Feasibility study (MATS CNG filling station)

Completed by Students of MBA 3rd semester

IMS
(UNIVERSITY OF BALOCHISTAN) SHUMAIRA RAHEEM M-47 ZAHRA ISLAM MADIHA ARIF NADIA SALEEM HAJIRA DAWOOD MUNAZZA BATOOL M-67 M-45 M-58 M-44 M-73

INTRODUCTION

Introduction

Natural gas is a natural resource of energy, commonly used in residential, commercial and industrial sector. It is one of the most valuable natural resources abundantly available in our country. Compressed Natural Gas (CNG) is produced when the natural gas is compressed into cylinders to be used as a fuel in the automobiles.

CNG-powered vehicles uses natural gas the same fuel that is used by stoves, water heaters and clothes dryersstored in cylinders at pressures of 2,000 to 3,500 pounds per square inch

CNG has been used as an automobile fuel since 1940, and over the years, the technology has been modified and refined. In the recent years, the usage if CNG as an automobile fuel has significantly increased because of its low cost and environment friendly nature.

The people of Pakistan have been using the petroleum as fuel in their automobiles, thus spending a large amount of foreign exchange on import of petroleum products. Because there are abandoned supplies of natural gas in Pakistan, using natural gas to replace gasoline helps reduce our countrys dependency on foreign petroleum.

In Pakistan, hydrocarbon development institute of Pakistan (HDIP) first established the use of CNG as an automobile fuel in 1982. the market of this type of fuel, which is commonly available at much cheaper price, is increasing because of continuous increase in petroleum prices. At present, about 270 CNG station are operational in different parts of the country to cater to the needs of the consumers.

Market Analysis
One of the elements of Government petroleum policy is the commercial application of CNG technology .It is reflected in the efforts made by the government for the installation of CNG station and converting vehicles on CNG fueling system .Due to the efforts made by the Government and comparatively low prices of gas, more then 220,000 vehicles have already been converted to operate on Compressed Natural Gas (CNG)fueling system all over Pakistan .there are more then ,270 CNG station operating in the country and there is a need to set up more CNG station to meet the growing demand for it. As a part of its policy government has made great efforts to promote the use of CNG in Quetta as well.

Introduction and promotion of newly developed gas kits for rickshaw in Quetta city

TaraqeeTrust of Quetta has undertaken to reduce green house emission leading to global warning by introducing 400 CNG gas kits in two stroke rickshaws in Quetta city through the provision of credit to the rickshaws owner. The key stakeholders in this project are Rickshaw Drivers Association, Pakistan Hydrocarbon Institute, Canadian International Development Agency and Balochistan EPA.

Market supply
Existing Supply

At present, only one CNG station is operating in Quetta and that is situated at Qambrani road near UoB.That single CNG station is quite alarming to meet the growing demand of CNG.There is great potential to increase the number of CNG station here.

The capacity of the above mentioned CNG station is 378 to 424 cubic meter/hour

That is equivalent to about 4500 to 5100 cubic meter/day i.e. say 4800 in average, (12 hour working day)

The capacity of a mediocre CNG vehicles is 12 .9 cubic meter per cylinder.

The capacity of the existing CNG station is capable of refueling 30 to 32 vehicles per hour (filling 1 cylinder).

And therefore can fill 600 to 640 cars per day.

Market Demand
There are about more then 1000 vehicles, which have been converted to CNG fueling system in Quetta, and a large number of vehicles are being converted. It has been projected that the total number of CNG fuel vehicles will be increased up to 4000 by the end of next five years.

Due to the increasing prices of petroleum products, the trend of converting cars to CNG fueling system has been on a raise. The government of Pakistan has taken certain concrete steps in order to promote the use of natural gas as a fuel substitute in the automobiles. There are kits available in the market through which a petrol car can easily be converted into CNG fueling system. However, there were a large number of people who were reluctant to convert their vehicles from petrol to gas due to safety concerns. Recently, many car manufactures have started manufacturing the cars with built-in CNG fueling system, e.g., Suzuki car manufacturing company. This change has led to enhancing the confidence of the general public regarding the the safety concerns, and now, more people are towards purchasing these factory fitted CNG fueling system cars.

Considering the market trend and number of vehicles being converted into CNG fueling system there is exist an opportunity for the new entrants to earn profits fueling by setting up new filling station to meet the growing demand.

There are about more then 1000 vehicles in Quetta, operating with CNG fuel system, The average requirement of each car is about 12.9m per day

1000*12.9=12900 cubic meter per day

Demand Supply Gap

As mentioned earlier,

The demand for CNG fuel=12900 cubic meter/day

And

The existing supply for CNG fuel=4800 cubic meter/day

Demand supply Gap = 12900-4800

=8100 cubic meter/day

Its quite clear that there is an extra demand of about 8100 cubic meter /day on average. It is because of this demand supply gap that there always is a great rush at the sole supplier of the CNG fuel is not able to fulfill the demand of all vehicles.

But this is not the end, there is an increasing trend of CNG fueling system, the demand for this type of fuel will be increased by 300% within next five years and hence there a great opportunity for the new entrants to earn profits by setting up new CNG filling station t meet the growing demand.

Future Demand

The main factors for the rise in the demand for CNG fuel are;

1) Increase in the prices of petroleum 2) Government support and policies 3) Promotion of vehicles with built in CNG fueling system

Based on the above criteria the Demand projecti0ns are given in the following table:

Demand Projections for vehicles on CNG (in Quetta)

Year 1 2 3 4 5 Number of Vehicles on CNG 1000 1600 2300 3100 4000 Percentage Increase

60% 70% 80% 90%

The above-mentioned table indicates that the demand for CNG fuel is fast increasing .The industry is growing and there is opportunity for the new entrants to setup new CNG station to meet the growing demand.

