smeda green house farm (export of fresh cut roses)

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Pre-Feasibility Study

GREENHOUSE FARM

(Export of Fresh Cut Roses)

Small and Medium Enterprises Development Authority

Government of Pakistanwww.smeda.org.pk

HEAD OFFICE

6th Floor LDA Plaza Egerton Road, LahoreTel (042)111 111 456,

Fax: [email protected]

REGIONAL OFFICE

PUNJAB

REGIONAL OFFICE

SINDH

REGIONAL OFFICE

KHYBER PAKTUNKHWA

REGIONAL OFFICE

BALOCHISTAN

8th Floor LDA Plaza,Egerton Road,

Lahore.Tel: (042) 111 111 456,

Fax: (042) [email protected]

5TH Floor, Bahria Complex II,M.T. Khan Road,

Karachi.Tel: (021) 111-111-456


Ground FloorState Life Building The Mall,

Peshawar.Tel: (091)111 111 456, 9213046-7


Bungalow No. 15-A ChamnHousing Scheme Airport Road,

Quetta.Tel: (081) 2831623, 2831702


April, 2011



Pre-Feasibility Study Greenhouse Farm (Export of Fresh Cut Roses)

DISCLAIMER

The purpose and scope of this information memorandum is to introduce the subject

matter and provide a general idea and information on the said area. All the material

included in this document is based on data/information gathered from various

sources and is based on certain assumptions. Although, due care and diligence has

been taken to compile this document, the contained information may vary due to any

change in any of the concerned factors, and the actual results may differ substantially

from the presented information. SMEDA does not assume any liability for any

financial or other loss resulting from this memorandum in consequence of

undertaking this activity. Therefore, the content of this memorandum should not be

relied upon for making any decision, investment or otherwise. The prospective user

of this memorandum is encouraged to carry out his/her own due diligence and gather

any information he/she considers necessary for making an informed decision.

The content of the information memorandum does not bind SMEDA in any legal or

other form.

DOCUMENT CONTROL

Document No. PREF-49

Revision 3

Prepared by SMEDA Punjab

Approved by Provisional Chief Punjab

Revision Date April, 2011

Issued by Library Officer

PREF-49/Apr, 2011/Rev31




11 EEXXEECCUUTTIIVVEE SSUUMMMMAARRYY

Pakistan is primarily an agri-based economy, there exists a huge potential of cutflowers cultivation for exports, especially when local growers have alreadyaccumulated many years of experience in cut flowers cultivation. The onlyrequirement now is of putting up a proper glasshouse with efficient management and

we are ready to take our share of growing international cut flower trade. Pakistan hasone of the most fertile agriculture lands, where excellent quality flowers can beproduced, it is only producing low quality cut flowers that are sold locally and asmall number is exported to Middle East

The world trade of cut flowers runs into billions of dollars. Netherlands serves asthe center of cut flower trade. Millions of flowers are traded through the auctionhouses in Netherlands. Major suppliers of fresh cut flowers to these auctions areKenya, Columbia, Zimbabwe, Ecuador, Israel, Iran and India. Besides these fourmajor suppliers, there are many other exporting countries as well. Pakistan is alsoexporting Cut Flowers but majority of the industry is unorganized. Therefore, there

is great potential for anyone who put up a greenhouse for growing fresh cut roses.This is the only way to get into export market on sustainable basis.

A Greenhouse Farm needs a capital investment estimated at Rs. 14.634 million forconstruction and purchasing machinery & equipment. In addition to this, a sum of Rs. 0.913 million is required as working capital. The total project cost is estimated atRs. 15.547 million. Projected IRR, NPV and Payback of the proposed project are21%, Rs. 1.721 Million and 4.16 years respectively.

This pre-feasibility is being prepared by SMEDA and is intended to provide generalinformation on the opportunity for an investor in the floricultural sector to establish afresh cut rose flower farm equipped with a glasshouse. This would allow the projectto export flowers to European markets, thereby, adding value and maximizingprofits.





22 IINNTTRROODDUUCCTTIIOONN TTOO SSMMEEDDAA

The Small and Medium Enterprises Development Authority (SMEDA) wasestablished with the objective to provide fresh impetus to the economy through thelaunch of an aggressive SME support program.

Since its inception in October 1998, SMEDA had adopted a sectoral SMEdevelopment approach. A few priority sectors were selected on the criterion of SMEpresence. In depth research was conducted and comprehensive development planswere formulated after identification of impediments and retardants. The all-encompassing sectoral development strategy involved recommending changes in theregulatory environment by taking into consideration other important aspectsincluding finance, marketing, technology and human resource development.

