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Model Bankable Projects

   
   
 

Animal Husbandry

 
Dairy Farming
 
 

1. Introduction
Dairying is an important source of subsidiary income to small/marginal farmers and agricultural labourers. The manure from animals provides a good source of organic matter for improving soil fertility and crop yields. The gobar gas from the dung is used as fuel for domestic purposes as also for running engines for drawing water from well. The surplus fodder and agricultural by-products are gainfully utilised for feeding the animals. Almost all draught power for farm operations and transportation is supplied by bullocks. Since agriculture is mostly seasonal, there is a possibility of finding employment throughout the year for many persons through dairy farming. Thus, dairy also provides employment throughout the year. The main beneficiaries of dairy programmes are small/marginal farmers and landless labourers.


2. Scope for Dairy Farming and its National Importance.
The total milk production in the country for the year 2008-09 was estimated at 108.5 million metric tonnes and the demand is expected to be 180 million tonnes by 2020. To achieve this demand annual growth rate in milk production has to be increased from the present 2.5 % to 5% .  Thus, there is a tremendous scope/potential for increasing the milk production through profitable dairy farming.


3.Financial Assistance Available from Banks/NABARD for Dairy Farming.


3.1. Loan from banks with refinance facility from NABARD is available for starting dairy farming.

For obtaining bank loan, the farmers should apply to the nearest branch of a commercial bank, regional rural bank or co-operative bank in their area in the prescribed application form which is available in the branches of financing banks.


3.2.  For dairy schemes with very large outlays, detailed project reports will have to be prepared.

The items of finance would include capital asset items such as purchase of milch animals, construction of sheds, purchase of equipments etc. The feeding cost during the initial period of one/two months is capitalised and given as term loan. Cost towards land development, fencing, digging of well, commissioning of diesel engine/pumpset, electricity connections, essential servants' quarters, godown, transport vehicle, milk processing facilities etc. can be considered for loan. Cost of land is not considered for loan.


4.Scheme Formulation for bank loan


4.1 A Scheme can be prepared by a beneficiary after consulting local technical persons of State Animal Husbandry Department, DRDA, Dairy Co-operative Society / Union / Federation / commercial dairy farmers. If possible, the beneficiaries should also visit progressive dairy farms and government / military / agricultural university dairy farms in the vicinity and discuss the profitability of dairy farming. A good practical training and experience in dairy farming will be highly desirable. The dairy co-operative societies, if existing in the villages would provide all supporting facilities particularly for marketing of fluid milk. Nearness of dairy farm to such a society, veterinary aid centre, artificial insemination centre should be ensured. There is a good demand for milk, if the dairy farm is located near urban centre.


4.2 The scheme should include information on land, livestock markets, availability of water, feeds, fodder, veterinary aid, breeding facilities, marketing aspects, training facilities, experience of the farmer and the type of assistance available from State Government, dairy society/union/federation.


4.3 The scheme should also include information on the number and types of animals to be purchased, their breed, production performance, cost and other relevant input and output costs with their description. Based on this, the total cost of the project, margin money to be provided by the beneficiary, requirement of bank loan, estimated annual expenditure, income, profit and loss statement, repayment period, etc. can be worked out and shown in the Project report. A format developed for formulation of project report for a dairy farm is given as Annexure I.


5.Scrutiny of Schemes by banks.
The scheme so formulated should be submitted to the nearest branch of the bank. The bank's officer can assist in preparation of the scheme or filling in the prescribed application form. The bank will then examine the scheme for its technical feasibility and economic viability.

 

(A) Technical Feasibility - this would briefly include -
1. Nearness of the selected area to veterinary, breeding and milk collection centre and the financing bank's branch.
2. Availability of good quality animals in nearby livestock market
3. Availability of training facilities.
4.Availability of good grazing ground/lands.
5.Availability of Green/dry fodder, concentrate feed, medicines etc.
6.Availability of veterinary aid / breeding centres and milk marketing facilities near the scheme area.


