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Date: 21-07-2010.
This is to certify that the project entitled “Financial Feasibility for Setting up of
a Plant for the Production of Single Super Phosphate (SSP)” submitted to
Institute for Technology & Management, Kharghar, Navi Mumbai for the partial
fulfillment of the degree of Post Graduate Diploma in Management, is a record of
original work done by Rituraj Priyadarshi Das, during the period of his
study under my guidance.
Faculty Guide
CERTIFICATE
(From Company Guide)
This is to certify that the project entitled “Financial Feasibility for Setting up of
a Plant for the Production of Single Super Phosphate (SSP)” submitted to
Institute for Technology & Management, Kharghar, Navi Mumbai for the partial
fulfillment of the degree of Post Graduate Diploma in Management is a record of
original work done by Rituraj Priyadarshi Das during the period of his study
under my guidance.
Chief Engineer,
RCF Ltd,
Mumbai .
EXECUTIVE SUMMARY
About SSP
SSP is a popular fertilizer in the country. SSP contains 16% w.s. P2O5, 11%
Sulphur and 16% Calcium. Presently there are 74 SSP units in the country of
which some are in the small scale sector. More than 90% of the units are located
in seven states of A.P., Gujarat, M.P., Maharashtra, Rajasthan, U.P. and West
Bengal. SSP is marketed in powder and granulated form.
Govt. Policy
Project at a Glance
Project.
6. Realization
Total……...7600 `/MT
9. Manpower : 70 Nos.
INDUSTRY PROFILE
In the present scenario, there are more than 57 large and 64 medium and small
fertilizer production units under the India fertilizer industry. The main products
manufactured by the fertilizer industry in India are phosphate based fertilizers,
nitrogenous fertilizers, and complex fertilizers. The fertilizer industry in India with
its rapid growth is all set to make a long lasting global impression.
Some of the public sector companies in India fertilizer industry:
RCF unit at THAL is one of the largest fertilizer producing complexes of the
country. The annual turnover of RCF LTD is about Rs 5700 Crore. Both the units
have acquired “INTEGRATED MANAGEMENT SYSTEM”, ISO 9001
certification for quality, ISO 14001-2004 Certification for "Environmental
Management System” and OSHAS-18001 for Occupational Safety and Health
Assessment Series.
Organization Structure
Rashtriya Chemical and Fertilizers Ltd have proactively taken part in various
corporate social responsibilities. And this can be accounted by the various steps
taken by RCF for society. There are various areas where welfare is done by
Rashtriya Chemical and Fertilizers.
1. Community Welfare
2.Education
3.Healthcare
4.RuralDevelopment
5.Sports
6.Water
7.Women
The Company is quite conscious of its CSR and discharging the same
assiduously to the best of its capacity. It runs various programmes to
help inhabitants around its plants at Trombay and Thal. Apart from
taking various measures to control pollution in its plant at Trombay, it
2. To study the constituents of the cost sheet viz.; Variable cost, Fixed cost,
Capital cost, IDC, Contribution, Working Capital Management etc. for the
factory perspective.
Learning Objectives
The plinth of this project is laid with the idea of Capital Budgeting. Since it is a
new venture, the risk-return balance is the important. The idea is to minimize the
risk and maximize the return. The project deals with the kick start of the idea of
The next part of the project involves attainment of the loan, repayment of the loan,
DSCR and other profitability ratios to be studied in detail so that the profitability
index of the company goes on with an increasing positive slope.
PRODUCT DESCRIPTION
SSP Fertilizer : Single Super Phosphate
4. Free phosphoric acid (as P2O5) per cent by weight: maximum 4.0
6. For Granulated SSP - Particle size: Not less than 90 per cent of the
material shall pass through 4 mm IS sieve and shall be retained on 1 mm IS
sieve. Not more than 5 per cent shall pass through 1 mm IS sieve.
LITERATURE REVIEW
Manufacturing Process
Ground Rock phosphate reacts with Sulphuric acid as per the following chemical
reaction:
Sulphuric & Ground Rock Phosphate are fed in the mixer. The resultant slurry
from the mixer is then fed to a den where it solidifies. The den is basically a
covered slat conveyor. The low conveyor speed allows settling time for the slurry,
Granulated SSP
The powdered SSP is fed to the granulator having a facility for adding moisture, in
the form of water sprays. The undersize material SSP forms the seed for the
granule formation. After granulation, the product is dried in a fuel fired dryer and
screened, the fines are returned to the granulation unit. This final product is then
bagged in 50 kg HDPE bags.