CNG policy
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The government of Pakistan has offered number of incentives for encouraging the use of CNG in the country some of these are summarized below:

Strong Government commitment to promote usage of CNG Liberal policy of providing for CNG retailing Deregulated market price of CNG (for the consumers) Priority of providing natural gas connection to CNG station Rexlation of import duty and sales tax on import of machinery and equipment ,CNG kits cylinders

This has provided a boost to the industry, and so far, more then 220,000 vehicles have been converted to CNG and 270 CNG stations are operational. Another 320 stations are under construction in different parts of the country .According to inter national Associations for Natural Gas Vehicles (IANGV) statistics Pakistan is ranked third in the CNG using countries after Argentina and Italy

Jadoon asks HDIP to promote CNG plants manufacturing technology

ISLAMABAD, November 12 (Online): Federal Minister for Petroleum and Natural Resources Amanullah khan Jadoon has asked the Hydrocarbon Development Institute of Pakistan (HDIP0to emphasis upon its research and developm3nt activities for the promotion of oil and gas sectors at an accelerated pace and expand and promote Compressed Natural GAS (CNG) planets and kits manufacturing technology aimed at saving foreign exchange of the country.

Addressing the 65th HDIP Board of Governors meeting here on Thursday, the minister said that the government was according top priority for the speedy promotion of the oil and gas sector in order to put the country on the road to self reliance in this vital field of economy.

He said that it was the prime responsibility of oil and gas research and development institute of the country to equip them with the modern and sophisticated technologies pre-requite for the successful exploration and boosting the petroleum industry.

As a result of far-reaching steps taken by the government to deregulate the petroleum sector and providing attractive package of incentives to the investors, it witnessed the petroleum industry.

He said that the government would take further steps to provide more incentives and facilities in the oil and gas to attract investment.

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TECHNICAL ANALYSIS

All the prerequisites for successful commissioning of the project is available in the city:
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In this section it will be clarified and justified that all the prerequisites required for the successful commissioning of the project regarding Raw material, Infrastructure, Land, Building, Equipment, Personnel, etc are available in the city.

Material inputs:
There are two main inputs required for CNG filling station, one is natural gas and other is electricity. We are required to obtain both in the connections from the relevant authorities i.e. WAPDA and sui southern gas company (SSGC). According too the governments policy CNG filling stations will be given the priority of providing natural gas connection. CNG ranks relatively high in convenience and availability. Quettas extensive network of natural gas pipelines can deliver the fuel directly to many sites where compressors are installed by the local utility.

Land:

The minimum land requirements for installing CNG filling station is from 6000 to 9000 square feet. It must have at least 75 feet front opening. In case of our project we have already acquired land for the purpose of installing CNG filling station on lease from the 12th crop. The covered area of the land acquired is 8000 square feet, which will be having 75 square feet front opening. An amount of 4,000,000 rupees at the rate of Rs.500 per square feet lease payment has been paid to the 12th crop.

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Site selection:
The site selected for the filling station is opposite to the Askari park at the Airport road. it is adjacent to the Askari petrol pump near Askari Bungalows. The covered area of the acquired land as stated earlier is 8000 square feet. The site offers an ideal location for the filling station; as it is a commercial area and the residents of the whole city will have a very easy access to the station.

Infrastructure:
The project highly depends upon the availability of the infrastructure facilities; because the material inputs required as mentioned earlier are, natural gas and electricity. The site chosen for setting up the CNG Fuel station enjoys infrastructure facilities and possesses all the pre-requisites for the smooth operation of the Project i.e. Water, Power, road etc.

Building:
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There are certain civil works required to be carried out at the proposed location. The civil works would be carried out on an area of 2250 square feet. The rest of the area will be floored with tuff tiles. Civil work includes the following:

1.

Office Control Room Compressor and Cascade/Cylinder Storage Room Shed for Dispenser Toilet/Washroom Underground Gas Piping Flooring

The total cost of construction is estimated at Rs 1.5 million. Details for the said cost are as follows: Construction cost (Amount in Rupees)

Description Office with washroom Control room Compressor & Cylinder storage room Shed Underground gas piping Flooring Contingencies Total cost

Type of Construction RCC RCC RCC Canopy _ _ _

Covered Area(sq. ft) 436 144 1400

Cost per Sq.ft. (Rs.) 475 475 475 Lump sum 50 _

Cost(Rs.) 207,100 68,400 665,000 200,000 300,000 300,000 90,000 3,630,500

_ About 6,000 _

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Explosive department has laid down certain specifications for the compressor and cascade/cylinders storage room, which are as follows: 1. Minimum one-meter distance is required between wall and Compressor. 2. Minimum distance of one meter should be kept between Compressor and Cascade/cylinders. 3. Fire related walls (with RCC structure) must be used in the compressor and Cylinders storage room. 4. Roof of the compressor and storage room should not be of permanent nature. Corrugated asbestors might be used to prevent the compressor and Cylinders from heat.

Machinery and Equipment:

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The following equipment is required for a CNG filling station:

Gas Compressor

The purpose of compressor is to compress the gas enabling it to discharge the gas for refueling. This compressor requires an input pressure of 10 PSIG (pounds per square inch gauge) from the main gas supply with the outlet pressure of 3,600 PSIG. With this discharge pressure, the equipment can refuel 50 vehicles per hour.

Electric control panel

Electric control panel is required to operate the gas compressor. This panel will be mounted in the control room.