(B) Economic Viability - this would briefly include -
1. Unit Cost
2. Input cost for feed and fodder, veterinary aid, breeding of animals, insurance, labour and other overheads.
3.Output costs i.e. sale price of milk, manure, gunny bags, male/female calves, other miscellaneous items etc.
4.Income-expenditure statement and annual gross surplus.
5.Cash flow analysis.
6. Repayment schedule (i.e. repayment of principal loan amount and interest).
Other documents such as loan application form, security aspects, margin money requirements etc. are also examined. A field visit to the scheme area is undertaken for conducting a techno-economic feasibility study for appraisal of the scheme. 


6.Sanction of Bank Loan and its Disbursement.
After ensuring technical feasibility and economic viability, the scheme is sanctioned by the bank. The loan is disbursed in kind in 2 to 3 stages against creation of specific assets such as construction of sheds, purchase of equipments and machinery, purchase of animals and recurring cost on purchase of feeds/fodders for the initial period of one/two months. The end use of the funds is verified and constant follow-up is done by the bank.


7.Lending terms - General


7.1Outlay
Outlay of the project depends on the local conditions, unit size and the components included in the project. Prevailing market prices may be considered to arrive at the outlay.

 

7.2 Margin Money:
Margin depends on the category of the borrowers and range from 5 to 25%.

 

7.3 Interest Rate for ultimate borrower :
Banks are free to decide the rates of interest within the overall guidelines. However, for working out the financial viability and bankability of the model projects we have assumed the rate of interest as 12 % p.a.

 

7.4 Security
Security will be as per NABARD/RBI guidelines issued from time to time.

 

7.5 Repayment period of loan
Repayment period depends upon the gross surplus in the scheme.  The loan will be repaid in suitable monthly/quarterly instalments usually within a period of five to seven years.

 

7.6Insurance
The animals and capital assets may be insured annually or on long term master policy, where ever it is applicable.
A model project with 10 buffaloes is given as Annexure II. This is indicative and the applicable input and output costs as also the parameters observed at the field level may be incorporated.


Annexure I
 
FORMAT FOR PROJECT REPORT PREPARATION - DAIRY FARM


1. GENERAL
i) Nature and objectives of the proposed scheme
ii) Details of proposed investments
iii) Specification of the project area
iv) Name of the financing bank branch
v) Status of beneficiary:
(individual/Partnership/Company/Corporation/Co-operative Society / Others)
vi) Details of borrowers profile
(a) Capability
(b) Experience
(c) Financial Soundness
(d) Technical/Other special Qualifications
(e) Technical/Managerial Staff and adequacy thereof


2. TECHNICAL ASPECTS :
a) Location, Land and Land Development :
i) Location details of the project
ii) Total Area of land and its cost
iii) Site map
iv) Particulars of land development, fencing, gates, etc.


b) Civil Structures :
Detailed cost estimates along with measurements of various civil structures
- Sheds
- Store room
- Milk room
- Quarters, etc.


c) Equipment/Plant and Machinery :

i) Chaff cutter
ii) Silo pit
iii) Milking machine
iv) Feed grinder and mixer
v) Milking pails/milk cans
vi) Biogas plant
vii) Bulk coolers
viii)Equipment for manufacture of products
ix) Truck/van (price quotations for the above equipments)


d) Housing :
i) Type of housing
ii) Area requirement
- Adults
- Heifers (1-3 years)
- Calves (less than 1 year)


e) Animals :
i) Proposed species
ii) Proposed breed
iii) Source of purchase
iv) Place of purchase
v) Distance (km.)
vi) Cost of animal (Rs.)


f) Production parameters :
i) Order of lactation
ii) Milk yield (ltrs. per day)
iii) Lactation days
iv) Dry days
v) Conception rate
vi) Mortality(%)
- Adults
- Young stock


g) Herd projection (with all assumptions) :


h) Feeding :
i) Source of fodder and feed - Green fodder
- Dry fodder
- Concentrates
ii) Fodder crop rotations
- Kharif
- Rabi
- Summer
iii) Fodder cultivation expenses
iv) Requirement and costs :


Quantity required (kg./day)

 

 

Cost(Rs. / Kg)

Lactation

Dry Period

Young Stock

Green Fodder

 

 

 

 

Dry Fodder

 

 

 

 

Concentrates

 

 

 

 

