QF Processing Unit

Introduction

India till the year 1986 was exporting fish products by using conventional type of freezing wherein the products
were generally packed in blocks of 2 kgs. by block freezing. The disadvantages of block freezing are that the
product looses its identity and the consumer is forced to buy the product in bulk. In cases where reprocessing is
involved the quality of end product is affected. Hence these factors necessitated the introduction of individually
Quick Frozen Products. Direct production of IQF products eliminates reprocessing and the drop loss during
thawing and refreezing is considerably reduced. The preference of the individual consumer in importing
countries is also towards IQF products as he can avoid purchase in bulk packages. The IQF products fetch a
better price in the international market. IQF technology was introduced in developed countries as far back in
1965 and India could make a beginning in this regard only in 1986.

Scope for establishing IQF units

At present 50 IQF units are operating in India. The scope for establishing more number of IQF unit is bright. At
present only 15% of the total shrimp products exported out of India are in IQF form. Shrimp products are the
major item among the marine products exported from India.

Since the preference in importing countries is towards IQF products and also there is value addition if the
products is IQF, it can be assumed that scope exists for establishing new units. A large number of brackish and
fresh water prawn farms have been established. The additional quantity of prawns produced by these farms may
also require IQF facility.

Variety of IQF exported from India

The major varieties of IQF products which are exported include shrimp, cuttle fish, lobsters and fishes as per
details given below :-

I Marine shrimp

(a) Headon white/brown/tiger

(b) Headless white/brown/pink/flower/tiger
(c) Peeled and deveined
(d) Peeled and undeveined
(e) Peeled and cooked
(f) Cooked and peeled
(g) Fan tail - round deveined

II Head on scampi

III Lobsters

(a) Rock lobster tail

(b) deep sea lobster tails
(c) Sand lobsters/slipper tails

IV Cuttle Fishes

(a) Whole cleaned

(b) Fillets (flat or rolled)

V Squids

(a) Stuffed squid tubes

(b) Squid tubes with tentacles
(c) Squid rings

VI Fishes
Red snappers, millets, promfrets, seer fish etc.

VII Crabs

(a) Cooked whole mud crab

(b) Raw whole mud crab
(c) Dressed crab
(d) Crab meat

Location of the project

The site for location of the IQF units has to be selected carefully after conducting a proper survey of the existing
IQF units, their capacity utilisation, need for further units etc. It will be useful if the assistance of MPEDA offices
is taken for selection of the suitable site.

Technical parameters

A list of technical suggestions for establishment and operation of an IQF unit are indicated in Annexure I. It is
also suggested that an outside agency like MPEDA may also be consulted in the matter.

Borrower's profile

Complete details of the entrepreneurs, partnership firm like registered company or qualification and experience of
the promoters, net worth of the borrowers, other activities undertaken by them etc. have to be furnished.

Physical and financial outlay

Details of the physical and financial outlay involved for setting up of an IQF unit of 2500 metric tonnes capacity is
furnished in Annexure II. It can be seen therefrom that the total cost including working capital expenses (60%
capacity utilisation during 1st year) works out to Rs.1430.00 lakh. While submitting the project to the banks for
sanction of loan, entrepreneurs are expected to submit detailed plan and estimates for all the civil works to be
undertaken as also invoices of various items to be purchased from the suppliers.

Margin money and bank loan

The entrepreneur has to bring in 25% of the project cost out of his own resources and the balance of 75% will be
provided by banks as bank loan. However, NABARD could consider providing margin money assistance in
suitable and eligible cases as per the guidelines contained in circular No.DPD.67/92-93 dated 24/02/1993.

Rate of refinance

NABARD refinance is available for setting up of IQF processing unit provided the same is technically feasible and
financially viable. In view of priority attached to exports NABARD is agreeable to provide refinance as per
existing norms.

Financial viability

For working out the income and expenditure from the IQF unit the following assumptions have been made:-

1 Number of working days 250

2 Number of shifts per day 3 shifts (each shift of 6 hrs operation with one
hour for defrosting and one hour for reaching
ambient temp. of 400C
3 Capacity utilisation 1st year - 60%

2nd year - 70%

3rd year - 80%

 onwards
4 Product composition at 80% utilisation (2000 1. Prawns (60%)-1200 tonnes
tonnes of end product)
2. Fishes (25%) 500 tonnes

3. Cuttle fish/squids (10%) 200 tonnes

4. Lobsters (5%) 100 tonnes

5 Expected life of plant and machinery 10 years

It is assumed that there will be 4 operating cycles in a year.

