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A PROJECT REPORT ON
SUBMITTED BYGROUP 2
(Roll No. 10016-10030 & 10062)
MBA- BT- II
IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE AWARD OF DEGREE
OF MASTERS OF BUSINESS ADMINISTRATION-BT
DEPARTMENT OF MANAGEMENT SCIENCES
UNIVERSITY OF PUNE (PUMBA)
CERTIFICATEDepartment of Management Sciences, PUMBA 1
This is to certify that the project report on
A BUSINESS PLAN ON VERMICOMPOST FARMING
The Agrovermi Fertilisers
has been submitted by
Group 2
(Roll No. 10016-10030 & 10062)
MBA BT II (2010-12)
In partial fulfilment of the requirement for the Degree of
Master in Business Administration –Biotechnology (MBA-BT) from the
Department of Management Sciences, University of Pune.
Examiner’s Sign
Department of Management Sciences, PUMBA 2
OVERVIEW OF BUSINESS:
Department of Management Sciences, PUMBA 3
Name of the Company: The Agrovermi Fertilisers
Type of Company: Partnership Company
Product: Vermicompost
By-Product: Earth-worms
Type of Industry: Organic Fertilizers
Owners of the Company: Group 2 (Roll No. 10016-10030 & 10062)
Location: Baramati, Maharashtra
Vision:
“To establish the company as a strong producer of organic fertilizer in the market”.
Mission:
“To produce good quality organic fertilizer product and make it available at a profitable and affordable price in the market”.
Objectives:
To produce organic fertilizers that is environmental friendly. To produce products that satisfies the farmers by helping them achieve the expected
and required yield of crops. To maintain reputation of the company and its products by consistent performance. To carry out business in tandem with the current market dynamics. To sustain in the market by formulating competitive strategies. To ensure that proper steps are taken against the threats to the business.
Index of the Report
Department of Management Sciences, PUMBA 4
Topic Page No.
1.Introduction to the Product Introduction to Vermicompost Importance of Vermicompost
6
2. Market Scenario Market Study Demand Analysis for Product: Scope Competitive Market analysis
10
3. Industry Scenario The Organic Fertiliser Industry The Vermicomposting Industry
15
4. Environmental Analysis Environmental appraisal SWOT Analysis
17
5. Operations Plan Manufacturing Process for Vermicomposting Operating details about the plant
27
6. Marketing Plan Plan for executing marketing and distribution of the product
31
7. Human Resource Plan Organization Structure, Employee structure, Payment Structure, Corporate Social Responsibility
33
8. Financial Plan
34
9. Bibliography 42
1. INTRODUCTION TO THE PRODUCTDepartment of Management Sciences, PUMBA 5
1.1 Introduction to Vermicompost:
Vermicomposting is a simple biotechnological process of composting, in which certain species
of earthworms are used to enhance the process of waste conversion and produce a better end
product. Vermicomposting differs from composting in several ways It is a mesophilic process,
utilizing microorganisms and earthworms that are active at 10–32°C (not ambient temperature
but temperature within the pile of moist organic material). The process is faster than
composting; because the material passes through the earthworm gut, a significant but not yet
fully understood transformation takes place, whereby the resulting earthworm castings (worm
manure) are rich in microbial activity and plant growth regulators, and fortified with pest
repellence attributes as well! In short, earthworms, through a type of biological alchemy, are
capable of transforming garbage.
1.2 Importance of vermicompost
a) Source of plant nutrients
Earthworms consume various organic wastes and reduce the volume by 40–60%. Each
earthworm weighs about 0.5 to 0.6 g, eats waste equivalent to its body weight and produces
cast equivalent to about 50% of the waste it consumes in a day. These worm castings have been
analyzed for chemical and biological properties. The moisture content of castings ranges
between 32 and 66% and the pH is around 7.0. The worm castings contain higher
percentage (nearly twofold) of both macro and micronutrients than the garden compost.
From earlier studies also it is evident that vermicompost provides all nutrients in readily
available form and also enhances uptake of nutrients by plants. Sreenivas et al. (2000) studied
the integrated effect of application of fertilizer and vermicompost on soil available nitrozen (N)
and uptake of ridge gourd (Luffa acutangula) at Rajendranagar, Andhra Pradesh, India. Soil
available N increased significantly with increasing levels of vermicompost and highest N uptake
was obtained at 50% of the recommended fertilizer rate plus 10 t ha-1 vermicompost. Similarly,
the uptake of N, phosphorus (P), potassium (K) and magnesium (Mg) by rice (Oryza sativa) plant
was highest when fertilizer was applied in combination with vermicompost
Nutrient Composition of Vermicompost and Garden compost
Department of Management Sciences, PUMBA 6
Nutrient element Vermicompost (%) Garden Compost (%)
Organic Carbon 9.8–13.4 12.2
Nitrogen 0.51–1.61 0.8
Phosphorus 0.19–1.02 0.35
Potassium 0.15–0.73 0.48
Calcium 1.18–7.61 2.27
Magnesium 0.093–0.568 0.57
Sodium 0.058–0.158 <0.01
Zinc 0.0042–0.110 0.0012
Copper 0.0026–0.0048 0.0017
Iron 0.2050–1.3313 1.1690
Manganese 0.0105–0.2038 0.0414
b) Improved crop growth and yield
Vermicompost plays a major role in improving growth and yield of different field crops,
vegetables, flower and fruit crops. The application of vermicompost gave higher germination
(93%) of mung bean (Vigna radiata) compared to the control (84%). Further, the growth and
yield of mung bean was also significantly higher with vermicompost application. Likewise, in
another pot experiment, the fresh and dry matter yields of cowpea (Vigna unguiculata) were
higher when soil was amended with vermicompost than with biodigested slurry (Karmegam et
al. 1999, Karmegam and Daniel 2000).
c) Reduction in soil C:N ratio
Vermicomposting converts household waste into compost within 30 days, reduces the C:N ratio
and retains more N than the traditional methods of preparing composts (Gandhi et al. 1997).
The C:N ratio of the unprocessed olive cake, vermicomposted olive cake and manure were 42,
29 and 11, respectively. Both the unprocessed olive cake and vermicomposted olive cake
immobilized soil N throughout the study duration of 91 days. Cattle manure mineralized an
appreciable amount of N during the study. The prolonged immobilization of soil N by the Department of Management Sciences, PUMBA 7
vermicomposted olive cake was attributed to the C:N ratio of 29 and to the recalcitrant nature
of its C and N composition. The results suggest that for use of vermicomposted dry olive cake as
an organic soil amendment, the management of vermicomposting process should be so
adjusted as to ensure more favorable N mineralizationimmobilization (Thompson and Nogales
1999).
d) Role in nitrogen cycle
Earthworms play an important role in the recycling of N in different agroecosystems, especially
under jhum (shifting cultivation) where the use of agrochemicals is minimal. Bhadauria and
Ramakrishnan (1996) reported that during the fallow period intervening between two crops at
the same site in 5- to 15-year jhum system, earthworms participated in N cycle through cast-
egestion, mucus production and dead tissue decomposition. Soil N losses were more
pronounced over a period of 15-year jhum system. The total soil N made available for plant
uptake was higher than the total input of N to the soil through the addition of slashed
vegetation, inorganic and organic manure, recycled crop residues and weeds.
e) Improved soil physical, chemical and biological properties
Limited studies on vermicompost indicate that it increases macropore space ranging from 50 to
500 μm, resulting in improved air-water relationship in the soil which favorably affect plant
growth (Marinari et al. 2000). The application of organic matter including vermicompost
favorably affects soil pH, microbial population and soil enzyme activities (Maheswarappa et
al.1999). It also reduces the proportion of water-soluble chemical species, which cause possible
environmental contamination (Mitchell and Edwards 1997).
