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DECLARATION

I, Rituraj Priyadarshi Das hereby declare that the Summer Internship


project report entitled at Rashtriya Chemical and Fertilizers Ltd. , Mumbai
under the guidance of Mr. Alkesh Takpere (Company Guide), submitted to ITM
Business school, Kharghar, Navi Mumbai for the partial fulfillment to the award of
degree of PGDM programme , is my original empirical-research study, carried out
from 1st May 2010 to 30th June 2010 and the same has not been submitted to any
other institution / organization for the award of any other degree / diploma /
fellowship of other similar titles or prizes or university by any other person. I
further declare that all the facts and figures furnished in this project report are the
outcome of my own intensive research and findings.

Place: Navi Mumbai

Date: 21-07-2010.

Name: Rituraj Priyadarshi Das

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ACKNOWLEDGMENT

I take immense pleasure in thanking Dr. Ganesh Raja, Director, ITM


Business School and Dr. V.V. Sople, Deputy Director for having permitted me to
carry out this project work.

I wish to express my deep sense of gratitude to my Internal Faculty Guide


Ms. Rakhi Shrivastava for her able guidance and useful suggestions, which
helped me in completing the project work, in time.

I am indebted to my company guides, Mr. Alkesh Takpere, Chief


Engineer and Mr. Girish Temgire, Deputy Chief Engineer, who had been a
source of inspiration the project in systematic manner.

Finally, yet importantly, I would like to express my heartfelt thanks to my


beloved parents for their blessings, my friends/classmates for their help and wishes
for the successful completion of this project.

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CERTIFICATE
(From Faculty 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.

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Signature:_____________________

Prof. Rakhi R. Shrivastava

Faculty Guide

Institute for Technology & Management

Kharghar, Navi Mumbai.

Rashtriya Chemicals and Fertilizers Ltd.


Priyadarshini Building, Eastern Express Highway, Sion, Mumbai-400 022

CERTIFICATE
(From Company Guide)

To Whom So Ever It May Concern

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.

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Signature:_____________________

Mr. Alkesh Takpere,

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

As per Department of fertilizers, Government of India notification, Per MT NBS


for SSP meeting quality specifications as per the FCO would be `4400, which
would be inclusive of cost of freight. Since the subsidy on the nutrients shall
remain fixed, the selling price of SSP at will be decontrolled and will be
determined by market forces and shall be decided by the manufacturer.

Project at a Glance

1. Name of the project : Single Super Phosphate fertilizer

Project.

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2. Location : Thal

3. Stream Days : 300

4. Project Time Schedule : 12 Months

5. Total Project Cost : `51.51 Crores

6. Realization

: MRP …….3200 `/MT

Subsidy…. 4400 `/MT

Total……...7600 `/MT

7. Annual Production : 3,00,000 MTPA @ 100% load

8. Cost of Production : 5859.98 `/MT

9. Manpower : 70 Nos.

10. IRR : 50.17%

11. Payback Period : 2.29 years

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PACKING OF FERTILIZER

INDUSTRY PROFILE

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Indian fertilizer industry is one industry with immense scopes in the future. India is
primarily agriculture oriented country and its economy is highly dependent on the
agrarian produce. The majority of the populace of India lives in rural areas and the
foremost occupation in the villages is agriculture. Developments pertaining to
different industries are being made on a massive scale to change the country's
economy from an agrarian one to an industrial one. It is extremely important for
the fertilizer industry India to have development in terms of technologically
advanced manufacturing process and innovative new-age products. The first
fertilizer manufacturing unit in India was set up in the year 1906 at Ranipat in
Chennai.

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:

• National Fertilizers Limited


• Fertilizers & Chemicals Travancore Limited
• Rashtriya Chemicals & Fertilizers Limited
• Madras Fertilizers Limited
• Paradeep Phosphates Limited
• Pyrites, Phosphates & Chemicals Limited

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Some of the private sector companies in India fertilizer industry:

• Chambal Fertilizers & Chemicals Limited


• Balaji Fertilizers Private Limited
• Deepak Fertilizer and Petrochemicals Corporation Limited
• Bharat Fertilizer Industries Limited
• Coromandal Fertilizers Limited
• Gujarat Narmada Valley Fertilizer Co. Limited
• Godavari Fertilizers & Chemical Limited

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COMPANY PROFILE

Rashtriya Chemicals and Fertilizers Limited is a Public Sector Undertaking of


Government of India. The plants at RCF were set up in early sixties. Today RCF
is one of the largest chemical and fertilizer complexes in India, with 21 operating
plants at Trombay and 5 large plants at its super fertilizer unit at Thal, 100 Km
south of Mumbai.

Company's Vision Statement: RCF shall be a well respected world class


corporate with progressive growth in core and non-core areas achieving highest
standards in efficiency, profitability, environment protection and Corporate Social
responsibility through operational excellence and ethical business culture. It will
strive to provide world class services to its customers and continually enhance
shareholder value.

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Company's Mission Statement: RCFs mission is to achieve continuous
improvement in existing operations and strive for all round growth through
expansion, diversification, innovation and productive research and development.

RCF's unit at TROMBAY, Mumbai, is a sprawling complex having 21 operating


plants. Main fertilizers produced are Urea, Suphala 15:15:15 and Suphala 20:20:0.
Other specialized fertilizers and other related products are- 100% water soluble
fertilizers, bio-fertilizers, micro-nutrients etc. It produces variety of chemical in
both its units.

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.

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A VIEW OF FERTILIZER PLANT AT THAL

Organization Structure

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CSR Activities

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 three main CSR activities are:


a) Community Welfare
b) Rural development
c) Employee Welfare

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

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is running Chembur Green Project for the entire neighborhood by
planting trees and providing saplings free of cost. So far it has
planted more than a million trees. It also provides help to the needy
organizations such as orphanages, old age homes, balwadi schools, etc.
either by itself or in association with NGOs.

