Feasibility study

(MATS CNG filling station)

Completed by
Students of MBA 3rd semester

IMS
(UNIVERSITY OF BALOCHISTAN)

SHUMAIRA RAHEEM M-47

ZAHRA ISLAM M-67

MADIHA ARIF M-45

NADIA SALEEM M-58

HAJIRA DAWOOD M-44

MUNAZZA BATOOL M-73

1
INTRODUCTION

2
 Introduction

Natural gas is a natural resource of energy, commonly used in residential, commercial and industrial
sector. It is one of the most valuable natural resources abundantly available in our country.
Compressed Natural Gas (CNG) is produced when the natural gas is compressed into cylinders to be
used as a fuel in the automobiles.

CNG-powered vehicles uses natural gas the same fuel that is used by stoves, water heaters and
clothes dryersstored in cylinders at pressures of 2,000 to 3,500 pounds per square inch

CNG has been used as an automobile fuel since 1940, and over the years, the technology has been
modified and refined. In the recent years, the usage if CNG as an automobile fuel has significantly
increased because of its low cost and environment friendly nature.

The people of Pakistan have been using the petroleum as fuel in their automobiles, thus spending a
large amount of foreign exchange on import of petroleum products. Because there are abandoned
supplies of natural gas in Pakistan, using natural gas to replace gasoline helps reduce our countrys
dependency on foreign petroleum.

In Pakistan, hydrocarbon development institute of Pakistan (HDIP) first established the use of CNG as
an automobile fuel in 1982. the market of this type of fuel, which is commonly available at much
cheaper price, is increasing because of continuous increase in petroleum prices. At present, about 270
CNG station are operational in different parts of the country to cater to the needs of the consumers.

3
 Market Analysis

One of the elements of Government petroleum policy is the commercial application of CNG technology
.It is reflected in the efforts made by the government for the installation of CNG station and converting
vehicles on CNG fueling system .Due to the efforts made by the Government and comparatively low
prices of gas, more then 220,000 vehicles have already been converted to operate on Compressed Natural
Gas (CNG)fueling system all over Pakistan .there are more then ,270 CNG station operating in the
country and there is a need to set up more CNG station to meet the growing demand for it. As a part of its
policy government has made great efforts to promote the use of CNG in Quetta as well.

Introduction and promotion of newly developed gas kits for

rickshaw in Quetta city

TaraqeeTrust of Quetta has undertaken to reduce green house emission leading to global warning by
introducing 400 CNG gas kits in two stroke rickshaws in Quetta city through the provision of credit to the
rickshaws owner. The key stakeholders in this project are Rickshaw Drivers Association, Pakistan
Hydrocarbon Institute, Canadian International Development Agency and Balochistan EPA.

4
 Market supply

Existing Supply

At present, only one CNG station is operating in Quetta and that is situated at Qambrani road near
UoB.That single CNG station is quite alarming to meet the growing demand of CNG.There is great
potential to increase the number of CNG station here.

The capacity of the above mentioned CNG station is 378 to 424 cubic meter/hour

That is equivalent to about 4500 to 5100 cubic meter/day i.e. say 4800 in average, (12 hour working
day)

The capacity of a mediocre CNG vehicles is 12 .9 cubic meter per cylinder.

The capacity of the existing CNG station is capable of refueling 30 to 32 vehicles per hour (filling 1
cylinder).

And therefore can fill 600 to 640 cars per day.

5
 Market Demand

There are about more then 1000 vehicles, which have been converted to CNG fueling system in Quetta,
and a large number of vehicles are being converted. It has been projected that the total number of CNG
fuel vehicles will be increased up to 4000 by the end of next five years.

Due to the increasing prices of petroleum products, the trend of converting cars to CNG fueling system
has been on a raise. The government of Pakistan has taken certain concrete steps in order to promote the
use of natural gas as a fuel substitute in the automobiles. There are kits available in the market through
which a petrol car can easily be converted into CNG fueling system. However, there were a large number
of people who were reluctant to convert their vehicles from petrol to gas due to safety concerns. Recently,
many car manufactures have started manufacturing the cars with built-in CNG fueling system, e.g.,
Suzuki car manufacturing company. This change has led to enhancing the confidence of the general
public regarding the the safety concerns, and now, more people are towards purchasing these factory
fitted CNG fueling system cars.

Considering the market trend and number of vehicles being converted into CNG fueling system there is
exist an opportunity for the new entrants to earn profits fueling by setting up new filling station to meet
the growing demand.

There are about more then 1000 vehicles in Quetta, operating with CNG fuel system,

The average requirement of each car is about 12.9m per day

6
 1000*12.9=12900 cubic meter per day

Demand Supply Gap

As mentioned earlier,

The demand for CNG fuel=12900 cubic meter/day

And

The existing supply for CNG fuel=4800 cubic meter/day

Demand supply Gap = 12900-4800

=8100 cubic meter/day

Its quite clear that there is an extra demand of about 8100 cubic meter /day on average. It is because of
this demand supply gap that there always is a great rush at the sole supplier of the CNG fuel is not able to
fulfill the demand of all vehicles.

But this is not the end, there is an increasing trend of CNG fueling system, the demand for this type of
fuel will be increased by 300% within next five years and hence there a great opportunity for the new
entrants to earn profits by setting up new CNG filling station t meet the growing demand.

