EXERCISE 2 PROJECT FORMULATION
Structure
2.0 Introduction
Objectives
2.1 Study Guide
2.2 Procedure
Principle
Requirements -
Steps
2.3 Tips and Caution for Preparing a Good Prqject
I 2.4 Conclusion
b
I
2.0 INTRODUCTION ,
We know that organic agriculture is based on minimizing the use of the external
inputs, prohibiting the use of chemicals and avoiding any form of contamination
from internal or external sources. 'Organic' is a labelling word that denotes
products that have been produced in accordance with given organic standards
throughout production, processing, handling and marketing and duly certified
by an Accredited Certifiing Agency.
The organic farming also involves production of different inputs at the farm
itself to avoid any form of contamination from outside. The farmer need to
understand the basic philosophy of the organic farming in order to sustain it.
'The organic agriculture is catching up fast and government is aiding this spread.
Many schemes and subsidies are being made available to the organic farmers to
boost their organic production. Schemes are available for support to establish
vermicompost unit, biopesticide production unit, meeting the certification cost,
conversion of conventional farm to organic farms, etc. Different institutions such
as NABARD (National Bank for Agriculture and Rural Development) accepts
proposal for funding of different activities in organic agriculture. This bank
accepts proposals to set up biopesticide units, biofertilizer units, agriclinics for
vermicomposting and NADEP compost unit. But this bank does not give loan
directly to the individual. National Horticulture Mission (NHM), Govt. of India
also extends loan to the farmers for setting up vermicomposting units at their
farms through the State Horticulture Missions. -
Besides these agencies, the Ministry of Agriculture and Department of Science
and Technology, Govt. of India and many NGOs also extend financial support
for various enterprises in organic farming. North Eastern States have different
schemes in which proposals from individual farmers are accepted for funding to
establish a v e r m i ~ o m ~ o sunit
t i ~at~ their farms. Unit 2 of Block 1 of Course 4
describes different schemes available for funding in organic farming.
CAPART (Council for Advancement of People's Action and Rural Technology)
is another agency that gives fund for organic farming ta the f m e r s who are
PracticaCManuaI- registered with some recognized Voluntary Organizations. CAP.4RT was fornled
Economics and Marketing
of Organic Produce
by amalgamating two agencies, the 'Council for Advancement of Rural
Technology' (CART) and People's Action for Development India (PADI). It is
an autonomous body registered under the Societies Registration Act 1860 and is
functioning under the aeigs of the Ministry of Rural Development. Government
of India. This agency is a major promoter of rural development in India, assisting
over 12,000 voluntary organizations across the country in implementing a wide
range of developmental initiatives. CAPART has set the following criteria for
assistance in organic farming to the volun& organizations:
Registration under the Societies Registration Act, 1860 (or a State
amendment of this Act), the Indian Trusts Act 1862, or the Charitable and
Religious Trusts Act 1920.
At least three years of experience of working in the field after registration.
A strong field presence and experience of mobilising communities to act
for development.
CAPART gives priority to voluntary organizations with a good track record
and proven competence in community mobilisation and empowerment of
disadvantaged groups.
Organizations accessing CAPART support for the first time are required to
submit their proposals directly to the concerned Regional Committees.
Project proposals must be submitted in the proper format (included in each
of the scheme guidelines) and must be accompanied by a complete
organization profile in the appropriate format (also included in the scheme
guidelines).
It is clear from above examples that different agencies have different terms and
conditions. So the farmers have to analyse them properly and if they suit them,
the project should be prepared. There are certain hidden terms and conditions
also. Usually the government agencies have less or no such terms and conditions
but the private or NGOs do have such terms and conditions. These terms and
conditions must be analysed and understood prior to the project preparation.
The word 'proposal' refers to a plan, offer, scheme etc., to be presented before a
hnding agency in their format,for acceptance. Before preparing a proposal, one
should get acquainted with the terms and conditions of the hnding agency, basic
features of the agency, format, monitoring methodology, repayment options etc..
Objectives
After going through this exercise, you will be in position to:
acquaint yourselves about the funding agencies available for organic farming;
select a right agency for yourselves;
prepare a good. quality and acceptable project for funding; and
improve your organic farming production or organic input generation.
2.2 STUDY GUIDE
The following guide books and references will be useful for fixther understanding
14 the concept:
Practical 'Manual- The component may vary depending upon the format of the different agencies.
