Released By: The Development Commissioner (SSI), Ministry of SSI, New Delhi

Electric Furnace
PRODUCT CODE (ASICC) : 77152

The technical specification of electric

furnace is as per customers requirement. The
QUALITY AND STANDARDS : testing procedure of resistance heating type
of electric furnace is governed by BIS
Specifications
IS 9025:1978 and
IS 8506:1977

Production Capacity : Quantity: 48 Nos. (per annum)

Value : Rs. 76,80,000

YEAR OF PREPARATION : 2002 _ 2003

PREPARED BY : Branch Small Industries Service Institute

386, Patel Road, Ram Nagar,
Coimbatore_641009
and
Office of the Development Commissioner
Small Scale Industries
Electrical and Electronics Division,
7th Floor,
Nirman Bhavan,
New Delhi-110 011.

Introduction

Electric furnace is used for heating purpose in various industrial production processes. Electric
furnaces are used where more accurate temperature control is required. There are three types of
electrical furnaces namely: (1) Induction Heating Furnace (2) Resistance Heating Furnace and (3)
Arc furnace depending upon the method of heat generation.

Induction heating furnaces and arc furnaces are beyond the scope of this project profile. The scope
of this project profile is confined to the resistance heating furnace only. In resistance heating
furnaces, the resistance heating

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 Released By: The Development Commissioner (SSI), Ministry of SSI, New Delhi

elements are used to generate the heat in a heating chamber. The heating elements used are
Nichrome wire, Kanthal wire or Graphite rods depending upon the temperature requirements. The
unit proposed in this project profile envisages manufacturing furnaces to a maximum temperature
of 1000OC and only up to 50 kW power rating. In this case, Kanthal wire is used. The temperature
is controlled using thermostats and the temperature is monitored by thermocouples. The heating
chamber is constructed by M. S. Sheets and channels and for thermal Insulation, fire clay bricks
and refractory bricks are used

Market Potential

Electric furnaces find its application in Engineering Industries, Food processing industries,
Chemical processing Industries, Laboratories etc. The furnace is designed and constructed as per
the requirement of the customer. The various parameters such as maximum attainable temperature
dimension of the heating chamber, automatic or semi - automatic controlling of temperature etc.
depends upon the requirement of the customer.

The demand for this item depends upon the growth of industrialization. The present day growth in
demand for this product is approximately 10% per year. There are 15 to 20 SSI units
manufacturing this item in Kerala and Tamil Nadu. Since this is industrial machinery, quality
assumes prime importance.

Basis and Presumptions

i) The basis for calculation of production capacity has been taken on single shift basis on 75%
efficiency.

ii) The maximum capacity utilization on single shift basis for 300 days a year. During first year
and second year of operations the capacity utilization is 60% and 80% respectively. The unit is
expected to achieve full capacity utilization from the third year onwards.

iii) The salaries and wages, cost of raw materials, utilities, rents, etc. are based on the prevailing
rates in and around Coimbatore. These cost factors are likely to vary with time and location.

iv) Interest on term loan and working capital loan has been taken at the rate of 16% on an average.
This rate may vary depending upon the policy of the financial institutions/agencies from time to
time.

v) The cost of machinery and equipments refer to a particular make/model and prices are
approximate.

vi) The break-even point percentage indicated is of full capacity utilization.

vii) The project preparation cost etc. whenever required could be considered under pre-operative
expenses.

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 Released By: The Development Commissioner (SSI), Ministry of SSI, New Delhi

viii) The essential production machinery and test equipment required for the project have been
indicated. The unit may also utilize common test facilities available at Electronics Test and
Development Centres (ETDCs) and Electronic Regional Test Laboratories (ERTLs) and Regional
Testing Centres (RTCs).

Implementation Schedule

The major activities in the implementation of the project has been listed and the average time for
implementation of the project is estimated at 12 months:

Sl.No. Activity Period (In Months)

1. Preparation of project report 1
2. Registration and other formalities 1
3. Sanction of loan by financial institutions 3
4. Plant and Machinery:
a) Placement of orders 1
b) Procurement 2
c) Power connection/ Electrification 2
d) Installation/Erection of machinery/Test
2
Equipment
5. Procurement of raw materials 2
6. Recruitment of Technical Personnel etc. 2
7. Trial production 11
8. Commercial production 12

Notes

1. Many of the above activities shall be initiated concurrently.

2. Procurement of raw materials commences from the 8th month onwards.

3. When imported plant and machinery are required, the implementation period of project may
vary from 12 months to 15 months.

