See discussions, stats, and author profiles for this publication at: https://www.researchgate.net/publication/330488613
Project Proposal for Post-Consumer Plastic Recycling Project
Technical Report · January 2019
DOI: 10.13140/RG.2.2.27442.04805
CITATIONS
READS
2
81,514
1 author:
A.Aruna Shantha
Sabaragamuwa University of Sri Lanka
55 PUBLICATIONS 73 CITATIONS
SEE PROFILE
Some of the authors of this publication are also working on these related projects:
Economic Losses of Chronic Kidney Diseases of Uncertain Etiology (CKDue) in the Dar-Zone of Sri Lanka: Cost of Illness Approach View project
World Bank View project
All content following this page was uploaded by A.Aruna Shantha on 19 January 2019.
The user has requested enhancement of the downloaded file.
Project Proposal for Post-Consumer
Plastic Recycling Project
Emerald Electricals & plastic industries
Chief Consultant
A. Aruna Shantha (PhD)
Executive Summary
Criteria
Summary Description
Name of the
Emerald Electricals & plastic industries
Project
Year Initiated
2002.04.27
Main Objectives of To conduct a cost benefit analysis for proposed post-consumer and postthe Project
industrial plastic recycling project in Puttalm.
Proposal
Summary of
The project is laid out basically under 4 main branches of (a).collecting
Proposed Project
plastics from rural areas (b), purification of chemical barrels (c) crushing
plastics and (d) manufacturing products. The water used for the purification
of chemical barrels will be re-used after undergoing a purification process
via water treatment plants. Around 55% of the plastic powder, which is the
final output, will be used in the production of plastic flower pots and
plastic crates and balance 45% will be sold as plastic raw materials.
Total Investment
Fixed Cost = Rs. 33.26 Million, Average Variable cost with full capacity
(Rs.M) Rs/Year = 9.59 Millions, Raw material cost Rs. 48.4 Million per year.
Gross Revenue
With Full production capacity 90 Million
(Rs. Per year)
Net Revenue (Rs.
With full production capacity 69 Million
Per year)
Total Job Creation 64 direct employments.
National level
It is lead to address the behavior change necessary among the Sri Lankan
impact of the
consumer to ensure the proper disposal of plastic waste in manner which
project
will not be harmful to the environment and Natural Resources.
Project directly support to save the foreign exchange by enhancing
recycling of post-consumer and post-industrial plastic waste
Methodology
The methodology adopted for the cost benefit analysis of the investment is
Adopted
based on guideline for environmental project assessment generally
recommended by Asian Development Bank and World Bank
Decision Criteria
IRR , NPV and B/C ratio (Financial analysis or with financial Benefit
for overall project only),
evaluation
IRR, NPV and B/C ratio (Economic analysis or with financial and Foreign
saving )
.
Major Conclusion It was observed that a financing of the prosed post-consumer and postunder financial
industrial plastic recycling project can be well justified in both financial
analysis
and terms.
Major Conclusion All these decision criteria presented and discussed in this study, indicate
under overall
that the financing of this plastic recycling Project would be well justified
Economic analysis economic terms. Besides, on social point of view, the project is highly
viable.
Major
Recommendation
of the Report
As the project is economically and financially justified, this study proposes
to the further extension of project activities with the support of the local
government.
1
1. Industry and Marketplace Analysis
1.1 Global Context
Global production of plastic has increased dramatically in the past 70 years, from 1.9 million
tons in 1950 to 336 million tons in 2013. (Jones, 2015). It is estimated that 4 percent of the
world’s annual consumption of petroleum is used as feedstock for plastic , and more than one
third of plastic are consumed as packaging that is discarded quickly (Thompson, Moore, Vom
Saal, & Swan, 2009). Production of plastic around the world has grown by an average of 8.7
percent per year from 1950 to 2012; and since the 1970s, plastic has been replacing glass metals
and paper in automotive and packaging applications (Johnson, 2015). As size of the global
middle class continues to expand, consumption of plastic will also grow. It is estimated that
consumption of nine major thermoplastic will grow by 4.5 percent annually from 2013 to 2017
or by more than 40 million tons (Galie & Trabucchi, 2013).
1.2 Local Context
According to UNIDO, annual plastics consumption in Sri Lanka is close to 140,000 metric tons,
with an estimated growth rate of 10-12%. More than 900 businesses in Sri Lanka are engaged in
plastics processing for both domestic & international market, the bulk of them being in SME
scale. 490 companies are engaged in direct plastic exports in 2016 with 88% of them being
finished products exporters and rest 12% are raw materials and waste exporters.
Among the finished products exports, 60% were packaging materials / packaging goods of
plastics. Cellulose and its Chemical derivatives constitute the highest export value among the
primary forms of plastic exports taking 6% of the total plastic exports in 2009. USA is the
dominant buyer of plastic exports over the last number of years taking 40% of the total exports.
1.3 Environmental Issues
Sri Lanka imports annually a considerable amount of plastic raw materials and finished products
and a major portion of them end up as Post Consumer Plastic Waste causing severe
environmental problems. It is estimated that about 160,000 tons of plastic raw materials and
products are imported and out of this 30% has been exported as finished products and the
remaining are used in the local market. In Sri Lanka dump one million sachet packets - be it with
sauce, jam or shampoo, dump 20 million polythene bags and 15 million lunch sheets landfill per
2
day. (Dangalla, Chandrasena, Semasingha, & Amarasingha, 2013). The Colombo municipal
Council collects 700 tons of garbage on average per day and 6 percent of this is polythene and
plastic waste. Although the share of polythene and plastics of in Municipal waste is only about 6.0 per
cent of the total solid waste, its environmental impact is much greater than the other waste material. This
material i.e. 'thin' polythene when discarded after use (20 and less micron thickness) will remain in the
soil for at least 100 years (Dangalla, Chandrasena, Semasingha, & Amarasingha, 2013). The problems
they create are numerous According to world surveys by every ten years the plastic consumption
increases by three times. This poses a great challenge as well as a threat to the environment.
Life-cycle analysis can be a useful tool for assessing the potential benefits of recycling
programmes. If recycled plastics are used to produce goods that would otherwise have been
made from new (virgin) polymer, this will directly reduce oil usage and emissions of greenhouse
gases associated with the production of the virgin polymer (less the emissions owing to the
recycling activities themselves).
2. Industry Profile
2.1 Background of the Company
Emerald Electricals & Plastic Industries is a wholly Sri Lankan owned private company owned
by Mr.H.S Priyantha Silve, Chairman, and incorporated by Business Names Statute No.4 of
1990, was registered in the Department of the Provincial Registrar of Companies for Western
Province under no. W. U 8691 on 27th April, 2002. The company has taken an Environment
Protection License from Central Environment Authority. Presently the company is one of the
major plastic and polythene collector, recycler and producer in the western province in Sri
Lanka and company head office & factory located in Peralanda, Ragama. At the movement,
Industry is collecting and recycling post-consumer and post- industrial plastic and 25% of
recycled plastic are being used for reproduction (Sunk Boxes, MCB, Ceiling rose, Shoe heel,
Measuring cup and etc.) and balance 75% are being sold as plastic raw materials.
3
Table 01: Summary of Company Profile
The Business Name
Emerald Electrical and Plastic Industries
The General Nature of the Business
Recycling plastic and Injection Molding
The Principal Place of the Business
No. 181/A, Peralanda, Ragama
The Date of the Commencement of the 2002.04.27
Business
Full Name of the Owner
Hettiyadura Susil Priyantha Silva
The Nationality of the Owner
Sri Lankan
The Usual Residence of the Owner
No. 181/A, Peralanda, Ragama
Nature of the Registration
Department of the provincial Registrar of Companies,
Western Province
Registration No
W.U 8691
2.2 Existing Management Structure
Mr. Susil Priyantha Silva is the owner and promoter of Emerald Plastic. His son Mr. H. Nalaka
Silva is working as a Managing Director and he has intensive knowledge and vast understanding
in plastic recycling and management which undoubtedly help in the business. Besides, the elder
son of the owner Mr. Shivanka Silva has a good knowledge of chemicals and their properties,
marketing skills like convincing power, negotiating ability, creating promotional strategies and
sales skills which are extremely helpful in taking the business a long way and prove intensely
valuable to this venture. Thus such potential skills of family members and other qualities like
efficient interpersonal skills, leadership skills and decision making quality of owner, are success
elements of Emerald Electricals & Plastic Industries. Presently the industry is functioning with
six supportive skilled and unskilled labourers The organization chart is briefly explaining the
present management structure as shown in figure 01
4
Figure 01: Organization Chart
Managing Director
Supervisors
Supervisors
Raw Materials
Unskilled Workers
Recycling
Skilled & Unskilled
Workers
Sales
Production
Skilled Workers
(Procuanment)
Skilled Workers
Skilled Workers
5
2.3 Further Expansion of the Business
As our per capita plastic consumption is set to increase from current 6 Kg to 8 Kg and plastic has
become an indispensable item in our lives and manufacturing, company believe this is the right
time to strengthen this sector and company is planning to expand our recycling capacity by
establishing new plant at Puttalam. The existing plant has the capacity to recycle 12 tons of
plastics per month but it is not sufficient for monthly collection and fulfills the demand for our
plastic products and powder. Around 25 percent of total recycled plastic is reused for production
and the balance is sold to local plastic manufacturers as raw materials who produced various
plastic items. Since the company has a sufficient post-consumer and industrial consumer plastic
supply chain, present recycle volume could be increased substantially if the factory could get
sufficient storage capacity for waste plastic. The company is now seriously looking for extra
opportunities for post-consumed plastic, especially plastic chemical barrels and cans for
recycling process. Presently, company has a single plant and warehouse at Ragama and company
has planned to extend this facilities to Puttalam District.