Storage cascade

Storage cascade/cylinders are used to store the natural gas.

Priority panel for Vehicle priority

During rush hours, the compressor is directly connected to the dispenser, by passing the storage cascade/cylinders with the help of priority panel, facilitating the refueling of vehicles at a faster rate.

CNG Dispenser high flow dual hose

Gas is filled in to the vehicles with the help of dispenser. This dual hose dispenser is capable of handling two vehicles at a time.

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ALL the CNG filling station equipment is foreign manufactured and imported on the specific requirement of the sponsor by the authorized agent. At present the countries that manufacture CNG filling station equipment rate, New Zealand, Italy, Canada and England. We have selected a Canadian origin compressor viz, Gemini Compressor H302, Jordaire Model J-H320 295-100E. This equipment is selected because of its low electricity consumption and higher outlet pressure. The total capacity of the selected equipment is 424m3/hr with a total power load of 200 KW.

The equipment will be delivered within 12 to16 weeks from the receipt of purchase order and initial payment. The details of this equipmet and accessories are available in Annexure 1.2.

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Suppliers
The central board of revenue (CBR) has specified the list of compressors, storage cylinders vehicle cylinders, CNG machinery & equipment and conversion kits in SRO 38(1)/98. In the case of our project the order for the machinery will be placed to the supplier at Lahore, which will b supplied to us from Karachi port directly to our destination.

The list of some local agents dealing in the specific equipment and machinery is given below:

Suppliers name National Engineers Correct Xpress (Pvt) Ltd.

ARM Gas Ventures

Hurricane Compressors Techno men Gas Ventures (Pvt) Ltd. Rix Pakistan (Pvt) Ltd.

Address 90-Bank Square Market, Model Town, Lahore. Suite # 14, 2nd Floor, Resham plaza, Chandni Chowk, Rawalpindi P.O.Box 114 Rasul Building 60 Sharah-e-Quaid-e-Azam, Lahore 8 Hong Kong Plaza, Satellite Town, Rawalpindi. H # 3B, St # 16, F-8/3, Islamabhad 37-A, Chaklala Scheme 2, Tipu Road, Rawalpindi.

Contact No. Phone: 042-583353, 5837026 Fax: 042-5839369 nlenger@lhr.comsats.net.pk Phone: 051-4844189 Fax: 051-4410872 correct@isb.compol.com Phone: 042-6366950-51, 6366948 Fax: 042-6369756, 6361142 albario@brain.net.pk Phone: 051-4840078 Fax: 051-4427426 Techcentric_pk@yahoo.com Phone: 051-2856996-8 Fax: 051-2856995 T_gasventures@usa.net Phone: 051-5591160 Fax: 051-5504414 rix@rixpakistan.com

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Stores and Spares

The whole equipment required for setting up a CNG filling station is imported. Therefore, it is required to build an inventory of necessary spare parts to meet the unforeseen circumstances such as breakdown or any other fault in any part or equipment. For this purpose, a stock of necessary spare parts worth $8,000, which is equivalent to 484,000 rupees will be imported along with other equipment to maintain a minimum level of spare parts for the 1st year of operation.

Furniture and Fixture

Furniture and fixtures mainly include tables, chairs, sofas, fans & lights, carpe, curtains and fire extinguishers. It is estimated that the furniture and fixture of Rs.85, 000 would be purchased.

Some office equipment is also required for the proposed project. A provision of Rs. 100,000 has been made for acquiring the required office equipment. The details of office equipment are annexed in Annexure______________

Manpower Requirement
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Manpower requirement for the CNG filling station includes manager, cashier, dispenser, operators, accountant, watchman and sweeper. There is not at all any problem to get the required staff, with the specific requirements, from the area. The total staff strength would be 15 persons for the two shifts. The basic salaries of the staff year one are as follows:

Human Resource Requirement Designation No. Of Employees for two shifts 1 1 2 4 2 1 1 2 1 15 Basic Salary per month (Rs.) 10,000 7,000 4,000 2,000 2,500 3,000 2,000 2,000 1,500 Total salary per year (Rs.) 120,000 84,000 96,000 96,000 60,000 36,000 24,000 48,000 18,000 582,000

Manager Accountant Cashier Dispenser Operators Mechanic Helper Watchman Sweeper Total

The details of the Wages and Salaries for the first five years that includes increments and fringe benefits for are given Annexure # 3.2

Compression process
Natural gas is a natural resource of energy, commonly used in residential, commercial and industrial sector. It is one of the most valuable natural resources abunbtly available in our country.
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Compressed natural gas is produced when the natural gas is compressed into cylinders to be used as a fuel in the automobiles. The compression process of CNG at CNG station is a multi steps process, it compress the natural gas to 3600 per square inches(PSI) from 8 PSI. The machinery, which is used, for the compression of the natural gas is fully automatic and has two main parts/compressor.

1. Screw compressor 2. Main compressor The screw compressor , compress the natural gas to 75 PSI from 8 PSI. for screw compressor to work or to start compression minimum pressure of 8 PSI is require, which is provided by the main gas pipline by the supplies of GAS (SSGC). After the gas is compressed to 75 PSI than it is send to radiator for cooling and than to filter for the filtering. After the filtering the compresed gas is transfer to the main compressor. The main compressor is consisted of four sub compressor, which compress the gas at different PSI. the first sub compressor of the main compressor receive the compressed gas at 75 PSI form the screw compressor it compress this 75 PSI to 220 PSI and than transfer it the next sub compressor which compress this 220 PSI to 480 PSI, this than transfer to the next sub compressor which compress it to 1200 PSI, which is transfer to next compressor which compress it to 3600 PSI. This compressed gas of 3600 PSI is than send to radiator for cooling and than to filter for filtering before storage. After the cooling and filtering the compressed gas is transfer to the storage cylinders from where is filled in the automobiles. Automobiles are filled at 2900 PSI when the presser of stored gas decline and reach to 2900 PSI the machine or compressor starts automatically again and the entire process is repeated again and when presser reaches to 3600 PSI than it stop automatically again.