7
 Future Demand

The main factors for the rise in the demand for CNG fuel are;

1) Increase in the prices of petroleum

2) Government support and policies
3) Promotion of vehicles with built in CNG fueling system

Based on the above criteria the Demand projecti0ns are given in the following table:

Demand Projections for vehicles on CNG (in Quetta)

Year Number of Vehicles on CNG Percentage Increase

1 1000
2 1600 60%
3 2300 70%
4 3100 80%
5 4000 90%

The above-mentioned table indicates that the demand for CNG fuel is fast increasing .The industry is
growing and there is opportunity for the new entrants to setup new CNG station to meet the growing
demand.

8
 CNG policy

The government of Pakistan has offered number of incentives for encouraging the use of
CNG in the country some of these are summarized below:

Strong Government commitment to promote usage of CNG

Liberal policy of providing for CNG retailing
Deregulated market price of CNG (for the consumers)
Priority of providing natural gas connection to CNG station
Rexlation of import duty and sales tax on import of machinery and equipment ,CNG kits
cylinders

This has provided a boost to the industry, and so far, more then 220,000 vehicles have been converted to
CNG and 270 CNG stations are operational. Another 320 stations are under construction in different parts
of the country .According to inter national Associations for Natural Gas Vehicles (IANGV) statistics
Pakistan is ranked third in the CNG using countries after Argentina and Italy

9
 Jadoon asks HDIP to promote CNG plants manufacturing technology

ISLAMABAD, November 12 (Online): Federal Minister for Petroleum and Natural

Resources Amanullah khan Jadoon has asked the Hydrocarbon Development Institute
of Pakistan (HDIP0to emphasis upon its research and developm3nt activities for the
promotion of oil and gas sectors at an accelerated pace and expand and promote
Compressed Natural GAS (CNG) planets and kits manufacturing technology aimed at
saving foreign exchange of the country.

Addressing the 65th HDIP Board of Governors meeting here on Thursday, the minister said that the
government was according top priority for the speedy promotion of the oil and gas sector in order to put
the country on the road to self reliance in this vital field of economy.

He said that it was the prime responsibility of oil and gas research and development institute of the
country to equip them with the modern and sophisticated technologies pre-requite for the successful
exploration and boosting the petroleum industry.

As a result of far-reaching steps taken by the government to deregulate the petroleum sector and
providing attractive package of incentives to the investors, it witnessed the petroleum industry.

He said that the government would take further steps to provide more incentives and facilities in the oil
and gas to attract investment.

10
TECHNICAL ANALYSIS

11
All the prerequisites for successful commissioning of the project is available in the
city:
In this section it will be clarified and justified that all the prerequisites required for the successful
commissioning of the project regarding Raw material, Infrastructure, Land, Building, Equipment,
Personnel, etc are available in the city.

Material inputs:

There are two main inputs required for CNG filling station, one is natural gas and other is electricity. We
are required to obtain both in the connections from the relevant authorities i.e. WAPDA and sui southern
gas company (SSGC).

According too the governments policy CNG filling stations will be given the priority of providing natural
gas connection.

CNG ranks relatively high in convenience and availability. Quettas extensive network of natural gas
pipelines can deliver the fuel directly to many sites where compressors are installed by the local utility.

Land:

The minimum land requirements for installing CNG filling station is from 6000 to 9000 square feet. It
must have at least 75 feet front opening.

In case of our project we have already acquired land for the purpose of installing CNG filling station on
lease from the 12th crop. The covered area of the land acquired is 8000 square feet, which will be having
75 square feet front opening.

An amount of 4,000,000 rupees at the rate of Rs.500 per square feet lease payment has been paid to the
12th crop.

12
Site selection:

The site selected for the filling station is opposite to the Askari park at the Airport road. it is adjacent to
the Askari petrol pump near Askari Bungalows. The covered area of the acquired land as stated earlier is
8000 square feet. The site offers an ideal location for the filling station; as it is a commercial area and the
residents of the whole city will have a very easy access to the station.

Infrastructure:

The project highly depends upon the availability of the infrastructure facilities; because the material
inputs required as mentioned earlier are, natural gas and electricity.

The site chosen for setting up the CNG Fuel station enjoys infrastructure facilities and possesses all the
pre-requisites for the smooth operation of the Project i.e. Water, Power, road etc.

13
Building:

There are certain civil works required to be carried out at the proposed location. The civil works would be
carried out on an area of 2250 square feet. The rest of the area will be floored with tuff tiles. Civil work
includes the following:

Office
Control Room
Compressor and Cascade/Cylinder Storage Room
Shed for Dispenser
Toilet/Washroom
1. Underground Gas Piping
Flooring

The total cost of construction is estimated at Rs 1.5 million. Details for the said cost are as follows:

Construction cost (Amount in Rupees)

Description Type of Covered Cost per Sq.ft. Cost(Rs.)

Construction Area(sq. ft) (Rs.)
Office with RCC 436 475 207,100
washroom
Control room RCC 144 475 68,400
Compressor & RCC 1400 475 665,000
Cylinder
storage room
Shed Canopy Lump sum 200,000
Underground _ _ - 300,000
gas piping
Flooring _ About 6,000 50 300,000
Contingencies _ _ _ 90,000
Total cost 3,630,500

14
Explosive department has laid down certain specifications for the compressor and
cascade/cylinders storage room, which are as follows:

1. Minimum one-meter distance is required between wall and Compressor.

2. Minimum distance of one meter should be kept between Compressor and
Cascade/cylinders.
3. Fire related walls (with RCC structure) must be used in the compressor and Cylinders
storage room.
4. Roof of the compressor and storage room should not be of permanent nature. Corrugated
asbestors might be used to prevent the compressor and Cylinders from heat.

