(1st Draft)

PRE-FESIBILITY STUDY

ESTABLISHMENT OF BIOLOGICAL CONTROL LABORATORY FOR MANAGEMENT OF LEPIDOPTEROUS INSECT PESTS

PAKISTAN AGRICULTURE RESEARCH COUNCIL ISLAMABAD

MINISTRY OF NATIONAL FOOD SECURITY AND RESEARCH

Government of Pakistan

www.parc.gov.pk

January 2014

Contents

1. DISCLAIMER3

2. PURPOSE OF THE DOCUMENT3

3. INTRODUCTION TO SCHEME3

4. EXECUTIVE SUMMARY4

5. BRIEF DESCRIPTION OF TECHNOLOGY5

6. CRITICAL FACTORS7

7. INSTALLED AND OPERATIONAL CAPACITIES8

8. GEOGHRAPHICAL POTENTIAL FOR INVESTMENT8

9. POTENTIAL TARGET MARKET8

10. PRODUCTION PROCESS FLOW8

11. PROJECT COST SUMMARY8

11.1: Project Economics9

11.2: Project Financing9

11.3: Project Cost10

11.4: Space Requirement10

11.5: Machinery and Equipment11

11.6: Raw Material Requirements11

11.7: Human Resource Requirement11

11.8: Revenue Generation12

12. CONTACTS – SUPPLIERS, EXPERTS / CONSULTANTS12

13. ANNEXURES13

14: KEY ASSUMPTIONS14

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 under taking 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 the document

The central idea of this feasibility report is to provide basic information to investors for starting business in biological control of sugarcane borers. The Insect Pest Management Program (IPMP), Department of Plant and Environmental Protection (DPEP), National Agricultural Research Centre (NARC), Islamabad has the capacity to train the investors and their technicians to enable them to establish biological control laboratories for management of sugarcane borers. The investors will be able to produce parasitoids, provide services and sail products to farmers on commercial basis.

3. Introduction to scheme

Sugarcane is an important cash crop of Pakistan. It is damaged by a number of insects such as sugar cane borers (stem borer, top borer, Gurdaspur borer and root borers), pyrilla, scale insects, whitefly, mealy bugs, termites and mites. Sugarcane borers are the most destructive insect pests and cause 15-20% losses in yield and also reduce sugar recovery. For the last many years insecticides have been applied in different forms (aerial sprays and granular applications) to control these insect pests. Due to extensive and intensive use of pesticides human health and environmental degradation had been erupted. Moreover, insecticides application alone was unable to give economic control of insect pests in sugarcane crop. To overcome this problem biological control of insect pest is being used as one of the important alternatives. Taking into account the importance of biological control the Insect Pest Management Program (IPMP), National Agricultural Research Centre (NARC), Islamabad took the initiative to develop biological control program against sugar cane borers. Technologies for biological control i.e. mass-production of Trichogramma (an egg parasitoid of sugarcane borers) were developed at IPMP, NARC, and transferred to 08 sugar mills and 05 institutes all over Pakistan. Prior to biological control application each sugar mill used to provide granular insecticides of worth approx. 50-70 million rupees to farmers. Bio-control application has minimized the use of granular insecticides in sugar cane crop. Now sugar mills are providing bio-control, agents instead of granular insecticides. Every year more than 2000 farmers are being benefited by using bio-control agents to control sugarcane borers. Biological control is being applied on 20-25 thousand acres around each sugar mill.

4. Executive summary

The central idea of this feasibility report is to provide basic information to investors for starting business in biological control of sugarcane insect pests particularly chewing insects (borers). Sugarcane is an important cash crop of Pakistan. Sugarcane borers are the most destructive insect pests of the crop and cause 15-20% yield losses and also significantly reduce sugar recovery. For the last many years insecticides had been applied for their control. Due to extensive and intensive use of insecticides human health and environmental degradation had been erupted. Therefore, there is need to apply biological control (eco friendly) of insect pests as an alternative to chemical control. To cater the needs of sugarcane growers and sugarcane industry, entomologists at Insect Pest Management Program (IPMP), National Agricultural Research Centre (NARC), Islamabad, took initiative in the year 2000 to develop biological control laboratories. Trichogramma chilonis (an egg parasitoid), hereafter cited Trichogramma is considered as one of the most effective bio-control agent of lepidopterous insect pests. The technology for production of Trichogramma was developed at NARC. To make a bio-control program sustainable, technology of Trichogramma production was transferred to sugar mills and other institutes all over Pakistan. Bio-control laboratories established at sugar mills are now producing Trichogramma and selling it as a commercial product to sugarcane growers. Involvement of private sector in the business of biological control lead to the establishment of a sustainable control of sugarcane borers which shows that investment in biological control business is viable. Due to successful control of sugarcane borers by biological means, farmers are convinced to adopt biological control and demand for bio-control agents are increasing but the existing production facilities of bio-control agents at sugar mills are insufficient to cater the demands by farmers. Therefore, there is scope for the investors to produce bio-control agents on commercial basis, provide services and sale their products to farmers.