 

i) Breeding Facilities :
i) Source :
ii) Location :
iii) Distance (km.) :
iv) Availability of semen :
v) Availability of staff :
vi) Expenditure per animal/year


j) Veterinary Aid :
i) Source
ii) Location
iii) Distance (km.)
iv) Availability of labour and other staff
v) Types of facilities available
vi) If own arrangements are made -
a) Employed a veterinary doctor/stockman/consultant
b) Periodicity of visit
c) Amount paid/visit (Rs.)
vii)Expenditure per animal per year (Rs.)


k) Electricity :
i) Source
ii) Approval from SEB
iii) Connected load
iv) Problems of power failure
v) Arrangements for generator


l) Water :
i) Source
ii) Quality of water
iii) Availability of sufficient quantity for drinking, cleaning and fodder production
iv) If investment has to be made, type of structure, design and cost


m) Marketing of milk :
i) Source of sales
ii) Place of disposal
iii) Distance (km.)
iv) Price realised - (Rs. per liter of milk)
v) Basis of payment
vi) Periodicity of payment


n) Marketing of other products :
i) Animal - age
- place of sale
- price expected
ii) Manure - Qty./animal
Price/unit (Rs.)
iii) Empty gunny bags
- Number
- Cost/bag (Rs.)


o) Beneficiary's experience :


p) Comments on technical feasibility :


q) Government restrictions, if any :

 

3. FINANCIAL ASPECTS :


i) Project Cost

 

Sr. No.

Item

Physical Unit and Specification

Cost  (Rs.)

 

Capital Costs

 

 

 

 

 

 

 

 

 

 

 

Total Capital Costs(A)

 

 

 

Recurring Costs

 

 

 

 

 

 

 

 

 

 

 

Total Recurring Costs (B)

 

 

 

Total Project Cost (A+B)

 

 

 

ii) Down payment/margin/subsidy (Indicate source & extent of subsidy):


iii) Financial viability (comment on the cash flow projection on a farm model/unit and enclose the same.)
Particulars :
a) Internal Rate of Return (IRR) :
b) Benefit Cost Ratio (BCR) :
c) Net Present Worth (NPW) :


iv) Financial position of the borrowers (to be furnished in case of corporate bodies/partnership firms)
a) Profitability Ratio :
i) GP Ratio
ii) NP Ratio
b) Debt Equity Ratio :
c) Whether Income Tax & other tax obligations are paid upto date :
d) Whether audit is upto date (enclose copies of audited financial statements for the last three years)


v) Lending Terms :
i) Rate of Interest :
ii) Grace Period :
iii) Repayment Period :
iv) Nature of Security :
v) Availability of Government guarantee wherever necessary :


4. INFRASTRUCTURAL FACILITIES :
a) Availability of technical staff with bank/implementing authority for monitoring
b) Details of -
i) technical guidance
ii) training facilities
iii) Govt. support /extension support
c) Tie-up arrangements with marketing agencies for loan recovery
d) Insurance -
- Type of policy
- Periodicity
- Rate of premium
e) Whether any subsidy is available, if so amount per unit
f) Arrangements for supply of green fodder and cattle feed

 

Model Unit Cost and Economics of a 10 Buffalo Unit

 
A. Project Cost   Rs.
Cost of milch animals including transportation cost

:

330000

Cost of construction of shed for adult animals

:

60000

Cost of construction of shed for calves

:

20000

Cost of chaff cutter

:

50000

Cost of equipment

:

10000

Capital cost

:

470000

Cost of concentrate feed for first batch for first month

:

4800

Cost of fodder cultivation in 2 acres

:

9000

Insurance of first batch of milch animals

:

16000

Recurring cost

:

29800

Total cost

:

499800

or say

:

500000

Margin (15%)

:

75000

Bank Loan

:

425000

 

B. Techno economic parameters

   
Type of Animal

:

Graded Murrah Buffalo

No. of Animals

:

10

Cost of Animal (Rs./animal)

:

32000

Transportation Cost/Animal

:

1000

Average Milk Yield (litre/day)

:

8

Floor space (sqft) per adult animal

:

60

Floor space (sqft) per calf

:

20

Cost of construction per sqft (Rs.)