Types of earthworms
Earthworms are invertebrates. There are nearly 3600 types of earthworms in the world and
they are mainly divided into two types: (1) burrowing; and (2) non-burrowing. The burrowing
types Pertima elongata and Pertima asiatica live deep in the soil. On the other hand, the non-
burrowing types Eisenia fetida and Eudrilus eugenae live in the upper layer of soil surface. The
Department of Management Sciences, PUMBA 8
burrowing types are pale, 20 to 30 cm long and live for 15 years. The non-burrowing types are
red or purple and 10 to 15cm long but their life span is only 28 months.The non-burrowing
earthworms eat 10% soil and 90% organic waste materials; these convert the organic waste
into vermicompost faster than the burrowing earthworms. They can tolerate temperatures
ranging from 0 to 40°C but the regeneration capacity is more at 25 to 30°C and 40–45%
moisture level in the pile. The burrowing type of earthworms come onto the soil
surface only at night. These make holes in the soil up to a depth of 3.5 m and
produce 5.6 kg casts by ingesting 90% soil and 10% organic waste.
Earthworm multiplication
Numerous organic materials have been evaluated for growth and reproduction of earthworms
as these materials directly affect the efficacy of vermicompost. Nogales et al. (1999) evaluated
the suitability of dry olive cake, municipal biosolids and cattle manure as substrates for
vermicomposting. They reported that larger weights of newly hatched earthworms were
obtained in substrate containing dry olive cake. In another study, maize straw was found to be
the most suitable feed material compared to soybean (Glycine max) straw, wheat straw,
chickpea (Cicer arientinum) straw and city refuse for the tropical epigeic earthworm, Perionyx
excavatus (Manna et al. 1997). Zajonc and Sidor (1990) evaluated and compared various non-
standard materials for the preparation of vermicompost. A mixture of cotton waste with cattle
manure in the ratio of 1:5 was found to be the best. The use of grape cake alone increased
earthworm weight slightly. Tobacco (Nicotiana tabacum) waste, used as substrate, increased
earthworm weight but the earthworms failed to reproduce. A mixture of tobacco waste with
rabbit manure in the ratio of 1:5 was found to be lethal to the earthworms.
2. MARKET SCENARIO FOR VERMICOMPOSTING
2.1 Market Potential for Vermicompost
Department of Management Sciences, PUMBA 9
Vermicompost is a valuable input for sustainable agriculture and wasteland development. This
also can be used widely in pot culture and in home gardens. Several farmers are successfully
using Vermicompost. Studies in Maharashtra have shown that usage of vermicompost has
improved the production and quality of grapes. There are many successful farmers’ experiences
of using vermicompost from different climatic zones of the country. There will be lot of demand
for vermicompost in future for developing cultivable land subjected to some form of
degradation. Government agencies and NGOs are popularizing organic agriculture using
vermicompost by organizing awareness campaigns and film show in rural and urban areas. In
some cities like Bangalore and Bombay, vermicompost is sold at the rate ofRs.2 per Kgs. and is
being used in pot culture and kitchen gardens.
2.2 Market Demand For Vermicompost
In 1985, Maharashtra Agricultural Bioteks was formed and established a small plant to
manufacture vermicompost from agricultural waste. Those involved believed that a successful
commercial venture based on regenerative principles might convince others to adapt
sustainable practices. The organization currently produces 5,000 tons of vermicompost
annually. Its real achievement, however, has been in raising awareness among farmers,
researchers and policy makers in India about regenerative food production methods. The group
is directlyresponsible for 2,000 farmers and horticulturists adopting vermicomposting. These
converts have begun secondary dissemination of the principles they were taught.In 1991-92,
Maharashtra Bioteks and the India Department of Science and Technology promoted the
adoption of vermicompost technology in 13 states in India. The group has also established a
vermicompost unit with Chitrakoot Gramodaya University, Madhya Pradesh which produces
five tons of vermicompost per month.
It has been computed that India, as a whole, generates as much as 25 million tonnes of urban
solid waste of diverse composition per year. But per capita waste production in India is
minisculous compared to the per capita production of wastes in the industrialized countries.
Even so, the problem of waste disposal in India has of late attaining serious proportions posing
as it does immense health hazards and an environmental crisis of the first magnitude. Today,
Department of Management Sciences, PUMBA 10
many corporate units and business agencies are making a fortune by marketing vermicompost
—an excellent soil conditioner—to the farmers and gardeners. For thousands of years now, the
process of vermicomposting has been in vouge in nature due to the activities of earthworms
which excrete droppings called vermicastings. It has been estimated that about 5,000
earthworms can degrade a heap of organic wastes of the dimension 1.2x2.4mx0.6m speedily
and efficiently. BERI has established six large-scale vermicomposting projects, and motivated
nearly 5,000 farmers in 16 Indian states to use worms in their farming practices. Several
experiments have proven that vermiculture can contribute significantly to crop yields and
quality. In the Pune district, grape production increased 50 percent at a vineyard that employed
earthworms. In Maharashtra State, vermiculture helped stabilize soil pH and increase potash (a
type of potassium and key plant nutrient) content of the soil. In Auroville, Southern India,
worms are credited for doubling wheat production and quadrupling grass pasture production.
Savings on input costs such as fertilizer and water have dramatically increased profits. However,
for further increasing the efficacy of vermicomposting, care should be taken to see that worms
thrive on organic matter, breed faster, tolerate moisture and withstand climatic fluctuations.
The most beneficial feature of vermicomposting is that it eliminates foul smell of decaying
organic wastes. Japan imports 3000-million tonnes of earthworm per annum for waste
conversion. But India is still a long way behind in fully exploiting the promises of vermiculture
technology for waste disposal and manure generation. With the amount of waste produced in
India, the country could easily produce 400 million tonnes of plant nutrients and considerably
reduce the outflow of foreign exchange towards the import of fertilizers. Today, many industrial
units covering paper, pulp and tanning make use of vermiculture technology for waste
treatment. Now there is an all-round recognition that adoption and exploitation of vermiculture
biotechnology would besides arresting ecological degradation could go a long way towards
meeting the nutrient needs of the agricultural sector in a big way. On another front,
widespread use of vermicultural biotechnology could result an increased employment
opportunity and rapid development of the rural areas. It is hightime that the scientific
community of the country gave a serious attention to standardizing and popularizing
vermiculture technology on a countrywide basis.
Department of Management Sciences, PUMBA 11
2.3 Scope of Vermicomposting
From vermiculture, we get well decomposed worm casts, which can be used as manure for
crops, vegetables, flowers, gardens, etc. In the process, earthworms also get multiplied and the
excess worms can be converted into vermi-protein which can be utilized as feed for poultry and
fish etc. The vermiwash can also be used as spray on crops. Thus various economic uses can be
obtained from organic wastes and garbage and prevent pollution. The total annual waste
generated in India in the form of municipal solid waste is 25 million tons, agriculture waste
residues 320 million tons, cattle manure 210 million tons and poultry manure is 3.3 million tons
(Central Pollution Control Board, 2001). Traditionally the solid waste management practices
involve collection and transportation to far off low dumping sites. This leads to fowl smelling
area, disease spreading, and mosquito breeding grounds that the aesthetics of urban as well as
rural dwellings. The other option is composting which involves the dumping of waste into a pit.
