1st Draft
PRE-FESIBILITY STUDY FOR PRODUCTION OF TROUT FISH FARMING
(INLAND FISH FARMING)
PAKISTAN AGRICULTURE RESEARCH COUNCIL ISLAMABAD
MINISTRY OF NATIONAL FOOD SECURITY AND RESEARCH
Government of Pakistan
www.parc.gov.pk
February, 13 2014
1
Table of Contents
1.
DISCLAIMER ..........................................................................................................................1
2.
PURPOSE OF DOCUMENT ...................................................................................................1
3.
INTRODUCTION TO SCHEME ............................................................................................1
4.
EXECUTIVE SUMMARY ......................................................................................................2
5.
BRIEF DESCRIPTION OF PROJECT ....................................................................................2
6.
CRITICAL FACTORS .............................................................................................................3
7.
INSTALLED AND OPERATIONAL CAPACITY FOR TROU FISH FARMING ..............3
8.
GEOGRAPHICAL POTENTIAL FOR INVESTMENT .........................................................3
9.
POTENTIAL TARGET MARKETS .......................................................................................3
10.
PRODUCTION PROCESS FLOW ......................................................................................4
11.
PROJECT COST AND BENEFIT SUMMARY ..................................................................4
11.1.
Project Economics..................................................................................................................... 4
11.2.
Project Financing ...................................................................................................................... 4
11.3.
Project Cost ............................................................................................................................... 5
11.3.1.
Space Requirement ................................................................................................................... 5
11.3.2.
Machinery and Equipment ........................................................................................................ 5
11.3.3.
Furniture and Fixture ................................................................................................................ 5
11.3.4.
Operational and Maintenance cost ............................................................................................ 6
11.3.5.
Human Resource Requirement ................................................................................................. 6
11.4.
Revenue Generation .................................................................................................................. 6
12.
KEY ASSUMPTION ............................................................................................................7
13.
USEFUL LINKS ...................................................................................................................8
14.
ANNEXURES ......................................................................................................................9
Annexures I: Income Statement ................................................................................................................ 9
Annexure II: Summary Statistics ............................................................................................................ 10
i
List of Tables
Table 1. Project Economics
-------------------------------------------------------------- 4
Table 2. Project financing
-------------------------------------------------------------- 4
Table 3. Total Project Cost
-------------------------------------------------------------- 5
Table 4. Space requirement and its cost ----------------------------------------------------- 5
Table 5. List of Furniture & Fixture and its cost -------------------------------------------- 5
Table 6. Operational & Maintenance cost
-------------------------------------------- 6
Table 7. Human Resource Requirement its cost -------------------------------------------- 6
Table 8. Revenue of the Project ------------------------------------------------------------- 6
Table 9. Key Assumption
------------------------------------------------------------- 7
ii
1. DISCLAIMER
This information memorandum is to introduce the subject matter and provide a general idea and
information on the subject. Although, the material included in this document is based on data /
information generated from experiments and field testing by a team of relevant scientists;
however, it is based upon certain assumptions which may differ from case to case. The contained
information may vary due to any change in any of the concerned factors, and the actual results
may differ accordingly from the presented information. The PARC and its employees do not
assume any liability for any financial or other loss resulting from this memorandum in
consequence of undertaking this activity. The prospective user of this memorandum is
encouraged to contact qualified consultant/technical expert, especially designated focal person(s)
of this enterprise for reaching to an informed decision.
2. PURPOSE OF DOCUMENT
The purpose of this document is to facilitate potential investors in Trout Fish Farming Business
by providing them with a general understanding of the business, with the intention of supporting
potential investors in crucial investment decisions. The project pre-feasibility may form the basis
of an important investment decision and in order to serve this objective, the document/study
covers various aspects of project concept development, start-up, production, finance, and
business management. The need to come up with pre-feasibility reports for undocumented or
minimally documented sectors attains greater imminence as the research that precedes such
reports reveal certain thumb rules; best practices developed by existing enterprises by trial and
error, certain industrial norms and well established research findings that become a guiding
source regarding various aspects of business set-up and it’s successful management. Apart from
carefully studying the whole document, one must consider critical aspects provided later on,
which form the basis of investment decisions.