2.4 Need Analysis for Proposed Project
A pesticide may refer to a particular compound or chemical substance. It can be a fungicide,
herbicide, insecticide, mulluscicide, nematicide, rodenticide, and others that are used to target
certain unwanted living organisms. Since the 1900s, people have been using different types of
pesticides and the environment is filled with various levels of these chemicals. These include
organochlorine, organophosphate, carbamates, and pyrethroids, which all became successful in
controlling pests. All those pesticides come from different sizes of plastic cans and barrels.
However, up until now, proper recycling process of these chemical barrels has not been
identified in Sri Lanka and it is a major drawback in rural areas. Since more than 65% of Sri
Lankan rural households are engaging in farming as their main occupation, small size postconsumer chemical plastic cans could be found at every household in rural areas. Thus, this
environmental friendly project is laid out basically under 4 main branches of collecting from
rural areas, purification of chemical barrels, crushing plastic and manufacturing of products. The
water used for the purification of chemical barrels will be re-used after undergoing a purification
process via water treatment plants. The plastic powder, which is the final output, will be used in
6
the production of non-consumer plastics such as plastic flower pots, plastic crates, wesak
Lanterns.
3. Technical Information
3.1 Types of plastics
The six most common types of plastics which can easily be recycled. The plastics industry has
voluntarily devised a coding system which makes recycling plastics easier. Table 1 shows these
6 types of plastics with their identification code, general properties and common uses.
Table 02: Type of Plastic
Identification
Type of plastic
code
Polyethylene
terephthalate
(PET/PETE)
PET
High density
polyethylene
(HDPE)
HDPE
Polyvinyl chloride PVC
(PVC)
General properties
Common uses
Clear
Hard
Tough
Barrier to gas and
water
Resistance to heat
Resistance to
grease/oil
Barrier to water
Chemical resistance
Hard to semi-flexible
Strong
Soft waxy surface
Low cost
Permeable to gas
Natural milky white
colour
Transparent
Hard, rigid (flexible
when plasticised)
Good chemical
resistance
Long term stability
Electrical insulation
Low gas permeability
Mineral water bottles
2 liter soda bottles
Cooking oil bottles
Powder detergent jars
Fibre for clothing
Fibre for carpets
Strapping
Peanut butter jars
Jerry cans
“Crinkly” shopping bags
Film
Milk packaging
Toys
Buckets
Rigid pipes
Crates
Bottle caps
Pipes and fittings
Carpet backing
Window frames
Water, shampoo and
vegetable oil bottles
Credit cards
Wire and cable sheathing
Floor coverings
Shoe soles and uppers
7
Low density
polyethylene
(LDPE)
Poly
LDPE
PP
propylene (PP)
Polystyrene (PS)
PS
Other plastics
OTHER
Tough
Flexible
Waxy surface
Soft - scratches
easily
Good transparency
Low melting point
Stable electrical
properties
Moisture barrier
Excellent chemical
resistance
High melting point
Hard, but flexible
Waxy surface
Translucent
Strong
Clear to opaque
Glassy surface
Rigid
Hard
Brittle
High clarity
Affected by fats and
solvents
Agricultural films
Refuse sacks
Packaging films
Foams
Bubble wrap
Flexible bottles
Wire and cable
applications
Yoghurt containers
Potato crisp bags
Drinking straws
Medicine bottles
crates,
plant pots
Car battery cases
Heavy gauge woven bags
Packaging pellets
Yoghurt containers
Fast food trays
disposable cutlery
Coat hangers
Mostly not available in
sufficient quantities for
recycling
8
4. Production Process
4.1 Collection of waste plastic
An important first step in starting a plastic recycling business is setting up a collection system of
waste plastics. A constant supply of raw materials to the factory is of utmost importance for the
existence of the business. Collection of waste plastic may already happen through the activities
of scavengers, middlemen and traders. It is possible to integrate this system by letting them know
that the factory is willing to buy plastic waste material. Another option is to cooperate with the
municipality to get involved in collection schemes accompanied with a public awareness
campaign. In this way the public can be informed about the advantages of plastic recycling. Our
mega suppliers are Sri Lanka telecom, Singer, Lanka Bell, Santel and Robbialac.
Figure 02: Production Process with Flow Chart
Plastic Waste
Collection
Shredding
Cutting
Packing & Storage
Selling as Plastic
Raw Materials
Further processing
Production
Storage
Drying
Identification
Washing
Selling of Products
4.2 Storage
The plastic recycling enterprise needs quite a large storage space in order to store all collected
waste items, processed materials and finished products. Plastic waste items, especially chemical
barrels and cans which we have planned to collect, have a large volume and therefore a large
storage place is necessary. At the moment we have only one ware house at Ragama.
9
4.3 Sorting and identification
Plastics sorting operations may be carried out manually or automatically using appropriate means
of identification. The more accurate and efficient the means of identification, sorting and
separation, the better is the quality of the recovered product obtained. Best suited for sorting
plastics is manual process and we use full time man power for this task. The secondary raw
material obtained by hand sorting is of high quality and offers an excellent basis for producing
high quality products by small and medium scale industry. To aid in identification, it is now
common for plastic containers to have a polymer identification code. Unfortunately, other plastic
applications do not carry such identifiers and are, therefore, more difficult to identify by polymer
type without some experience. There are several simple tests that can be used to distinguish
between the common types of polymers so that they may be separated for processing. We are
applying the following test for identification of plastics.
The Water Test.
A piece of plastic is put into a container of water and if the plastic floats, the plastic belongs to a
low-density materiel such as PP, HDPE, LDPE, HDPE. And if the plastic sinks, then the plastic
belongs to the high-density plastic group such as ABS, HIPS Kerasin,PBT, acralic, PC.
Burning Test.
Hold a piece of the plastic in a tweezers or on the back of a knife and apply a flame. If this
plastic burns continually, then the plastic belongs to the recyclable plastic group. If the plastic
burns and gives a dark black smoke, then the plastic belongs to ABS.
However in our organization, this separation or segregation process, in many cases, are done by
manual process utilizing the availability of cheap and expert labor force. In case the waste is
contaminated with embedded metals, proper method of separating the metals / other
contaminants is required.
4.4 Washing
The scale of cleaning depends on the type of waste. Whenever a cleaning operation is involved,
it is to be ensured that the water or any other cleaning material used, should be discharged after
ascertaining that the discharge does not contain any objectionable substance. A proper Treatment
Device may have to be deployed – like a water treatment plant / effluent treatment plant. For
drying, a suitably designed drier is used. Many industries situated outside the metropolises, use
10
open space for natural drying of the cleaned waste. If the plastic is dirty, cleaning is necessary.
However, at the moment we don’t have a washing plant to wash the collected plastic and we
have planned to establish the washing plant in the Puttalam branch. The main cleaning steps
which we are planning to apply:
- Draining of remaining fluids from containers into prepared collection barrels.
-Rough cleaning of plastic containers and other pieces of plastic.
- Removing of paper, plastic or metal stickers.
- In the case of PET bottles removing of caps and etiquettes.
- Intensive washing in cold or hot water with addition of detergents or caustic soda. The waste
water can be reused by installing a simple waste water treatment system like a sedimentation
basin
4.5 Cutting
Cutting is usually carried out for initial size reduction of large plastic objects. It can be carried
out with a plastic cutting machine, specifically designed to cut plastic into smaller plastic pieces.
4.6 Shredding
Shredding is suitable for smaller pieces. A typical shredder has a series of rotating blades driven
by an electric motor, some form of grid for size grading and a collection bin. Materials are fed
into the shredder via a hopper which is sited above the blade rotor. The product of shredding is a
pile of coarse irregularly shaped plastic flakes which can then be further processed.
4.7 Extrusion / Palletisation
This is the most important part of the process wherein the sized / chipped plastics are plasticized
and granulated to make the plastics material ready for fabrication next. The type and size of the
Extruder depend on the type and volume of the plastics waste. The project will commence the
palletisation with new investment.