The bio-conversion of waste to vermicompost by this method takes about 3- 4 months. There is
a tremendous scope to convert the bio-degradable waste into organic manure through
vermiculture biotechnology or vermicomposting.
Organic food exports from India
Organic food exports from India are increasing with more farmers shifting to organic farming.
With the domestic consumption being low, the prime market for Indian organic food industry
lies in the US and Europe. India has now become a leading supplier of organic herbs, organic
spices, organic basmati rice, etc. The exports amount to 53% of the organic food produced in
India. This is considerably high when compared to percentage of agricultural products exported.
In 2003, only 6 - 7% of the total agricultural produce in India was exported (Food Processing
Market in India, 2005).
Exports is driving organic food production in India
Department of Management Sciences, PUMBA 12
The increasing demand for organic food products in the developed countries and the extensive
support by the Indian government coupled with its focus on agri-exports are the drivers for the
Indian organic food industry. Organic food products in India are priced about 20 -30% higher
than non-organic food products. This is a very high premium for most of the Indian population
where the per capita income is merely USD 800. Though the salaries in India are increasing
rapidly, the domestic market is not sufficient to consume the entire organic food produced in
the country. As a result, exports oforganic food are the prime aim of organic farmers as well as
the government. The Indian government is committed towards encouraging
organic food production. It allocated Rs.100 crore or USD 22.2 million during the Tenth Five
Year Plan for
promoting sustainable agriculture in India. APEDA (Agricultural and Processed Food Export
Development Authority) coordinates the export of organic food (and other food products) in
India. The National Programme for Organic Production in India was initiated bythe ministry of
commerce. The programme provides standard for the organic food industry in the country.
Since these standards have been developed taking into consideration international organic
production standards such as CODEX and IFOAM, Indian organic food products are being
accepted in the US and Europeanmarkets. APEDA also provides a list of organic foodexporters
in India.
2.4 Competitive Market analysis
Madhya Pradesh is one of the fore runners in promotion of organic farming. The State
Government has adopted a concept called Bio farming through bio-villages for the promotion of
organic farming. Bio-farming is implemented in 1565 villages selected from 313 blocks of 48
districts in the state. It is reported that the message of growing crops through organic resources
is spreading from village to village through farmers contact programme.
The survey conducted by the Indian Institute of Soil Science (IISS-ICAR), Bhopal on organic
farming in Central Madhya Pradesh revealed that the major crops grown under organic farming
are soybean, wheat, lentil, safed musli, maize, pigeon pea, vegetables and sugarcane. The
Department of Management Sciences, PUMBA 13
survey also revealed that more number of large and medium farmers are involved in organic
farming as compared to small farmers. The average area under organic farming varied from
0.80 ha (with small farmer) to 5.00 ha (with large farmer)
Adoption of organic farming is reported to have a positive correlation with the number of cattle
maintained by the farmers, in the state. The large farmers have more cattle and hence more
resources for organic manure which facilitates more area under organic farming. Compost or
Farm Yard Manure (FYM) is the common source of organic manure used by the farmers,
followed by Vermicompost and Narayan Devaraj Pandey (NADEP) compost. Farmers are also
using bio-gas slurry, green manure and cow horn manure. Poultry manure, neem cake, karanjee
cake and bio-fertilizers like rhizobium, azospirillum, phosphate solubilizing bacteria etc, are the
other supplements under off-farm organic sources.The IISS survey has indicated that the
quantum of organic manure applied by the farmers do not have any scientific basis to meet the
nutrient requirements of the crops grown. The quantity applied is based on the on-farm
availability and the nature of crops grown. However, the periodicity of application is found to
be regular, either every season or crop grown under organic farming as against application once
in two or three years under conventional farming.
In Karnataka, the players involved in vermicompost production activities are the
farming sector, government organizations, private organizations, and other agencies. This
has encouraged many government and non-government agencies to promote vermicompost
production. Many enterprises by farmers and private agencies have shown keen interest in
undertaking of vermicompost production. These prospectives clearly show that vermicompost
could contribute enormously to farm production and economic conditions of rural people,
besides being an eco-friendly activity. In recent years, concerted efforts have been initiated by
the state as well as by private sector including many NGOs to create awareness among
farming community about need for application of suitable soil amendments mainly in the form
of organic matter for sustainable agricultural production. In this direction, vermicompost is an
important source of organic matter to the soil as well as soil amendment due to its
multifunctional roles and benefits. Though there is no documented information on quantities of
Department of Management Sciences, PUMBA 14
vermicompost produced in the state, the rough estimates indicate that Karnataka state
produces around 40,000 to 50,000 metric tons annually. An approximate breakup of the total
of 40,000 tons of vermicompost is as follows:
a. Farming sector: At around 1,000 tons per district, farmers account for nearly 25,000.
b. tons / annum.
c. Government sector accounts for nearly 5,000 tons / annum.
d. Private sector accounts for nearly 5,000 tons / annum.
e. Other accounts for nearly 5,000 tons /annum.
Vermicompost produced in the state is being utilized in agriculture, horticulture and
sericulture. The government of Karnataka procures huge quantity of vermicompost every year
for coconut crop for management of coconut mite. From utilization point of view, there is
tremendous potential in horticulture crops, agriculture crops and moriculture. Keeping in view
the advancement in organic farming in the state, a substantial increase in vermicompost
production can take place in the state in recent years.
3. THE ORGANIC AGRICULTURE INDUSTRY
Since 1980s, agricultural scientists in the world have been realizing the limitations of
chemical fertilizers used for fertility management. While on one hand research is being
initiated to improve the use efficiency of chemical fertilizers, on other hand alternative inputs
are being considered. Organic matter recycling has been in use in India for centuries. The
shift towards organic production is supported by consumers who are aware of health hazards:
demand for food grown organically is increasing by 20-25% in developed countries where
awareness is comparatively high. The organic agriculture is indeed being pursued in India;
the national programme of organic products (NPOP) was launched in 2000. Its aim is mainly
to create certification facilities; since its inauguration, 2.5 million ha (6.2 million acres) have
been certified as organic, providing 115 to 238 metric tons of produce by the end of 2004-05
(Gauri 2005). Organic agriculture, a holistic system that focuses on improvement of soil
health, use of local inputs, and relatively high-intensity use of local labor, is admirably fit for
dry lands in many ways, and the dry lands offer many benefits that would make it relatively
Department of Management Sciences, PUMBA 15
easy to implement. The organic agriculture is key element for development and sustainable
environment. It minimizes environmental pollution and the use of non-renewable natural
resources and conserves soil fertility and soil erosion through implementation of appropriate
conservation principles. In fact, India's national project on organic farming (NPOF), launched
in 2004, has given top priority to the dry lands (NPOF 2005). The real achievement in organic
method of farming has been in raising awareness among farmers, researchers and policy
makers in India about regenerative organic food production methods. In 1991-92, India
Department of Science and Technology promoted the adoption of vermicompost technology
in 13 states in India. From 1997-98 onwards, several government agencies and NGOs are
working individually to promote organic farming.