SMEDA has so far successfully formulated strategies for industries such ashorticulture, including export of fruits and vegetables, marble and granite, gems and jewellery, marine fisheries, leather and footwear, textiles, surgical instruments,transport, dairy etc. Whereas the task of SME development at a broader scale still

requires more coverage and enhanced reach in terms of SMEDA’s areas of operation.

Along with the sectoral focus a broad spectrum of business development services isalso offered to the SMEs by SMEDA. These services include identification of viablebusiness opportunities for potential SME investors. In order to facilitate theseinvestors, SMEDA provides business guidance through its help desk services as wellas development of project specific documents. These documents consist of information required to make well-researched investment decisions. Pre-feasibilitystudies and business plan development are some of the services provided to enhancethe capacity of individual SMEs to exploit viable business opportunities in a betterway.

This document is in the continuation of this effort to enable potential investors tomake well-informed investment decisions.

33 PPUURRPPOOSSEE OOFF TTHHEE DDOOCCUUMMEENNTT

The objective of this proposed Pre-feasibility is primarily to facilitate potentialentrepreneurs with the investment information and provide an overview about the"Export of Fresh Cut Roses Business". The project pre-feasibility may form the basisof an important investment decision and in order to serve this objective, thedocument/study covers various aspects of project concept development, start-up, and

marketing, finance and business management. The document also provides sectoralinformation and international scenario, which have some bearing on the projectitself.

The purpose of this document is to facilitate potential investors of the Fresh CutRoses business by providing them a macro and micro view of the business with thehope that the information provided herein will aid the potential investors in crucialinvestment decisions.





This particular Pre-feasibility is regarding setting up a "Green House Farm (Exportof Fresh Cut Roses)". This report is based on the information obtained from industrysources as well as discussions with businessmen. For financial model, since theforecast/projections related to the future periods, actual results are likely to differbecause of the events and circumstances that don’t occur as frequently as expected.

44 PPRROOJJEECCTT IINNTTRROODDUUCCTTIIOONN

44..11 PPrroo j jeecctt BBrriieef f

The world trade of cut flowers runs into billions of dollars. Netherlands serves asthe center of cut flower Millions of flowers are traded through the auction houses inNetherlands. Major suppliers of fresh cut flowers to these auctions are Kenya,Columbia, Zimbabwe, Ecuador, Israel, Iran and India.

Pakistan has no significant share in the international trade of fresh cut flowers.

Although, Floriculture could not get established up to the mark in spite of availability of all natural conditions in the country. A large number of fresh cutflowers are wasted due to mishandling and other related problems.

This pre-feasibility is being prepared by SMEDA and is intended to provide generalinformation on the opportunity for an investor in the floricultural sector to establish afresh cut rose flower farm equipped with a glasshouse. This would allow the projectto export flowers to European markets, thereby, adding value and maximizingprofits.

44..22 OOppppoorrttuunniittyy RRaattiioonnaallee

Production of high quality cut fresh flowers, especially roses, requires propergreenhouses where environment is controlled. This controlled environment gives theproducer control over what kind of flowers he/she wants to produce and under whatconditions. Another important aspect of using a greenhouse is that high qualityflowers can be produced all year round, irrespective of the weather that existsoutside.

As Pakistan is primarily an agri-based economy, there exists a huge potential of cutflowers cultivation for exports, especially when local growers have alreadyaccumulated many years of experience in cut flowers cultivation. The onlyrequirement now is of putting up a proper glasshouse and ready to take the share of

growing international cut flower trade.Based on this scenario, it is high time to put up a glasshouse for growing andexporting fresh cut roses.





44..33 CCrruucciiaall FFaaccttoorrss aanndd SStteeppss iinn DDeecciissiioonn MMaakkiinngg f f oorr IInnvveessttmmeenntt

SSttrreennggtthhss

• Pakistan has got favorable climate conditions which are very helpful for raisingcut flower.

• Cut flower crops also give premium prices almost round the year and there is noneed to wait for a long time as in the case of other routine crops.

• Net profit against the investment is much higher from these compared with otherconventional crops. The products are in high demand all over the world.

• Availability of cheap labor for growing cut flower.

WWeeaakknneesssseess

• Floriculture in the country is in emergent stage. There are lack of resources andskilled persons to develop the industry up to international standards.

• The marketing issue are the limited airfreight space; lack of proper cold chain;

lack of regional and international cooperation; patenting, royalties, the WTOlaws; and inadequate transport facilities.

OOppppoorrttuunniittiieess

• In Pakistan, most of the flowers are produced in winter when Europe sinks in thesnow and most of traditional functions are held during that period.

• The available natural resources can be exploited commercially. Marketing of cutflowers is unorganized. In most cities, with large market potential, flowers arebrought to wholesales markets, which mostly operate in open yards.

• The government should invest in setting up auction centres, as well as organizefloral shops with better storage facilities to prolong life of cut flowers.