4.8 Fabrication into end Product
Finally the reprocessed plastics granules are used as raw material for producing end products
using similar fabrication machines like Injection Molding / Extrusion etc., depending upon
specific requirement
11
5. Employment Generation of the Project
In order to better inform investment decisions, it is important to understand all of the potential
benefits of projects, both direct and indirect. Given that a key feature of government policy is the
creation of jobs, an analysis of the employment impact of investment projects would clearly be
of assistance in the formulation of budgetary decisions. This note estimates the employment
impact of a range of possible infrastructure projects. The purpose of this section is to provide
clarity on the short-term employment effects of a range of potential investment projects.
For each project, the level of employment is evaluated. This includes the level of direct
employment (people employed on the project), indirect employment (people employed in the
supply of goods or services to the project) and induced employment (the additional employment
generated due to the increase in consumption as a result of the direct and indirect employment
increases). There are some individual collectors who earns between Rs 2,000 to 4,000 daily by
collecting plastic waste and once it is expanded to the North and East collectors could sell them
to our collectors at the best current market prices. This will give an opportunity for people to
earn an extra income for their day-to-day living while ensuring an Environment is ensuring the
free of plastic waste. Further, both skilled and unskilled additional labour will be absorbed to the
project.
Table 03: Job Creation (With & Without Project)
Process
No of Employees
Without Project
No of Employees
With Project
No of New Job
opportunities with
New Project
64
Direct Employment
80
144
Supervisors
2
3
1
Skilled Workers
2
4
2
Unskilled Workers
4
12
8
Waste Collectors
60
100
40
Agents
12
25
13
50
150
100
Others
Indirect Employment
Total
12
6. With and Without Situation of the Project
“Without” examines the current situation of the project and “With” examine the project situation
with proposed new investment
6.1 Scope of Operations (With and Without Project)
At present our recycling capacity is 12 Tons per month from which in initial stages we were
utilizing around 50%. As the business expanded company has reached to optimum capacity
utilization. With the establishment of our new branch at Puttalam the company expects to start
producing more advance plastics in the second year of our operations and accordingly the sales
will increase and the facility will have to be expanded. The proposed plant at Puttalam will
commence recycling of chemical plastic barrels in the second year with the capacity of 54 tons
per month. The recycling capacity of the company is given in table 04 below.
Table 04: Recycling Capacity of Plastic – With Project and Without Project
Without Project (2015)
With Project (2019)
Incremental
Output With New
Investment
Type of Plastic
Recycled
(Mt/Month)
HDPE (4%)
MT
0.4
Type of Plastic
Recycled
(Mt/Month)
HDPE (52%)
MT
Mt/Month
28
27.6
PP (15%)
8.1
4.1
PP (33%)
4
PS (1%)
0.1
Ps (3%)
1.7
1.6
Other (ABS) (62%)
7.5
ABS (30%)
16.2
8.7
Total
12
54
42
6.2 Existing Production Capacity (Without Project)
We provide a wide range of plastic items for households as finished goods and supportive
materials to companies which are produced based on post-consumer plastic and post-industrial
plastic. Besides, the plastic power which is our recycle unit is processed and eventually sold to
13
main plastic products in the country as raw materials which can be used for the production of
finished plastic good. The plastic powder, which is the final output is being used in the
production of Sunk Boxes, Ceiling Rose, MCB and Round Block under the Emerald brand name.
We produce different sizes of chemical measuring cups to Harcross and M-Chem Company as
sub orders. Beside, we produce Wesak Lanterns, Antenna boxes, Three-Wheeler mud cover, rim
cover and tricycle wheel and household level requirements.
6.3 Production Capacity With New Investment (With Project)
With project Our existing production capacity, both the plastic powder and finished product is
supposed to be increased by 500% after the establishment of the new plant at Puttalam.45% of
plastic powder, which is the final output, will be used in the production of plastic flower pots and
plastic crates under Emerald brand name and the balance will be sold to plastic producers as raw
materials for their production.
7. Sales and Distribution System – With Project
7.1 Target Market Segments
One of the first steps to identifying a target market for our product is to take a long hard look at
the people who already buy from us. Even if our current customers seem like adverse bunch, the
changes are pretty good that they will share at least one or two common characteristics. The
company current market segmentation is given in figure 03 below.
7.2 Distribution Strategy
Firstly we will target the Western Province and North Western Province for our new product and
secondly the rest of the country. We will have a distribution center in Puttalam, and Ragama
which will continuously maintain the supply of finished goods. The household plastics will be
sold through small local grocery shops and Agents from which the customers can get them
easily. As a new strategy we will hire street hawkers who will roam around the main cities and
sell the goods door to door. Our final products will be stored in warehouses which are close to
the factory itself. The sales people will directly contact to the companies which require our
products and look for the contracts. With the expansion of the market we will have distribution
centers in other provinces and based on that center we will distribute to whole sellers among the
country.
14
Figure 03: Market Segmentation
Market Segmentation
Plastic Products
Plastic Raw
Materials
Directly Sold to Plastic
Manufacturing Industries
Direct Sold to Contractors
Compliments for other industries
(Mesuring cups & lids, Antenna
boxes, Shoe heels, TW mud cover.
Wesak Lanterns)
Our Own products under Emerald
brand name
Whole sales for Businessman
Whole sales for Agents
(Sunk Boxes, ceiling Rose,
MCB, Round Block,
(Sunk Boxes, ceiling Rose, MCB,
Round Block, ) whole sales for
Agents
15
7.3 Advertising & Promotion Strategy
We will use two different promotional strategies. For our own products we will use flyers which
will have full detail of our product range, price and discounts. These flyers will circulate through
the newspapers across. For all business we will promote through online social media and we will
also develop our website which will enable us to widely spread our contact among various
companies. The site will have full details of product which are available for companies as well as
the end user.
7.4 Sales Strategy
The strategy of sales effort will be to convert potential and first time customers into long term
customers. Our sales strategy is totally based upon the distribution channel and the pricing
strategies. The industry presently has a distribution center at Ragama and new one will be
established in Puttalam and it will take care of sales of household and also supply products to
the whole sellers. We will also give the industrial customers a facility to order the products
through our website which will help them in reducing the delivery time.
To market the products, the Company will use a number of sales agents/brokers. They have a
customer base of their own, having developed successful relationships with their clients over the
years. Their customer base is currently demanding products so they can expand upon their
current base. Of course, they will expand that to new customers when the product is available. If
the Company grows faster than its prime customer base, additional capacity may be developed.
The company will identify additional prospective customers who can be attracted for our
products
7.5 Marketing Strategy
It is helpful to view marketing strategy planning as a process of segmenting markets, target
specific customers and working to offer an effective position among the competitors. Four basic
market opportunities: market penetration, market development, product development and
diversification. With new plants at Puttalam we attempt to increase sales of current products in
present markets at the beginning and we will introduce new strategies to penetrate markets
including: more aggressive marketing, increasing service to improve renewal rates, or attracting
competitor customers directly. Under market development our effort to increase sales by selling
current products into new markets. We have planned to reach new target customers by expanding
16
our geographic region and look into international markets for expansion. With new plant at
Puttalam we have planned to increase the quality of the product or product development. It refers
to offering new or improved products to present markets. By working closely with our
customers, we may find new and innovative ways to better satisfy our target market. Besides
after the establishment of our new venture at Puttalam we would be able to diversify our current
products. With diversification of our products, it will open completely new lines of business,
with new products in new markets. We have planned to commence the production of plastic
flower plots and plastic crates with the new investment. We will diversify our product mix to
mitigate risks related to economic variables such as recessions.
7.6 Market Comparison
While quality and delivery are important factors to our potential clients, price is most often the
determining factor in a buying decision. Good-quality plastic products manufactured from
recycled (less expensive) resins, as close as practical to the end customer's operations, will be
most competitive and achieve a significant market share. These factors have helped to determine
the business parameters of Replay Plastics. Thus, we will highly focus those areas to expand the
market share.
7.7 Competitor Analysis
In the recycled plastic manufacturing market there is no specific brand name existing so the
market in Sri Lanka is flooded by small companies which are in this business. So they are our
biggest direct competitors. As we are also not alone as a supplier of ABS, PP, HDPE and PS to
the companies as raw materials, there are many companies in this region who are supplying those
types of recycled plastics. So in case of business to business market they are our direct
competitors.
17
8. Supply Chain (Post- Consumer and Post-Industrial Plastic)
8.1 Supply Chain - Without Project
In the Western Province there are various small post-consumer plastic collectors closely
connected with our industry. To make a continuous supply of raw material we have linked with a
few large scale plastic suppliers such as Sri Lanka Telecom, Singer Lanka, Lanka Ball, House of
Fashion and Phoenix. We have 40 permanent suppliers (agents) who are continuously supplying
the raw material over the country. We directly parched plastic materials from Gampaha,
Colombo, Kurunagala, Puttalam and Vauniya Districts and indirectly our service spill over to
other districts. We are taking bulk amounts of post-consumer plastic telephone from Sri Lanka
Telecom regularly in line with their tender procedure.