The awareness of organic matter and concept of sustainable agriculture is gaining
impetus among our farmers in recent years to produce good quality consumable agricultural
produce. In this context, recycling of available bio-wastes of different sources is helpful and
can reduce the environmental pollution. Vermicomposting is an important component of
organic farming without much financial involvement, which can convert rural and urban
biowastes into nutrient rich organic manures. (Sajnanath and Sushama, 2004).
Vermicomposting through organic farming is the pathway that leads us to live in harmony with
nature. Vermicomposting is the secure system for agriculture. Use of this vermicomposting with
increased efficiency by developing various methods which do not change the originality of the
process i.e. use of earthworms for sustainable and secure system should be adopted. Several
reasons have been emphasized for the need of organic agriculture including vermicomposting,
like limited land holdings, poor socio- economic conditions of farmers, and rise in input cost.
The broadest view shows two major reasons viz., population and environment, emphasized the
ultimate need for eco-friendly technologies through vermicomposting. In the past ten years
these agencies in India have prompted farmers and institutions to switch from conventional
chemicals to the organic fertilizer, vermicompost. Noted for its ability to increase organic
matter and trace minerals in soil, vermiculture has been the primary focus in India, these
agencies which have initiated both commercial and educational ventures to promote
vermiculture. In 1985 a small plant was established to manufacture vermicompost from
Department of Management Sciences, PUMBA 16
agricultural waste. Those involved believed that a successful commercial venture based on
regenerative principles might convince others to adapt sustainable practices. Farmers have
reduced their use of chemical fertilizers by 90% by using vermicompost as a soil amendment for
growing grapes, pomegranates and bananas. Similar work is underway on mangoes, cashews,
coconuts, oranges, limes, strawberries and various vegetable crops. These agencies have
devised methods to convert biodegradable industrial waste like pulp waste from paper mills
and filter cake and liquid effluent from sugar factories into vermicompost.
4. ENVIRONMENTAL REGULATIONS ON THE ORGANIC AGRICULTURE INDUSTRY
4.1 Impact of Govt. (Political) Environment on Organic farming industry
In response to the $26 billion global market for organic foods, the Indian Central Government
set up a National Institute of Organic Farming in October 2003 in Ghaziabad, Madhya Pradesh.
The purpose of this institute is to formulate rules, regulations and certification of organic farm
products in conformity with international standards. The major organic products sold in the
global markets include dried fruits and nuts, cocoa, spices, herbs, oil crops, and derive products.
Non-food items include cotton, cut flowers, livestock and potted plants.
Most farms in organic agriculture in India is not certified. The certifying agencies thus far named
by the Centre include the APEDA (Agricultural and Processed Food Products Export
Development Authority), the Tea Board, the Spices Board, the Coconut Development Board and
the Directorate of Cashew and Cocoa. They will be accountable for confirming that any product
sold with the new “India Organic” logo is in accordance with international criteria, and will
launch major awareness and marketing campaigns, in India and abroad.
Organic farming has been identified as a major thrust area of the 10th plan of the central
government. 1 billion rupees have been allocated to the aforementioned National Institute of
Organic Farming alone for the 10th five-year plan, Mann said. And by the end of 2004,
according to APEDA chairman K.S. Money, 15% of farm products will be organically grown &
processed. A working group has been set up by the Planning Commission, and the Department
of Commerce has established National Organic Standards.
Department of Management Sciences, PUMBA 17
Recognising the importance of organic farming in Indian Agriculture, Government of India has
taken various initiatives to promote and support organic production. Setting up of National
Centre of Organic Farming with Regional Centres at various places, launching of the National
Programme on Organic Production encompassing National Standards and Accreditation
Programme for Certification Agencies etc., are important steps in this direction. The importance
of organic inputs in development of organic farming is adequately emphasized with the
launching of the Capital Investment Subsidy Scheme for Commercial Production Units of
Organic Inputs by Government of India.
NABARD, as an apex institution in the field of agriculture and rural development has identified
Organic Farming as a thrust area and has taken various initiatives for its promotion. These
initiatives include building capacities of bankers, NGOs, farmers through training programmes,
exposure visits etc., technology development and its dissemination through various funds and
suggesting policy measures for financing organic farming.
Package of practices for organic farming is being developed by many Universities and Research
Institutions. These practices need to be developed into a bankable model for aiding financial
institutions in extending credit for organic farming. Preparation of model bankable schemes
based on package of practices developed by research institutions and those adopted by farmers
is an attempt in this direction. I am certain that these model schemes may act as a catalyst in
promoting organic farming amongst prospective entrepreneurs especially with the support of
institutional credit.
The recent policy measures and interventions by the Government, civil society organizations,
and financial institutions like banks and National Bank for Agriculture and Rural Development
(NABARD) are tuned to help farmers, particularly women, to access technical and financial
resources for rural enterprises. The rise of Self Help Groups (SHGs) and Farmers Clubs has
mobilized farmers and built their capacity to establish and organize enterprises and market
their produce collectively. The organic agriculture based enterprises include the production of
Department of Management Sciences, PUMBA 18
organic composts or other farm produce, value addition of organic produce, and improved
marketability of organic produce with better packaging and preservation.
4.2 Economic Environmental Aspects
India is bestowed with lot of potential to produce all varieties of organic products due to its
agro-climatic regions. In several parts of the country, the inherited tradition of organic farming
is an added advantage. This holds promise for the organic producers to tap the market which is
growing steadily in the domestic market related to the export market. Currently, India ranks
33rd in terms of total land under organic cultivation and 88th position for agriculture land
under organic crops to total farming area in the World. The cultivated land under certification is
around 2.8 million ha. This includes one million ha under cultivation and the rest is under forest
area (wild collection) (APEDA, 2010). India exported 86 items during 2007-08 with the total
volume of 37533 MT. The export realization was around 100.4 million US $ registering a 30 per
cent growth over the previous year (APEDA, 2010).
Organic farming has the potential to provide benefits in terms of environmental protection,
conservation of nonrenewable resources and improved food quality. Countries like Europe have
recognized and responded to these potential benefits by encouraging farmers to adopt organic
farming practices, either directly through financial incentives or indirectly through support for
research, extension and marketing initiatives. As a consequence, the organic sector throughout
Europe is expanded rapidly (24% of world’s organic land). But, in the developing countries like
India, the share is around 2 per cent only (included certified and wildlife). However, there is
considerable latent interest among farmers in conversion to organic farming in India. But, some
farmers are reluctant to convert because of the perceived high costs and risks involved. Those
who have converted earning equal incomes to their conventional counterparts, if premium
markets are exist for organic produce. Despite the attention which has been paid to organic
farming over the last few years, very little accessible information actually exists on the costs
and returns of organic farming in India. Similarly, there are only a few attempts of comparing
efficiency between organic and conventional production systems in India.