The financial analysis has been shown in Annexure III. Results of the analysis are as under:-

(i) NPW at 15% DE - Rs.1770 lakhs

(ii) BCR at 15% DF - 1.11
(iii) IRR is more than 50%

Marketing

At present the Indian exports in IQF products comprising mainly shrimps are exported to EEC, USA etc. With
proper product diversification it would be possible to explore other world markets.

Interest rate for ultimate borrowers

Banks are free to decide the rate of interest within the overall RBI guidelines. However, for working out the
financial viability and bankability of the model project we have assumed the rate of interest as 12% per annum.

Interest rate for refinance from NABARD

As per the policy circulars of NABARD issued from time to time.

Repayment period

As can be seen from Annexure IV the borrower will be able to repay the bank loan in 6 years with a moratorium
of one year on principal, interest on the loan will be collected from first year itself.

Working capacity

Banks sanctioning term loan for setting up the unit should also make arrangements for availability of working
capital loan to enable the borrower to run the unit smoothly.

Security

Banks may take a decision as per RBI guidelines.

ANNEXURE I

Technical suggestions for establishment and operation of an IQF unit

Principal of IQF production and types of plant

Individual quick freezing generally takes place in two stages. In the first stage the product is partly frozen to a
pre-determined point and fluidized to the semi-weightless stage of the product by partially suspending it in the air
in the second stage. In the process the velocity and pressure of air is adjusted to ensure ultra rapid freezing in
IQF form. Based on the mechanical structures used for the conveyance of the raw materials, IQF machinery can
be of two types.

i) Conveyor type where the air flow is from top to bottom or vice versa and
ii) Spiral type

The refrigerant used can be Ammonia, Liquid Nitrogen, Freon (Refrigerant-22) or brine based on which
modification would be made in the machinery.

Criteria for selection of plant site

1. Nearness to landing centre/shrimp farm is of paramount importance for getting fresh raw materials in adequate
quantities.
2. Uninterrupted power supply.
3. Easy accessibility for free flow of raw material and finished product.
4. Adequate supply of fresh water.
5. Availability of skilled and unskilled labour

The process

Stage - 1 Receipt of Raw material

The raw materials are subjected to preliminary inspection then iced and stored till processing.

Stage - 2 Cleaning finished products

The raw materails are de-iced, cleaned and made in the form in which the ultimate product ought to be e.g. fillets,
headon,headless etc., washed and weighted.

Stage - 3 Processing

The raw material is loaded on to the conveyor and the process is continued till the core temperature is below -
180C. The product is glazed and packed in vaccum formed packs.

Stage - 4 Storing

The product is stored at -200C till shipment.

Note : Weight loss during thawing should be adequately compensated by adding additional weight at the time of
freezing. The quantum of drip loss is a factor of size and variety of the raw materials to be processed.

Some conditions for ensuring better quality products

1. The temperature inside the freezing tunnel should be maintained constantly below - 400C. The refrigeration
machinery should be capable of maintaining the air temperature below - 400C even when the raw material is fed.

2. Defrosting should be done preferably after 5-6 hours of continuous operation of the plant. After defrosting the
raw material should be fed only when the air temperature is below - 400C to ensure a core temperature below -
200C.

3. All parts coming in contact with the product should be corrosion-resistant preferably of stainless steel.

4. The freezing time depends on the thickness of the raw material. The thicker the product, longer will be the
freezing time. In order to freeze various types of products the freezer should be equipped with a variable
conveyer speed control ranging from 5-50 minutes (stopless).

5. The IQF unit is to be installed in an air conditioned room so that the temperature of the product fed to the
conveyor will not rise.

6. The IQF outlet should be preferably in the anteroom of the cold storage, so that grading and packing can be
done in the anteroom and the product can be transferred to cold storage without much delay.