15
Machinery and Equipment:

The following equipment is required for a CNG filling station:

Gas Compressor

The purpose of compressor is to compress the gas enabling it to discharge the gas for refueling. This
compressor requires an input pressure of 10 PSIG (pounds per square inch gauge) from the main gas
supply with the outlet pressure of 3,600 PSIG. With this discharge pressure, the equipment can refuel 50
vehicles per hour.

Electric control panel

Electric control panel is required to operate the gas compressor. This panel will be mounted in the control
room.

Storage cascade

Storage cascade/cylinders are used to store the natural gas.

Priority panel for Vehicle priority

During rush hours, the compressor is directly connected to the dispenser, by passing the storage
cascade/cylinders with the help of priority panel, facilitating the refueling of vehicles at a faster rate.

CNG Dispenser high flow dual hose

16
Gas is filled in to the vehicles with the help of dispenser. This dual hose dispenser is capable of handling
two vehicles at a time.

ALL the CNG filling station equipment is foreign manufactured and imported on the specific requirement
of the sponsor by the authorized agent. At present the countries that manufacture CNG filling station
equipment rate, New Zealand, Italy, Canada and England.

We have selected a Canadian origin compressor viz, Gemini Compressor H302, Jordaire Model J-H320
295-100E. This equipment is selected because of its low electricity consumption and higher outlet
pressure.

The total capacity of the selected equipment is 424m 3/hr with a total power load of 200 KW.

The equipment will be delivered within 12 to16 weeks from the receipt of purchase order and initial
payment. The details of this equipmet and accessories are available in Annexure 1.2.

17
Suppliers

The central board of revenue (CBR) has specified the list of compressors, storage cylinders
vehicle cylinders, CNG machinery & equipment and conversion kits in SRO 38(1)/98. In the
case of our project the order for the machinery will be placed to the supplier at Lahore, which
will b supplied to us from Karachi port directly to our destination.

The list of some local agents dealing in the specific equipment and machinery is given below:

Suppliers name Address Contact No.

National 90-Bank Square Market, Phone: 042-583353, 5837026
Engineers Model Town, Fax: 042-5839369
Lahore. nlenger@lhr.comsats.net.pk
Correct Xpress Suite # 14, 2nd Floor, Phone: 051-4844189
(Pvt) Ltd. Resham plaza, Fax: 051-4410872
Chandni Chowk, correct@isb.compol.com
Rawalpindi
ARM Gas P.O.Box 114 Phone: 042-6366950-51,
Ventures Rasul Building 6366948
60 Sharah-e-Quaid-e-Azam, Fax: 042-6369756, 6361142
Lahore albario@brain.net.pk
Hurricane 8 Hong Kong Plaza, Phone: 051-4840078
Compressors Satellite Town, Fax: 051-4427426
Rawalpindi. Techcentric_pk@yahoo.com
Techno men Gas H # 3B, St # 16, Phone: 051-2856996-8
Ventures (Pvt) F-8/3, Fax: 051-2856995
Ltd. Islamabhad T_gasventures@usa.net
Rix Pakistan (Pvt) 37-A, Phone: 051-5591160
Ltd. Chaklala Scheme 2, Fax: 051-5504414
Tipu Road, rix@rixpakistan.com
Rawalpindi.

18
Stores and Spares

The whole equipment required for setting up a CNG filling station is imported. Therefore, it is
required to build an inventory of necessary spare parts to meet the unforeseen circumstances
such as breakdown or any other fault in any part or equipment. For this purpose, a stock of
necessary spare parts worth $8,000, which is equivalent to 484,000 rupees will be imported
along with other equipment to maintain a minimum level of spare parts for the 1 st year of
operation.

Furniture and Fixture

Furniture and fixtures mainly include tables, chairs, sofas, fans & lights, carpe, curtains and fire
extinguishers. It is estimated that the furniture and fixture of Rs.85, 000 would be purchased.

Some office equipment is also required for the proposed project. A provision of Rs. 100,000 has
been made for acquiring the required office equipment. The details of office equipment are
annexed in Annexure______________

19
Manpower Requirement
Manpower requirement for the CNG filling station includes manager, cashier, dispenser,
operators, accountant, watchman and sweeper. There is not at all any problem to get the required
staff, with the specific requirements, from the area. The total staff strength would be 15 persons
for the two shifts. The basic salaries of the staff year one are as follows:

Human Resource Requirement

Designation No. Of Employees Basic Salary per Total salary per

for two shifts month (Rs.) year (Rs.)

Manager 1 10,000 120,000

Accountant 1 7,000 84,000

Cashier 2 4,000 96,000

Dispenser 4 2,000 96,000

Operators 2 2,500 60,000

Mechanic 1 3,000 36,000

Helper 1 2,000 24,000

Watchman 2 2,000 48,000

Sweeper 1 1,500 18,000

Total 15 582,000

The details of the Wages and Salaries for the first five years that includes increments and fringe
benefits for are given Annexure # 3.2

20
 Compression process
Natural gas is a natural resource of energy, commonly used in residential, commercial and
industrial sector. It is one of the most valuable natural resources abunbtly available in our
country. Compressed natural gas is produced when the natural gas is compressed into cylinders
to be used as a fuel in the automobiles.