• There is considerable need for research on different cut flowers. In addition todeveloping varieties which give higher yield, the research should also seek todevelop varieties which produce flowers and are more appealing to the domesticas well as international consumers.

TThhrreeaattss

• Flowers are perishable products with a limited life span. Even if they are treatedwith life enhancing solution, their life is limited. If they are not sold in time theyloose appeal and have to be dumped, resulting in economic loss.

• Poor image of sources (Logistics problem, lack of professionalism,

inexperienced commercial attitude)• The production issues which hampers growth of this industry are lack of required

seed, flowers, germplasm and tissue culture facilities; lack of technologicalassistance; shortage of capital investment; shortage of trained manpower; poorpost-harvest management; and lack of pest and disease control.

• Increasing airfreight rates.





44..44 BBaassiicc CChhaarraacctteerriissttiiccss oof f aa GGrreeeennhhoouussee

The basic function of a glasshouse is to protect the plants from severe climaticconditions and provide favorable environment that is required for optimal productionof the crop. But this alone does not sum up the characteristics and the benefits of aglasshouse. Following are a few of the benefits of a glasshouse:

Production in a glasshouse increases yield by threefold when compared withconventional farming.

Production in a glasshouse improves the quality of the produce by at least 50%. The output is disease free and conforms to the international hygiene standards. Production in a glasshouse reduces the harvesting period by half. Minimizing the command area optimizes land mass utilization. Any crop can be produced at anytime, irrespective of the conditions prevailing

outside the glasshouse, by simulating/creating the required environmentalconditions

44..55 VViiaabbllee EEccoonnoommiicc SSiizzee

Taking into account the amount of investment required for putting up a properglasshouse where all factors including, temperature, humidity, pest control, CO2 levels in air, etc. are controlled, it is suggested that the farm should be started on oneacre land. 18,000 rose plants will be planted in the farm that is to be covered by theglasshouse. Besides the one acre that would be used as the cultivation field,approximately another four kanal area would be used for constructing a packagingshed, a storeroom and an office.

44..66 PPrroo j jeecctt CCoosstt

A Greenhouse Farm needs a capital investment estimated at Rs. 14.634 million forconstruction and purchasing machinery & equipment. In addition to this, a sum of Rs. 0.913 million is required as working capital. The total project cost is estimated atRs. 15.547 million.





55 PPRROOCCEESSSS FFLLOOWW CCHHAARRTT

55..11 PPiicckkiinngg oof f FFlloowweerrss

It is an important process as it plays vital role for determining the price of flowers.Following steps should be followed

• Picking should always be done early in the morning.

• After picking wash the flowers in clean water.

• Flowers should be treated with life enhancing solutions to increase their life.

• Dry flowers with natural air after the use of preservatives.

• Inspect each flower for its quality then pack in wooden / cardboard boxes.

• Ready for delivery / distribution.

66 CCUURRRREENNTT IINNDDUUSSTTRRYY SSTTRRUUCCTTUURREE

Pattoki serves as the center for floricultural activity in Pakistan. Though Kasur andSheikhupura districts have also developed some expertise in this field, yet Pattokistill serves as the hub market for all floricultural trade. Patto ‘mandi’ is the majorforum for buying and selling of fresh cut flowers, especially roses. From Pattoki,flowers are distributed to all parts of the country including Karachi, Peshawar,Lahore, and Islamabad.

Overall, this sector is still in infancy, still going through birth pains. This is not agood sign considering the years this sector has been around. The major reason forthis slow development process has been the lack of interest on part of progressivefarmers to enter this field. The credit goes to small and poor farmers who have kepton going without much technical and/or financial support over the years. Whateverpre-harvest and post-harvest handling techniques are being used is the direct result of their personal ingenuity, however primitive they may be.





There are only few major players in this industry. Majority of the industry isunorganized. Therefore, there is great potential for anyone who put up a greenhousefor growing fresh cut roses. This is the only way to get into export market onsustainable basis.

Total exports fall around US $40 billion all over the world and Netherlands, Japan,

and United States of America (USA) account for nearly half of the world flowertrade, whereas Indian flower exports stand at Rs 6 billion (GUV 2009)

1. Pakistan’s

total flower export is Rs 35 million (PHDEB)2 and it could earn billions of rupeesthrough exports of flowers if the cultivation of flowers is promoted in the country.