Economics and Marketing
of Organic Produce
We have given a format of a Bankable Project at the end of the unit as an
APPENDIX. This is just an example. You should study this project profile and
prepare your project on the desired aspect.
2.3 TIPS AND CAUTION FOR PREPARING A GOOD
PROJECT
The following points may be taken into consideration at the time of formulation
of a project on organic farming:
1) Don't prepare any superficial project. Stick to the proper format of the
funding agency.
2) Identify your problem and estimate the required budget. You should seek
the portion amount of the budget that you may not arrange from your own
sources.
3) Analyse the terms and conditions of the funding agency properly.
4) Provide firm information inputs.
5) Be clear about the repayment optionslmode.
2.4 CONCLUSION
The farmer should submit a project to a funding agency after going through all
the required steps. The project should be formulated as per the format of the
agency. After submission of the project, the agency scrutinizes the proposal and
suggests the modification, if any. Some agency requires presentation of the project
before their staff. In such cases, the fate of the project is decided on the spot. You
should be clear about your project cost and implementation strategy.
16
Project Formulation
FORMAT OF NABARD'S BANKABLE PROJECT
(Source: http://nabard.org/modelbankprojects/ld~vermi.asp)
(This is just an example only for the reference, not to be copied)
Agri-clinic for Vermicompost
Establishment of Vermicomposting Units Under Agri-clinics
1.0 INTRODUCTION
There is a growing realisation that vermicomposting provides the nutrients and
have better keeping quality. A growing number of individuals and institutions
. are taking interest in the production of compost utilising earthworm activity.
Some of them ventured into commercial production as well. As the cost of
of this compost works out to about Rs.1.5 per kg, it is quite profitable
to sell the compost even at Rs.2.50 per kg. Other organic manures like neem
cake, groundnut cake, etc., are sold around this price.
moisture content and a temperature of 20 - 30" C by sprinkling water over the
beds. The earthworms being voracious eaters consume the biodegradable matter
and give out a part of the matter as excreta or vermicasting. The vermicasting
containing nutrients is rich manure for the plants.
When the commercial scale production is aimed at in addition to the cost of
production, considerable amount has to be invisted initially on capital items.
The capital cost may work out to about Rs. 1,500 to Rs.2,500 for every tonne of
compost produced annually. The high variability in the unit capital cost is due to
the fact that large units require considerable expenditure on machinery and
transport particularly when the source of raw materials is away from the site of
production facility and the finished product has to be transported to far off places
before being marketed. However, in most of the cases. the activity is viable and
bankable. Following are the items required to be considered while setting up a
unit for production of vermicompost.
2.0 ABOUT THE WORMS
Of about 350 species of earth worms in India with various food and burrowing
hibits, Eisenia fetiuir. Eudrilus eugeniae. Perionqx excavatius are some of the
species for rearing to convert organic wastes into manure. The worms feed on
any biodegradable matter ranging from coir waste to kitchen garbage and
vermicomposting units are ideally suited to locations/units with generation of
k days. Three to seven worm^ emerge out of each capsule. Thus, the multiplication
Project Formulation
When the activity is taken up on a large scale on commercial lines, considerable
amount may have to be spent on buildings to house the office, store the raw
material and finished product, prdvide minimum accommodation to the Manager
and workers. The cost of the buildings along with the electrification of these
buildings and the vermi-sheds may be included under this item.
v) Seed Stock
This is an important item requiring considerable investment. Though the worms
multiply fast to give the required numbers over a period of 6 months to a year. it
may not be wise to wait till such a time having invested on the infrastructure
heavily. Thus, worms @ 350 worms per m-' of bed space.should be adequate to
start with and to build up the required population in about two cycles or three
without unduly affecting the estimated production.
vi) Fencing and Roadstpaths
The site area needs development for construction of structures and development
ofroads and pathways for easy movement of hand-drawn trolleys/wheel barrows
for conveying the raw material and the finished products to and from the
verrnisheds. The entire area has to be fenced to prevent trespass by animals and
other unwanted elements. These could be estimated based on the length of the
periphery of the farm and the length and type of roads/paths required. The costs
on fencing and formation of roads should be kept low as these investments are
essential for a production unit, yet would not lead to increase in production.
vii) Water Supply System
As the beds have always to be kept moist with about 50% moisture content,
there is need to plan for a water source, lifting mechanism and a system of
conveying and applying the water to the verrni-beds. Drippers with round the
clock flow arrangement would be quite handy for continuous supply and saving
on water. Such a water supply/application system requiring considerable initial
investment, however, reduces the operational costs on hand watering and prove
economical in the long run. The cost of these items depend on the capacity of the
. unit and the type of water supply chosen.