The compression process of CNG at CNG station is a multi steps process, it compress the natural
gas to 3600 per square inches(PSI) from 8 PSI.

The machinery, which is used, for the compression of the natural gas is fully automatic and has
two main parts/compressor.

1. Screw compressor

2. Main compressor

The screw compressor , compress the natural gas to 75 PSI from 8 PSI. for screw compressor to
work or to start compression minimum pressure of 8 PSI is require, which is provided by the
main gas pipline by the supplies of GAS (SSGC). After the gas is compressed to 75 PSI than it is
send to radiator for cooling and than to filter for the filtering. After the filtering the compresed
gas is transfer to the main compressor.

The main compressor is consisted of four sub compressor, which compress the gas at different
PSI. the first sub compressor of the main compressor receive the compressed gas at 75 PSI form
the screw compressor it compress this 75 PSI to 220 PSI and than transfer it the next sub
compressor which compress this 220 PSI to 480 PSI, this than transfer to the next sub
compressor which compress it to 1200 PSI, which is transfer to next compressor which compress
it to 3600 PSI.

This compressed gas of 3600 PSI is than send to radiator for cooling and than to filter for
filtering before storage. After the cooling and filtering the compressed gas is transfer to the
storage cylinders from where is filled in the automobiles. Automobiles are filled at 2900 PSI
when the presser of stored gas decline and reach to 2900 PSI the machine or compressor starts
automatically again and the entire process is repeated again and when presser reaches to 3600
PSI than it stop automatically again.

21
ENVIRONMENTAL/ECOLOGICAL
ANALYSIS

22
 ECOLOGICAL/ENVIRONMENTAL ANALYSIS
CNG is not hazardous to the environment as is the case with the traditional petroleum fuel. It is
highly of environment friendly nature. This is one of the main reason that its demand is
continuously increasing and the Government is supporting it.

Due to the environment friendly and low cost of natural gas, Hydrocarbon Development Institute
of Pakistan (HDIP) has recognized the need and necessity to promote the use of CNG as a fuel in
automobiles.

Quetta is one the most polluted cities of the country, it is almost because of the unburned carbon
practices in the atomosphere that is discharge as a result of the combustion process of the
petroleum products inside the vehicles. CNG is highly composed of methane gas (i-e 90%)
which is a non flammable gas and thus does not discharge unburned carbon in the atmosphere.

The promotion of the CNG fueling projects will be a step towards the fight against pollution.

23
ECONOMIC ANALYSIS

24
 ECONOMIC ANALYSIS
Natural gas is one of the most valuable natural resources abundantly available in our country.
With promotion of CNG fuel industry the dependency of the government on petroleum products
will be decreased. It will be a great support to the Pakistans economy, as it will help to minimize
the impact of petroleum products.
Hydrocarbon development institute of Pakistan has pioneered the use of environment friendly
CNG in road transport as an economically viable fuel, which can substitute the imported
petroleum products.
Moreover with the petroleum of less costly fuel the people will start switching from use of
Iranian petrol towards the CNG.as the demand of Iranian petrol has decreased the trend of
smuggling and illegally supplying Iranian petrol will be reduced and hence the economic burden
is relaxed from that aspect too.
With the start of this project our economy will be supported in a number of ways, a few of them
are discussed as under
Employment Opportunity
The project will provide employment opportunity to the people of Quetta city, as it needs a
number of people to work for it, from the construction to the successful operation of the
business.
Contribution to GDP
The input materials, natural gas and electricity, will be utilized and will be converted to the
compressed natural gas. The value added to the input materials will be an addition to the GDP of
Pakistan.
Tax benefit
The proposed project will benefit the government of Pakistan in the form of a number of tax
collections, such as, tax imposed on the income of a business, on the income of the employees on
the import of the CNG equipment, etc.
Foreign exchange
The people of Pakistan have been using the petroleum products such as fuel in their automobiles,
thus spending a huge amount of foreign exchange on import of petroleum products.
The proposed project will help to reduce our countrys dependence on foreign petroleum.

25
Because there are abundant supplies of natural gas in Pakistan, using natural gas to replace
gasoline will be more economic to the country and will help us to save foreign exchange.

PROCEDURE FOR OBTAININ THE LECENSE OF

CNG STATION
Three copies of prescribed application forms should be submitted with the following documents.
Application forms are available free of cost

1. Status of applicant/applicants:-individual/joint ventures/registered company

2. In case of joint venture an attested copy of the document by the notary public or attested copy
of registration certificate in case of registered company.
3. Attested copy/copies of applicant/applicants ID card.
4. Local proof of ownership pf proposed land for CNG station.
5. Bank statement of the applicant clearly expressing financial stability for setting up CNG
station.
6. copy/copies of applicant/applicants national tax No certificate.
7. Proposed site plan of CNG station
8. Map of concerned area/city identifying the proposed site of the CNG station located in area.
9. Details of education, training and experience of the proposed technical staff.
10. Details of proposed security measures.
11. original bank receipts showing deposit of fee rs 25000 on prescribed form in favor of the
Federal ministry of petroleum and natural resources.
12. The authority letter of the person authorized for correspondence side office.
13. NOC from the concerned marketing company, if the cng station is proposed to setup at petrol
pumps otherwise a certificate that the station is not being set up for petrol pump.

Contact director or director general in case of non issuance of license after submission of
complete application in 15 days. For further information contact deputy director CNG.