6.1 Import and EExxppoorrtt oof f FFlloowweerrss bbyy PPaakkiissttaann33::

TTaabbllee 66--11:: EExxppoorrtt oof f FFlloowweerrss

Period TradeFlow Reporter Partner TradeValue Net Weight(kg) TradeQuantity

2006 Export Pakistan World $286,769 200,926 200,926




TTaabbllee 66--22:: IImmppoorrttss oof f FFlloowweerrss

Period TradeFlow

Reporter Partner TradeValue

Net Weight(kg)

TradeQuantity

2006 Import Pakistan World $61,895 31,762 31,762




1 Global Urban Vision 2009 2 Pakistan Horticulture Development and Export Board3 UN Comtrade





77 MMAARRKKEETTIINNGG

Many different types of people buy fresh cut roses for different purposes.Consumption patterns of buyers living in different parts of the world are varied. Butthese consumption patterns can be grouped based on common features.

The purpose of purchasing flowers is mostly to give them away as gift. About 40 to50 percent are used for this purpose. 20 to 30 percent flowers are bought for specialoccasions and about 20 to 25 percent are used for decoration.

Roses are used to convey a message of love and are therefore, the most widely usedflower in the world. It has sort of become a necessity for conveying the message of love on any occasion and in any situation.

The proposed project has two different markets for the two different categories of fresh cut roses. The first market is Europe and USA for 'A' category flower. MiddleEast and Far East constitutes market for 'B' category flower. About 20% productionwould constitute 'C' category flowers, which will be sold in local market at thenearest 'Mandi'.

In the export markets, there are three channels through which the product is sold,either at an auction house, directly to a wholesaler or directly to retail stores. It isadvisable to start the proposed project with selling directly to wholesalers, both inEurope and Middle East markets, and then move to auction house option with thepassage of time when capacity is increased. Auction house facility is not currentlyavailable in Asia, but India is starting its own auction houses for flowers and wouldlead the way in Asia very soon.

Selling initially to wholesalers will help the proposed project to acquire therequirements and standards in Europe. With the passage of time when production isup to the required standards on regular basis, auction house option can be used.

There will be three different market segments to be targeted by this project. Thebifurcation of target market is based on two factors i.e. quality demanded andquantity demanded.

The major demand for fresh cut roses is in Europe and USA. Therefore, the targetmarket for 'A' quality produce is Europe and USA. Similarly for 'B' quality produceit is Far East and Middle East. And finally for 'C' quality produce, the target marketis local market in Pakistan. The demand pattern also exists on the same lines.

Mode of sale for export consignments would be on 45 days L/C or 45 days D/Abasis. This is the general norm, which is followed around the world. It is only duringperiods of high demand that more favorable payment terms can be negotiated.

As far as local sale is concerned, it would be both on cash as well as 15 days credit.The produce that would be sold in 'Mandi' would be against Cash. Direct sale toretailers and commercial exporters would entail 15 days credit at the maximum.





88 EExxppoorrttaabbllee ccuutt f f lloowweerrss

It is interesting to know the Pakistan exports cut flowers, not only to the Gulf Statesbut even to Europe. The exporting of cut flowers from Pakistan is still very much inits infancy as the necessary infrastructure, such as cold-storage, is not yet fully inplace but it is still encouraging that this is now being looked at seriously.

For the exports of cut flowers, Pakistan is updating technology but it still needs tolook at alternatives to the country’s-old growing and exporting methods.

Reshipment checking is a vital part of ensuring rotting perishable items sent abroad.Therefore Pakistan needs a “cool chain” which would ensure flowers/plants to bekept in suitable environment from the moment they leave the fields to when theyreach the shelves.

The development of the “cool chain system” would not only increase shelf life of thehorticulture products but would also reduce exploitation of growers in the hands of the buyers due to their perishable nature.

The “cool chain system” covering the whole country could save about the 40%production that is wasted due to absence of proper cold storage facilities andimproper handling. It is necessary that TDAP (Trade Development Authority of Pakistan) and PHDEB should evolve a plan of action to boost production andexports. Although a cut flower farm is a profitable and attractive venture and there isan opportunity to get maximum profit by making the product value added forsupplies to as flower baskets, bouquet, and bunch for direct export.

The prospects are bright for the export value to double in a very short time. And if quality standards are maintained, the exporter will be able to command a premiumprice for these products.

88..11 EExxppoorrtt ccoonnssttrraaiinnttss::

Pakistan’s export of floriculture product is not encouraging. The low performance isattributed to many constrained like:

• Non availability of air space in major airlines, since most of the airlines operators’prefers heavy consignment.

• Exporters for infrastructural problem like bad interior road, inadequate refrigeratedtransport and storage facilities.

• Lack of professional backup of delivery and supporting companies, which resort into high cost of technology.

• Tedious phyto-sanitry certification and an unorganized domestic market.





