Yard 14.00

Monthly Fabric Finishing Expenses in Tk. 25,519,225

Annual Fabric Finishing Expenses in Tk. '000 306,231

119
 APPENDIX: C

DETAILS OF FACTORY STAFFS AND THEIR WAGES

 Table C.1: Details of Factory Staff and Their Wages

(Fig in Tk. ' 000)

Individual Head Total per Total per
Designation
Monthly Pay Count Moth Annum

Chief Operating Officer 100.0 1 100.0 1,200

Manager Coordination 70.0 1 70.0 840
Store In Charge 15.0 3 45.0 540
Office Assistant 12.0 3 36.0 432

Maintenance & Supervision

Maintenance Manager 60.0 1 60.0 720
Maintenance Engimeer 40.0 2 80.0 960
Electrical Engimeer 40.0 1 40.0 480
Assistant Engineer (Mech) 12.0 3 36.0 432
Assistant Engineer (Elec) 12.0 3 36.0 432

Weaving & Preparation

Weaving Manager 50.0 1 50.0 600
Shift Officer 20.0 3 60.0 720
Sizing In Charge (IC) 30.0 1 30.0 360
Mending & Drawing IC 20.0 1 20.0 240
Foreman for Looms 20.0 2 40.0 480
Sizing Operator 10.0 6 60.0 720
Warping Operator 8.0 6 48.0 576
Back Sizer 5.0 6 30.0 360
Assistant Warper 5.0 7 35.0 420
Weaver Highly Skilled 6.0 60 360.0 4,320
Weaver Skilled 5.0 30 150.0 1,800
Weaver Semi Skilled 3.0 30 90.0 1,080
Shift Fitter 10.0 3 30.0 360
Assistant Fitter 7.0 7 49.0 588
Article Drawer Man 5.0 12 60.0 720
Fabric Mending 3.5 18 63.0 756
Assistant for Drawing 3.0 12 36.0 432
Unskilled Labour 2.5 30 75.0 900
Sub Total 253 21,468

120
 Table C.1: Details of Factory Staff and Their Wages

(Fig in Tk. ' 000)

Individual Head Total per Total per
Designation
Monthly Pay Count Moth Annum
Yarn Dyeing
Dyeing Manager 50.0 1 50.0 600
Laboratory In Charge 40.0 1 40.0 480
Assistant Dyeing Manager 35.0 3 105.0 1,260
Laboratory Assistant 10.0 3 30.0 360
Foreman for Vessels 12.0 3 36.0 432
Shift Fitter 7.0 3 21.0 252
Operator Pricision Winding 9.0 12 108.0 1,296
Operator Re - Winding 8.0 12 96.0 1,152
Helper for Winding 2.5 12 30.0 360
Operator Vessels 8.0 6 48.0 576
Helper at Vessels 2.5 6 15.0 180
Hydro Extractor Operator 7.0 6 42.0 504
RF Dryer Operator 7.0 6 42.0 504
Helper at Drying Units 3.0 12 36.0 432
Unskilled Labour 2.5 12 30.0 360

Finishing
Finishing Manager 50.0 1 50.0 600
Shift Officer 20.0 3 60.0 720
Foreman 25.0 1 25.0 300
Shift Fitter 10.0 3 30.0 360
Asst. Fitter 7.0 3 21.0 252
Operator 6.0 18 108.0 1,296
Asst. Operator 4.0 18 72.0 864
Helper 3.0 18 54.0 648
Unskilled Labour 2.5 18 45.0 540

Utility
Utility Manager 50.0 1 50.0 600
Utility Asst. Manager 30.0 3 90.0 1,080
Foreman for Utility 20.0 1 20.0 240
Fitters 10.0 3 30.0 360
Asst. Fitter 7.0 6 42.0 504
Skilled Operator-Generator 6.0 3 18.0 216
Skilled Operator-Others 6.0 7 42.0 504
WTP and ETP 7.0 6 42.0 504
Total 464 39,804

121