Sri Lanka Telecom regularly calls the
tender for post-consumed plastic telephone and we are one of the main buyers of such tenders in
line with tender procedures. Besides, our collectors are collecting post-consumer computer
terminals and recycle the plastic component of such terminals. Further, our agents are collecting
post-consumer paint baskets, fiber, and vehicle buffers. Different types of plastic component
which are used by garment industries in Free Trade Zones are also collected by our agents and
added to the supply chain. House of Fashion and Phoenix are another two large scale
organizations which is contribute to our supply chain. Robbialac and Haritha Lanka also
contribute to our supply chain. In case of excess demand other suppliers will be taken into
consideration. All collected raw materials are stored in our wharehouse which is located in
Ragama. With the new project, we have planned to establish a new warehouse in Puttalam to
strengthen the existing supply chain and minimize the raw material risk.
18
Figure 04: Supply Chain
Mega Suppliers
SLT, Singer, Lanka
Bell, House of
Fashion, Phoenix,
Free Trade Zone
Household level
Plastic waste
Agents/ Collectors
Purchased and
Transported
Warehouses
Ragama
Proposed at Puttalam
19
Table 05: Monthly Average Plastic Collections
Without Project
Quantity
(Kg/Month)
With Project
Quantity
(Kg/Month)
Incremental Net
Collection
(Kg/Month)
SLT
3.0
3.7
0.7
Singer
6.5
3.7
-2.8
Lanka Bell
4.0
5.0
1.0
Garments
0.5
0.6
0.1
House of Fashion
0.25
0.3
0.05
Phoenix
0.5
0.6
0.1
Nico
-
7.4
7.4
Household level
0.25
0.3
0.05
Chemical Barrels
-
37
37
Nawam Lanka
-
8.0
8.0
Total
15.0
66.6
51.6
Suppliers
Mega Suppliers
8.2 Supply Chain (With project)
We have planned to further expand our supply chain with the proposed plant at Puttalam and
expected yearly improvement are as follows.
Table 06: With Project Productivity Improvement
Year
% Improvement
1 Year
66%
2 Year
125%
3 Year
500%
Out of 100% collection improvement, 50% is supposed to be from chemical barrel collection
which is new area to the industry.
20
8.3 Sorting and storing facilities (Without Project)
Collected plastic raw materials are initially shrted in line with common categories of plastics and
stored in three stores. Since more than 62% of our collections are ABS, we have used two stores
for ABS collections. Capacity of store one is around 5.0 Mt and it is 504 sf2. Our second store is
323 sf2 and storage capacity is 3.2Mt. Third store is allocated for storing HDEP, PP and Ps, its
capacity is 5.7 Mt and it has 180 sf2. After cutting and drying all these collected and sorted
materials, they are again stored in the fourth store with a capacity of 170 sf2.
8.4 Sorting and Storing (With Project)
We have planned to establish a new warehouse and recycling plant at Puttalam. With this effort
storing and recyclable capacity of plastic would be almost double by 2020. As we have planned
to collect chemical barrels and cans we need more room for sorting and storing with new the
project. (See land utilization plan for more details)
9. Operations & Land Utilization (With Project)
The operations is defined as the process used to deliver products and services to the customer
market place and also include manufacturing, transportation, logistics, travel and after sales
services. Facility is divided in two parts; Recycling and Production unit and Warehouse. The
facility is located in an area of 3000 sf2. Apart from these two units there is an office which will
looks for the perpetual supply of required raw materials and also take care about the outbound
logistics. The production capacity with new investment will increase up to 54 Mt per month. The
company will have contracted with the suppliers who can supply the raw material as quickly as
we want. The raw material contains post-consumer plastic materials and post-industrial plastic
materials. Since there are a variety of products being produced, the preference will be given to
that product whose demand is high. All the products will not be produced each and every day.
There will be different products which will be produced on different days according to the
demand in the market.
21
Figure 05: Land Utilization Plan
Raw Materials Inventory
Washing Area
Cutting
Machine
Chip Store
Scraps Store
Crusher
Machine
Machine
Machine
Machine
Finished good Inventory
Office
22
Machine
10. Time Targets
Main Activities
Duration
2017
2016
18
19
M J J A S O N D J F MA MJ J A S O N D
Preparation of Project Proposal
Taking legal approval from local
authorities
Preparation of land for
X
X
X
X
construction
Ordering required machines
X
Commence construction
X
Establishing electricity, water and
X X X
telephone
X X
Establishment of plants/machine
And Test run
X
Commence the initial production
X
Commence the Chemical barrels
recycling
Establishment of plants
X
X
66% improvement of whole
production process
100% improvement of production
process
500% improvement of production
process
X
X
11. Structure of Economic and Financial Analysis
11.1 Objective of the Report
The owner of the project requested one acre of land from the Ministry of Industry and commerce
in the Puttalam Industrial Zone for further expansion of his plastic recycling project, which is
currently functioning at Ragama. For this purpose, the Industrial Development Division,
Ministry of Industry & Commerce requested a project proposal in line with their guideline. Thus,
the intention of the present study is to evaluate the cost and benefit of the present recycling
23
project activities and observe the financial and economic viability of further expansion of the
project activities in the Puttalam Industrial Zone.
11.2 Instrument of Data Collection
A structured questionnaire was used to facilitate the study of the present empirical position of the
initial objectives of the project. The recorded and projected data was used to facilitate the study
of the present empirical position of the project. Previous reports, recorded cost and income data
at the project office and supportive documents have been reviewed for constructing the cost and
benefit structure of the project from year 2002 to year 2015. Besides the above instruments of
data collection, the bulk of the data on objectively verifiable indicators were gathered during
survey through direct observation. A substantial volume of qualitative information of the project
was observed through direct observation.
11.3 Methodology
The methodology adopted for the cost benefit analysis of the investment is based on guideline
from environmental project assessment generally recommended by Asian Development Bank
and World Bank. It is based on widely accepted techniques for the appraisal of environmental
based investment projects. The method provides a basis for achieving the necessary degree of
uniformity and comparability between similar projects. The data used and all conclusions are
based on the latest available information with a bearing on the project office at Ragama.
However, reliability and consistence of the information were rechecked with field observation at
each point and finally made reasonable adjustment to minimize the mismatch.
11.4 Approach
The approach followed is that of a cost and benefit analysis with the emphasis on economic
criteria and their impact in the national context. Consequently, elements of multi-criteria analysis
such as environmental impacts and, in particular cost and benefit condition have been dealt with
financial and economic validity of the project. The economic analysis described here has been
carried out on the basis of comparisons of cost incurred and benefit expected “without project
and with project”. With project means; with new investment of the project and without means;
existing situation of the project.
24
11.5 Principles and Procedures
•
The economic useful life of project is twenty years
•
All benefits and costs have valued in constant in 2016 financial prices
•
The exchange rate of US$ 1.00 = Rs 150.00
•
The overall economic viability of the project has been judged on the basis of four
decision criteria; (a) The Financial Internal Rate of Returns (FIRR), (b) The Financial Net
Present Value (FNPV) , The Cost Ratio (B/C) and Net Profit.
12. Financial Analysis – Without Project
Under this section present study examines the existing financial cost and benefit stream of the
project.
12.1 Cost Structure – Without Project
12.1.1 Fixed Cost (Without Project)
According to recorded data, the net value of total fixed investment of the project is Rs.
20.6Million by mid of year 2016 and average variable cost is Rs 5.5 Million per year during the
period of year 2002 to 2015. 12% out of total expenditure is recorded under variable cost and it
consists of raw materials cost, salaries, transport, rental and other utilities. Based on year 2013 to
year 2015 actual variable cost, this study has projected the project variable cost for the next 15
years in line with projected inflation rate in the country. After depreciation of fixed assets based
on purchased year of relevant machine and equipment, it was possible to measure the net value
of current fixed assets in year 2016 prices as follows.
25
Table 07: The Value of Fixed Cost by mid of year 2016 – Without Project
Fixed Assets
Land
Qty
Year
Net value after
Purchased
Depreciation (Rs.M)
37 Purch
5.7
Building
3.5
Water cooling tower
1
2007
0.25
Crusher Machine
2
2007/2016
1.0
Cutter Machine
3
2007/2012
0.15
Injection Molding Machine
3
2005/2007/
1.5
(G 180-2, G90-1)
Moulds
2012
35
Vehicle 01
7.0
2011
0.5
Other Equipment
1.0
Total Value of Fixed Assets
20.6
12.1.2 Variable Cost (Without Project)
Variable cost measured based on the actual expenses of last 3 years actual expenses on
production process. Based on actual variable cost, the study projected the variable cost for the
next 15 years in line with extrapolated inflation in the country. The total variable cost per last
three years is shown in table 08 below.