Department of Management Sciences, PUMBA 19
Role of Organic Farming on Indian Rural Economy
The role of Organic Farming in India Rural Economy can be leveraged to mitigate the ever-
increasing problem of food security in India. With rapid industrialization of rural states of India,
there has been a crunch for farmland. Further, with the exponential population growth of India,
the need for food sufficiency has become the need of the hour. Furthermore, the overuse of
plant growth inhibitor, pesticides and fertilizers for faster growth of agricultural produce is
detrimental to human health and the environment as a whole. The proposition of Organic
Farming in India Rural Economy holds good, as an alternative to arrest this problem. The
introduction of the process of Organic Farming in India Rural Economy is a very new concept.
The huge furor over the overuse of harmful pesticides and fertilizers to increase agricultural
out put has in fact catalyzed the entry of Organic Farming in India Rural Economy. The process
of organic farming involves using of naturally occurring and decomposable matter for growth
and disease resistance of different crops. The concept of organic farming in India dates back to
10,000 years and it finds its reference in many Indian historical books.
The main advantages of Organic Farming in India Rural Economy are as follows -
Organic fertilizers are completely safe and does not produces harmful chemical compounds
The consumption of chemical fertilizers in comparison to organic fertilizers is always more, especially in unused cultivable lands.
Moreover, chemical fertilizer needs huge quantities of water to activate its molecule whereas, organic fertilizers does not need such conditions.
Further, chemical fertilizers almost always have some harmful effects either on the farm produce or on the environment.
Furthermore, it can also produce harmful chemical compound in combination with chemical pesticides, used to ward-off harmful pests.
It is estimated that there is around 2.4 million hectare of certified forest area for collection of wild herbs.
The actual available area for cultivation of organic agriculture in India is much more than that is identified and certified so far.
India has around 1,426 certified organic farms.
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India produces approximately 14,000 tons of output annually. It is estimated, that around 190,000 acres of land is under organic farming in India. The total annual production of organic food in India in the last financial year was
120,000 tons.
4.3 Social Aspects of Organic Farming
The potential social benefits of going organic range from the small to the dramatic. Farmers
who transition to organic production often have a renewed interest in farming; they join
together with others who have a similar passion for farming in a new way. Perhaps they
collaborate on renovating an abandoned grain mill for handling organic grains, or a processing
facility for organic poultry. Young, new farmers, drawn to farming because of the organic
appeal, add more vitality to their rural communities. And because organic farming is often
about building relationships and connections, consumers can support these farmers in a variety
of ways. A network develops and flourishes.
Social Benefits
Organic farming practices can be adopted in small farms and benefits for marginal farmers.
It could reduce dependency on external inputs and costly technologies thus reducing the competitiveness and disparity among the farmers in a community.
It will also lead to food security at the family level and national level. Organic farming is revival of a culture and brings back the indigenous
knowledge, beliefs and value system that are almost on extinction now. It also contributes to employment generation at the community level.
4.4 Technological Aspects of Organic Farming in India (Vermicomposting)
In India, the integration of crops and livestock and use of manure as fertilizer were traditionally
the basis of farming systems. But development of chemical fertilizer industry during the green
revolution period created opportunities for low-cost supply of plant nutrients in inorganic forms
which lead to rapid displacement of organic manures derived from livestock excreta. The
deterioration of soil fertility through loss of nutrients and organic matter, erosion and salinity,
and pollution of environment are the negative consequences of modern agricultural practices.
Department of Management Sciences, PUMBA 21
In India, millions of tons of livestock excreta are produced annually. Odour and pollution
problems are of concern. Currently the fertilizer values of animal dung are not being fully
utilized resulting in loss of potential nutrients returning to agricultural systems. The potential
benefits of vermicomposting of livestock excreta include control of pollution and production of
a value added product. Vermicomposting of different livestock excreta including cattle dung;
horse waste; pig waste; goat waste; sheep waste; turkey waste and poultry droppings has been
reported. Organic wastes can be ingested by earthworms and egested as a peat-like material
termed “vermicompost”. Recycling of wastes through vermicomposting reduces the problem of
non-utilization of livestock excreta. During vermicomposting, the important plant nutrients such
as N, P, K, and Ca, present in the organic waste are released and converted into forms that are
more soluble and available to plants. Vermicompost also contains biologically active substances
such as plant growth regulators. Moreover, the worms themselves provide a protein source for
animal feed. Considering the tropical climate of India, vermiculture technology seems to be one
of the most appropriate technologies for Indian farmer.
4.5 Ecological Appraisal of Vermicomposting
Organic agriculture, through its systemic approach and avoidance of agro-chemicals, prevents
natural resource degradation and the loss of land and productive potential. In organic
agriculture, nature is both instrument and aim. As organic farmers cannot use synthetic
substances (e.g. fertilizers, pesticides, pharmaceuticals) they need to restore the natural
ecological balance because ecosystem functions are their main productive "input". For
example:
Many unspecific pests like aphids, thrips, whiteflies or spider mites, economically damaging in many crops, can be kept below the economic threshold with naturally occurring or purposely released predators and parasitoids. The former are direct goods and services of hedges, botanically diverse field margins, intercropping or weedy undergrowth, and the latter do better when released in botanically and ecologically enriched habitats.
The only way to suppress soil-borne pests and diseases in organic agriculture are wide crop rotations with several components of botanically different crops. Adhering to such rotations is crucial to providing agro-ecosystem diversity.
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Diverse crop rotations, or agro-forestry systems, guarantee a better uptake of nutrient elements from the soil and very efficient use of water and light, thanks to varying spatial and temporal root growth and leaf dispersion.
Soils with a high functional diversity of micro-organisms, which occur very often after decades of organic agriculture practice, develop disease suppressive properties and can help to induce resistance in plants.
By restricting farm inputs farmers have to use preventive techniques appropriately. The ban on herbicides, for instance, makes it impossible to ignore good crop rotation principles and disastrous in terms of yields and long-term problems with weeds. The ban on soluble and purchased fertilizers makes nutrient-conserving crop rotations and the sparing use of organic fertilizers to reduce losses, economically worthwhile.
4.6 Legal aspects of Organic Farming
S.O. 908(E).- Whereas the draft of the Municipal Solid Wastes (Management and Handling)
Rules, 1999 were published under the notification of the Government of India in the Ministry of
Environment and Forests number S.O. 783(E), dated, the 27th September, 1999 in the Gazette of
India, Part II, Section 3, Sub-section (ii) of the same date inviting objections and suggestions
from the persons likely to be affected thereby, before the expiry of the period of sixty days
from the date on which the copies of the Gazette containing the said notification are made
available to the public.
And whereas copies of the said Gazette were made available to the public on the 5th October,
1999; And whereas the objections and suggestions received from the public in respect of the
said draft rules have been duly considered by the Central Government
4.7 Risk Factors Associated with Solid waste composting (Vermicomposting)
Political risk factors
Department of Management Sciences, PUMBA 23
Considering the nature of the projects, political factors may not be perceived to be major risk
posers, however they have a very strong potential to affect sustainability of MSW treatment
plant related projects. For instance in case of Trivendrum compost plant the different political
set up at the ULB and state level and changes after the general elections created a new set of
constraints for the city planners and the operator. The assurances given by the city
government/previous government were not honoured by the state/new government. Likewise
the assurances on fiscal incentives and preferential treatment given by the urban development
department could not be honoured by the agriculture department. The plant operator is unable
to address evolving situation and faces several unmanageable risks.