At Thal, it runs a Secondary School and also provides facilities to some


other schools in the area. It provides water facilities to some villages
and also takes up some specific projects for the welfare of the people
around the plant.

The Company also undertakes socio-economic activities in other parts of


the country through its marketing organizations particularly the
development of rural sports, water management, farmer's education, etc.

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INTRODUCTION

What is a Financial Feasibility Study?

A financial feasibility study is an assessment of the financial aspects of a


Venture/Plan or Project. It considers many things including start-up capital,
expenses, revenues, and investor income and disbursements.

A financial feasibility study can focus on one particular project or area, or on a


group of projects (such as advertising campaigns). However, for the purpose of
establishing a business or attracting investors, we should include at least three key
things in our comprehensive financial feasibility study:

• Start-Up Capital Requirements,


• Start-Up Capital Sources, and
• Potential Returns for Investors.

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SETTING UP OF A PLANT FOR THE PRODUCTION OF
SINGLE SUPER PHOSPHATE (SSP)

Objectives of the Project

1. To analyze the Financial Feasibility for setting up of a new factory/Venture.

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

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laying the plant till the product is floated in the market as well as the after sales
implications are also to be considered.

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

1. Molecular formula : Ca(H20P4)2.H2O

2. Molecular Weight : 234.05

3. Moisture per cent by weight : maximum 12.0

4. Free phosphoric acid (as P2O5) per cent by weight: maximum 4.0

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5. Water soluble phosphates (as P2O5) per cent by weight: minimum 16.0

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.

7. Pack : in 50kg bag with inner poly bag.

LITERATURE REVIEW

Manufacturing Process

Ground Rock phosphate reacts with Sulphuric acid as per the following chemical
reaction:

Ca10(PO4)6F2 + 7H2SO4 + 3H2O 3Ca(H2PO4)2.H2O + 7 CaSO4 + 2HF

Rock Sulphuric Monocalcium

Phosphate acid phosphate

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,

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thereby solidifying it into a solid mass. At the end of the conveyor a radial cutter is
placed which cuts the solid mass into fine powder. This final product is then
provided a curing period of around 7-21 days depending upon rock phosphate
quality. During curing, the reaction approaches completion. The free acid,
moisture, and unreacted rock contents decrease and the available and water soluble
P2O5 contents increase.

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.

In addition to the above following additional facilities shall be required:

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Bagged SSP storage 50,000 MT

Rock Phosphate silo 10,000 MT

Sulphuric acid storage 5,000 MT

Bagging facility 1,000 MTPD

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.

Major Raw Materials and their availability

The specific consumption of raw materials and utilities per MT of SSP is:
1. Rock Phosphate : 0.58 MT

2. Sulphuric Acid (98%) : 0.40 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

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utilized for captive consumption without any surplus, and hence the requirement of
sulphuric acid for the SSP project shall be met through external sources.

Requirement of sulphuric acid shall be around 400 Tonnes per Day i.e. around
1,20,000 MT per annum.

Power & other utilities

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 & TIME SCHEDULE

Manpower Requirement

The manpower requirement of the plant has been framed on the principle of
current practices followed by the company.

Manpower Requirement Summary:

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Designation Strength
Workers/Majdoors 28
Operators 20
Technicians 12
Supervisor 8
Manager 1
General Manager 1

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.

PROJECT CAPITAL COST & FINANCIAL PLAN

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.

The summary of the project cost is given in the following table:

Sr. Description Total Cost

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No. (` Crore)
1. Plant 22
2. Offsite and infrastructure 15.75
Facility
3. Pre-operative expenses 0.1
4. Contingencies 1.89
5. Commissioning expenses 0.5
6. Financing charges 1.79
7. Margin money on working 9.47
capital
Total Project Cost 51.51

The detailed Project cost is presented in Annexure – II.

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.

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CONTINGENCY

Contingency provision of 5% on all base costs, to cover up minor deviations from


the basis used for the estimates and for any unforeseen expenditure has been made.

INTEREST DURING CONSTRUCTION (IDC)

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

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The delivered prices of raw materials & utilities for the calculation of cost of
production are furnished in the table below:

Items Units `/Unit


Rock Phosphate MT 6000.43
Sulphuric Acid MT 3004.95
Water M3 40
Power KWh 6
Bags No. 14

Based on the above inputs the average Cost of production of SSP is as


under:

Items `/MT
Variable Cost 5352.23
Fixed Cost 507.75
Total 5859.98

NET REALIZATION

Items `/MT
MRP 3200
Subsidy 4400
Total 7600
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Less Freight 700
Net Realization 6900
Profitability

The above project configuration generates an IRR of 50.14% with a


payback period of 2.29 years. The detailed workout is mentioned in
Annexure – VIII and IX.

SENSITIVITY ANALYSIS

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Sensitivity Analysis is the analysis of the parameters when there is a deviation
from the original value so as to note down the difference in the values, if the
scenario was different. In this case, I have carried out the sensitivity analysis
for the landed cost of Rock Phosphate, Sulphuric acid. Debt: Equity Ratio,
Interest rates and Capital cost and the effect on Cost of Production, Fixed Cost,
Variable Cost, Working Capital, IRR and the Payback period.

The table in the next page shows the corresponding readings.

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.

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CONCLUSION

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.

The Sensitivity Analysis shows that there is an increase in the Cost of


Production of SSP if the price of the raw material is increased, which leads to

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increase in the payback time and decrease in the IRR. There is an opposite
situation if the price is decreased.

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.

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