Technical Aspects

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 Released By: The Development Commissioner (SSI), Ministry of SSI, New Delhi

Process of Manufacture

A Furnace essentially consists of a chamber in which the materials to be heated are placed. Heat is
supplied to this chamber from the resistance heating elements placed around the chamber. Heat is
transmitted to the object by radiation. M.S. Sheets and channels construct the chamber. Then the
chamber is lined with fire clay bricks. Fire clay bricks provide thermal insulation. After this a
lining with refractory bricks is made. Heating elements are embedded on the refractory lining.
Suitable groves will be provided to accommodate the heating elements on the refractory lining.
The terminals of the heating elements are taken out for connecting to the electric power supply.
The terminals are insulated using "SYNDANIO" an insulating material.

Quality Control and Standards

The technical specification of electrical furnace is as per the customers' requirement. BIS
specification IS 9025: 1978 and IS 8506: 1977 govern the testing procedure of resistance heating
type electric furnace.

Production Capacity (per annum)

The annual production capacity is 48 furnaces of 50 kW rating.

Motive Power 25 kV.

Pollution Control

The Government accords utmost importance to control environmental pollution. The small-scale
entrepreneurs should have an environmental friendly attitude and adopt pollution control measures
by process modification and technology substitution.

India having acceded to the Montreal Protocol in September 1992, the production and use of
Ozone Depleting Substances (ODS) like Chlorofluore Carbon (CFCs), Carbon Tetrachloride,
Halons and methyl Chloroform etc. need to be phased out immediately with alternative
chemicals/solvents. A notification for detailed Rules to regulate ODS phase out under the
Environment Protection Act, 1986 have been put in place with effect from 19th July 2000.

Energy Conservation

With the growing energy needs and shortage coupled with rising energy cost, a greater thrust in
energy efficiency in industrial sector has been given by the Government of India since 1980s. The
Energy Conservation Act, 2001 has been enacted on 18th August 2001, which provides for
efficient use of energy, its conservation and capacity building of Bureau of Energy Efficiency
created under the Act.

The following steps may help for conservation of electrical energy:

i) Adoption of energy conserving technologies, production aids and testing facilities.

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ii) Efficient management of process/manufacturing machineries and systems, QC and testing

equipments for yielding maximum Energy Conservation.

iii) Optimum use of electrical energy for heating during soldering process can be obtained by using
efficient temperature controlled soldering and de-soldering stations.

iv) Periodical maintenance of motors, compressors etc.

v) Use of power factor correction capacitors. Proper selection and layout of lighting system; timely
switching on-off of the lights; use of compact fluorescent lamps wherever possible etc.

Financial Aspects

A. Fixed Capital

(i) Land and Building

(a) Built up area 6000 Sq. ft.
(b) Office, Stores 1300 Sq. ft.
(c) Assembly and testing 4500 Sq. ft.
(d) Open area 200 Sq. ft.
(e) Rent payble (per month) Rs. 12,000

(ii) Machinery and Equipment

Sl. Rate Amount

Description Qty.
No. (Rs.) (Rs.)
1. Shearing machine 1200 mm 1 No. 30,000 30,000
2. Arc welding set 1 1 No. 25,000 25,000
3. Bending press 1 No. 26,000 26,000
4. Power press 1 No. 50,000 50,000
5. Drilling machine 2" cap. 2 No. 18,000 36,000
Grinding machine 200 mm dia.Double
6. 2 Nos. 10,000 20,000
ended 2 HP
7. Spring coil winding machine 1 No. 26,000 26,000
Air compressor with spray painting
8. 1 No. 20,000 20,000
Equipment
9. Flexible grinder (1/2 HP) 1 No. 8,000 8,000
10. Chain pulley block (5 T capacity) 1 No. 20,000 20,000

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 Released By: The Development Commissioner (SSI), Ministry of SSI, New Delhi