Administrative risk factors
Change of a Mayor or a municipal Chief Executive Officer/Commissioner can create a set of risk
factors which perhaps are not envisaged and factored in the agreement at the outset of the
project. For instance operations at the compost plant at Mysore (location not part of the study)
came to a stand still after one such change and the operator’s inability to meet the emerging
exigencies.
A major risk factor which the Manual on Municipal Solid Waste Management has also
attempted to address pertains to the countrywide practice of entrusting the responsibility of
MSW management to public health professionals who by training are clinical professionals.
They are expected to manage the curative facilities and measure indicators of public health
rather than get involved in logistics of collection, transport, treatment and disposal of solid
waste, management of fleet of dumper, loaders and earth moving machinery etc. The latter set
of tasks typically require engineering knowledge and skill which are best left for the engineering
departments. Because of this mismatch, it is no wonder that the solid waste operations are in a
rather poor shape across the country. In this context, it is encouraging to note the decision of
the Andhra Pradesh High Court which disallowed petition of the health professionals to prevent
transfer the responsibility to the engineering staff at the Municipal Corporation of Hyderabad.
As a consequence of this positive change the improvements in the city of Hyderabad in terms of
Department of Management Sciences, PUMBA 24
manpower and fleet planning, contractual arrangements, work allocation, demarcation of
responsibilities etc. are highly commendable.
Promoter background and contractual agreement
Some of the projects which came up in early stages of evolution of the sector witnessed entry
of inexperienced players with limited technical, financial and organisational strengths. Their
commitment was not towards long term sustainability rather in availing short benefits which
made them pursue the ‘waste to wealth’ paradigm. Integrated solid waste management
requires technical and logistical capabilities akin to mining operations with commensurate
financial resources. Lack of such capabilities has been demonstrated in many projects across
the country to have emerged as a major risk for short and medium term sustainability. It is
understandable that with the above kind of players and lack of appreciation on the part of the
urban local bodies on required expertise/resources, the contractual agreements were slanted
by the promoters towards availing capital subsidy and compensation in the event of deficit in
delivery of assured quantity of waste or closure of the plant. The fundamental premise of
converting ‘waste to wealth’ and expectation of royalty on the part of the ULBs entailed
operators to adopt short cuts to achieve operating profits. The contracts typically did not define
the responsibility of collection, transport and safe disposal of rejects, which highlights the
misplaced priority on the paradigm of ‘waste to wealth’ rather than on the paradigm of
‘safeguarding the environment and public health’.
Location of the plant
Nobody wants a waste treatment and disposal facility in his/her back yard. As a result, there is
severe protest by the affected community to any such proposals of the urban local bodies
across the country. Proximity to a habitation necessitates conducting due diligence (irrespective
of the size of capital investment), identification of impacts and incorporation of remedial
measures in terms of higher order technology and effective and robust pollution control
measures e.g., odour/emission control system, effluent treatment plant etc. On the social side,
unlike a typical large scale industrial project, a MSW treatment plant does not involve
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considerably high capital investment and thus there is not enough budget for compensation,
resettlement and rehabilitation of the project affected people. However, there is an utmost
need to address real fear of the community of being ostracised, loss of property values and
potential health impacts. Provision for host community fee and/or augmenting basic
infrastructure/services could help in reducing the risks, however these features are still not in
vogue.
FEEDSTOCK RELATED RISK FACTORS
Municipal solid waste to be treated and thereby receive value addition needs to be considered
not just as waste but as ‘feedstock’ from the point of view of the plant operator. As in case of
an industrial plant, feedstock/raw material delivery, quality and quantity become crucial from
operational efficiency point of view. Any shortfall on these counts can undermine plant
operations.
Delivery system In this regard lack of a seamless integration between treatment plant and the collection and
transport system emerges as a significant risk factor. Under the existing system the plant
operator has no control over the municipal personnel and fleet drivers who are entrusted with
the responsibility of delivery of the feedstock to its plant. The latter groups are well known for
their low efficiency and lack of accountability and the operator can be held at ransom or could
be a helpless observer when it comes to timely delivery of required quantity and quality of
feedstock. Secondly, in the evolving system of contracting out transport of waste, while there is
significant revenue for transport contractors, the plant operator does not get ‘gate fee’ in
proportion to the quantity of waste delivered at its premises. Integration of transport and
treatment systems/services will reduce such risk factors and offer higher motivation for a
private operator to make a competitive and realistic bidding.
4.8 SWOT Analysis
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5. Operations Plan
Plant and Production Facilities:
Land Area of the Plant : 2 acres which includes half acres for future expansion
Main product : Vermicompost
By-product : Earthworms
Production Capacity : 20000 kgs of vermicompost per batch
Capacity Untilisation : 100%
Price/bag of 50 kg : Rs.150
Annual Sales : Rs. 30,00000 from Vermicompost & Rs. 48,0000 from earthworms
Number of vermicomposting beds : 2000 beds
Dimensions of a single bed : 10x5x3
Capacity of vermicomposting per bed : 500 kgs of vermicompost
Number of batches produced per year : 3 batches i.e 100 metric tones
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g
STRENGTH
Good Quality and near to the market Good quality products Healthy and eco-friendly fertilizers No Bio magnification unlike chemical
fertilizers Basic raw materials free of cost
WEAKNESS
New In this Area Farmers are not habituated to
using organic fertilizers No brand image and brand equity
in the market
OPPORTUNITY
Less competitive market Easy availability of raw materials New Market Futuristic Market Health conscious Government subsidies
THREATS
Environmental effect is very high No skilled workers available Farmers demand for quick results
on the contrary to the fact that organic fertilizers take a longer time to give reults
Water supply Facility : Bore well water system
Means of Transportation : Tractor for farm use as well as for collection of garbage and
cow-dung
For every bed ½ kg of earthworms are required which amounts to 200 kgs for one batch.
From initial batch reproduction of earthworms leads to 600 kgs after the first batch.
Out of these 200 kgs will be retained for the culture of second batch and 400 kgs will be
sold in the market.
Next batches will not require any further purchase of earthworms.
In every batch henceforth there will be 400 kgs of earthworms as by-product that
amounts to 1200 kgs from three batches to be sold as a by-product.
Raw Materials used:
Garbage from different sources like industrial as well as household wastes, Various
Municipal Solid waste
Living organisms used: Earthworm weighing half kgs per bed of vermicomposting
Chemical used as a catalyst for vermicomposting: Agroculture 1 kg per 3 beds of
vermicomposting
Production type: Batch Production
Time required for one batch production: 4 months
Note: Time for first batch of yearly vermiculture start: June-July
Yearly Batch production: 3 batches
Plan for labourers
For maintenance of the farm 4 labourers will be on the field
Apart from these, 3 labourers will be used extra for 10 days during the initial spreading
of the garbage and preparation of the beds for vermiculture
Henceforth for 3 batches 90 days of extra working days of labourers will be required
Garbage and cowdung will be collected from the surrounding localities around the farm
in Baramati
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Plant Lay
Plant layout for vermicomposting plant
Vermicomposting process
It is an aerobic, bio-oxidation, non-thermophilic process of organic waste decomposition
that depends upon earthworms to fragment, mix and promote microbial activity. The
basic requirements during the process of vermicomposting are
• Suitable bedding
• Food source
• Adequate moisture
• Adequate aeration
• Suitable temperature
• Suitable pH
Climate and Temperature requirement
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g
Warehouse Packaging Vermicomposting plant
Storage plant
Industrial garbage Filtering PlantOffices
The most common worms used in composting systems, red worms (Eisenia foetida, Eisenia
andrei, and Lumbricus rubellus) feed most rapidly at temperatures of 15–25 °C (59-77 °F). They
can survive at 10 °C (50 °F). Temperatures above 30 °C (86 °F) may harm them. This
temperature range means that indoor vermicomposting with red worms is suitable in all but
tropical climates. (Other worms like Perionyx excavatus are suitable for warmer climates.) If a
worm bin is kept outside, it should be placed in a sheltered position away from direct sunlight
and insulated against frost in winter.