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ENVIRONMENTAL/ECOLOGICAL ANALYSIS

ECOLOGICAL/ENVIRONMENTAL ANALYSIS

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CNG is not hazardous to the environment as is the case with the traditional petroleum fuel. It is highly of environment friendly nature. This is one of the main reason that its demand is continuously increasing and the Government is supporting it. Due to the environment friendly and low cost of natural gas, Hydrocarbon Development Institute of Pakistan (HDIP) has recognized the need and necessity to promote the use of CNG as a fuel in automobiles. Quetta is one the most polluted cities of the country, it is almost because of the unburned carbon practices in the atomosphere that is discharge as a result of the combustion process of the petroleum products inside the vehicles. CNG is highly composed of methane gas (i-e 90%) which is a non flammable gas and thus does not discharge unburned carbon in the atmosphere. The promotion of the CNG fueling projects will be a step towards the fight against pollution.

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ECONOMIC ANALYSIS

ECONOMIC ANALYSIS
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Natural gas is one of the most valuable natural resources abundantly available in our country. With promotion of CNG fuel industry the dependency of the government on petroleum products will be decreased. It will be a great support to the Pakistans economy, as it will help to minimize the impact of petroleum products. Hydrocarbon development institute of Pakistan has pioneered the use of environment friendly CNG in road transport as an economically viable fuel, which can substitute the imported petroleum products. Moreover with the petroleum of less costly fuel the people will start switching from use of Iranian petrol towards the CNG.as the demand of Iranian petrol has decreased the trend of smuggling and illegally supplying Iranian petrol will be reduced and hence the economic burden is relaxed from that aspect too. With the start of this project our economy will be supported in a number of ways, a few of them are discussed as under Employment Opportunity The project will provide employment opportunity to the people of Quetta city, as it needs a number of people to work for it, from the construction to the successful operation of the business. Contribution to GDP The input materials, natural gas and electricity, will be utilized and will be converted to the compressed natural gas. The value added to the input materials will be an addition to the GDP of Pakistan. Tax benefit The proposed project will benefit the government of Pakistan in the form of a number of tax collections, such as, tax imposed on the income of a business, on the income of the employees on the import of the CNG equipment, etc. Foreign exchange The people of Pakistan have been using the petroleum products such as fuel in their automobiles, thus spending a huge amount of foreign exchange on import of petroleum products. The proposed project will help to reduce our countrys dependence on foreign petroleum. Because there are abundant supplies of natural gas in Pakistan, using natural gas to replace gasoline will be more economic to the country and will help us to save foreign exchange.

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PROCEDURE FOR OBTAININ THE LECENSE OF CNG STATION

Three copies of prescribed application forms should be submitted with the following documents. Application forms are available free of cost 1. Status of applicant/applicants:-individual/joint ventures/registered company 2. In case of joint venture an attested copy of the document by the notary public or attested copy of registration certificate in case of registered company. 3. Attested copy/copies of applicant/applicants ID card. 4. Local proof of ownership pf proposed land for CNG station. 5. Bank statement of the applicant clearly expressing financial stability for setting up CNG station. 6. copy/copies of applicant/applicants national tax No certificate. 7. Proposed site plan of CNG station 8. Map of concerned area/city identifying the proposed site of the CNG station located in area. 9. Details of education, training and experience of the proposed technical staff. 10. Details of proposed security measures. 11. original bank receipts showing deposit of fee rs 25000 on prescribed form in favor of the Federal ministry of petroleum and natural resources. 12. The authority letter of the person authorized for correspondence side office. 13. NOC from the concerned marketing company, if the cng station is proposed to setup at petrol pumps otherwise a certificate that the station is not being set up for petrol pump.

Contact director or director general in case of non issuance of license after submission of complete application in 15 days. For further information contact deputy director CNG.

REGULATION, LICENSES AND INCENTIVES

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In this section a list of the licenses and NOC's that are required for the CNG filling station are given. It has been applied for Land is expected to be granted by the concerned authorities. LICENSE Obtaining a license from ministry of petroleum and natural resources is a ore requisite for setting up a CNG station. The cost associated with license is Rs 25000. CERTIFICATE (by HDIP) After the installation of the required equipment for CNG filling station, HDIP will inspect the working of the equipment, and once satisfier, will issue a certificate verifying that the installed equipment is up to the required standard. Cost associated with this certification is Rs. 35000. NOC's No objection certificate will be required from the following departments prior to the commencement of business. 1. concerned development authority of the city 2. Traffic engineering and planning authority (TEPA) 3. Traffic police (SSP) 4. Department of civil defense. 5. National highway authority (NHA) 6. Central board of revenue (CBR) 7. Civil administration tehsil municipal administration (TMA) 8. Irrigation department 9. Forest department 10. Explosive department INCENTIVES
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Sales tax The import of CNG equipment is exempt from sales tax vide SRO No.38(1)/98 dated 21st january till october 31,2002 Custom duty The CNG equipment is also exempted from custom duties as per the above referred SRO. REGULATORY REQUIREMENTS Quality certificate SRO 38(1) dated 21st January 1998 has been amended on April 11, 2002 and the quality certificate from original manufacture has been mandatory. This certificate should state that the equipment meets the safety standard as laid down in Pakistan CNG rule 1992. The designated third party inspectors witness this quality certificate .the cost of third party inspection is $500. List of Equipments The list of equipment and their various manufacturers has been mentioned in the same amended SRO whose import is exempted from custom duty and sales tax. Income tax on the import of CNG equipment Income tax, at rate of 6% is payable by the importer on the import of CNG equipment. Income tax The income of the CNG station is not exempted from the income tax. The investor has to pay tax on her/his income according to the nature of the business entity.