3. INTRODUCTION TO SCHEME
Prime Minister’s Youth Business Loan Program, for young entrepreneurs, with an allocated
budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide subsidized financing at 8%
mark-up per annum for one hundred thousand (100,000) beneficiaries, through designated
financial institutions, initially through National Bank of Pakistan (NBP) and First Women Bank
Ltd. (FWBL). Loans from Rs. 0.1 million to Rs. 2.0 million with tenure up to 8 years inclusive of
1 year grace period, and a debt: equity of 90: 10 will be disbursed to SME beneficiaries across
Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan, Gilgit-Baltistan, Azad
Jammu & Kashmir and Federally Administered Tribal Areas (FATA).
1
4. EXECUTIVE SUMMARY
Trout is considered for Inland Fish Farming Business in this pre-feasibility document. This
business is proposed to be located primarily in a cold area, having a water temperature range of
05-15 degrees centigrade. All the prospects of Trout i.e. stocking density, nutritional
requirement, reproductive performance and management and development of brood stock has
been studied at Trout Multiplication Research Station, Mountain Agricultural Research Centre
(MARC), Gilgit and Trout Hatchery Madyan, Swat, KPK. After successful experimentation, this
species is declared technically feasible for commercial fish farming. The technology of trout
culture and breeding are in the phase of extension to the farmers. Farmers are already practicing
its culture at their farms. The project can be started at an area of two kanals with 12,000 fish
fingerlings of trout for one and half year cycle with survival rate of 90%. Total cost estimate is
Rs.2.17 million, with fixed investment of Rs.0.85 million and working capital amounting to
Rs.1.32 million. Given the cost assumptions, Net Present Value (NPV), Internal Rate of Return
(IRR), Benefit Cost Ratio (BCR) and payback period are Rs.9348988, 54 %, 1.82 and 2.31 years
respectively.
5. BRIEF DESCRIPTION OF PROJECT
Following key parameters must be addressed as per pre-feasibility study:
• Techniques: Different techniques are used for trout farming. However, keeping in view the
economical, technical and managerial factors, semi-intensive fish farming, and monoculture
technique is suggested for the proposed project.
• Location: The business can be initiated in cold area specially Swat, Kaghan, Chitral (KPK),
Murree in Punjab, Gilgit Baltistan and Azad Jammu Kashmir having suitable environment,
particularly freshwater temperature range between 5-15 oC.
• Product: Fish consumption is increasing in Pakistan due to changing food habits and special
preferences for high quality white meat. Trout is becoming very popular due to its taste.
• Target Market: In addition to local market of the regions where it is produced, major cities,
such as Quetta, Karachi, Lahore and Islamabad are the target markets. Moreover, there is an
enormous export potential to Middle Eastern countries.
• Employment Generation: The proposed project will provide direct employment to two
individuals. Financial analysis shows the profitability of proposed business within first year of its
operation.
2
6. CRITICAL FACTORS
The commercial viability of the proposed project depends on the following factors:
• Selection of proper location with water, equipment, and staff play very important role in
ensuring the project to run successfully. This species is sensitive to and temperature above 15oC
is not suitable for trout culture.
• Clean water rich in oxygen is mandatory for this species.
• Healthy seedlings must be purchased from reliable/reputed dealers, for the assurance of desired
fish species. Incidence of diseases may be monitored on regular basis.
• Farm is required to maintain the record of production and management practices for successful
marketing and traceability.
• Farm should have strong market linkages for effective disposal of produce.
7. INSTALLED AND OPERATIONAL CAPACITY FOR TROU FISH FARMING
This pre-feasibility suggests a farm operation on two kanals of land with 12,000 fish for one year
of growing cycle (starting with seedlings of 3-4 inches) with survival rate of 90%.This area can
be increased from 02 Kanals with double input and output.
8. GEOGRAPHICAL POTENTIAL FOR INVESTMENT
The proposed location for establishment of the fish farms will primarily be Northern Areas of
Pakistan specially Swat, Kaghan, Chitral, (KPK), Murree in Punjab, Gilgit Baltistan and Azad
Jammu Kashmir that provide suitable environment for species (trout) with particularly water
temperature.
9. POTENTIAL TARGET MARKETS
The marketing of fish follows the traditional distribution channel, through middlemen or
wholesalers at farm who identifies potential buyers and negotiate price, or directly to retailers in
urban markets. The time spent in transportation, from farm to the retail shop, varies from area to
area. Over the years, collection and transportation of fish has improved with the use of loader
vehicles. However, greater the distance between farm and consumer, more complicated will be
the marketing or distribution system, due to the perishable nature of the product. The key factors
in marketing are availability of current market information, quality of fish and supply & demand
which will determine the selling price.