99 EExxppoorrtt / / DDiissttrriibbuuttiioonn CChhaannnneellss

99..11 FFiigguurree:: EExxppoorrtt CChhaannnneellss oof f CCuutt FFlloowweerr

Auction House

Wholesalers/ Importer

Traditional

florists

Other Retailers

Garden Centers

Franchised

floristsSupermarkets

Grower/ Producer

99..22 AAuuccttiioonnss

Auctions are an attractive option in that they are able to sell, as long as the quality isof the correct standard. Flowers are sold at the market price with secure payment,they are sold relatively quickly, and there are no quality disputes. However, auctionstend to work with larger producers of the ‘mass-produced’ greenhouse varieties.

99..33 VViiaa aann iimmppoorrtt wwhhoolleessaalleerr

A producer can also sell directly to wholesalers instead of going through the auctionsand/or agents. Import wholesalers often function as export wholesalers orwholesalers on the domestic market, and are able to advise and assist producers onall manner of technical and product know-how, from quality, presentation andassortment to transportation and handling matters. Wholesalers tend to conductbusiness at an arm’s length basis and without long-term contracts, trying to sourcethe particular products they require. Thus big savings are to be made, both in timeand money, by going directly to a wholesaler. But there are also potential problems,

such as quality claims, volatile demand and payment issues. Overall the wholesalerfunction is becoming more important and more concentrated, with many wholesalecompanies becoming multinational and sending their purchases to all importantworld flower auctions. Added to this is the increasing role of e-commerce, wheresales can be made online.





99..44 DDiirreeccttllyy ttoo aa rreettaaiill cchhaaiinn

More and more retail chains, including supermarkets, and garden centres purchaseflowers directly from growers, bypassing the auctions, agents and wholesalersaltogether. This obviously requires them to co-ordinate transportation and otherlogistics, and set up supply chains from the growers to the various domestic markets

where their stores are located.

1100 EExxppoorrtt PPrroocceedduurree..

1100..11 SSaalleess CCoonnttrraacctt

There should be a sales contract between the seller (Exporter) and the buyer(Importer).The seller (exporter) should prepare a pro-forma Invoice and send it to thebuyer. The pro-forma invoice is an invitation to the buyer to place a firm order and itoften requires the importer to make his import arrangements. In the pro-formainvoice following details should be mentioned.

• Product description• Quality

• Price

• Terms of Payment (L/C,D/P,D/A etc.)

• Terms of Delivery (FOB, CFR, CIF etc.)

• Packing & Marking Details

1100..22 TTeerrmmss oof f PPaayymmeenntt

The terms of payment agreed between the exporter and importer depends on how

well the exporter knows the importer, risk involved in the transaction, and thevolume of business, Methods of payment for foreign trade are:

• Advance Payment

• Letters of Credit (L/C)

• Documentary Collection1. Document against payment (D/P)11. Document against acceptance (D/A)

• Open Accounts

• Consignment account

1100..33

SSeennddiinngg TTrraaddee SSaammpplleess The foreign buyer may ask for samples of products before a trade transaction takesplace. In such a case the exporter will send samples of his products to the foreignbuyer, and the samples are usually sent by air mail to avoid undue delay.

Packaging





Packaging is an important aspect contributing to the positioning of a product in themarket. Packaging must protect the product on it way from the exporter to theultimate consumer.The exporter should ensure that:

• The packages are properly packed to resist rough handling in the

transportation by sea/air• The packaging has been done according to the buyer's requirements as

specified in the trade contract

• The shipping marks and the port of destination is marked on all packages.

• The packages are loaded in such a way to facilitate inspection by customsofficials

1100..44 CCaarrggoo SSppaaccee RReesseerrvvaattiioonn

10.4.1 Sea Cargo

Shipping space should be reserved well ahead of the date of shipment. Therefore theexporter should meet the shipping agent to get reserved shipping spaces. For thispurpose exporter should submit duly completed shipping notes.

10.4.2 Air Cargo

For air cargo, the exporter would have to check with the "Air Line Agent" officersservicing the country concerned. The exporter should submit a document called"Shippers letter of Instruction". Finally this document will be used to issue theAirway Bill (AWB)

1111 FFAARRMM IINNPPUUTTSS

1111..11 LLaanndd RReeqquuiirreemmeenntt

A one-acre plot would be required for growing flowers. This one-acre would becovered by glasshouse for production of fresh cut roses under a controlledenvironment. Besides this one-acre plot, another area (about four kanal) would berequired for establishing a packaging room, a storeroom and an office block.Although land is available on lease, but considering the amount of investment

required for setting up a glasshouse it is better to own your own land. Land pricesvary between 600,000 rupees and 800,000 rupees per acre according to the locationof the land. As this project is an export-oriented project, the farm should be locatedclose to a city with an international airport. For this pre-feasibility study, we estimatethe cost of 1 acre land to be 800,000 rupees.