26
Table 08: Total Variable Cost (Without Project) Rs/Year
Type of Variable Cost
2013
2014
2015
Electricity
600,000
600,000
600,000
Transport (Fuel and related expenses)
60,000
60,000
50,000
Water
50,000
60,000
60,000
Telephone
120,000
140,000
150,000
Other Utilities
150,000
160,000
160,000
Insurances
25,000
25,000
25,000
Production Incentives
40,000
50,000
50,000
Overtime Payment
50,000
60,000
60,000
O&M
125,000
140,000
150,000
Depreciation
4,120,000
4,120,000
4,120,000
Other Expenses
100,000
100,000
100,000
Total
5,440,000
5,515,000
5,525,000
12.1.3 Labour Cost (Without Project)
Table 09: Average Labour Cost per Year (Without Project)
Production Supervisors
2
35,000
Monthly
Expenditure for
salaries
70,000
Skilled Workers
2
30,000
60,000
Unskilled Workers
4
20,000
80,000
Total
8
Type of Job
No
Monthly Salary
Scale
190,000
Total Annual Cost on Salaries = 2,280,000.00
27
12.1.4 Raw Material Cost – Without Project
Table 10: Average Cost on Raw Material (Rs/ Year) – Without Project -2015
Type of Raw
Quantity
Unit Price
Monthly Cost on
Annual Cost on
Materials
Purchased
(Rs/Mt)
Materials
Materials (Rs.M)
(Mt/Month)
(Rs.M)
ABS
9.3
65,000
604,500
7.3
PP
5.0
80,000
400,000
4.8
HDPE
0.6
50,000
30,000
0.36
PS
0.1
60,000
6,000
0.07
Total
15
12.53
Table 11: Total Cost of Production – Without Project (Rs/Year)
Type of Cost
2013
2014
2015
Fixed Cost (20.6M)
-
-
-
Variable Cost
5.4
5.5
5.5
Salaries
2.28
2.28
2.28
Material Cost
12.2
12.2
12.53
Total
19.88
19.98
20.31
12.2 Returns of the Project – Without Project
Without project benefit comes from plastic raw materials and plastic products. Around 75%
recycled plastic is sold as raw materials and balance is used to produce various plastic items.
The details of the final output are given in table 12 to 16 below.
28
12.2.1 Returns from Plastic Raw Materials – Without Project
Table 12: Returns from Plastic Powder (Rs. M/year) – Without Project (Rs.)
Type of Powder
2013
2014
2015
Qty (Mt)
Income
Qty (Mt)
Income
Qty (Mt) Income
ABS
43.2
4.3
43.2
4.8
43.2
4.8
PP
22.8
2.2
22.8
2.3
22.8
2.3
HDPE
33.6
3.2
33.6
3.4
33.6
3.4
PS
8.4
0.9
8.4
1.0
8.4
1.0
Total
108.0
10.6
108.0
11.5
108.0
11.5
Table 13: Average Prices of Plastic Raw Materials (Rs/Mt) – Without Product
Average Sold Price
(Rs/.Kg)
2013
Average Sold Price
(Rs/.Kg)
2014
Average Sold Price
(Rs/.Kg)
2015
ABS
100
110
110
PP
95
100
100
HDPE
95
100
100
PS
110
120
120
Type of Powder
29
Table 14: Average Selling Prices of Plastic Product (Rs)
Type of Product
Average Sold Price
Average Sold Price
Average Sold
Price (Rs/Unit)
(Rs/Unit)
Price (Rs/Unit)
2013
2014
2015
Sunk Boxes
20.0
25.0
25.0
Ceiling Roses
30.0
33.0
33.0
MCB
240.0
250.0
250.0
Round Blocks
4.00
4.00
4.00
Measuring Cups
3.00
3.00
3.00
Measuring Lids
3.00
3.00
3.00
Wesak Lanterns
25.0
25.0
25.0
Shoe heels
30.0
30.0
30.0
12.2.2 Returns from Product – Without Project
Table 15: Gross income from Product (Rs/M) – Without Project
Type of Product
2013
2014
Quantity
Income
Quantity
Sunk Boxes
2500
0.05
2400
0.06
2500
0.06
Ceiling Rose
5000
0.15
6000
0.18
5000
0.16
MCB
250
0.06
350
0.08
250
0.06
Round Blocks
6000
0.02
4000
0.02
5000
0.02
Measuring Cups
300,000
0.90
250,000
0.75
3,00,000
0.9
Measuring Lids
250,000
0.75
300,000
0.9
300,000
0.9
Wesak Lanterns
155,000
3.85
150,000
3.75
150,000
3.75
Shoe heels
100,000
3.0
120,000
3.6
120,000
3.6
Total
8.78
Income
2015
9.34
30
Quantity
Income
9.45
12.2.3 Total Returns – Without Project
Table 16: Total Annual Gross Revenue (Rs. Million) – Without Project
Revenue
2013
2014
2015
From Plastic Raw Materials
10.6
11.5
11.5
From Plastic Product
8.78
9.34
9.45
Total Gross Revenue
19.38
20.84
20.95
31
12.3 Profit and Loss Account – Without Project
Table 17: Profit and Loss Account (Without Project)
Particulars
2013
2014
2015
Amount (Rs.)
Amount (Rs.)
Amount (Rs.)
Revenue
Income from Plastic Raw
Materials
Income From Production
10,600,000
11,500,000
11,500,000
8,780,000
9,340,000
9,450,000
Total Revenue
19,380,000
20,840,000
20,950,000
Cost of Materials
12,216,750
12,216,750
12,530,000
Gross Profit
7,163,250
8,623,250
8,420,000
600,000
600,000
600,000
Transport (Fuel and related 60,000
expenses)
Water
50,000
60,000
50,000
60,000
60,000
Telephone & Internet
120,000
140,000
150,000
Other Utilities
150,000
160,000
160,000
Packing (Bags)
25,000
25,000
25,000
Production Incentives
40,000
50,000
50,000
Overtime Payment
50,000
60,000
60,000
O&M
125,000
140,000
150,000
Depreciation
3,090,000
3,090,000
3,090,000
Other Expenses
100,000
100,000
100,000
Salaries and Wages
2,280,000
2,280,000
2,280,000
Total Expenses
6,690,000
6,765,000
6,775,000
Net Profit
473,250.00
1,858,250.00
1,645.000.0
Expenses
Electricity
32
13. Financial Analysis – With Project
13.1 Cost Structure
13.1.1 Fixed Cost (With Project)
Table 18: Fixed Cost – With Project
Type of Cost
Start‑up
and
Unit/Qty
2017
2018
2019
200,000
technical
costs
Land
160 Pur
16,000,000
Warehouses
25,600sf2
500,000
1.500,000
Building
6400 sf2
1,500,000
1,000,000
Water Filter Tank
300,000
Machinery
Crusher Machines
4
1,500,000
1,500,000
Cutter Machines
3
75,000
150,000
Injector Molding Machine
4
Palletizer
1
Water purification
Machine
Cooling Plant
1
1,000,000 3,000,000
1,500,000
2,500.000
250,000
Shredder
800,000
Barrel Washing Machine
1,500,000
Other Equipments
200,000
Total Fixed Cost
21,535,000 1,250,000 10,002,500
33
100,000
250,000
13.1.2 Fixed Costs for Office Equipments (With project)
Table 19: Costs for Office Equipments – Year 2017
Type of Equipment
Executive Tables
2
25,000
Cost of Equipment
(Rs)
50,000
Executive Chairs
2
7,500
15,000
File Cupboards
2
8,000
16,000
Office Tables
2
12,000
24,000
Visitors Chairs
5
4,500
22,500
Computers
2
85,000
170,000
Printers
2
15,000
30,000
Fax Machine
1
20,000
20,000
Telephone line
1
15,000
15,000
CCTV camera System
1
125,000
125,000
25,000
25,000
Other office items
Quantity
Unit Price
Total
512,500
34
13.1.3 Total Variable Cost (With Project) Rs/Year
Table 20: Total Variable Cost – With Project
Type of Variable Cost
2017
2018
700,000
920,000
2,000,000
Transport (Fuel and related 60,000
expenses)
Water
-
180,000
300,000
15,000
30,000
Telephone & Internet
200,000
250,000
15,000
30,000
Electricity
180,000
Other Utilities
2019
Packing (Bags)
35,000
60,000
120,000
Production Incentives
60,000
220,800
480,000
Overtime Payment
70,000
138,000
300000
O&M
180,000
180,000
250,000
Other Expenses
100,000
150,000
250,000
Total
1,385,000 2,078,800 4,010,000
13.1.4 Labour Cost (With Project)
Table 21: Labour Cost (With Project)
Type of Job
Production
Monthly
Salary
35,000
Y1
no
2
Y1 Cost
Y2 Cost
840,000
Y2
No
2
840,000
Y3
No
3
Y3 on ward
Cost
1,260,000
30,000
2
720,000
2
720,000
4
1,440,000
20,000
4
960,000
6
1,440,000
12
2,880,000
8
2,520,000
10
3,000,000
19
5,580,000
Supervisors
Skilled
Workers
Unskilled
Workers
Total
Note: Y1 = 2017, Y2 = 2018, Y3 = 2019
35
13.1.5 Cost of Raw Materials
Table 22: Cost on Raw Material (Rs/ Year) – With Project – Year 2017
Type of Raw
Materials
ABS
Quantity Required Unit Price
Annual Cost on
(Mt/Year)
(Rs/Mt)
Materials (Rs.)