viii) Machinery
Farm machinery and implements are required for cutting (shredding) the raw
material in small pieces, conveying shredded raw material to the vermi-sheds,
loading, unloading, collection of compost, loosening of beds for aeration, shifting
of the compost before packing and for air drying of the compost, automatic
packing and stitching for efficient running of the unit. Costs of providing
necessary implements and the machinery have to be included in the project cost.
ix) Transport
For any vermicomposting unit transport arrangement is a must. When the source
of raw material is away from the production unit, an off-site transport becomes
major item of investment. A large sized unit with about 1000 tonnes per annum
capacity may require a 3-tonne capacity mini-truck. With small units particularly
with the availability of raw material near the site, expending on transport facility
Practical Manl~al- may become infructuous. On-site transport facilities like manually drann trolleys
Economics and Marketing
of Organic Produce
to convey raw material and finished products between the storage point and the
vermicompost sheds could also be included in the pro-ject cost.
I x) Furniture
A reasonable amount could also be considered for furnishing the office-cum-
stores including the storage racks and other office equipment. These enhance
the efficiency of operations.
xi) Operational Costs I
In order to operate the unit, expenditure on some items have to be incurred on a
recurring basis. These items include salaries of the staff, wages to the labourers,
cost of raw material, fuel cost on transport of raw materials and tinished goods,
packing material cost, repairs and maintenance, power. insurance. etc. The number
of office personnel and labourers have to be decided breaking each activity into
a number of sub-activities and for each sub-activity estimating the work involved
and the capacity of the labour to finish the work in a given time. The number of
persons should be so chosen to keep them engaged throughout by providing
enough persons at various work points like stores, vermi-beds and equipping
them with adequate number of implements to avoid undue waiting.
6.0 PROJECT PROFILE
Vennicomposting could be taken up on any scale starting from 10 tonnes per
annum (tpa) to 1000 tpa and above. As the production is proportional to the
vermi-bed space, it is advantageous to start with less capacities and later on
expand the unit after gaining production experience and developing assured
market for the product.
The Society for Preservation of Environment and Quality of Life (SPEQL)
organised a pilot project on vermicomposting in fruit market premises, Kothapet,
Hyderabad. The project, being operated c u ~ ~ e n ton
l y commercial lines is serving
as a demonstration unit. The estimates of costs and benefits, presented in the
profile are based on the experience of that pilot project.
A bed volume of 330 m-' spread over sixteen beds - 15 m long, 1.5 m wide and
0.3 m high is estimated to produce vermicompost of 200 tpa over 5 cycles1
crops of 75 days each annually. These beds are housed in 8 open sheds of
15 m x 5.4m.
n e cost of construction of sheds, cost of machinery and tools, operational cost/
production cost of compost are set out in Annexure I, I1 and I11 respectively. The
costs and benefits of the unit are set out in Annexure IV. As can be seen, the
investment cost is Rs.2,77.000/-, operational cost Rs.3.68.000. Operational cost
of two cycles amounting to Rs.l,47.200 is capitalised. Production of 60% in the
first year and 90% in the subsequent years is assumed. Benefits include the
income from sale of vennicompost @ Rs.2,500 per tonne and worm @ Rs.501-
per kg. The net income from the 2nd year onwards would be ahout Rs.1,37,000
annually. The financial analysis of the project suggests that the activity is
financially viable with financial rate of return of 36% (Annexure V). Economics
have been worked out without the subsidy component. With the subsidy its Project Formulation
viability will be much better. The loan could be repaid over a period of 8 years
with a grace period of 1 year. The repayment schedule is set out in Annexure VI.
-
7.0 EXTENSION SERVICE
The unit will provide extension services to the nearby villages. Under this the
unit will provide cultural material of the desired species, and train farmers and
entrepreneurs who would like to set up their own small units for use in their
farms. Those who want to set up commercial units also can get know-how and
culture material at a reasonable cost. The technical graduates who will establish
such an unit under the scheme for agri-clinicswill train more people, demonstrate
practically the production methodology on the unit that will be set up by him
and also supply the pure culture with quality worms. He may also try to explore
marketing for small units that will be promoted by him at a reasonable cost. The
following benefits can be assumed under extension services for the unit:
Sale of culture material @5-10 paise.