TTaabbllee 1111--11 LLaanndd CCoosstt

Description Area Total cost (in Rs)

Green house Farm 1 Acre 800,000

Packaging & storage shed 17,500 Sq ft. 321,395

Office block 1,000 Sq ft 18,365

Total Cost 1,139,760

1111..22 BBuuiillddiinngg

Building is required for housing the office block, packaging area, and storeroom.The office block would consist of two rooms and a reception.

TTaabbllee 1111--22 CCoonnssttrruuccttiioonn CCoosstt

Description Area Const. cost (in Rs) Total cost (in Rs)

Packaging and Storage Shed

Building (sq. ft.) 17,500 350 6,125,000

Office Block

Building (sq. ft.) 1,000 850 850,000

Total Infrastructure 6,975,000

1111..33 RRoossee PPllaannttss

A total of 18,000 rose plants would be planted in one acre. This would include threedifferent varieties. As red color rose has the highest demand around the world, 50%of the plants would be Cardinal Rose. Pink Perfume and Perfect Moment would bethe other two varieties with 25% plants each. Rose plants will be taken from localnurseries.

1111..44 GGrreeeennhhoouussee

This is the most important input of this project. There are two options in this respect.First is to install an imported pre-fabricated glasshouse. Although, this is the bestoption, but the cost involved is so high that it puts the project beyond the reach of most of the potentially interested investors in Pakistan. Therefore, a second option ispresented in this report. This second option is to fabricate the glasshouse in Pakistanusing as many local components as possible. Although, it would not be as accurate

an apparatus as the imported one, yet it will conform to international qualitystandards and would give the required quality in production.

Major components of a glasshouse are:

GI (Galvanized Iron) Pipes (grouting with PCC) - Load bearing columns Truss (mild steel) Re-enforcement Cage - 3mm Steel Strip Fiber Glass





Cooling Pads Propellers/Extruders Water Storage Tank Water Circulation Pipes Water Pump

Cooling Tower Ammonia Chilling units CO2 generators

There are three basic types of a greenhouse. These are:

1) Lean-to2) Detached3) Ridge and furrow (gutter connected)

In this report, it is recommended to use a glass house of length =54 ′-6′′, width=22′ &

Height=15′. It is selected because of its easy mechanics to build and operate.

Table 11-3 Size of Glass

Description Qty Rate

Total

Cost

(Rs.)

P/F of Size Of Glass House

Length =54′-6′′

Width =22′

Height=15′

1 2,575,000 2,575,000

Tube well (2HP, 3.5 dia) 1 100,000 100,000

Cost of Civil Works 280,000

Generator Set (5 KVA) 1 65,000 65,000

Total 3,020,000

1111..55 SSpprraayy MMaacchhiinneess

Spray machine is required for the spraying of pesticides on rose plants inside theglasshouse. One such machine is sufficient for a one-acre farm. Good quality spraymachine costs around 30,000 rupees.

1111..66 FFaarrmm FFiixxttuurreess aanndd TToooollss

Basic tools would include equipment for pruning, cutting, cleaning, and thornremoving. Besides these, certain other tools and fixtures would be required likeplastic water tubs for washing the flowers, fans for drying them, tables for spreadingthe flowers for drying, and some testing and measuring instruments. All thesefixtures and tools would be purchased locally and their total cost should not exceedRs. 150,000. PPeessttiicciiddee,, WWeeeeddiicciiddee,, && AAnnttii--tteerrmmiittee SSpprraayyss

Three different kinds of sprays are required to keep plants inside the glasshousehealthy and in prime condition. Pesticide sprays are important to save the flowerplants from any attack from pests. Different kinds of pesticides are sprayed for





different pests. On an average, one spray costs 900 rupees and four sprays arerequired every month. Total cost of pesticide sprays is 3,600 rupees per month.

Weedicide spray is important to stop the growth of unwanted shrubs and plants.These unwanted shrubs and plants hamper the normal growth of rose plants byunduly consuming the energy of the soil. On average, one spray of Weedicide costs

950 rupees/spray and at least two sprays are required every month.

Third important spray is the anti-termite spray. This is required to keep the plantsfree from termite attacks as termite attack can kill a plant in a few weeks time.

TTaabbllee 1111--44 PPeessttiicciiddee,, WWeeeeddiicciiddee,, && AAnnttii--tteerrmmiittee SSpprraayyss

Glass houseOne Spray

Cost

Total Spray

per Year

Total cost

(Rs.)