Fig: Flowchart for vermicomposting process
6. MARKETING PLAN
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6.1 Marketing Strategy
Pre-executing Marketing Strategy
Post-executing Marketing Strategy
Pre-executing Marketing Strategy:
Identification of the Area:
Area should be near to the market so that it is easy to communicate with the farmers.
Area should also be near to the suppliers of raw materials. Moreover it should be such
that water is easily available. Area should be isolated from human dwelling so that there
is no issues regarding the bad odour of the garbage compost of the farm
Mass Campaigning:
The farmers who are the end customers will be made aware of the vermicompost
product, its features and its advantages, its availability through mass campaigning. This
is very necessary since the farmers are used to using the conventional chemical
fertilizers. Through mass campaigning they will also be made aware about the harmful
effects of the chemical fertilizers on their land as well as on their health and the dangers
associated with their small children as well.
Village meeting:
The farmers can also be made aware of the product and its competitive advantages
through village meeting. Also we can seek the help of the village authorities like the
Panchayat , or the farmers welfare unit since they have a high influence on the farmers.
They can help in convincing the farmers about the product as well as the govt subsidies
available for this product and its cheaper rates.
Meeting with the target farmers
Meeting with the target farmers is very important to convince them and demonstrate
them about the product. Moreover it will be easy to understand their expectations and
their min set about the product. It is also necessary to remove the confusions and wrong
notions of the farmers about the product. It will also help in making them aware about
the financial assistance available for this product.
Post-Execution Marketing Strategy
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Mass campaigning
Publicity:
Product publicity can be made through various ways like wall posters, banners, free
samples etc. Colourful posters usually attract the village folk and make them curious
So it will be easy to attract the attention of the farmers. Various tools that can be used
for publicity are as follows:
1. Literature Distribution
2. Wall Painting
3. Shop Painting
4. Farming Equipment Painting
5. Press news Coverage
6. Print Media
7. Local Radio
Mega Farmer Meeting
Product Display: The product will be physically displayed to the farmers to give them a
clear idea about the features of the product and its usability
Demonstration: This is very important since most farmers are used to the chemical
fertilizers and are not aware of hoe to use the organic fertilizers. Demonstration of the
product will help them in using the product in their fields.
1. Result Demonstration
2. Crop Specific Demonstration
3. Result group demonstration
7. HUMAN RESOURCES PLAN
Department of Management Sciences, PUMBA 32
Organization and Employee Structure
1. Finance Department : Financial Manger, Head Accountant, Assistant Accountant2. Marketing Department : Marketing Manager,
Sales, Promotion and distribution team of 8 members Two drivers for driving the carrier van
3. Operations Department : Two supervisors for the Vermicomposting plant One supervisor for the packaging plant Eight field and packaging labour
4. Human Resources Department : One recruiting officer
Human resource Policies
Employee Motivation: Bonus for outstanding performance
Organisation Culture: Transparency within organization, Unity of Command
Health and Safety: Health check up, Medical Facility
Employee retention policy: Promotion policy, Career development policy
Corporate Social Responsibility
Health Conciousness
Ecofriendly System
Free soil testing and water testing for friends
8. FINANCIAL PLAN Department of Management Sciences, PUMBA 33
GENERAL MANAGER(Administrative Head)
FINANCIAL MANAGER
MARKETING MANAGER
OPERATIONS MANAGER
HUMAN RESOURCE MANAGER
1. Cost of Project (in Rupees)
Investment in Fixed assets Amount (Rs)
Land and Building 800000
Machinery 3000
IT equipment 19000
Earthworm 80,000
Miscellaneous assets 20000
Contingency (10%) 20,300
Investment in Working Capital 2,49,627
Investment in Preliminary expenses 50000
TOTAl Expenses 12,41,927
2. Means of Finance
Particulars Amount(Rs)
Loan
Long Term Loan 7,40,000
Equity Capital 11,10,000
Total 18,50,000
3. Financial Cost
S.No. Particulars 1st Year 2nd Year 3rd Year
1 Interst on Term Loan 0 55500 44400
TOTAL 99900
Note: Loan is taken from NABARD @ the rate of 7.5% for Organic farming
4. Loan Repayment Schedule:
Year Amount Interest@ Installment Paid Balance
Department of Management Sciences, PUMBA 34
7.5% p.a.1st year OPENING 740,000 0 740,000
CLOSING 740000
2nd Year OPENING 740,000 55500 148,000 592,000
CLOSING 592000
3rd Year OPENING 592000 44400 148,000 444,000
CLOSING 444,000
5. Cost of Capital
Particulars Amount
Interst Rate of Debt 7.5%
Interst rate of Equity dividend 16%
Income tax rate 30%
Amount of Debt 7,40,000
Amount of Euity 111,0000
Cost of Capital 11.7%
6. Projected Sales Revenue
Products sold: A. Vermicompost B. By-product: Live earthworms
10%
% Increase in S.P 10%wt. /bag 50 Kg
Selling Price Vermicomppost
113 Rs./bag
Earthworms 400 Rs/kg
1st year 2nd 3rd
Rs./Unit(kg)
Units Rs. Rs./Unit
Units Rs. Rs./Unit
Units Rs.