26
 REGULATION, LICENSES AND INCENTIVES

In this section a list of the licenses and NOC's that are required for the CNG filling station are
given. It has been applied for Land is expected to be granted by the concerned authorities.

LICENSE

Obtaining a license from ministry of petroleum and natural resources is a ore requisite for setting
up a CNG station. The cost associated with license is Rs 25000.

CERTIFICATE (by HDIP)

After the installation of the required equipment for CNG filling station, HDIP will inspect the
working of the equipment, and once satisfier, will issue a certificate verifying that the installed
equipment is up to the required standard. Cost associated with this certification is Rs. 35000.

NOC's

No objection certificate will be required from the following departments prior to the
commencement of business.

1. concerned development authority of the city

2. Traffic engineering and planning authority (TEPA)
3. Traffic police (SSP)
4. Department of civil defense.
5. National highway authority (NHA)
6. Central board of revenue (CBR)
7. Civil administration tehsil municipal administration (TMA)
8. Irrigation department
9. Forest department

27
10. Explosive department

INCENTIVES

Sales tax
The import of CNG equipment is exempt from sales tax vide SRO No.38(1)/98 dated 21st
january till october 31,2002

Custom duty

The CNG equipment is also exempted from custom duties as per the above referred SRO.

REGULATORY REQUIREMENTS

Quality certificate

SRO 38(1) dated 21st January 1998 has been amended on April 11, 2002 and the quality
certificate from original manufacture has been mandatory. This certificate should state that the
equipment meets the safety standard as laid down in Pakistan CNG rule 1992. The designated
third party inspectors witness this quality certificate .the cost of third party inspection is $500.

List of Equipments

The list of equipment and their various manufacturers has been mentioned in the same amended
SRO whose import is exempted from custom duty and sales tax.

Income tax on the import of CNG equipment

Income tax, at rate of 6% is payable by the importer on the import of CNG equipment.
Income tax
The income of the CNG station is not exempted from the income tax. The investor has to pay tax
on her/his income according to the nature of the business entity.

28
ANNEXURE

29
Annexure 1

Cost of the Project & Financial Plan

Cost of the Project

Cost already Cost to bet Total cost on

met met completion
Land 4,000 - 4,000
(including development registration cost)
Building/civil work - 3,541 3,541
Contingencies - 90 90
Total cost of building - 3,631 3,631
Plant and Machinery (with Installation) - 9,680 9,680
Loading/unloading charges - 30 30
Total cost of machinery - 9,710 9,710
Furniture and Fixture - 100 100
Pre-operating expenses (3%) - 291 291
Total cost of furniture and fixture - 391 391
Total fixed cost 4,000 13,732 13,732
Net working capital - 1,538 1,538
Total cost of the project 4,000 15,270 15,270

Financial plan

The above cost of the project is proposed to be financed as below:

Fixed cost Net working Total

capital Means/sources
Already met To be met

Long term finance

- 9,710 - 9,710
Equity
4,000 4,022 1,538 9,560
Total 4,000 13,732 1,538 19,270

30
Annexure 1.1

Cost of Building

Description Type of Covered Cost per Cost

construction Area (sq.ft) sq.ft (Rs.) (Rs.)

Office with washrooms RCC 436 475 207,100

Control room RCC 144 475 68,400
Compressor & Cylinder RCC 1400 475 665,000
storage room
Shed (90*40) Canopy Lump sum 2,000,000
Underground gas piping - - - 300,000
Flooring - About 6,000 50 300,000
Contingencies - - - 90,000
Total cost 3,630,500

31
Annexure 1.2

List of equipments for CNG filling station

Description US $ Rs.
H302 Jodair Natural Gas Comressor 105,900 6,406,950
Remote mounted electrical control Included included
Gas cover system Included included
For upgrading up to 424 m3
One bank two line priority panel for buffer direct vehicle 2,652 158,813
filling
Storage cascade, 28 cylinders single bank cascade 10,800 653,400
Dispenser (D38 High flow dual hose two line sequencing) 28,140 1,702,470
9,103,133
Income tax on the import of Machinery @6% 546,188
Third party inspection 500 30,250
Inland freight (Karachi port to destination) 30,000
Total Cost of Machinery 150,965 9,709,570

32
Annexure 2

Sales Estimate (Revenue)

Revenue
Quantity of gas sale per Vehicle: 12.9 m3
( i.e., Quantity demanded per vehicle on average

Annaul increase in the sales price of Gas: 2.5%

Year of operation Year 1 Year 2 Year 3 Year 4 Year 5

Capacity utilization 75% 80% 85% 90% 95%
Car wise capacity 142 151 161 170 180
(# of cars filled/year) (000)
Selling pric (Rs. Per vehicle) 226 232 237 243 249
Sales value 30,290 35,032 38,157 41,310 44,820

33
Annexure 2.1

Sales estimate (Revenue): Working

Total capacity =424m3/hour

=2,442,240m3/year

(Based on 16 hour working day and 360 days per annum)

The capacity of one cylinder on average = 12.9m3

Car wise capacity can be calculated as

Car wise capacity = 2,,442,240/12.9 = 189,231 (say 189,000) at 100% capacity

It means that 189 thousand cars will be filled per year if the project runs at its full
capacity.

As the project cannot take a start from a 100% capacity therefore the capacity of the first year
after having made a thorough analysis and visited the existing CNG station is projected as to be
75%. There will be a gradual increase in the capacity utilization of the proposed project.