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ANNEXURE

Annexure 1

Cost of the Project & Financial Plan

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Cost of the Project Cost already met Land (including development registration cost) Building/civil work Contingencies Total cost of building Plant and Machinery (with Installation) Loading/unloading charges Total cost of machinery Furniture and Fixture Pre-operating expenses (3%) Total cost of furniture and fixture Total fixed cost Net working capital Total cost of the project 4,000 4,000 4,000 Cost to bet met 3,541 90 3,631 9,680 30 9,710 100 291 391 13,732 1,538 15,270 Total cost on completion 4,000 3,541 90 3,631 9,680 30 9,710 100 291 391 13,732 1,538 15,270

Financial plan The above cost of the project is proposed to be financed as below: Fixed cost Already met Long term finance Equity Total 4,000 4,000 4,022 13,732 1,538 1,538 9,560 19,270 9,710 9,710 To be met Net working capital Total Means/sources

Annexure 1.1

30

Cost of Building
Description Office with washrooms Control room Compressor & Cylinder storage room Shed (90*40) Underground gas piping Flooring Contingencies Total cost Type of construction RCC RCC RCC Canopy About 6,000 Covered Area (sq.ft) 436 144 1400 Cost per sq.ft (Rs.) 475 475 475 Lump sum 50 Cost (Rs.) 207,100 68,400 665,000 2,000,000 300,000 300,000 90,000 3,630,500

Annexure 1.2

List of equipments for CNG filling station

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Description H302 Jodair Natural Gas Comressor Remote mounted electrical control Gas cover system For upgrading up to 424 m3 One bank two line priority panel for buffer direct vehicle filling Storage cascade, 28 cylinders single bank cascade Dispenser (D38 High flow dual hose two line sequencing) Income tax on the import of Machinery @6% Third party inspection Inland freight (Karachi port to destination) Total Cost of Machinery

US $ 105,900 Included Included 2,652 10,800 28,140 500 150,965

Rs. 6,406,950 included included 158,813 653,400 1,702,470 9,103,133 546,188 30,250 30,000 9,709,570

Annexure 2

Sales Estimate (Revenue)

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Revenue
Quantity of gas sale per Vehicle: 12.9 m3 ( i.e., Quantity demanded per vehicle on average Annaul increase in the sales price of Gas: Year of operation Capacity utilization Car wise capacity (# of cars filled/year) (000) Selling pric (Rs. Per vehicle) Sales value 2.5% Year 1 75% 142 226 30,290 Year 2 80% 151 232 35,032 Year 3 85% 161 237 38,157 Year 4 90% 170 243 41,310 Year 5 95% 180 249 44,820

Annexure 2.1

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Sales estimate (Revenue): Working

Total capacity

=424m3/hour =2,442,240m3/year (Based on 16 hour working day and 360 days per annum)

The capacity of one cylinder on average = 12.9m3

Car wise capacity can be calculated as Car wise capacity = 2,,442,240/12.9 = 189,231 (say 189,000) at 100% capacity It means that 189 thousand cars will be filled per year if the project runs at its full capacity.

As the project cannot take a start from a 100% capacity therefore the capacity of the first year after having made a thorough analysis and visited the existing CNG station is projected as to be 75%. There will be a gradual increase in the capacity utilization of the proposed project.

The current rate or sales price pf the CNG fuel is Rs.17.51 (GST included) Considering the inflation rate and market condition it is projected that there will be an increase of 2.5% annually in the price of CNG fuel, so the projected prices of CNG for the first five years are as follows:

Revenue: Working

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Year of operation Capacity utilization Prices of CNG Car wise capacity (# of cars filled/year) No of vehicles filled/day

Year1 75% 17.51

Year 2 80% 17.95

Year 3 85% 18.39

Year 4 90% 18.86

Year 5 95% 19.33

142,000 151,000 161,000 170,000 180,000 394 420 446 472 499

Annexure 3

Cost of Goods Sold

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Consumption of Gas per vehicle Rate of Gas Rate of Electricity: fixed: Variable:

12.9 Cubic Meter Rs 7.35/cubic Meter Rs.381.11/kw/month Rs. 5.25/kw/month

Annual increase in the prices of Gas

5% (Rs. In 000)

Year of operation Capacity utilization Gas consumed (in Rs.) Wages & Salaries Factory overheads Power (electricity consumed) Stores and spares Rapairs and Maintenance Depreciation Other Manufacuring overheads Total factory overheads Total Cost of Goods sold

Year 1 75% 13,465 781

Year 2 80% 15,202 820

Year 3 85% 16,546 861

Year 4 90% 17,884 904

Year 5 95% 19,428 9494

4,088 484 133 631 321 6,388 20,634

4,315 514 200 631 350 6,777 22,799

4,542 545 267 631 322 7,112 24,519

4,768 575 267 631 413 7,500 26,288

4,995 605 267 631 448 7,834 28,211

Annexure 3.1

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Rate of Gas Consumed;