Sales Projection
(Units)
Vermicompost
3 1000000
3000000
3.3 1100000 3630000
3.63 1210000
4392300
Earthworms 400 1200 480000 440 1200 528000 484 1201 581284
7. Cost of Raw Material
Department of Management Sciences, PUMBA 35
1st Batch: 6667 bags of vermicompost of 50 kgs each
2nd batch: Purchase Earthwrorms is not required from the start of the second batch as
there will be around 600 kgs of freshly reporoduced earthworms. This will lead to cut
down of the costs as follows:
1st batch cost of raw materials/bag of 50 kg= Rs.51.5
From second batch onwards the cost of raw materials will decrease since purchase of
earthworms will no more be required
Therefore only in the first batch purchase of earthworms are require
% increase= average rate of inflation in food industry= 10%
Therefore growth in prices = 10%
1st Batch 6667 bags 1000000 Kgs1st year 2nd year 3rd year
Qty / Batch Qty / Packet
Rs./Kg. Rs./Packet
Cow Dung 40000 kg 10 1 10.00Garbage 160000 kg 40 0 0.00
Agroculture 10000 kg 0.5 75 37.50Earthworms 200 kg 0.01 400 4.00
Total 51.50 2976816 2370000 2607000
7. Working Capital Requirement Statement
1ST Year 2nd Year 3rd Yea
1) WORKING CAPITAL REQUIREMENT
Amount (Rs)
Holding
Period (Days)
Total Cost
Amount (Rs)
Holding Period (Days)
Total Cost
Amount (Rs)
Holding Period (Days)
Total Cost
(i) RM 9923 10 99227 7596 120 911538 8356 10 83558
(ii) WIP 0 0 0 0 0 0 0 0
(iii) FG 0 0 0 0 0 0 0 0
(iv) Less: Creditors 9923 15 148841 7596 15 113942 8356 15 125337
(iv) Debtor 11438 30 343142 9567 30 287006 10524 30 315707
(V) Working Capital Requirement
293528 1084602 273928
8. Depreciation on Fixed Assets (WDV Method)
1st 2nd 3rd
Department of Management Sciences, PUMBA 36
Fixed assets
Depreciation Rate
Gross Block
Depreciation
Net Block (WDV)
Gross Block
Depreciation
Net Block (WDV)
Gross Block
Depreciation
Net Block (WDV)
Land and Building
10% 500000
50000 450000
450000
45000 405000
405000
40500 364500
Plant& Machinery
10% 3000 300 2700 2700 270 2430 2430 243 2187
Tractor 10% 250000
25000 225000
225000
22500 202500
202500
20250 182250
Computer 10% 16500 1650 14850 14850 1485 13365 13365 1337 12029
Furniture 10% 8000 800 7200 7200 720 6480 6480 648 5832
Laser Printer
10% 2500 250 2250 2250 225 2025 2025 203 1823
TOTAL 780000
78000 702000
702000
70200 631800
631800
63180 568620
10. Operating Expenses (SG & A)
% Sales % Growth
1st Year 2nd Year 3rd Year 4th Year 5th Year
Salary 960000 1056000 1161600 1277760 1405536
Electricity expenses 10% 36000 39600 43560 47916 52707.6
Telephone expenses 10% 7200 7920 8712 9583.2 10541.52
Printing and stationery 0.25% 8700 10395 12433.96 14886.57 17838.23
Fuel 10% 15000 16500 18150 19965 21961.5
TOTAL 1026900 1130415 1244456 1370111 1508585
11. Salary Statements
Persons
% Growth
1st Year 2nd Year 3rd Year
Salary/Month
Yearly Salary
Salary/Month
Yearly Salary
Salary/Month
Yearly Salary
MANAGERS 3 10% 20000 720000 22000 792000 24200 871200
ACCOUNTANT
1 10% 10000 120000 11000 132000 12100 145200
OFFICE BOY 1 10% 5000 60000 5500 66000 6050 72600
SALES PERSON
1 10% 5000 60000 5500 66000 6050 72600
Total 960000 1056000 1161600
Cost Sheet
Particulars Inner Outer
Department of Management Sciences, PUMBA 37
Raw Materials 2976816
Wages 250000
Prime cost 3226816
Factory Overheads
1)Water Supply charges 0
2)Electricity charges 15000
3)Packaging charges 69600
4) Factory Rent
Depreciation on Machinery 3000
Factory Costs 3314416
Add:
Addministrative Overhead
Salary 900000
Electricity expenses
Telephone esxpenses 7200
Printing and stationery 8700
Cost of Production 4230316
Add:
Selling and Distribution Overheads
1) Salesman 60000
2) Travelling 30000
90000
TOTAL COST 4320316
Profit 432032
TOTAL SALES 3480000
11. Projected Profitability Statement
Year 1 Year2 Year3
Department of Management Sciences, PUMBA 38
Sales 3480000 4158000 4973584
Raw Materials 2976816 2370000 2607000
1)Water Supply charges 0 0 0
2)Electricity charges 15000 16500 18150
3)Packaging charges 69600 76560 84216
4) Factory Rent 0 0 0
5) Labour charges 250000 275000 302500
8) Operator, Supervisor and Incharge 120000 132000 145200
Cost of production 3431416 2870060 3157066
Operating Profit 48585 1287940 1816518
Insurance
SG&A 1026900 1130415 1244456
Rent
Depreciation 78000 70200 63180
Cost of Sales 1104900 1200615 1307636
EBIT -1056316 87325 508882
Less Interest 0 0 55500
-1056316 87325 453382
Less Taxes 0 26198 136015
Net Profit -1056316 61128 317367
12. Capital Budgetting
a) Cash Flow Statement
Particulars Year 1 YEAR 2 Year 3
Net Profit (1056316) 61128 317367
Department of Management Sciences, PUMBA 39
ADD Non Cash Charges
Depreciation 78000 70200 63180
ADD Non Operating expenses
Interest Charges 0 0 55500
Changes in Working Capital (293528) (791074) 810674
Cash Flow from Operations (1271843) (659747) 1246722
Investment Activiites
Plant Property & Equipment (780000)
Vehicles 0
Cash Flow from Investment (780000) 0 0
Financing Activities
Debts Raised 740000 0 0
Interest charges 0 0 (55500)
Debt Repayement 0 0 (148000)
Share Holders Equity 1110000 0 0
Cash Flow From Financing Activities 1850000 0 (203500)
Total Cash flow for This year (201843) (659747) 1043222
Cash From Previous Year (201843) (861590)
Year end Cash Flow (201843) (861590) 181632
b) Net present Value and Pay-back period
NPV and PAY Back period
Cost of Capital 12%
Year 0 Year1 Year 2 Year 3 Year 4 Year 5
Department of Management Sciences, PUMBA 40
Cash inflows -1111327 -451500 131328 380547 759607 1353542
Discounting Factor 1 0.8928571 0.79719388 0.7117802 0.6355181 0.567426856
Present Value -1111326.667 -403125 104693.479 270866.14 482743.98 768036.336
13. Balance Sheet
Sources of Funds
Year 1 Year 2 Year 3Shareholders Funds Shareholders Equity 1110000 1110000 1110000 Resrves and Surplus 0 -995188 -677821 1110000 114812 432179Loan Funds Secured Loans 740000 740000 740000 Repayment of Loans 0 0 148000 Balance 740000 740000 592000TOTAL 1850000 854812 1024179 Application of Funds Fixed Assets Net Block 702000 631800 568620 702000 631800 568620Current Assets Cash -201843 -861590 181632 Trade Recievables 343142 287006 315707 Inventory 99227 911538 83558 240525 336954 580896Less Current Liablities Trade Payables 148841 113942 125337 148841 113942 125337Net Current Assets 91685 223012 455559 Profit & Loss Account 1056316 0 0TOTAL 1850000 854812 1024179
9. BIBLIOGRAPHY
Economics and Efficiency of Organic Farming vis-à-vis Conventional Farming in India
By D.Kumara Charyulu and Subho Biswas1
American-Eurasian Journal of Agricultural & Environmental Sciences
Special Issue on‘VERMICULTURE & SUSTAINABLE AGRICULTURE’
By Ravi Sinha
Department of Management Sciences, PUMBA 41
Production and marketing ofproduction and marketing of
vermicompost in karnataka: a case of dharwad district: Thesis submitted to theUniversity
of Agricultural Sciences, Dharwad
http://www.composting101.com/worms-cut-waste-article.html
http://www.compostsantacruzcounty.org/Home_Composting/Worm_Composting/
worm_feeding.htm
http://www.iobbnet.org/drupal/node/view/609
Wikipedia : http://en.wikipedia.org/wiki/Earthworm
http://ejournal.icrisat.org/agroecosystem/v2i1/v2i1vermi.pdf
Department of Management Sciences, PUMBA 42
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