The current rate or sales price pf the CNG fuel is Rs.17.51 (GST included)

Considering the inflation rate and market condition it is projected that there will be an increase
of 2.5% annually in the price of CNG fuel, so the projected prices of CNG for the first five years
are as follows:

34
Revenue: Working

Year of operation Year1 Year 2 Year 3 Year 4 Year 5

Capacity utilization 75% 80% 85% 90% 95%
Prices of CNG 17.51 17.95 18.39 18.86 19.33
Car wise capacity 142,000 151,000 161,000 170,000 180,000
(# of cars filled/year)
No of vehicles filled/day 394 420 446 472 499

35
Annexure 3

Cost of Goods Sold

Consumption of Gas per vehicle 12.9 Cubic Meter

Rate of Gas Rs 7.35/cubic Meter

Rate of Electricity: fixed: Rs.381.11/kw/month

Variable: Rs. 5.25/kw/month

Annual increase in the prices of Gas 5%

(Rs. In 000)

Year of operation Year 1 Year 2 Year 3 Year 4 Year 5

Capacity utilization 75% 80% 85% 90% 95%
Gas consumed (in Rs.) 13,465 15,202 16,546 17,884 19,428
Wages & Salaries 781 820 861 904 9494
Factory overheads
Power (electricity consumed) 4,088 4,315 4,542 4,768 4,995
Stores and spares 484 514 545 575 605
Rapairs and Maintenance 133 200 267 267 267
Depreciation 631 631 631 631 631
Other Manufacuring overheads 321 350 322 413 448
Total factory overheads 6,388 6,777 7,112 7,500 7,834

Total Cost of Goods sold 20,634 22,799 24,519 26,288 28,211

36
Annexure 3.1

Rate of Gas Consumed;

(Rs in 000)

Year of operation Year 1 Year 2 Year 3 Year 4 Year 5

Capacity utilization 75% 80% 85% 90% 95%
Car wise capacity (000) 142 151 161 179 180
Gas consumed (in m3) 1,832 1,954 2,076 2,198 2,320
Rate of Gas/m3 7.35 7.72 8.11 8.52 8.95
Gas consumed (in Rs) 13,465 15,202 16,546 17,884 19,428

1. Gas consumed = total capacity * capacity utilization * rate

37
Annexure 3.2

Wages and salaries

Designation No of employees for Salary per month Total salary per year
two shifts (Rs)
Manager 1 9,000 108,000
Accountant 1 6,000 72,000
Cashier 2 4,000 96,000
Dispenser 4 2,000 96,000
Operator 2 2,500 60,000
Mechanic 1 3,000 36,000
Helper 1 2,000 24,000
Watchman 2 2,000 48,000
Sweeper 1 1,500 18,000
Total 15 558,000
i.e, 558

(Rs in 000)

Year of operation 1st year 2nd year 3rd year 4th year 5th year
Basic salary 558 558 586 615 646
Increments @ 5% - 28 29 31 32
Total basic salary 558 586 615 646 678
Fringe benefits @40% 223 234 246 258 271
Total wages and salary 781 820 861 904 949

38
Annexure 3.3

Power (electricity consumed)

Connected load = 150kw

Fixed charges

Rate = Rs.381.11/kw/month

Charges = 381.11*150

=57,176 per month

57,176*12= 685,998 per year (i.e 686)

Variable charges

Rate =5.25/kw/hour

Charges =5.25*150*16*360

=4,536,000

(i.e., 4,536) at 100% capacity

(Rs. In 000)
Year of operation Year 1 Year 2 Year 3 Year 4 Year 5
Capacity utilization 75% 80% 85% 90% 95%
Fixed cost 686 686 686 686 686
Variable cost 3,402 3,629 3,856 4,082 4,309
Total cost 4,088 4,315 4,542 4,768 4,995

39
Annexure 3.4

Stores and spares

The whole equipment required for setting up CNG filling station is imported. Therefre, it is
required to built an inventory of necessary spare parts to meet the unforeseen circumstances such
as a breakdown or any other fault in any part or equipment. For the purpose, a stock of necessary
spare parts worth $8,000 which is equivalent to 484,000 rupees will be imported along with other
equipment to maintain a minimum level of spare parts for the 1st year of operation. The amount
of stores and spaes for the next four years as per requirement are shown below:

Current dollar exchange rate = 60.5 rupees

(Rs. And $ in 000)

Year of operation Year 1 Year 2 Year 3 Year 4 Year 5
Capacity utilization 75% 80% 85% 90% 95%
Stores and spares ( in $) 8 8.5 9 9.5 10
(in Rs) 484 514 542 575 605

40
Annexure 3.5

Repairs and maintenance

(Rs. In 000)
Year of operation Year 1 Year 2 Year 3 Year 4 Year 5
1% 1.5% 2% 2% 2%
Machinery (9,710) 97 146 194 194 194
Building (3,631) 36 54 73 73 73
133 200 267 267 267

Other manufacturing overhead

Other manufacturing overhead are estimated to be equal to 1% of sales.