The proposed business can be started with the total cost estimate of Rs. 20,5552 including fixed investment of Rs. 540,700. Given the cost assumptions, net present value (NPV) and internal rate of return (IRR), benefit cost ratio (BCR) and payback period are Rs. 259705, 34%, 1.39, and 3.03 years respectively.

5. Brief description of technology

The technology consists of mass rearing chamber of Sitotroga (Fictitious host of Trichogramma). Mass rearing chamber is made of tin sheets having two parts. The upper part is rectangular and measuring 37x37x50 cm while lower part tapers downwards and has opening measuring 3x3 cm. Below to this opening adult collection box is attached. Open top is screened with iron gauze and covered with wooden frame. The trays measuring 36x30x5 cm are also made of tin sheets. Five trays filled with wheat grain are placed in each chamber. The adults of Sitotroga are released in chambers. At temperature of 26-28° C and relative humidity 50 -60%, the development of larvae of Sitotroga is completed in 29- 35 days. Emerged moths fall directly into the adult collection/oviposition box. When sufficient host eggs are available daily then rearing of Trichogramma is initiated. First gum is spread uniformly on pieces of ivory card (5x6 cm) and eggs of Sitotroga are sprinkled. Afterwards these egg cards are placed in a glass jar containing Trichogramma adults at least for 24 hours. After 24 hours these egg cards are removed, because they are parasitized and placed fresh cards in it. Parasitized eggs can be kept in cold storage at least for two weeks without losses. They are released in field as per requirement.

Flow chart for the production of Trichogramma

Bio-product (Trichogramma card) developed at NARC

6. Critical factors

· Knowledge intensive business: The person should be well trained and should get intensive knowledge of this technology before starting this business. In addition, intensive management and planning, record keeping, and patience will also be required.

· Mites infestation in host culture (Sitotroga cereallela): Sitotroga cereallela is used as a host culture for mass rearing of Trichogramma sp. Mites infestation in S. cereallela is a very common problem which causes mortality of S. cereallela. Mortality of host culture can undermine mass production of Trichogramma sp.

· Sex ratio of Trichogramma sp.: Rearing without adopting standard protocols may yield more number of Trichogramma males than females. It will adversely affect the mass production of Trichgramma sp.

· Fecundity of factitious host insect (Sitotroga cereallela) and egg parasitoid (Trichogramma sp.): Low fecundity of hosts insects and parasitoids will decrease the mass production of parasitoids.

· Continuous electricity supply for mass rearing facility: Uninterrupted supply of electricity is required to maintain optimum environment (temperature, humidity, photo period) for successful production of parasitoids and hosts, otherwise culture of host insects and parasitoids will be lost. For continuous electricity supply, a powerful energy backup (generator) will be required. However, if it fails to work due to any reason, again the system will be disturbed and cause mortality.

· Mortality of bio-control agents due to polluted environment caused by pesticide spray: Insecticides do pollute the environment which will cause the mortality of parasitoids in the field.

· Regular monitoring of parasitoids and pests: The farmers using Tricho cards should visit and monitor his crop and parasitoid cards regularly. If necessary, should replace the cards so that parasitoids should remain available in the field.

· Frequent releases of Tricho cards: Tricho cards should be applied in the field at 10 days interval regularly, so that Trichogramma sp. presence in the field didn’t allow to build up population of pests.

· Effective marketing: The person involved in bio-control business should contact the farmers in different areas to convince them for biological control and sale of bio-control agents (Tricho cards). Liaison with sugar mills may be useful to reach out farmers and sail of Tricho cards.

7. Installed and operational capacity of bio-control laboratory

This pre-feasibility suggests that the proposed bio-control laboratory has the capacity to produce 180000 Tricho cards that will be sufficient for management of sugar cane bores in 1000 acres for one year.

8. Geographical potential for investment

Sugarcane growing areas of Punjab, KPK and Sindh province.

9. Potential target market

Farmers involved in agriculture will be the main clients. The above mentioned areas are suitable. The investor has to work hard for marketing as doing by pesticides companies.

10. Production process flow

Active period for the production of Tricho cards will be 6 months that is period of sugar cane borers infestation in the field. Rest of the period will be utilized for the management of host and parasitoid culture.

11. Project’s cost and benefit summary

A detailed financial model has been developed to analyze the commercial viability of bio-control laboratory under the Prime Minister’s Loan Scheme. Various cost and revenue related assumptions, along with results of the analysis, are outlined in this section.

11.1. Project economics

The following table shows internal rate of return and payback period.

Table 1: Project economics

Description

Detail

Internal rate of return

34%

Net Present Value

Rs. 2,597,056

BCR

1.39

Payback period (years)

3.026

The cost incurred on the project is returnable from the profit in 3.03 years. The positive internal rate of return IRR i.e. 34% and net present value NPV Rs. 2597056 shows the viability of the project.

11.2. Project financing

The following table provides details of the equity required and variables related to bank loan;

Table 2: Project financing

Description

Details

Total Equity (10%)

200645

Bank Loan (90%)

1805805

Markup to the Borrower (%age/annum)

8%

Tenure of the Loan (Years)

08

Grace Period (Years)

01

Table 3: Project capital cost

Capital Cost

Quantity

Amount (Rs.)