186
65,000
12.09
PP
99.6
80,000
7.97
HDPE
1.2
50,000
0.06
PS
3.0
60,000
0.18
Total Cost
289.8
20.3
Table 23: Cost on Raw Material (Rs/ Year) – With Project – Year 2018
Type of Raw
Materials
ABS
Quantity Required Unit Price
Annual Cost on
(Mt/Year)
(Rs/Mt)
Materials (Rs.)
253.2
65,000
16.45
PP
134.64
80,000
10.8
HDPE
16.8
50,000
0.84
PS
4.08
60,000
0.24
Total Cost
408.72
28.33
Table 24: Cost on Raw Material (Rs/ Year) – With Project – Year 2019
Type of Raw
Materials
ABS
Quantity Required Unit Price
Annual Cost on
(Mt/Yera)
(Rs/Mt)
Materials (Rs.M)
244.8
65,000
15.9
PP
122.4
80,000
9.8
HDPE
424.32
50,000
21.2
PS
24.48
60,000
1.5
Total Cost
48.4
36
Table 25: Total Projected Raw Materials Cost for next 5 Years (Rs/M)
Type of Raw
Materials
Year
2017
2018
2019
2020
2021
ABS
12.09
16.45
15.9
15.9
15.9
PP
7.97
10.8
9.8
9.8
9.8
HDPE
0.06
0.84
21.2
21.2
21.2
PS
0.18
0.24
1.5
1.5
1.5
Total
20.3
23.28
48.4
48.4
48.4
13.1.6 Total Estimated Cost – With Project
Table 26: Total Estimated Cost – With Project (Rs.M/Year)
Type of Cost
Year
Y1
Y2
Y3
Y4
Y5
Fixed Cost (Including
office equipment)
Variable Cost
21.5
1.76
10.0
-
-
1.38
2.09
4.01
4.01
4.01
Salaries
2.52
3.0
5.58
5.58
5.58
Material Cost
20.3
23.28
48.4
48.4
48.4
Total
45.7
29.62
67.99
57.99
57.99
13.2 Benefits of the Project
The benefits generated by this project can be divided into categories such as direct financial
benefit and indirect environmental benefits depending on the time period involved and the nature
of the benefits. If the time period is taken into account, then the benefits generated by the project
could be related to short term and long term benefits, individually.
Apart from this, benefits can be looked into under the basis of financial criteria and /or economic
criteria. The sate of recycled plastic powder which is the final output and different types of
products we produced using plastic powder creates direct and immediate financial benefits.. In
this study, attention has been paid to the assessment of environmental or economic benefits also,
37
since this type of project are be focused on economic and environmental impacts rather than
financial benefits. However, long term sustainability of the project depends on their financial
profitability. Thus this study has done micro level financial analysis while observing the
environmental impact as well.
13.2.1 Returns from Plastic Product – With Project
Table 27: Gross income from Plastic Products (Rs) – With Project
Type
of
Product
Sunk
Boxes
Ceiling
Rose
Round
Block
Measuring
Cup
Measuring
Lids
Wesak
Lanterns
Flower
Pots
Bottle
Crate
Plastic
Household
items
Shoe heels
Total
2017
2018
2019
2020
Quantity Income Quantity Income Quantity Income
Per/Month (Rs.M/)
(Rs.M)
(Rs.M)
2,500
0.75
7,500
2.25
15,000
4.725
Quantity Income
(Rs.M)
15,000
4.725
5,000
1.9
15,000
5.9
30,000
12.4
30,000
12.4
10,000
0.48
30,000
1.4
60,000
2.9
60,000
2.9
16,600
0.6
50,000
1.8
100,000
3.8
100,000
3.8
16,600
0.6
50,000
1.8
100,000
3.8
100,000
3.8
2,700
0.97
8,000
2.9
16,000
6.1
16,000
6.1
3,750
2.92
11,250
8.75
22,500
19.0
22,500
19.0
8,00
1.45
2,500
4.5
5,000
9.5
5,000
9.5
6,650
4.0
20,000
12.0
40,000
25.0
40,000
25.0
6,600
2.4
20,000
7.2
40,000
15.2
40,000
15.2
13.67
48.5
38
102.4
102.4
Table 28: Average Selling Prices of Plastic Products (Rs) – With Project
Type of Product
Average Sold Price
Average Sold Price
Average Sold
Price (Rs/Unit)
(Rs/Unit)
Price (Rs/Unit)
2017
2018
2019
Sunk Boxes
25.0
25.0
25.0
Ceiling Rose
33.0
33.0
33.0
MCB
250.0
250.0
250.0
Round Blocks
4.00
4.00
4.00
Measuring Cups
3.00
3.00
3.00
Measuring Lids
3.00
3.00
3.00
Wesak Lanterns
25.0
25.0
25.0
Flower Pots
65.0
65.0
65.0
Bottle Crates
150.0
150.0
150.0
Plastic
Household items
Shoe heels
50.0
50.0
50.0
30.0
30.0
30.0
Note: As a marketing strategy, the company maintainthe same prices for their products until
2020.
13.2.2 Returns from Plastic Raw Materials
Table 29: Financial Benefit of Plastic Powder – With Project (Rs.)
Type of Powder
2017
Qty (mt)
Income
2018
2019
Qty (Mt)
Income
Qty (Mt)
Income (Rs.M)
ABS
66.96
7.4
91.2
10.0
87.6
10.1
PP
36.0
3.6
49.2
4.92
43.2
4.5
HDPE
51.84
5.2
70.8
7.08
151.2
15.9
PS
12.96
1.5
18
2.16
9.36
1.2
Total
167.76
17.7
229.2
24.16
291.36
31.7
39
Table 30: Average Prices of Plastic Powder (Rs/Kg) – With Project
Type
Powder
of
ABS
Average
Sold Price
2017
110
Average
Sold Price
2018
110
Average Sold
Price
2019
115
Average Sold
Price
2020
120
Average Sold
Price
2021
120
PP
100
100
105
110
110
HDPE
100
100
105
110
110
PS
120
120
125
130
130
11.2.3 Total Annual Revenue – With Project
Table 31: Total Annual Gross Revenue (Rs. Million) – With Project
Revenue
2017
2018
2019
From Plastic Powder
17.7
24.16
31.7
From Plastic Product
13.67
48.5
102.4
Total Gross Revenue
31.37
72.66
134.1
40
13.3 Profit and Loss Account – With Project
Table 32: Profit and Loss Account (With Project)
Particulars
2017
Amount
(Rs.)
2018
Amount
(Rs.)
2019
Amount
(Rs.)
2020
Amount
(Rs.)
2021
Amount
(Rs.)