ANNEXURE II

Estimated physical and financial outlay involved for setting up of an

IQF unit of 2500 MT capacity ( Illustrative )

A. Capital cost

Sr.No Items of Investment Rs.lakh

1 Plant and Machinery IQF unit (10 tons per day)
i) Spiral belt freezer (double belt) 100
ii)Refrigeration system (Kirloskar compressor 150 7
HP)
iii) Other accessories 30
2 Cold storage-300 ton capacity (3 compartments of 40
100 ton capacity each)
3 Civil construction - Plantroom, anteroom, processing 150
room, labour room, lab, office, changing
rooms,labour quarters etc., as per EU norms.
4 Diesel Generator (380 KVA) 20
5 Miscellaneous equipment's like washing, grading 10
table, filleting machine, air curtain, air conditioning,
lab equipments, jet washers, packaging unit etc.
6 Refrigerated Van (2 refrigerated vans of 5 ton 15
capacity each)
7 Electrification 15
8 Fresh water and water conveyance structure like 7
pipe, piping pumps etc.
9 Water treatment plant 9800 lit per hour 10
10 Miscellaneous 6
Total 410

B. Recurring Expenses

Assumptions
1 Cleaning & Processing loses for
a) Shrimp 20% by weight
b) Quality fishes 10% by weight
c) Lobsters 40% by weight
d) Cuttle fish / squid 25% by weight
2 Average drop loss for IQF product 5% max

Computation of recurring expenses

(Rs. in lakh)

1 Cost of Raw material

i) Shrimp - 1600 ton @ Rs.200/kg 3200.00
ii) Fish - 600 ton @ Rs.50/kg 300.00
iii) Cuttle fish/squids -145 ton @ Rs.50/kg 72.50
iv) Lobsters- 185 tonnes @ Rs.125/kg 231.25
2 Power, Refrigerant/Fuel @Rs. 15 lakh per month (avg. 180.00
for 12 months)
 3 Salary and wages for skilled and unskilled workers 6.00
4 Administrative expenses (establishment & salary) 3.60
5 Packaging & marketing expenses @ Rs.500/ton(approx.) 10.00
6 Repair and maintenance (10% of the cost of plant and 41.00
machinery)
7 Miscellaneous expenses (1% of items 1-5) 40.00
Total 4084.35

Say Rs. 4085 lakh

C.Income of maximum production

(Rs. in lakh)

1 Sale of 1200 ton of shrimp @ Rs.300/kg 3600

2 Sale of 500 ton of fish @Rs.100/kg 500
3 Sale of 200 ton of Cuttlefish/squids @ Rs.150/kg 300
4 Sale of 100 ton of lobsters @ Rs.250/kg 250
Total 4650

Total Project Cost = Capital cost + Recurring Cost for the first operating cycle

410+1020= Rs.1430 lakh

Margin money @ 25% = Rs.358 lakh

Total financial assistance = Rs.1073 lakh

ANNEXURE III

STATEMENT SHOWING FINANCIAL ANALYSIS FOR

AN IQF UNIT OF 2500 M.T. CAPACITY (Illustrative)

(Rs. lakhs)

I Year II Year III to X Year

Financial Analysis
A Cost
1 Fixed cost 410
2 Recurring cost 2451 2860 3268
Total cost 2861 2860 3268
B Benefits 2790 3255 3720
C Net Benefits -71 396 452
Present worth of cost at 15% DF 2488 2162 11088

= 15738
Present worth of benefits at 15 2426 2461 12622
% DF
= 17509
NPW 1771
Benefit Cost Ratio 1.11:1
IRR >50%
ANNEXURE IV

STATEMENT SHOWING REPAYMENT OF PRINCIPAL

AND PAYMENT OF INTEREST (ILLUSTRATIVE)

Total Project Cost = Capital cost + Recurring Cost for the first operating cycle

410+1020= Rs.1430 lakh

Margin money @ 25% = Rs.358 lakh

Total financial assistance (Bank Loan) = Rs.1073 lakh

(Rs.lakhs)

Year Bank loan O/S Net Income Repayment Net surplus

at the
beginning of
the year
Interest@ 12 Principal Total
%
1 2 3 5 6 8
1 1073 2790 129 129 2661
2 1073 396 129 215 344 52
3 858 452 103 215 318 134
4 643 452 77 215 292 160
5 428 452 51 215 266 186
6 213 452 26 215 239 214