Pesticide requirement per Year 900 48 43,200

Weedicide requirement per spray 950 24 22,800

Termite spray requirement per spray 900 12 10,800Total 76,800

1111..88 FFeerrttiilliizzeerrss

Fertilizers are important to keep the soil nourishment up to the required level.Proper nourishment ensures healthy and strong plants. Four kinds of fertilizers areused in this project. Flower plants require DAP, potash, and ammonium nitratefertilizers for proper yield. Sometimes one or two bags of urea are also required. 4bags of DAP are required every quarter at Rs 3,025/bag. 3 bags of potash arerequired every quarter at Rs 700/bag, and 4 bags of ammonium nitrate are requiredevery quarter at Rs 700/bag.But for this feasibility we are using the combination of

NPK4 which cost 900/bag and 2 bags per month per acre are required.

TTaabbllee 1111--55 FFeerrttiilliizzeerrss RReeqquuiirreedd

Material Per Bag Cost Total Bags

Required

Amount (Rs.)

NPK 900 24 21,600

1111..99 HHuummaann RReessoouurrccee RReeqquuiirreemmeennttss

Project manager will be responsible for all the activities of the farm, whereas, thefield manager will be responsible for the management of the glasshouse only.

TTaabbllee 1111--66 HHuummaann RReessoouurrccee

Employees No Per month

salary

Total Salary

(Rs.)

Farm Manager 1 30,000 360,000

4 NPK is a combination of Nitrogen, Potassium and phosphors





Marketing & Export Manager 1 50,000 600,000

Export officer 1 25,000 300,000

Supervisor 1 15,000 180,000

Skilled field workers 2 7,000 168,000

Accounts Officer 1 15,000 180,000

Helpers (packaging) 2 7,500 180,000

Driver 1 7,000 84,000

Electrician 1 10,000 120,000

Security Guards 2 8,000 192,000

Total 13 197,000 2,364,000

1111..1100 VVeehhiicclleess

An air-conditioned Toyota Hiace van would be required for transportation of packedflowers from the farm to the airport. Besides this, the van will also be used for otherchores. A second hand Toyota Hiace would cost approximately 1.24 million rupees,including registration and insurance. One, second-hand small tractor will also bebought for the project. It would cost approximately 300,000 rupees.

1122 OOUUTTPPUUTT

The production of rose flowers has seasonal variation. The purpose of putting up agreenhouse, with controlled environment, is to obtain constant production over theperiod of 12 months. This is important because otherwise with seasonal production itis not possible to access European markets, the prime target market of this project.

The total number of plants in this project is 18,000. These 18,000 plants are of three

different varieties. Each variety has different output. On average, yield of one plantis approximately 30 flowers for the first year and 45 flowers from second year andon wards. Therefore, total number of rose stems available for sale is 540,000 for thefirst year. Out of these, approximately 50% would be 'A' quality stems that will beexported to Europe. 30% of the output will be 'B' quality that will be exported toMiddle East or Far East markets. Remaining output would be sold in local market.Capacity utilization is assumed to be 80% for the first year and 90% from secondyear onwards.

In European market, two different prices prevail. One is if flowers are sold at theauction house and the other is if sold directly to any wholesaler. Selling directly towholesalers fetches better price. This is so because at the auction house, the quantity

sold is very large and the buyers have to pay commission to the auction house.Selling directly to the wholesaler helps him save all that cost and some of the benefitis passed to the supplier. This project envisages selling directly to the wholesaler. Inthe Middle Eastern market, auction house option is not available and thereforewholesalers are the only buyers.

On average the European buyers give approximately Rs. 20-22 per stem. In MiddleEastern market, average export price is around Rs. 15. While in Pakistan, a major





seasonal variation has been noticed in flower prices. Approximately 4% would bededucted from the export price of 'A' quality and 'B' quality flower stems. Thisdeducted amount would be the freight cost.

1133 RREEGGUULLAATTIIOONNSS

There are no specific government regulations that affect this project negatively.Rather the government is encouraging export oriented projects and is trying tofacilitate this process as much as possible. As this proposed project would be the firstof its kind in Pakistan, it will lead the way in getting even more favorablegovernment regulations, specifically related to this type of business.

1144 KKEEYY SSUUCCCCEESSSS FFAACCTTOORRSS

There are a few factors, which would make this project a successful businessventure. They are:

Growing demand of fresh cut roses in international market. First proper greenhouse equipped fresh cut rose farm in Pakistan. Ample experience of cut flower cultivation in Pakistan. The countries presently supplying cut flowers to international markets are

moving to high tech industry, which is leaving a gap in supply demand situation. Easy access to European and Middle Eastern markets due to regular air flights to

these destinations from Pakistan.

1155 TTHHRREEAATTSS

As it is for any project, this project would also face certain threats. A serious threatis the destruction of cultivated flowers due to a number of reasons like pest attack,

unforeseen change in temperature, and any mechanical or structural problem in thegreenhouse.

Another threat is fall in international demand and consequent fall in price. Althoughthis is a distant threat yet, it cannot be ignored.