Gases from the mixer / den are taken to absorption unit where
these are dissolved in water. Liquid effluent generated is used in
the mixer for dilution of acid.
Project Configuration
It is proposed to set up a 1,000 MTPD SSP plant at Thal unit of RCF. Based on the
infrastructure available at Thal, it is considered that the utility requirements such
Air, Water, Power, Lab facility etc shall be available from the existing
infrastructure and hence setting up such facilities and their related costs is not
envisaged.
Apart from above, a large covered area shall have to be provided for the curing of
SSP, movement of material for mixing/forming appropriate grade etc.
The specific consumption of raw materials and utilities per MT of SSP is:
1. Rock Phosphate : 0.58 MT
3. Power : 25 KW
Rock Phosphate
Requirement of Rock phosphate shall be around 580 Tonnes per Day i.e.
around 1,74,000 MT per annum. Rock Phosphate can be sourced indigenously
from Rajasthan State Minerals and Mines Limited (RSMML), Rajasthan or
through imports from Jordan, Togo etc. For this study it is considered that the
entire Rock phosphate requirement shall be met from RSMML.
Sulphuric acid
RCF has its own sulphuric acid plant at its Trombay unit. However, the
production capacity of Trombay unit is only 300 MTPD, which is currently
Requirement of sulphuric acid shall be around 400 Tonnes per Day i.e. around
1,20,000 MT per annum.
It is envisaged that Power, Air, Water etc requirements shall be met from the
existing infrastructure at Thal and no capital investment on this account is
envisaged.
Manpower Requirement
The manpower requirement of the plant has been framed on the principle of
current practices followed by the company.
Time Schedule
The overall time schedule for implementation, complete engineering, erection and
commissioning activities shall be completed within 12 months from zero date.
The detailed manpower requirement is presented in Annexure – I.
The Project Capital Cost of SSP plant is estimated as `51.51Crore keeping in mind
all the financial responsibility of the plant and the Company.
Total capital requirement of the project will be arranged as 2:1 (debt: equity) from
financial institution. The interest rate for the long term loan has been considered as
12%.
WORKING CAPITAL
The total normal working capital requirements of ` 38.45 Crores at rated capacity
of the plant for proposed project have been worked out. The working capital
includes accounts receivable for 1 month. It also includes goods in process for 2
days, and cash in hand 50 Lakhs. The short-term loan from the bank has been
taken as 70% of total working capital i.e. ` 22.11 Crore. The balance amount of
normal working capital has been capitalized under margin money i.e. `9.47 Crore.
The detailed Working Capital is presented in Annexure-III.
Interest during construction period has been estimated on the basis of the
anticipated schedule of expenditure. It has been assumed that total project cost
would be financed by equity and long-term loan in the ratio 2:1. Equity portion of
the capital investment would be spent first and then only long-term borrowings
would be resorted to. The interest charges accruing during the construction period
have been included in the project cost as IDC charges. The rate of interest on long-
term borrowing has been taken as 12% and details are presented in
Annexure – IV,V
COST OF PRODUCTION
The capacity of the proposed SSP plant has been considered at 1,000 MTPD per
day operation. The cost of production is worked out assuming operation at the
rated capacity with 300 stream days/annum. The details of the Cost of Production
and Cost of Raw Materials are presented in the Annexure – VI and Annexure – VII
respectively.
Prices of Raw Materials & Utilities
Items `/MT
Variable Cost 5352.23
Fixed Cost 507.75
Total 5859.98
NET REALIZATION
Items `/MT
MRP 3200
Subsidy 4400
Total 7600
ITM BUSINESS SCHOOL 26
Less Freight 700
Net Realization 6900
Profitability
SENSITIVITY ANALYSIS
Hence, the trends in the sensitivity table show us that with the increase in the
price, our cost of production increases and which decreases our IRR and
increases the payback time. The case is just the opposite if the price is
decreased.
Hence, we see that the average Profit after tax per year is ` 24.02 Crore,
which shows that the plant is generating positive revenue every year. There
may be few commissioning loss at the beginning but the trend towards the
advancing years shows that it is certainly profitable to set up the factory.
Moreover, the Internal Rate of Return (50.17%) is quite appreciable for the
company. The Cost of Production is increasing (although with less margin)
towards the advancing years which may ultimately lead to the increase in the
profit of the company. Moreover, the payback time is 2.29 years which shows
that we can quickly recover the loan and hence there would be increase in the
cash and bank balance of the company in the later years.
Hence, it can be said that in order to increase the returns, the company should
decrease the Cost of Production which would ultimately lead to better reserves
of the company.