:

100

Cost of chaff cutter (power operated) (Rs.)

:

50000

Cost of equipment per animal (Rs.)

:

1000

Cost of fodder cultivation (Rs./acre/season)

:

4500

Insurance premium (% per annum)

:

5

Veterinary aid/animal/ year (Rs.)

:

250

Cost of concentrate feed (Rs./kg)

:

8

Cost of dry fodder (Rs./kg)

:

1.50

No. of labourers

:

1

Salary of labourer per month (Rs.)

:

3000

Cost of electricity and water/animal/year (Rs.)

:

150

Margin (%)

:

15

Rate of interest (%)

:

12

Repayment period (years)

:

7

Selling price of milk/litre (Rs./kg)

:

16.50

Sale price of gunny bags (Rs. per bag)

:

10

Lactation days

:

270

Dry days

:

150

 
  • Freshly calved animals in 1st or 2nd lactation are purchased in two batches of five animals each at an interval of 5 to 6 months.
  • Cost of rearing calves not considered as it will be nullified by their sale value or retention value.
  • Fodder cultivation considered in two acres and working capital for one crop / season considered. Two crops considered per year.
Manure utilised for fodder cultivation.
 

Feeding Schedule Per Day

 

 

Lactation

Dry

Price (Rs.)

Qty. (kg)

Cost Per Day 

(Rs.)

Qty. (kg)

Cost Per Day

(Rs.)

Concentrate Feed

8.00

4

32.00

1

8.00

Green Fodder

Home grown

25

0.00

20

0.00

Dry Fodder

1.50

4

6.00

5

7.50

Total

 

 

38.00

 

15.50

 

Lactation Chart

 

Years

1

2

3

4

5

6

7

Lactation Days

2100

2425

2425

2425

2200

2425

2425

Dry Days

625

1225

1225

1425

1450

1225

1075

Gunny Bags available for sale

171

208

208

196

195

200

195

 
C.  Economics
 

Particulars

Years

1

2

3

4

5

6

7

Sale of Milk

277200

320100

320100

293700

290400

320100

320100

Sale of Gunny bags

1710

2080

2080

1960

1950

2000

1950

Total

278910

322180

322180

295660

292350

322100

322050

Cost of feeding during lactation

79800

92150

92150

84550

83600

92150

92150

Cost of feeding during dry period

9690

18990

18990

22090

22480

18990

16660

Cost of fodder cultivation

18000

18000

18000

18000

18000

18000

18000

Veterinary aid and breeding charges

2500

2500

2500

2500

2500

2500

2500

Labour charges

36000

36000

36000

36000

36000

36000

36000

Electricity and misc. charges

750

1500

1500

1500

1500

1500

1500

Insurance charges

16000

16000

16000

16000

16000

16000

16000

Total

162740

185140

185140

180640

180080

185140

182810

Surplus

145970

137040

137040

115020

112270

136960

139240

 

D. Calculation of BCR and IRR

 

 

1

2

3

4

5

6

7

Capital Costs

470000

 

 

 

 

 

 

Recurring Cost

162740

185140

185140

180640

180080

185140

182810

Total Costs

632740

185140

185140

180640

180080

185140

182810

Benefit

278910

322180

322180

295660

292350

322100

322050

Net Benefit

-353830

137040

137040

115020

112270

136960

139240

 

PW Costs @ 15%

1153513

 

 

 

 

 

 

PW Benefits @ 15%

1272701

 

 

 

 

 

 

NPW

119187.8

 

 

 

 

 

 

B.C. Ratio

1.10 : 1

 

 

 

 

 

 

I.R.R. (%)

28.66

 

 

 

 

 

 

 

E. Repayment schedule

 

Year

Loan Outstanding

Gross Surplus

Interest

Principal

Total Repayment

Surplus

1

425000

145970

51000

51200

102200

43770

2

373800

137040

44856

51044

95900

41140

3

322756

137040

38731

57169

95900

41140

4

265587

115020

31870

48630

80500

34520

5

216957

112270

26035

52565

78600

33670

6

164392

136960

19727

76173

95900

41060

7

88219

139240

10586

88219

98805

40435

 
 
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