2.

Economics and Cost Estimation:

2.1. Battery Limits Investment:
Cost data are often presented as cost versus capacity charts or expressed as a power law of capacity:

Where,
CE= equipment cost with capacity Q
CB= known base cost for equipment with capacity QB
M = constant depending on equipment type
fM = correction factor for materials of construction
fP= correction factor for design pressure
fT= correction factor for design temperature

Data: ( ref 16 )

Equipment Quantity Capacity Measure Base Base Cost Cost

Size QB CB ($) Exponent
(M)
Reactor 2 Volume 1 1.15 x 104 0.45
( m3)
Distillation Column 1 Column diameter 0.5 1.8 x 104 0.97
(m)
Absober column 1 Column diameter 1 1.8 x 104 1.70
(m)
Extraction column 1 Power ( kW ) 1 1.97 x 103 0.35
Interstage cooler 1 Heat Transfer area 80 3.28 x 104 0.68
( m2)

We know that 1$ = Rs 65.08

1. Interstage cooler :
CE = CB (Q/QB)M fM fP fT
CE = 3.28 x 104 (73.39 / 80 )0.68 x 1 x 1 x 1
= $ 30,934.071
= Rs. 2,013,189.392
2. Packedbed Reactor ( R 01 ) :
CE = CB (Q/QB)M fM fP fT
CE = 1.15 x 104( 348.39 / 1 )0.45x 1 x 1 x 1.8
 = $ 288,336.6855
= Rs.18,764,951.49
3. Packedbed Reactor ( R 02 ) :
CE = CB (Q/QB)M fM fP fT
CE = 1.15 x 104( 646.23 / 1 )0.45x 1 x 1 x 1.8
= $ 380,754.0639
= Rs. 24,779,474.48
4. Distillation Column (Acid tower) :
CE = CB (Q/QB)M fM fP fT
CE = 1.8 x 104( 2.78 / 0.5 )0.97x 1 x 1 x 1.
= $ 95,059.3965
= Rs.6,186,465.526
5. Absorber column :
CE = CB (Q/QB)M fM fP fT
CE = 1.8 x 104( 1.083 / 0.5 )0.70 x 1 x 1 x 1
= $ 30,919.568
= Rs.1,881,455.731
Total Equipment Cost = Rs. 5.36 Crores

2.2. Estimation of Fixed Capital Investment

The fixed capital cost of the project is given as a function of the total purchase equipment cost.
There are direct and indirect costs which are to be included in estimating the fixed capital cost.
The factors included in the direct cost are:
1. Equipment erection, including foundations and minor structural work.
2. Piping, including insulation and painting.
3. Electrical, power and lighting.
4. Instruments, local and control room.
5. Process buildings and structures.
6. Ancillary buildings, offices, laboratory buildings, workshops.
7. Storages, raw materials and finished product.
8. Utilities (Services), provision of plant for steam, water, air, firefighting services (if
not costed separately).
9. Site, and site preparation.
 Factors
Items
Equipment Erection 0.4
Piping 0.7
Instrumentation 0.2
Electrical 0.1
Building, Process 0.15
Utilities 0.5
Storages 0.15
Site development 0.05
Auxiliary Buildings 0.15
Total 3.40

So, Fixed Direct Cost = 3.4 * 5.36 = Rs.18.23 Crores

In addition to the direct cost of the purchase and installation of equipment, the capital cost of a
project will include the indirect costs. The indirect costs include:
1. Design and Engineering Costs,
2. Contractor’s Fees, and
3. Contingency allowance.
Indirect costs are factors of direct cost. The factor are as follows:

Items Factor
Design and Engineering 0.30
Contractor’s Fee 0.05
Contingency 0.1
Total 1.45

Therefore the Fixed capital Cost = 1.45 * Fixed Direct Cost

= 1.45 * 18.23 = Rs.26.43 Crores
2.3. Operating Cost

Raw Materials Cost

Raw Materials Cost ( Rs/kg ) Amount ( kg/day )
Propylene 97.62 1,18,029.84
Oxygen 18.42 131,408.64

Raw Materials cost ( Rs/day ) = ( 97.62 x 1,18,029.84 ) + ( 18.42 x 131,408.64 ) = Rs.13,942,620.13

Raw Materials cost for a year = 365 x 1.3 = Rs.474.5 Croress

Utilities cost = Rs.142.35 Crores (30% of Raw material cost)

Maintenance cost ( 10 % of fixed capital cost )= Rs.2.643 Crores

Miscellaneouscost (Safety clothing: hard hats, safety glasses etc. , Instrument charts and accessories ,
Pipe gaskets , Cleaning materials ) (10 % of maintenance cost )= Rs.0.2643 Crores

Total production/ operating cost = Rs.622.20 Crores

Working Capital

Total capital Investment (TCI) = Fixed capital cost + (10 – 20 %) of Working capital

TCI = 26.43 + (0.1 x 26.43) = 29.07 crores

2.4. Profitability Analysis

Gross earning/ income

Wholesale Selling Price of Propylene per kg = Rs.106

Total Income = Selling price × Quantity of product manufactured
= 165 × (150,000 Kg/day) × (365 days/year)
= Rs. 903 Crores
Gross income = Total Income – Total Production Cost
= (903 – 622.20) Crores
Gross Income = Rs.280.8 Crores

Let the Tax rate be 40% (common)

Net Profit = Gross income - Taxes = Gross income× (1- Tax rate)
Net profit = 280.8 × (1- 0.4)
Net profit = Rs.168.48 Crores
Rate of return = Net profit/Total capital investment
= 168.48/29.07 = 5.79