(Rs in 000) Year of operation Capacity utilization Car wise capacity (000) Gas consumed (in m3) Rate of Gas/m3 Gas consumed (in Rs) Year 1 75% 142 1,832 7.35 13,465 Year 2 80% 151 1,954 7.72 15,202 Year 3 85% 161 2,076 8.11 16,546 Year 4 90% 179 2,198 8.52 17,884 Year 5 95% 180 2,320 8.95 19,428

1. Gas consumed = total capacity * capacity utilization * rate

Annexure 3.2

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Wages and salaries

Designation Manager Accountant Cashier Dispenser Operator Mechanic Helper Watchman Sweeper Total

No of employees for two shifts 1 1 2 4 2 1 1 2 1 15

Salary per month (Rs) 9,000 6,000 4,000 2,000 2,500 3,000 2,000 2,000 1,500

Total salary per year 108,000 72,000 96,000 96,000 60,000 36,000 24,000 48,000 18,000 558,000 i.e, 558

(Rs in 000) Year of operation Basic salary Increments @ 5% Total basic salary Fringe benefits @40% Total wages and salary 1st year 558 558 223 781 2nd year 558 28 586 234 820 3rd year 586 29 615 246 861 4th year 615 31 646 258 904 5th year 646 32 678 271 949

Annexure 3.3

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Power (electricity consumed)

Connected load = 150kw Fixed charges Rate Charges = Rs.381.11/kw/month = 381.11*150 =57,176 per month 57,176*12= 685,998 per year (i.e 686) Variable charges Rate Charges =5.25/kw/hour =5.25*150*16*360 =4,536,000 (i.e., 4,536) at 100% capacity

Year of operation Capacity utilization Fixed cost Variable cost Total cost

Year 1 75% 686 3,402 4,088

Year 2 80% 686 3,629 4,315

Year 3 85% 686 3,856 4,542

(Rs. In 000) Year 4 Year 5 90% 95% 686 686 4,082 4,309 4,768 4,995

Annexure 3.4
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Stores and spares

The whole equipment required for setting up CNG filling station is imported. Therefre, it is required to built an inventory of necessary spare parts to meet the unforeseen circumstances such as a breakdown or any other fault in any part or equipment. For the purpose, a stock of necessary spare parts worth $8,000 which is equivalent to 484,000 rupees will be imported along with other equipment to maintain a minimum level of spare parts for the 1st year of operation. The amount of stores and spaes for the next four years as per requirement are shown below: Current dollar exchange rate = 60.5 rupees (Rs. And $ in 000) Year 4 Year 5 90% 9.5 575 95% 10 605

Year of operation Capacity utilization Stores and spares ( in $) (in Rs)

Year 1 75% 8 484

Year 2 80% 8.5 514

Year 3 85% 9 542

Annexure 3.5
40

Repairs and maintenance

Year of operation Machinery (9,710) Building (3,631)

Year 1 1% 97 36 133

Year 2 1.5% 146 54 200

Year 3 2% 194 73 267

(Rs. In 000) Year 4 Year 5 2% 194 73 267 2% 194 73 267

Other manufacturing overhead

Other manufacturing overhead are estimated to be equal to 1% of sales. Year of operation Sales values Year 1 32,092 321 Year 2 35,032 350 Year 3 38,157 322 (Rs. In 000) Year 4 Year 5 41,310 413 44,820 448

Annexure 3.6

41

Depreciation
1. Machinery and building (Rs.in 000)

Machinery Building Total 2. Furniture and fixture

Cost 9,710 3,631

Estimated life 20 yrs 25 yrs

Rate 5% 4%

amount 486 145 631

Furniture and fixture

Cost 100

Estimated life 10 yrs

Rate 10%

(Rs. In 000) Amount 10

Annexure 4

42

General Administrative and Selling Expenses

Year of operation Printing and stationary Postage and telegram Insurance Travelling expenses Depreciation(Furntiure & fixture)* Telephone expenses Total

Year 1 20 15 10 10 10 50 115

Year 2 20 20 10 10 10 50 120

Year 3 25 20 10 15 10 55 135

(Rs. In 000) Year 4 Year 5 25 25 10 15 10 55 140 30 25 10 20 10 60 155

*refer to annexure 3.6

WORKING CAPITAL ESTIMATES

43

Tied up period Capacity utilization CURRENT ASSETS Cash Raw Material Stores and Spares Debtors 30 Lump sum 30 days

Year 1 75%

Year 2 80%

Year 3 85%

Year 4 90%

Year 5 95%

30 1200 __ 2674 3904

30 1200 __ 2919 4149

40 1200 __ 3180 4420

40 1200 __ 3443 4683

50 1200 __ 3735 4985

CURRENT LIABILITIES Creditors (30% of raw material) Accruals (5% of sales) 360 1605 360 1752 360 1908 360 2066 360 2241

GST payable

30

401

438

477

516

560

2366 Net working capital 1538

2550 1599

2745 1675

2942 1741

3171 1817

44

DISBURSEMENT SCHEDULE

45

Allied bank will provide the financial assistance of 9,710 (th) rupees, which will be granted in four installments. The details are given in the following table:

S.No 1 2 Advance payment 3 months after machinery order is placed Arrival of machinery Trial run 25% 15%

Amount of disbursement 2,428 (000) 1,456

Date of disbursement 31.01.2005 30.04.2005

3 4

40% 20%

3,884 1,942

31.08.2005 31.10.2005

REPAYMENT SCHEDULE

The first installment will fall due on March 31st or September 30th which ever date falls first after the completion of 24 months from the date of first disbursement.