1166 FFIINNAANNCCIIAALL AANNAALLYYSSIISS

1166..11 PPrroo j jeecctt EEccoonnoommiieess

Capital Investment Rs. in actuals

Land 1,139,760

Building/Infrastructure 6,975,000

Furniture & fixtures 398,500

Machinary & Equipment 3,344,000

Office vehicles 1,545,000

Office equipment 122,500

Pre-operating costs 1,109,177

Total Capital Costs 14,633,937

Working Capital Rs. in actuals

Equipment spare part inventory 8,292

155,165

L -

750,000 913,456

T 15,547,394

Rs. in actuals

D 7,773,697

7,773,697

Project

21%

N 1,721,013

4.16

Raw material inventory

and Tillage

CashTotal Working Capital

otal Investment

Initial Financing

ebt 50%

Equity 50%

Equity

IRR 29%

et Present Value (Rs.) 4,149,778

Payback Period (yrs) 3.96




1177 KKeeyy AAssssuummppttiioonnss

TTaabbllee 1177--11:: PPrroodduuccttiioonn AAssssuummppttiioonnss

TTaabbllee 1177--22:: SSaallee PPrriiccee AAssssuummppttiioonn

Description Price in Rs/Flower

Sale price for export (A grade) 20.00

Sale price for export (B grade) 15.00

Sale Price for local market (C grade) 5.00

TTaabbllee 1177--33:: EEccoonnoommyy RReellaatteedd AAssssuummppttiioonn

Description Total Plants Prod./Plant Amount / Other

Production capacity (1st Year) 18,000 30 540,000

Sale price growth rate (Flowers & Petals) 5%

Production capacity utilization 80%

Production capacity utilization growth rate 10%

Maximum capacity utilization 95%

Mortality rate 5%

Production (A grade) 50%

Production (B grade) 30%

Production (C grade) 20%

Description %

Cost of goods sold growth rate 3.0%

Traveling expense 3.0% % of administration expense

Communication expense 2.0% % of administration expense

Office vehicles running expense 3.0% % of vehicles cost

Promotional expense 1.0% % of revenue

Professional fees (legal, audit, consultants, etc.) 1.0% % of revenue





TTaabbllee 1177--44:: DDeepprreecciiaattiioonn AAssssuummppttiioonn

Depreciation Method Straight Line Method

Building depreciation rate 5%

Machinery & Equipment depreciation rate 10%

Office Equipment and Vehicle depreciation rate 10%Furniture & Fixtures depreciation rate 10%





1188 AANNNNEEXXUURREE

TTaabbllee 1188--11:: RRaaww MMaatteerriiaall && MMaacchhiinneerryy SSuupppplliieerr

Raw Material Suppliers Machinery Suppliers

UUnniivveerrssiittyy oof f AAggrriiccuullttuurree,, FFaaiissaallaabbaadd

The Institute of Horticulture SciencesFaisalabadTel: 041-9201085Web: http://www.uaf.edu.pk

Saleem Enterprises

(Contractor, General Order Supplier,Agricultural Green house, Glass House,Screen house)P-39, Scheme # 212, Part –II,Dijkot Road, Faisalabad, PakistanTel: 041-2640142, 2416442Fax: 041-2634042Mobile: 0301-8666542 (Saleem Abbas)Email: [email protected]

MMuuhhaammmmaadd SSiiddddiiqq && SSoonnss

P-167, New Grain Market, Dijkot RoadFaisalabad, PakistanTel: 041-2612232, 2634943Fax: 041-2614175Mobile: 0301-8656840 (Usman Azhar)

DADEX (ZarKaasht)71, Commercial Area, Gulistan Colony,Faisalabad.Tel: (92-41) 8861981, 8787944Fax: (92-41) 8787944Email: [email protected]

Rehman Corporation

45-P Ravi Garden Satyina Road,Faisalabad, PakistanTel: 41-8777527

Cell: 03216677827Fax: 041-8777327Email: [email protected]: www.rehmancorp.webs.com


http://www.uaf.edu.pk/

mailto:[email protected]


http://rehmancorp.webs.com/

http://rehmancorp.webs.com/



http://www.uaf.edu.pk/




TTaabbllee 1188--22:: CCoonnssuullttaannttss

Consultant

DDrr.. RRaannaa AAssllaamm KKhhaann

Project Director, The Institute of Horticulture SciencesUniversity of AgricultureFaisalabad, PakistanTel: 041-9201085

MMrr.. SSaalleeeemm AAbbbbaass

P-39, Scheme # 212, Part –II,Dijkot Road, Faisalabad, PakistanTel: 041-2640142, 2416442Fax: 041-2634042Mobile: 0301-8666542 (Saleem Abbas)Email: [email protected]



smeda green house farm (export of fresh cut roses)

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