(Rs. In 000)
Year of operation Year 1 Year 2 Year 3 Year 4 Year 5
Sales values 32,092 35,032 38,157 41,310 44,820
321 350 322 413 448

41
Annexure 3.6

Depreciation

1. Machinery and building

(Rs.in 000)

Cost Estimated life Rate amount

Machinery 9,710 20 yrs 5% 486
Building 3,631 25 yrs 4% 145
Total 631

2. Furniture and fixture

(Rs. In 000)
Cost Estimated life Rate Amount
Furniture and fixture 100 10 yrs 10% 10

42
Annexure 4

General Administrative and Selling Expenses

(Rs. In 000)
Year of operation Year 1 Year 2 Year 3 Year 4 Year 5
Printing and stationary 20 20 25 25 30
Postage and telegram 15 20 20 25 25
Insurance 10 10 10 10 10
Travelling expenses 10 10 15 15 20
Depreciation(Furntiure & fixture)* 10 10 10 10 10
Telephone expenses 50 50 55 55 60
Total 115 120 135 140 155

*refer to annexure 3.6

43
 WORKING CAPITAL ESTIMATES

Tied up Year 1 Year 2 Year 3 Year 4 Year 5

period

Capacity utilization days 75% 80% 85% 90% 95%

CURRENT ASSETS

Cash Lump sum 30 30 40 40 50

Raw Material 30 1200 1200 1200 1200 1200

Stores and Spares __ __ __ __ __

Debtors 30 2674 2919 3180 3443 3735

3904 4149 4420 4683 4985

CURRENT LIABILITIES

Creditors

(30% of raw 360 360 360 360 360

material)

Accruals 1605 1752 1908 2066 2241

(5% of sales)

GST payable 30 401 438 477 516 560

2366 2550 2745 2942 3171

Net working capital 1538 1599 1675 1741 1817

44
DISBURSEMENT SCHEDULE

45
Allied bank will provide the financial assistance of 9,710 (th) rupees, which will be granted in
four installments. The details are given in the following table:

S.No Amount of Date of

disbursement disbursement

1 Advance payment 25% 2,428 (000) 31.01.2005

2 3 months after machinery 15% 1,456 30.04.2005

order is placed

3 Arrival of machinery 40% 3,884 31.08.2005

4 Trial run 20% 1,942 31.10.2005

REPAYMENT SCHEDULE

The first installment will fall due on March 31st or September 30th which ever date falls first after
the completion of 24 months from the date of first disbursement.

Allied bank will provide the financial assistance of 9,710 (th) rupees. The mark up rate is 9.5%
and it would be paid back in 12 years including the grace period i.e 2 years (24 months) in half
yearly installments.

COMPUTATION OF RESALE PRICE

46
Bank finance 9710 th

Mode of repayment 20 half yearly installments

Date of repayment of 1st installment 31st March 2007

Rate of mark up 9.5%

Grace period 24 months

Calculation of Mark up during construction and Grace period:

Date of Amount of Debit balance Pd. of mark up Amount of

disbursement disbursement (months) mark up

31.02.2005 2,428 (000) 2428 3 58

31.04.2005 1,456 3884 4 123

31.08.2005 3,884 7768 2 123

31.10.2005 1,942 9710 17 1307

1,611

COMPUTATION OF AMOUNT OF INSTALLMENT

47
Amount of installment = F * R (1 + R) N + M

R (1 + R) N - 1 N

= 9710 * 0.0475 (1 + 0.0475) 20 + 1611

20
(1 + 0.0475) - 1 20

= 9710 * 0.079 +80.55

= 762.1 + 80.55

= 843

Resale price = 843 * 20

= 16,860

Profit of bank = 16860 9710

= 7150

Per installment = 3575

Per year = 715

ESTIMATES OF FINANCIAL EXPENSE

48
 (Rs. in 000)

Year of operation Year 1 Year 2 Year 3 Year 4 Year 5

Mark up on long
term financial
assistance 715 715 715 715 715

Mark up on short
term financial
assistance ---- ---- ---- ---- ----

Total 715 715 715 715 715

PROJECTED INCOME STATEMENT

(Rs. in 000)
49
 Year of operation Year 1 Year 2 Year 3 Year 4 Year 5

Sales 32,092 25,132 38,157 41,310 44,820

Cost of good sold 20,634 22,799 24,519 26,288 28,211

Gross Profit 11,458 12,233 13,638 15,022 16,609

General admin & 115 120 135 140 155

selling expense

Operating profit 11,343 12,113 13,503 14,882 16,454

Financial expenses 715 715 715 715 715

Net profit before 10,628 11,398 12,788 14,167 15,739

taxes (EBT)

Income tax 1,594 1,710 1,918 2,125 2,361

( @ 15%)

Net operating profit 9,034 9,688 10,870 12,042 13,378

after tax

Withdrawals 100 100 100 100 100

Retained earnings 8,934 9,588 10,770 11,942 13,278

PROJECTED CASH FLOW STATEMENT

(Rs. in 000)

50
 Year of operation End up const Year 1 Year 2 Year 3 Year 4 Year 5
period

Sources of funds

Operating profit ---- 11,343 12,113 13,503 14,882 16,454

Add: depreciation ---- 641 641 641 641 641

Total funds from ---- 11,984 12,754 14,144 15,523 17,095

operation

Owners capital 9,560 ---- ---- ---- ---- ----

Long term financial 9,710 ---- ---- ---- ---- ----

assistance

Short term borrowings ---- ---- ---- ---- ---- ----

Increase in creditors ---- 360 ---- ---- ---- ----

19,270 12,344 12,754 14,144 15,523 17,095

Application of funds

Investment in fixed 17,732 ---- ---- ---- ---- ----

assets
Payment of long term ---- 1,686 1,686 1,686 1,686 1,686
financial assistance