3
10. PRODUCTION PROCESS FLOW
The overall production cycle for the trout farming comprises of 12 months. In case of fresh
seedlings the production cycle will take more time to achieve the desired output. It varies
respectively, with the selection of fish (seedlings/fingerlings) size. Keeping in view the economic
perspective, it is suggested that fish with 3-4 inches may be used for different ponds which will
take 12 months.
11. PROJECT COST AND BENEFIT SUMMARY
A detailed financial model has been developed to analyze the commercial viability of Trout Fish
Farming under the Prime Minister’s Small Business Loan Scheme. Various cost and revenue
related assumptions, along with results of the analysis, are outlined in this section.
11.1.
Project Economics
All figures in the financial model have been calculated for 12,000 units of fish on 1 kanal of
land. The following table shows internal rates of return and payback period.
Table 1. Project Economics
Description
Details
Net Present Value (NPV)
Rs. 9,348,988
Benefits Cost Ratio (BCR)
1.82
Internal Rate of Return (IRR)
54%
Payback Period (years)
2.31
Factors that influence the profitability of Inland Fish Farm are farm management, quality of
inputs and environmental factors.
11.2.
Project Financing
Following table provides details of the equity required and variables related to bank loan;
Table 2. Project financing
Description
Total Equity (10%)
Bank loan (90%)
Details
Rs. 2,163,33
Rs 1,949,700
Mark up to borrower (per annum)
Tenure of Loan (Years)
Grace Period (years)
8%
8
1
4
11.3.
Project Cost
Following requirements have been identified for operations of the proposed business and along
with details costing (Table 3).
Table 3. Total Project Cost
Capital Investment
Amount (Rs.)
Total Capital Cost
850,000
Initial Working Capital
1,316,333
Total Project Cost
2,166,333
11.3.1. Space Requirement
Following table gives details of space requirements and its costing for the project under
consideration.
Table 4. Space requirement and its cost
Space Requirement (Sq. ft.)
Cost Rs./ Unit
Quantity
(Nos)
Area
(Sq. ft.)
Office Building cum Store
50,000
01
10x14
Total
Cost
(Rs.)
50,000
Construction of Ponds and
channels
Total
250,000
03
01 kanal
750,000
800,000
11.3.2. Machinery and Equipment
No machinery/equipment is required for trout fish farming.
11.3.3. Furniture and Fixture
Following table provides list of Furniture and Fixture required for Inland Fish Farm.
Table 5. List of Furniture & Fixture and its cost
Description
Furniture and Fixture
Quantity (Nos)
Lump sump
5
Unit Price
(rupees)
50,000
PKR
50,000
11.3.4. Operational and Maintenance cost
Following table provides list of consumable requirement for Inland Fish Farm and accordingly
cost of all the consumable required items using current prices.
Table 6 . Operational & Maintenance cost
Description
Nos
Trout fish Seed*
12000
Fish Feed
6000 kg
Land rent
2 kanal
Depreciation cost
Utility Bills
Communication Charges
Miscellaneous (cash in
hand)
Total
*Madyan Trout Hatchery Swat/MARC, Gilgit
Unit Price (PKR)
30
100/kg
20000/Kanal
1000/month
500/month
-
Total (PKR)
360,000
600,000
40,000
8333
12000
6000
50000
1,076,333
11.3.5. Human Resource Requirement
The table below provides details of human resource required to manage basic fish farm. The staff
salaries are estimated according to the market trends. However, these requirements and pay
scales may vary area to area.
Table 7. Human Resource Requirement its cost
Description
No. of Employees
Labour
11.4.
Salary/person/
month
10,000
2
Total salary per year
240,000
Revenue Generation
Final product of Inland Fish Farm is fish ready for sale in market that will generate revenue. The
capacity of farm is 12,000 units of fish for first year sell price as per market Rs. 1000.
Table 8. Revenue of the Project
Survival
Product
Unit
@90%
Fish
12,000
10,800
Average
Weight of
fish
0.25 kg
Total Sales Revenue
First Year
Sales
Production
Price
(Kg)
(Rs./Unit)
2700
1000
2,700,000
6
First Year
Revenue (Rs)
2,700,000
12. KEY ASSUMPTION
Table 9. Key Assumption*
Particulars
Assumption
Sales Price Growth Rate
10% per year
Increase in cost of raw material
10% per year
Increase in utilities
10% per year
Debt/Equity Ratio
90:10
Building & Ponds
5%
Office furniture & fixture
5%
Loan Period
8 years
Grace Period
1 year
Loan installments
Annually
Financial charges (interest rate)
8%
* Average inflation rate of past 10 years is used as proxy of input and out prices growth rate.