Total 2,61,000
11. Micro ohm meter (Digital) 1 No. 10,000 10,000
12. Multimeter 1 No. 3,000 3,000
13. HV Testing equipment 1 No. 20,000 20,000
14. Standard pyrometer 1 No. 4,000 4,000
15. Thermocouple test set 1 No. 5,000 5,000
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16. Ammeter 1,800 5,400
Nos.
3
17. Voltmeter 1,800 5,400
Nos.
2
18. Wattmeter 3,000 6,000
Nos.
19. Anemometer 1 No. 1,200 1,200
Total 60,000
Say 3,21,000
20. Electrification and Installation charges 32100
@10% of cost of machinery and
equipment
21. Office equipments and furniture 40,000
22. Hand Tools/ Jigs/fixture etc. 20,000
(iii) Pre-operative expenses 10,000
Total 4,23,100
Say 4,23,000

B. Working Capital (per month)

(i) Salaries and Wages (per month)

Sl. Rate Amount

Description Qty.
No. (Rs.) (Rs.)
1. Manager 1 8,000 8,000
2. Technical Supervisor 2 6,000 12,000
3. Clerk-cum-Typist 1 3,000 3,000
4. Peon 1 2,000 2,000
5. Skilled Workers 6 3,000 18,000
6. Un-skilled Workers 4 2,000 8,000
Total 51,000

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 Released By: The Development Commissioner (SSI), Ministry of SSI, New Delhi

Add perquistes @ 15% 7,650

Total 58,650

(ii) Raw Material (per month)

Sl. Rate Amount

Description Qty
No. (Rs.) (Rs.)
1. Kanthal resistance wire 8 Kgs 4,000 32,000
2. Thermocouples 4 Nos. 4,000 16,000
3. Thermostats 4 Nos. 800 3,200
Thermo couple compensating
4. 5m 35 175
cable
5. Fire clay bricks 5100 Nos. 16 81,600
5000
6. Refractory Bricks 22 1,10,000
Nos.
7. Fire clay 200 Kgs 16 3,200
8. M.S. Sheets (18 guage) 1300 Kgs 22 28,600
9. M.S. Channel 450 Kgs 21 9,450
Miscellaneous items such as
10. paints, Bolts, Nuts, Welding rods Lumpsum 8,000
etc.
11. Control panel assembly 4 Nos. 26,000 1,04,000
Total 3,96,225

(iii) Utilities (per month)

Sl. Amount
Description
No. (Rs.)
1. Power 6,400
2. Water 1,200
Total 7,600

(iv) Other Contingent Expenses (per month)

Sl. Amount
Description
No. (Rs.)
1. Rent 12,000
2. Postage and Stationery 2,400
3. Telephone 4,000

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 Released By: The Development Commissioner (SSI), Ministry of SSI, New Delhi

4. Transport Charges 8,000

5. Advertisement, Publicity and Sales promotion 15,000
6. Repair and Maintenance 2,800
7. Misc. expenditure 3,000
Total 47,200
(v) Recurring Expenditure (per month) 5,09,675
Say 5,09,600
(vi) Working Capital Requirement (Rs.)
Requirement of working capital is taken as 3 months recurring
15,28,800
expenditure = 3 x 5,09,600

C. Total Capital Investment

(i) Fixed Capital Rs. 4,23,000

(ii) Working Capital (3 month basis) Rs. 15,28,800
Total Rs. 19,51,800

Financial Analysis

Cost of Production (per annum) (Rs.)

Total recurring expenditure 61,15,200
Depreciation on machinery and equipment @ 10% 32,100
Depreciation on tools, jigs and fixtures @ 25% 5,000
Depreciation on office equipment, furniture @ 20% 8,000
Interest on total capital investment @ 16% 3,12,288
Total 64,72,588
Say 64,72,500

(2) Turnover (per annum)

Rate/ Unit Total sales

Item Qty.(Nos.)
(Rs.) (Rs.)
kW Furnace of Maximum
50 48 1,60,000 76,80,000
Temperature rise 800ºC

(3) Profit (per annum) (Before Taxes) 12,07,500

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 Released By: The Development Commissioner (SSI), Ministry of SSI, New Delhi

(4) Net Profit Ratio

= Profit per annum × 100

Sales per annum

= 12,07,500 × 100
= 15.72%
76,80,000

(5) Rate of Return

= Profit per annum × 100

Total capital investment

= 12,07,500 × 100
= 61.86%
19,51,800

(6) Break-even Point

Fixed Cost (per annum) (Rs.)