Air Conditioner (2000 BTU) Reversible

1

125000

Refrigerator 18 Cu.Ft

1

60000

wooden or angle iron rack

1

10000

Rearing Chamber @10000/chamber (for 12 Chambers)

12

120000

Electric Aspiration (LG blower)

1

12000

Sieve for cleaning grain

1

300

Sieve messh No. 80 (separating eggs from starch)

2

1600

Table lamp

1

800

Large Pan (5 KG capacity)

1

1000

Humidifire

1

10000

Generator

1

100000

Motorcycle

1

50000

Capital Cost Total

490700

11.3. Space requirement

The total operation of producing Trico cards requires one room of 12x12 area and a store room of 8x8. Rent for the whole area is given as 50000 for the first year.

Table 4: Space requirement

Description

Amount (Rs.)

Rent of 1 room (12x12 ft.) and store (8x8 ft.)

50000/year

11.4. Raw material requirements

Following raw material is required for one year

Table 5: Raw material requirement

Raw material

Amount Rs.

Plastic oviposition jars @ 50/jar

5000

Wheat (15kg/chamber) (37.5/kg)

15000

Muslin Cloth (Rs. 25/m)

500

Rubber bands (150/packet)

300

Starch @ 60/kg

1200

plastic plates @ 30/plate

3000

Nose mask

400

Plastic or aluminium bowls @ 60/bowl

3000

Egg storing plastic vials (@ 50/vail)

2500

Tissue papers

3000

plastic bag

500

Glass jars 5 liters

7500

piece of making ivory sheets for making cards

10000

Gum

1000

Honey

450

Forcep

900

Brushes

400

Plastic jars

3000

paper clips

400

sitotroga eggs sprinkling vials

500

water cooler for transportation

7200

Electricity expenses

240000

shipment charges @ 15000/month

180000

Diesel for generator @ 20000/month

360000

Miscellaneous Expenditure

20000

Total

865750

11.5. Human resource requirement

Total number of skilled human resource is 4. Two laboratory technicians are required whose salary will be @ 15000/month. Two labors will be hired @ 10000/month.

Table 6: Human resource requirement

Description

Amount Rs.

Laboratory technician salary @15000/month

360000

Labor @ 10000/month

240000

Total

600000

11.6. Total cost and revenue generation in first year

Table 7: Revenue Generations

Rs.

Total number of Tricho cards

Sale price

Cost

Total Revenue

Profit first year

180000

12

2055520

2160000

104480

12. Contacts

Dr. Ehsan ul Haq, Insectary-Biological Control Labs., IPMP, NARC, Islamabad,

Tel.: +92-51-8443493, +92-3025100119

13. Useful links

Federal

· Web: www.parc.gov.pk

· Insectary-Biological Control Labs., IPMP, NARC, Islamabad

Punjab

Biological control Laboratories at

· Ramzan Sugar Mill, Chiniot

· Shah Taj Sugar Mill, Mandi Bahauddin

· Phalia Sugar Mill, Phalia

· Pattoki Sugar Mill, Pattoki

· Tanlianwala Sugar Mill, Tandlianwala

· Layyah Sugar Mill, Layyah

· Department of Entomology, University of Agriculture, Faisalabad

· Nuclear Institute of Agriculture and Biology (NIAB), Faisalabad

· IPM station, PARC, Bahauddin Zakariya University, Multan

· Biological Control Labs, Agriculture Department Punjab at Sheikhupura and Toba Tek Singh

Khyber Pakhtun Khawa

· Sugar Crops Research Institute, Mardan

· Department of Plant Protection, KPK University, Peshawar

Sindh

· Nuclear Institute of Agriculture (NIA), Tandojam

· Central Cotton Research Institute, Sakran

1

14. Annexure

years

Investment

Total Variable Cost

Total cost (Rs)

Benefits

Cash Flows

DF

PVC

PVB

Installment

Income After Loan Payment

0

2006450

 

2006450

0

-2006450

 

 

 

 

 

1

 

1564820

1564820

2160000

595180

1.000

1564820

2160000

144464

450716

2

 

1716395

1716395

2376000

659605

0.926

1589255

2200000

346845

312760

3

 

1883128

1883128

2613600

730473

0.857

1614478

2240741

346845

383628

4

 

2066533

2066533

2874960

808427

0.794

1640481

2282236

346845

461582

5

 

2268280

2268280

3162456

894176

0.735

1667253

2324500

346845

547331

6

 

2490201

2490201

3478702

988501

0.681

1694789

2367546

346845

641656

7

 

2734314

2734314

3826572

1092258

0.630

1723081

2411389

346845

745413

8

 

3002838

3002838

4209229

1206391

0.583

1752127

2456045

346845

859546

15. Key assumptions

Description

Debt Equity Ratio

90:10

Interest rate

8%

Grace Period

1 year

Sales Growth rate

10%

Increase in salaries

10%

General inflation

10%