Income from
Plastic Raw
Materials
Income From
Production
Total Revenue
17,700,000
24,160,000
31,700,000
31,700,000
31,700,000
13,670,000
48,500,000
102,400,000
102,400,000
102,400,000
31,370,000
72,660,000
134,100,000
134,100,000
134,100,000
Cost of Materials
15,250,000
23,280,000
43,500,000
43,500,000
43,500,000
Gross Profit
16,120,000
49,380,000
90,600,000
90,600,000
90,600,000
Electricity
700,000
920,000
2,000,000
2,000,000
2,000,000
Transport (Fuel
and related
expenses)
Water
60,000
180,000
300,000
300,000
300,000
100,000
150,000
200,000
200,000
200,000
Telephone &
Internet
Other Utilities
180,000
200,000
250,000
250,000
250,000
200,000
250,000
300,000
300,000
300,000
Packing (Bags)
35,000
60,000
120,000
120,000
120,000
Production
Incentives
Overtime Payment
60,000
220,800
480,000
480,000
480,000
70,000
138,000
300,000
300,000
300,000
O&M
180,000
180,000
250,000
250,000
250,000
Other Expenses
100,000
150,000
250,000
250,000
250,000
Depreciation
8,130,000
8,682,000
8,079,000
10,680,000
10,680,000
Salaries and Wages 2,520,000
3,000,000
5,580,000
5,580,000
5,580,000
Revenue
Expenses
Total Expenses
12,335,000
14,130,800
18,109,900
20,710,000
20,710,000
Net Profit
3,784,500
35,249,200
72,490,100
69,890,000
69,890,000
41
13.4 Cash Inflow and Outflow of the Project
Table 33: Projected Cash Inflow and Outflow of the Proposed Project
Time
1
2
3
4
5
6
7
8
Income from
Plastic Raw
Materials
Income from
Products
Total Inflow
17.7
24.2
31.7
31.7
31.7
31.7
31.7
31.7
13.67
48.05
102.4
102.4
102.4
102.4
102.4
102.4
31.37
72.25
134.1
134.1
134.1
134.1
134.1
134.1
Fixed Cost
42.1
1.2
10.0
With New
Investment
Without New
Investment
Total Variable
Cost with New
Investment
Running
Expenses
Salaries
21.5
1.2
10.0
20.6
-
-
24.2
28.37
57.99
57.99
57.99
57.99
57.99
57.99
1.38
2.09
4.01
4.01
4.01
4.01
4.01
4.01
2.52
3.0
5.58
5.58
5.58
5.58
5.58
5.58
Raw Materials
20.3
23.28
48.4
48.4
48.4
48.4
48.4
48.4
O&M
0.18
0.18
0.25
0.25
0.25
0.25
0.25
0.25
Replacement
Cost
Total Outflow
Net Cash
Inflow
39.5
66.48
59.37
68,24
58.24
58.24
97.94
58.24
58.24
-35.11
12.88
65.86
75.86
75.86
36.16
75.86
75.86
42
14. Economic Analysis
14.1 Foreign Exchange Saving
About 250,000 tons of plastic raw materials and products are imported into the country every
year. Out of this, 30% have been exported as finished product and the remaining are used in the
local market. The entire primary materials (pallets) for producing polythene bags and lunch sheets were
imported at the beginning of the plastic industry in Sri Lanka. However, at present a noticeable amount of
pallets are produced in Sri Lanka through the recycling of waste polythene materials. However, the
importation of primary material of polythene has been continuing at an increased rate during the last three
decades. The increasing amounts of polythene raw materials are indicative of the increasing trend of
polythene bags and lunch usage in the country
With project, one of the major incremental net benefits is the net foreign saving on plastic and
polythene raw material imports. This proposed project has planned to recycle plastic chemical
barrels and finally produce plastic powder which could be substituted for imported plastic virgin.
Total financial value of recycled quantity under project is exactly equal to the net incremental
benefit from the project since in without project that output becomes zero value. Table no 34
shows the financial value of net foreign savings due to new investments. However, the foreign
savings due to project is not included to the IRR, NPV and B/C ratio calculation.
Table 34: The Financial Value of Import Saving
Year
Projected Recycled
Net Foreign
Quantity
Saving
(Mt/Year)
(Rs. M/Year))
2017
240
26.4
2018
324
35.64
2019
648
71.28
2020
648
71.28
2021
648
71.28
2022
648
71.28
Source: Author computation based on survey data - 2015
14.2 Environmental Benefit of the Project
Incinerating and landfilling of plastics and polythene at its end-of-life has associated numeral
environmental disadvantages. Thus, applying “natural capital valuation” techniques allow these
impacts to be expressed in monitory terms, reflecting the scale of damage caused (UNEP, 2015).
43
The overall value or “natural capital cost” gives indications of the financial cost to companies
were to internalize impacts associated with their current practices. These costs can also be
factored into business and investment decision making. In order to quantify the natural capital
cost of the impacts of plastic, the high-level methodology follows six steps: sector selection,
plastic use quantification, scope and boundary selection, impact quantification, and natural
capital valuation and application (Johnson, 2015). Thus this study does not apply all those steps
to measure natural capital valuation of plastic due to the absence of robust data and scientific
research. However, the report briefly examines the environmental impacts of the recycling
process of plastic as follows.
Generally there are three types of plastics such as Plastic-in-product, plastic-in-packaging and
plastic-in-supply-chain. Plastic-in-product includes the quantity of plastics directly used in the
product, as well as any losses that were incurred during the manufacturing process. Plastic-inpacking includes the quantity of plastic directly used in the packaging of the product as well as
any losses that were incurred during the packaging of the product. Plastic-in-supply-chain
includes the quantity of plastic used indirectly by consumer goods businesses via their supply
chain. According to the United Nations Environmental Programe (UNEP), 2015 overall, global
weighted average of plastic-in-packaging used in the consumer goods industry is 2 tons per $1m
revenue; of plastic-in-product 2 tons per $1m revenue; and of plastic-in-supply-chain 4 tons per
$1m revenue. This indicates that for every $1m in revenue in the consumer goods industry, 8
tons of plastics are consumed. The expected target of this project is to recycle 648 ton of postconsumer and post-industrial plastics. Otherwise all these plastics could cause damage to the
whole society. Thus, this project could be reasonably justifiable as an environmentally viable
project.
14.3 Cash Inflow and Outflow of the Project
The economic analysis was carried out by comparing all costs that have been already made and
required in the future to further extend and operate the project with the revenues generated by the
project once in operation. Cost and benefit over the analysis period of 15 years have been
calculated in financial terms. Table E-1 to E-4 in Annex – 1 shows the total economic net
benefits which will be developed From Rs. -35.0 million in the year 2017 to Rs. 75.0 million in
the final year 2031. The bulk of the benefits will be in year 2019. The cash flow becomes
44
positive from the year 2018 onwards, indicating that the project benefits will be able to offset
capital expenditure.
14.4 Economic Internal Rate of Return
The IRR is calculated for the project in table E1 to E4 in Annex 1 and summarized in table 35. It
indicates that the base case ratio stands at 111% and it is over and well above the social rate of
interest of cost of capital for environmental protection project, because the project produces
significant immeasurable environmental impacts to the country. Base case only considers the
financial returns from the project. With positive environmental impacts of the plastic recycling
process the EIRR would be further increased and it will be over and well above the social rate of
interest. However the study does not measure the environmental impacts in monitory terms while
the study measures the macro economic impacts of the project with the help of foreign savings.
The results of both scenarios are summarized in table 35.In both scenarios B/C ratio is above one
which indicates that the project will provide more benefits than cost.
Table 35: Internal Rate of Returns and NPV of the Proposed Project
Scenarios
Description
EIRR B/C Ratio
ENPV
01
Only with financial Benefits
111% 2.37
199.39
(Base Case)
02
Base Case + Foreign savings of 392% 3.18
652.6
the project
Note: Opportunity cost of capital is 20%
15 Sensitivity and Risk Analysis
In order to demonstrate the sensitivity of the project to changing parameters influencing benefits
as well as cost, the study applies sensitivity analysis. The results are presented in table no 36.
45
Table 36: Sensitivity Analysis
Scenarios
Description
Base Case
Benefits include, value of plastic
powder and plastic product
2
Base case+ Foreign Saving
3
Base case + all cost increased by
50%
4
Base case+ all revenue reduce by
50%
Note: Opportunity cost of capital is 20%
EIRR
111%
ENPV (Net Cash
flow)
Rs. M
199.39
B/C
Ratio
2.37
392%
94%
652.6
60.20
3.182
1.64
41%
55.34
1.18
Sensitivity tests were performed to assess the impact of variations in incremental cost and benefit
streams on the project viability. The results depicted that, without foreign savings , the EIRR is
111% and it is over and above the standard level. Further, if project cost including materials and
management increased by 50%, while without changing the cash inflow, the IRR will reduce to
94%. If project cash inflow reduces by 50%, while without changing the cost structure, the IRR
is 41% and it is still over and above the standard level. These are the possible risks and
uncertainties of the project with present financial returns. Thus, all those switching values
suggest that the project is economically and financially attractive project. Investor as well as
country will gain more benefits from the new investment.
16. Conclusions and Recommendations
16.1 Conclusion
All these decision criteria presented and discussed above, indicate that a financing of the plastic
recycling Project would be highly justified in both financial and economic terms. Besides, with
an environmental point of view, the project is highly viable. However, it is important to
emphasize that, this type of project should be focused more on social and environmental impacts
rather than the financial returns. Policy makers need to be concerned about the economic
viability rather than financial viability.
46
16.2 Recommendation
 As the project is economically and financially justified, this study proposed to the further
extension of project activities with the support of the local government

It was observed that the existing recording, monitoring and evaluation process of the
project needs to be restructured with relevant human capital for the betterment of the
project.
Prepared by
Dr. A. Aruna Shantha , Senior Lecturer in Economics
PhD in Business Economics (Malaysia), MSc in Environmental Economics ( Peradeniya), MSc
in Economics (U.K) , BA Hons in Economics (Kelaniya), CTHE, (U.K)
Department of Economics & Statistics
Sabaragamuwa University of Sri Lanka
2016.07.06
47
References
CEA, Central Environmental Authority (2007, 2008, 2009,2010,2011,2012,2013,2014.). Annual
Repor. Colombo.: Ministry of Environmental and Natural Resources.