Allied bank will provide the financial assistance of 9,710 (th) rupees. The mark up rate is 9.5% and it would be paid back in 12 years including the grace period i.e 2 years (24 months) in half yearly installments.

COMPUTATION OF RESALE PRICE

46

Bank finance Mode of repayment Date of repayment of 1st installment Rate of mark up Grace period

9710 th 20 half yearly installments 31st March 2007 9.5% 24 months

Calculation of Mark up during construction and Grace period:

Date of disbursement 31.02.2005 31.04.2005 31.08.2005 31.10.2005

Amount of disbursement 2,428 (000) 1,456 3,884 1,942

Debit balance 2428 3884 7768 9710

Pd. of mark up (months) 3 4 2 17

Amount of mark up 58 123 123 1307 1,611

COMPUTATION OF AMOUNT OF INSTALLMENT Amount of installment = F * R (1 + R) N + M

47

R (1 + R) N - 1

= 9710 * 0.0475 (1 + 0.0475) 20 + 1611 20 (1 + 0.0475) - 1 20 = = = Resale price = 843 * 20 = 16,860 Profit of bank = 16860 9710 = 7150 9710 * 0.079 +80.55 762.1 + 80.55 843

Per installment = 3575 Per year = 715

ESTIMATES OF FINANCIAL EXPENSE

(Rs. in 000)
48

Year of operation Mark up on long term financial assistance Mark up on short term financial assistance

Year 1

Year 2

Year 3

Year 4

Year 5

715

715

715

715

715

----

----

----

----

----

Total

715

715

715

715

715

PROJECTED INCOME STATEMENT (Rs. in 000)

49

Year of operation Sales Cost of good sold Gross Profit General admin & selling expense Operating profit Financial expenses Net profit before taxes (EBT) Income tax @ 15%) (

Year 1 32,092 20,634 11,458 115 11,343 715 10,628 1,594 9,034 100 8,934

Year 2 25,132 22,799 12,233 120 12,113 715 11,398 1,710 9,688 100 9,588

Year 3 38,157 24,519 13,638 135 13,503 715 12,788 1,918 10,870 100 10,770

Year 4 41,310 26,288 15,022 140 14,882 715 14,167 2,125 12,042 100 11,942

Year 5 44,820 28,211 16,609 155 16,454 715 15,739 2,361 13,378 100 13,278

Net operating profit after tax Withdrawals Retained earnings

PROJECTED CASH FLOW STATEMENT (Rs. in 000) Year 5

Year of operation Sources of funds

End up const period

Year 1

Year 2

Year 3

Year 4

50

Operating profit Add: depreciation Total funds from operation Owners capital Long term financial assistance Short term borrowings Increase in creditors

---------9,560 9,710 ------19,270

11,343 641 11,984 ---------360 12,344

12,113 641 12,754 ------------12,754

13,503 641 14,144 ------------14,144

14,882 641 15,523 ------------15,523

16,454 641 17,095 ------------17,095

Application of funds Investment in fixed assets Payment of long term financial assistance With drawls Increase in current assets Tax payments Total funds Cash surplus Cash at the beginning of the year Cash at the end of the year 17,732 ------------17,732 1,538 ---1,538 ---1,686 ---3,904 1,594 7,184 5,160 1,538 6,698 ---1,686 100 245 1,710 3,741 9,013 6,698 15,711 ---1,686 100 271 1,918 3,975 10,169 15,711 25,880 ---1,686 100 263 2,125 4,174 11,349 25,880 37,229 ---1,686 100 305 2,361 4,452 12,643 37,229 49,872

PROJECTED BALANCE SHEET (Rs. in 000) Year 5

Year of operation

End up const period

Year 1

Year 2

Year 3

Year 4

Assets Current Assets

51

Cash Stock Stores and Spares Debtors Total current assets Net fixed assets Total assets Current liabilities With drawls Creditors With drawls Total current Liabilities Long term financial assistance Less mark up on long term financial assistance Total long term liabilities Equity Retained earnings Total equity Equity + Liability

1,538 ---------1,538 17,732 19,270

6,698 1,200 ---2,674 10,572 17,121 27,693

15,711 1,200 ---2,919 19,830 16,480 36,310

25,880 1,200 ---3,180 30,260 15,849 46,109

37,229 1,200 ---3,443 41,872 15,208 57,080

49,872 1,200 ---3,735 54,807 14,580 69,387

Liabilities ------------16,860 100 360 ---460 100 360 100 460 100 360 100 460 100 360 100 460 10,116 100 360 100 460 8,430

Long term liabilities 15,174 13,488 11,802

7,150 9,710 9,560 ---9,569 19,270

6,435 8,739 9,560 8,934 18,494 27,693

5,720 7,768 Equity 9,560 18,522 28,082 36,310

5,005 6,797 9,560 29,292 38,852 46.109

4,290 5,826 9,560 41,234 50,794 57,080

3,575 4,855 9,560 54,512 64,072 69,387

BREAK EVEN ANALYSIS (Rs. in 000) Operational year 5 Distribution Ratio

52

Variable Raw Material Wages and Salaries Depreciation (Building & Machinery) Power Repairs and Maintenance Stores and Spares Manufacturing overheads Amortization General & Admin expenses 19428 474 ---1998 134 605 224 ---77 22940

Fixed ---475 631 2997 133 ---224 1686 78 6224

Total 19428 949 631 4995 267 605 448 1686 155 29164

Fixed 0% 50% 100% 60% 50% 0% 50% 100% 50%

Variable 100% 50% 0% 40% 50% 100% 50% 0% 50%

Total fixed cost = 6224 Variable cost = 22940

Break even in rupees = Fixed cost / (Selling value variable cost / selling value) = 6224 / (44820 22940 / 44820) = 6224 * (44820 / 21880) = 6224 * 2.05 = 12759