(Source: Economic Survey of Pakistan)
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13. USEFUL LINKS
 Resource/focal Person
PSO/Program Leader Aquaculture and fisheries program,
Livestock research institute, National Agriculture Research Center, Islamabad
Phone: 0518443868 OR 0519255331
Email: afzal_afri@hhotmail.com
 Aziz Ahmed, MARC, Juglot, Gilgit
Cell: 03468487776,
Email: azizglt_73@yahoo.com
 aqua.ucdavis.edu/DatabaseRoot/pdf/TROUTMAN.PDF
 www.fao.org
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14. ANNEXURES
Annexures I: Income Statement
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
2,700,000
2,970,000
3,267,000
3,593,700
3,953,070
4,348,377
4,783,215
5,261,536
5,787,690
6,410,823
Seedling Cost
360000
396000
435600
479160
527076
579783.6
637762
701538.2
771692
848861.2
Feeding Cost
600000
660000
726000
798600
878460
966306
1062937
1169230
1286153
1414769
Cost of Goods Sold
960000
1056000
1161600
1277760
1405536
1546090
1700699
1870768
2057845
2263630
Gross Profit
Repair &
Maintenance
1740000
1914000
2105400
2315940
2547534
2802287
3082516
3390768
3729845
4147194
0
42500
44625
46856.25
49199.06
51659.02
54241.97
56954.06
59801.77
62791.86
Salaries
240000
264000
290400
319440
351384
386522.4
425174.6
467692.1
514461.3
565907.4
Rent
40000
44000
48400
53240
58564
64420.4
70862.44
77948.68
85743.55
94317.91
Utilities
Communication
charges
12000
13200
14520
15972
17569.2
19326.12
21258.73
23384.61
25723.07
28295.37
6000
6600
7260
7986
8784.6
9663.06
10629.37
11692.3
12861.53
14147.69
8333.333
8333.333
8333.333
8333.333
8333.333
8333.333
8333.333
8333.333
8333.333
8333.333
50000
55000
60500
66550
73205
80525.5
88578.05
97435.86
107179.4
117897.4
155976
155976
138495
119616
99227
77206
53424
27740
0
0
Sub - Total
512309.3
589609.3
612533.7
637993.9
666266.2
697656.3
732502.8
771180.5
814104
891691
Operating Income
1227691
1324391
1492866
1677946
1881268
2104631
2350013
2619587
2915741
3255503
Net Income
1227691
1324391
1492866
1677946
1881268
2104631
2350013
2619587
2915741
3255503
Sales (Revenues)
Depreciation
Other Office
Expenditure
Interest on Loan
9
Annexure II: Summary Statistics
0 Period
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
2166333
0
0
0
0
0
0
0
0
0
0
Fixed Cost
850000
0
0
0
0
0
0
0
0
0
Variable cost
Total Cost (Fixed +
Variable)
1316333
1489633
1635638
1796138
1972575
2166539
2379777
2614209
2871949
3155320
2166333
1489633
1635638
1796138
1972575
2166539
2379777
2614209
2871949
3155320
Interest on loan
Total cost inclusive
interest payment
(Outflow)
Revenues from fish
production
155976
155976
1384951
119616
99227
77206
53424
27740
0
0
2322309
1645609
1774134
1915754
2071802
2243746
2433201
2641949
2871949
3155320
2,700,000
2970000
3267000
3593700
3953070
4348377
4783215
5261536
5787690
6366459
Salvage value of assets
0
0
0
0
0
0
0
0
0
44,365
Gross Profit (Inflow)
Net cash flow (Inflow –
Outflow)
2,700,000
2,970,000
3,267,000
3,593,700
3,953,070
4,348,377
4,783,215
5,261,536
5,787,690
6,410,823
377,691
1,324,391
1,492,866
1,677,946
1,881,268
2,104,631
2,350,013
2,619,587
2,915,741
3,255,503
Initial Project
Investment
-2166333
Payback Period
NPV
IRR
BCR
2.31
Rs. 9,348,988
54%
1.82
10