Dangalla, N., Chandrasena, U., Semasingha, W., & Amarasingha, A. (2013). Report of the
Survey on the Usage of Polythene Shopping bags and Lunch Sheets in Sri Lanka - Case
studies of five Selected Municipal Council. Colombo: Central Environment Authority of
Sri Lanka.
Galie, F., & Trabucchi, C. (2013, 03 20). World Polymers Outlook. Retrieved 01 20, 2016, from
http://img.en25.com/Web/ICIC
Johnson, J. (2015, 08 02). http://www.plasticsnews.com. Retrieved 02 20, 2016, from reportplastic-production in creasing - but-recyling-falling-behind.
Jones, K. (2015). Increasing Engagement in the HDPE recycling Value Chain in the United
States, Master Degree Programme. Duka University.
Oehlmann, J. (2009). Critical Analysis of the Biological Impacts of Plasticizers on Wildlife.
Journal of industrial ecology , 15(217-227), 217-227.
Rosalia, C. (2012). Sustainability of bio-based plastics: general Comparative Analysis and
Recommondation for Improvement. Journal of Cleaner Production , 23(2), 47-56.
Thompson, R., Moore, C., Vom Saal, F., & Swan, S. (2009). Plastic, The Environment and
Human Health: Current Consensus and Future Trends . Biological Sciences, 364(1526),
2153-2166.
UNEP. (2014). Valuing Plastic - The Business case for Measuring, Managing and Disclosing
plastic use in the consumer good industry. Norway: Marine Litter (GMPC).
Yatawara, D. (2013, 06 30). Sunday Obsever. Retrieved 01 19, 2016, from www.http//.sundar
observer.lk.
48
Contents
Executive Summary ........................................................................................................................ 1
1. Industry and Marketplace Analysis ............................................................................................ 2
1.1 Global Context ...................................................................................................................... 2
1.2 Local Context ........................................................................................................................ 2
1.3 Environmental Issues ............................................................................................................ 2
2. Industry Profile ........................................................................................................................... 3
2.1 Background of the Company................................................................................................. 3
2.2 Existing Management Structure ............................................................................................ 4
2.3 Further Expansion of the Business ........................................................................................ 6
2.4 Need Analysis for Proposed Project ..................................................................................... 6
3. Technical Information ................................................................................................................. 7
3.1 Types of plastics .................................................................................................................... 7
4. Production Process ...................................................................................................................... 9
4.1 Collection of waste plastic .................................................................................................... 9
4.2 Storage................................................................................................................................... 9
4.3 Sorting and identification .................................................................................................... 10
4.4 Washing............................................................................................................................... 10
4.5 Cutting ................................................................................................................................. 11
4.6 Shredding ............................................................................................................................ 11
4.7 Extrusion / Palletisation ...................................................................................................... 11
4.8 Fabrication into end Product ............................................................................................... 11
5. Employment Generation of the Project ................................................................................. 12
6. With and Without Situation of the Project ................................................................................ 13
6.1 Scope of Operations (With and Without Project) ............................................................... 13
6.2 Existing Production Capacity (Without Project) ................................................................. 13
49
6.3 Production Capacity With New Investment (With Project) ................................................ 14
7. Sales and Distribution System – With Project .......................................................................... 14
7.1 Target Market Segments ..................................................................................................... 14
7.2 Distribution Strategy ........................................................................................................... 14
7.3 Advertising & Promotion Strategy...................................................................................... 16
7.4 Sales Strategy ...................................................................................................................... 16
7.5 Marketing Strategy .............................................................................................................. 16
7.6 Market Comparison ............................................................................................................. 17
7.7 Competitor Analysis ............................................................................................................ 17
8. Supply Chain (Post- Consumer and Post-Industrial Plastic) .................................................... 18
8.1 Supply Chain - Without Project .......................................................................................... 18
8.2 Supply Chain (With project) ............................................................................................... 20
8.3 Sorting and storing facilities (Without Project) .................................................................. 21
8.4 Sorting and Storing (With Project) ..................................................................................... 21
9. Operations & Land Utilization (With Project).......................................................................... 21
10. Time Targets ........................................................................................................................... 23
11. Structure of Economic and Financial Analysis ....................................................................... 23
11.1 Objective of the Report ..................................................................................................... 23
11.2 Instrument of Data Collection ........................................................................................... 24
11.3 Methodology ..................................................................................................................... 24
11.4 Approach ........................................................................................................................... 24
11.5 Principles and Procedures ................................................................................................. 25
12. Financial Analysis – Without Project ..................................................................................... 25
12.1 Cost Structure – Without Project ...................................................................................... 25
12.1.1 Fixed Cost (Without Project) ...................................................................................... 25
12.1.2 Variable Cost (Without Project) ................................................................................. 26
12.1.3 Labour Cost (Without Project) ................................................................................... 27
12.1.4 Raw Material Cost – Without Project......................................................................... 28
12.2 Returns of the Project – Without Project ......................................................................... 28
12.2.1 Returns from Plastic Powder – Without Project ......................................................... 29
12.2.2 Returns from Product – Without Project ................................................................... 30
50
12.2.3 Total Returns – Without Project ................................................................................. 31
12.3 Profit and Loss Account – Without Project ..................................................................... 32
13. Financial Analysis – With Project .......................................................................................... 33
13.1 Cost Structure .................................................................................................................... 33
13.1.1 Fixed Cost (With Project) ........................................................................................... 33
13.1.2 Fixed Costs for Office Equipments (With project) .................................................... 34
13.1.3 Total Variable Cost (With Project) Rs/Year............................................................... 35
13.1.4 Labour Cost (With Project) ........................................................................................ 35
13.1.5 Cost of Raw Materials ............................................................................................... 36
13.1.6 Total Estimated Cost – With Project .......................................................................... 37
13.2 Benefits of the Project ...................................................................................................... 37
13.2.1 Returns from Plastic Product – With Project............................................................. 38
13.2.2 Returns from Plastic Raw Materials .......................................................................... 39
11.2.3 Total Annual Revenue – With Project ....................................................................... 40
13.3 Profit and Loss Account – With Project........................................................................... 41
13.4 Cash Inflow and Outflow of the Project........................................................................... 42
14. Economic Analysis ................................................................................................................. 43
14.1 Foreign Exchange Saving................................................................................................. 43
14.2 Environmental Benefit of the Project ................................................................................ 43
14.3 Cash Inflow and Outflow of the Project............................................................................ 44
14.4 Economic Internal Rate of Return ..................................................................................... 45
15 Sensitivity and Risk Analysis ................................................................................................. 45
16. Conclusions and Recommendations ....................................................................................... 46
16.1 Conclusion......................................................................................................................... 46
16.2 Recommendation ............................................................................................................... 47
References .................................................................................................................................... 48
APPENDIX 1 - IRR and NPV Calculation
51
LIST OF TABLES
Table
Page
Table: 01
Summary of Company Profile
04
Table: 02
Types of Plastics
07
Table: 03
Employment Generation of the Project
12
Table: 04
Recycling Capacity of Plastics – With Project and Without Project
13
Table: 05
Monthly Average Plastic Collections
20
Table: 06
With Project Productivity Improvement
20
Table: 07
The Value of Fixed Assets by Mid of Year 2016
26
Table: 08
Total variable Cost (Without Project)
27
Table: 09
Labour Cost (Without Project)
27
Table: 10
Average Cost on Raw Material (Without Project)
28
Table: 11
Total Cost of Production (Without Project)
28
Table: 12
Returns from Plastics Raw Materials
29
Table: 13
Average prices of Plastic Raw Materials
29
Table: 14
Average selling Prices of Plastic Products
30
Table: 15
Gross Income from Product – Without Project
30
Table: 16
Total Annual Gross Revenue – Without Project
31
Table: 17
Profit and Loss Account (Without Project)
32
Table: 18
Fixed Cost – With Project
33
Table: 19
Cost of Office Equipments
34
Table: 20
Total variable Cost – With Project
35
Table: 21
Labour Cost – With Project
35
Table: 22
Cost on raw Materials – With Project (2017)
36
Table: 23
Cost on raw Materials – With Project (2018)
36
Table: 24
Cost on raw Materials – With Project (2019)
36
Table: 25
Total Projected Raw Materials cost for next 5 years
37
Table: 26
Total Estimated Cost – With Project
37
Table: 27
Gross Income from Plastic Products – With Project
38
Table: 28
Average Selling Prices of Plastic Products
39
52
Table: 29
Financial Benefit of Plastic Raw Materials – With Project
39
Table: 30
Average Prices of Plastic Raw Materials
40
Table: 31
Total Annual Gross Revenue
40
Table: 32
Profit and Loss Account – With Profit
42
Table: 33
Projected Cash Inflow and Outflow of the Proposed Project
42
Table: 34
The Financial value of Import Savings
43
Table: 35
Internal Rate of Returns and NPV of the Proposed Project
45
Table: 36
Sensitivity Analysis
46
53
View publication stats