Consultancy for setting up new units @Rs. 1,0001- per unit and say 10 units
per year comes to Rs. 10,0001-.
It is advised that the same unit will also construct models of simple, alternate
methods of compost making to serve as demonstration to the local farmers. One
of the simple methods is NADEP compost process. Two NADEP tanks of size
1 0 x 6 ~ 3feet will be constructed at a suitable location. In addition any other
simpler low cost methods also may be installed in consultation with research
Institutions/Universities and give wide publicity to popularise the sustainable
practices for wider adoption.
21
Practical Manual-
Economics and Marketing
Annexure I
of Organic Produce
Estimate for construction of temporary shed for setting up 200 TPA
vermicompost unit
(Size 8 m x 15m x 5.4m)
S1. Particulars Quantity Rate Amount
No. (Rs*) (Rs.1
1. Wooden ballies (3 m long) 472 25 7,800
2. Wooden ballies (3.6 m long) 48 30 1,440
3. Bamboos (3 m long) 800 15 12,000
4. Bamboos (6 m long) 240 20 4,800
5. Bamboo mats for covering the roof 720 25 18,000
6. Coir rope 6 mm dia 200kg 15 3.000
7. Binding wire for tying bamboos & mats 100 kg 25 2,500
8. Labour charges for erection of sheds LS 20,000
/
Miscellaneous
9.
---2,460
Total 72000
' Annexure II
200 TPA vermicompost unit - Implements and machinery
S1. Particulars Amount (Rs.)
No.
1. Shovels, spades, crowbars, iron baskets, 2,800
'dung fork, buckets, bamboo baskets,
trowel, wire mesh sieves (3 mm and 6 mm)
2. Plumbing and fitting tools 1,000
3. Power operated shredder 20,000
4. Sieving maching with 3 wire mesh sieves 35,000
0.6 m x 0.9 m size - power operated without
motor
5. Weighing scale (100 kg capacity) 1,500
6. Weighing machine (platform type) 5,000
7. Bag closer 3,000
8. Empty barrels (200 L capacity) 4 Nos. 1,600
9. Culture trays (plastic) (35 cm x 45 cm) - 4 Nos 200
10. Wheel barrows - 2 Nos. 10,000
Total 80,100
Say 80,000
22
Project Formulation
SI. Years
No. Particulars I I1 onwards
1. Costs
a) lnv~styentCosts
i) Open sheds with bamboo mat roofing 72,000 -
over bambo~frame work supported
by wooden ballies
ii) Machinery and tools 80,000 -
iii) Ofice-cum-store 60,000 -
iv) Water source 60,000
v) 2 NADEP tanks 5,000
Total 2,77,000
b) Operational Cost 3,60,000 3,60,000
For 5 cycles in a year @ Rs. 72,000 per
cycle of 75 days lease rent 8,000 8,000
Total 3,68,000 3,68,Q00
(Rs.in lakhs)
S1. Particulars Years
No. I I1 to IX
1. Costs
A Capital Cost
''
i) Buildings 1.32 -
ii) Machinery / tools 0.8 -
iii) Water supply system 0.6 -
iv) NADEP tanks 0.05 -
B Operational cost 3.68 3.68
Total Cost 6.45 3.68
2. Benefits
i) Sale of vermicompost 3.00 4.50
ii) Sale of worms 0.45
iii) Consultancy and extension services 0.10
Total 3.000 5.05
3. Net benefit 0.792 1.37
Discounting Rate 15%
NPV 2.35
IRR 36%
NPV of benefits 22.3 1
NPV of costs 19.97
BCR 1.12
Annexure VI rrojecr r orrnularlon
Repayment Schedule
Outlay - Rs.4.242 lakh*
Bank loan - Rs. 3.394 lakh
Interest (%)- 15
Repayment
Year Loan Net Principal Interest Total Net
Out- Income Out- Surplus
Standing going
1 339400 79200 - 50910 50910 28290
2 339400 137000 31000 50910 81910 55090
3 . 308400 137000 36000 46260 82260 54740
4 272400 137000 41000 40860 81860 55140
5 231400 137000 47000 34710 81710 55290
6 184400 137000 54000 27660 81660 55340
7 130400 137000 62000 19560 81560 55440
8 68400 137000 68400 9510 77910 59090
* Including capitalization of operational cost for 2 cycles (Rs. 1,4 7,200/-)