Break even in Units = Fixed cost / Contribution margin = 6224 / 9.43 = 660 Margin of safety = Sale at 100% capacity
53

= 472085

Capacity utilization to achieve break even = Break even in rupees / Sale at 100% = 12759 / 472085 = 3% Margin of safety = 100 3 = 97%

RATIO ANALYSIS a. Leverage ratio = Debt / Fixed asset * 100 Construction Period Year 1 Year 2 Year 3 Year 4 Year5

54

9710 / 17732 = 54.76%

8739/17121 7768 / 1948 6797 / 15849 5826 / 15208 51.04% 47.14% 42.89% 38.31%

4855 / 14580 33.30%

b. Leverage ratio = Debt / Total asset * 100 Construction Period Year 1 Year 2 Year 3 Year 4 Year5

9710 / 19270 8739/27693 7768 / 36310 6797 / 46109 5826 / 57080 = 50.39% 31.56% 21.39% 14.74% 14.94%

4855 /69387 6.7%

Profitability ratio Gross profit margin = Gross profit / Sales * 100 Year 1 11458 / 32092 = 35.70% Year 2 Year 3 Year 4 Year5

12233 / 35032 13638 / 38157 15022 / 41310 16609 / 44820 34.92% 35.74% 36.36% 37.06%

Operating profit margin = Operating profit / Sales * 100 Year 1 Year 2 Year 3 Year 4 Year5

11343 / 32092 = 35.35%

12113 / 35032 13503 / 38157 14882 / 41310 16464 / 44820 34.58% 35.49% 36.03% Net profit margin = Net profit / Sales * 100 Year 2 Year 3 Year 4 37.71%

Year 1

Year5

9034 / 32092

9688 / 35032 10870 / 38157 12042 / 41310 13348 / 44820

55

= 28.15 %

27.65 %

28.49 %

29.15 %

29.85 %

Return on equity ratio = Net profit / Equity * 100 Year 1 Year 2 Year 3 Year 4 Year5

9034 / 18807 = 48.03%

9688 / 23288 10870 / 33440 12042 / 44823 13348 / 57433 41.60% 32.51% 26.69% 23.24%

Return on investment ratio = Net profit / Investment * 100 Year 1 Year 2 Year 3 Year 4 Year5

9034 / 27693 = 32.62%

9688 / 36310 10870 / 46109 12042 / 57080 13348 / 69387 26.68% 23.57% 21.10% 19.24%

COST OF CAPITAL Capital Debt Equity Cost 9.5% 19% Amount 9710 9560 Proportion 51% 49%

56

WACC = (cost of debt) (1 tax rate) (proportion) + (cost of equity) (proportion) = (0.095) (1 0.15) (0.51) + (0.19) (0.49) = 0.0412 + 0.0931 = 0.1343 = 13.43%

Internal financial rate of return Years Ash in flow Discount factor at 60 % 0.624 0.391
57

PV

1 2

11984 12754

7290 4988

Discount factor at 70 % 0.59 0.35

PV

7071 4464

3 4 5 6 7 8 9 10 Total

14144 15523 17095 17095 17095 17095 17095 29669 153846

0.244 0.153 0.095 0.06 0.037 0.023 0.015 0.009

3451 2375 1624 1026 632 393 256 267

0.2 0.12 0.07 0.04 0.02 0.01 0.01 0.005

2829 1863 1197 684 342 171 171 148 4464

X= (amount of low interest-initial cash flow) *(high interest-low interest) (Amount of low interest-amount of high interest) X= (22502-19270) * (70-60) (22502-18940) X= (3232) * (10) (3562) X=0.907 IRR = Low interest rate +X IRR = 60% +9.07% IRR = 69.07%

Net Present Value (NPV) Year 1 2 3 4 Cash Flows 11984 12574 14144 15523 Discount Factor (13.43) 0.882 0.778 0.686 0.605
58

PV 10569 9923 9703 9391

5 6 7 8 9 10 Total

17095 17095 17095 17095 17095 29669 153846

0.534 0.471 0.415 0.366 0.323 0.285

9129 8052 7094 6257 5522 8456 77002

Net present value = Present value of future cash flows-initial investment NPV = 862-19270 = 57732 Profitability Index Cash outflows = 19270 PV of future Cash inflows = 77002 Profitability Index = PV of future cash inflows/Cash out flows = 77002/19270 = 3996

PAYBACK PERIOD WITHOUT DISCOUNTING Years 0 1 ( a) 2 3 4 cash inflows 19270 (b) 11984 12754 (d) 14144 15523
59

cumulative cash flows 11984 ( c ) 24738 38882 54405

5 6 7 8 9 10

17095 17095 17095 17095 17095 29669

71500 88595 105690 122785 139880 169549

Payback period formula a + (b c)/ d 1 + (19270 11984) /12754 1 + 7286/12754 1 + 0.5712 1.5712years

PAYBACK PERIOD WITH DISCOUNTING Years 0 1 ( a) 2 3 cash inflows 19270 ( b) 10569 9923 ( d) 9703
60

cumulative cash inflows 10569 (c ) 20492 30195

4 5 6 7 8 9 10

9391 9129 8052 7094 6257 5522 8456

39586 48715 56767 63861 70118 75640 84096

Pay back period a +( b-c )/ d 1 + ( 19270 10569) / 9923 1 + 8701 / 9923 1 + 0.8768 1.8768

61