Rent 1,44,000
Depreciation on machinery and equipment @ 10% 32,100
Depreciation on tools, jigs and fixtures @ 25% 5,000
Depreciation on office equipment, furniture @ 20% 8,000
Interest on total capital investment @ 16% 3,12,288
40% of Salaries and wages 2,81,520
40% of other contingent expenses and utilities (excluding rent) 2,05,440
Total 9,88,348
Say 9,88,000

B.E.P.

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 Released By: The Development Commissioner (SSI), Ministry of SSI, New Delhi

= Fixed cost × 100

Fixed cost + Profit

= 9,88,000 × 100

9,88,000 + 12,07,500

= 9,88,000 × 100
= 45%

21,95,500

Additional Information

a. The Project Profile may be modified/tailored to suit the individual entrepreneurship

qualities/capacity, production Programme and also to suit the locational characteristics, wherever
applicable.

b. The Electrical Technology is undergoing rapid strides of change and there is need for regular
monitoring of the national and international technology scenario. The unit may, therefore, keep
abreast with the new technologies in order to keep them in pace with the developments for global
competition.

c. Quality today is not only confined to the product or service alone. It also extends to the process
and environment in which they are generated. The ISO 9000 defines standards for Quality
Management Systems and ISO 14001 defines standards for Environmental Management System
for acceptability at international level. The unit may therefore adopt these standards for global
competition.

d. The margin money recommended is 25% of the working capital requirement at an average.
However, the percentage of margin money may vary as per bank's discretion.

Addresses of Machinery and Equipment Suppliers

1. M/s. Batliboi and Company Ltd.

Appejay house, 6th Floor, Dr. V.B. Gandhi Marg, Fort, Mumbai - 400 001.

(General workshop machinery)

2. M/s. Stanley Machine Tools

Alves Compound, Vadkum College Road, Dahanu Road (W. Rly.), Mumbai - 401 602
(Drilling machine)

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3. M/s. MECO Instruments Pvt. Ltd.

Bharat Industrial Estate, T. J. Road, Sewree, Mumbai - 400 015

(Electrical measuring instruments)

4. M/s. Parksons Engineering Corpn.

37, Maharashtra Chamber of Commerce Lane, Mumbai - 400 001.

(General and workshop machinery)

5. M/s. Imanes Private Ltd.

94, Swami Viveka Nanda Road, Post Box No.: 8002, Erla, Mumbai- 400 056.

(Spring coil winding machine)

6. M/s. Kirloskar Electric Co. Ltd.

P.O. No.: 5555, Malleswaram West, Bangalore - 560 055

(Welding sets)

7. M/s. Machinery and Machine Tools

Opp. Share Bazaar,
Ambalal Doshi Marg (Hamam St.) Fort, Mumbai - 400 023

(Shearing machine)

8. M/s. Olivine Industries

Industrial Estate, Irimpnam, Cochin - 682 309

(Welding machine)

9. M/s. India Machine Tools Co.

Shamsu buildings, Kallai Road, Kozhikode - 673 002

(Welding machine)

Addresses of Raw Material Suppliers

1. M/s. Ruia Enterprises

Hari Nivas, Malaviya Road, Vile-parle (E) Mumbai - 400 057

(Resistance heating wires, thermostats, Thermocouples, Compensating cables etc.)

2. M/s. Kantilal Chunilal and Sons Appliances Pvt. Ltd 48 - 513, Jawahar Road, Udhna - 394 210,
Surat District

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(Heating elements, Temperature controls)

3. M/s. Chalakkudy Refractors Ltd.

P.B. No. 25, Railway Station Road, Chalakkudy, Trichur, Kerala.

(Refractories)

4. M/s. Allied Refractors Pvt. Ltd.

1477, Kandamod, Pirvam, Kerala

5. M/s. Pipes and Refractories of India

R. K. P. 3/169 - A, Ramanattukara, Kozhikode

(Refractories)

6. M/s. Naresserial Industries

Muttom, P.O. Haripad, Kerala

7. M/s. Ashok Bricks and Clay Products

M.P. 3/4, Kankam,
Kathiparambam, Kozhikode.

(Fire clay Bricks)

8. MPS Steel Industries Kerala Ltd.

Kozhikode

(M.S. Channels)

9. M/s. Steel Authority of India Ltd.

Kannamai Building, 611, Anna Salai, Chennai - 600 006.

(M.S. Channels and Sheets)

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