With drawls ---- ---- 100 100 100 100

Increase in current ---- 3,904 245 271 263 305
assets
Tax payments ---- 1,594 1,710 1,918 2,125 2,361
Total funds 17,732 7,184 3,741 3,975 4,174 4,452
Cash surplus 1,538 5,160 9,013 10,169 11,349 12,643
Cash at the beginning ---- 1,538 6,698 15,711 25,880 37,229
of the year

Cash at the end of the 1,538 6,698 15,711 25,880 37,229 49,872
year

PROJECTED BALANCE SHEET

(Rs. in 000)

51
 Year of operation End up const Year 1 Year 2 Year 3 Year 4 Year 5
period
Assets
Current Assets
Cash 1,538 6,698 15,711 25,880 37,229 49,872

Stock ---- 1,200 1,200 1,200 1,200 1,200

Stores and Spares ---- ---- ---- ---- ---- ----
Debtors ---- 2,674 2,919 3,180 3,443 3,735
Total current assets 1,538 10,572 19,830 30,260 41,872 54,807
Net fixed assets 17,732 17,121 16,480 15,849 15,208 14,580
Total assets 19,270 27,693 36,310 46,109 57,080 69,387
Liabilities
Current liabilities
With drawls ---- 100 100 100 100 100

Creditors ---- 360 360 360 360 360

With drawls ---- ---- 100 100 100 100

Total current ---- 460 460 460 460 460
Liabilities
Long term liabilities
Long term financial 16,860 15,174 13,488 11,802 10,116 8,430
assistance
Less mark up on long
term financial 7,150 6,435 5,720 5,005 4,290 3,575
assistance
Total long term 9,710 8,739 7,768 6,797 5,826 4,855
liabilities
Equity
Equity 9,560 9,560 9,560 9,560 9,560 9,560
Retained earnings ---- 8,934 18,522 29,292 41,234 54,512
Total equity 9,569 18,494 28,082 38,852 50,794 64,072
Equity 19,270 27,693 36,310 46.109 57,080 69,387
+ Liability

BREAK EVEN ANALYSIS

(Rs. in 000)

52
 Operational year 5 Distribution Ratio

Variable Fixed Total Fixed Variable

Raw Material 19428 ---- 19428 0% 100%

Wages and Salaries 474 475 949 50% 50%

Depreciation (Building & ---- 631 631 100% 0%

Machinery)

Power 1998 2997 4995 60% 40%

Repairs and Maintenance 134 133 267 50% 50%

Stores and Spares 605 ---- 605 0% 100%

Manufacturing overheads 224 224 448 50% 50%

Amortization ---- 1686 1686 100% 0%

General & Admin expenses 77 78 155 50% 50%

22940 6224 29164

Total fixed cost = 6224

Variable cost = 22940

Break even in rupees = Fixed cost / (Selling value variable cost / selling value)
= 6224 / (44820 22940 / 44820)
= 6224 * (44820 / 21880)
= 6224 * 2.05
= 12759

Break even in Units = Fixed cost / Contribution margin

= 6224 / 9.43
= 660

53
Margin of safety

= Sale at 100% capacity

= 472085

Capacity utilization to achieve break even = Break even in rupees / Sale at 100%
= 12759 / 472085
= 3%

Margin of safety = 100 3

= 97%

RATIO ANALYSIS

a. Leverage ratio = Debt / Fixed asset * 100

54
Construction Year 1 Year 2 Year 3 Year 4 Year5
Period

9710 / 17732 8739/17121 7768 / 1948 6797 / 15849 5826 / 15208 4855 / 14580

= 54.76% 51.04% 47.14% 42.89% 38.31% 33.30%

b. Leverage ratio = Debt / Total asset * 100

Construction Year 1 Year 2 Year 3 Year 4 Year5

Period

9710 / 19270 8739/27693 7768 / 36310 6797 / 46109 5826 / 57080 4855 /69387

= 50.39% 31.56% 21.39% 14.74% 14.94% 6.7%

Profitability ratio

Gross profit margin = Gross profit / Sales * 100

Year 1 Year 2 Year 3 Year 4 Year5

11458 / 32092 12233 / 35032 13638 / 38157 15022 / 41310 16609 / 44820

= 35.70% 34.92% 35.74% 36.36% 37.06%

Operating profit margin = Operating profit / Sales * 100

Year 1 Year 2 Year 3 Year 4 Year5

11343 / 32092 12113 / 35032 13503 / 38157 14882 / 41310 16464 / 44820

= 35.35% 34.58% 35.49% 36.03% 37.71%

Net profit margin = Net profit / Sales * 100

Year 1 Year 2 Year 3 Year 4 Year5

55
9034 / 32092 9688 / 35032 10870 / 38157 12042 / 41310 13348 / 44820

= 28.15 % 27.65 % 28.49 % 29.15 % 29.85 %

Return on equity ratio = Net profit / Equity * 100

Year 1 Year 2 Year 3 Year 4 Year5

9034 / 18807 9688 / 23288 10870 / 33440 12042 / 44823 13348 / 57433

= 48.03% 41.60% 32.51% 26.69% 23.24%

Return on investment ratio = Net profit / Investment * 100

Year 1 Year 2 Year 3 Year 4 Year5

9034 / 27693 9688 / 36310 10870 / 46109 12042 / 57080 13348 / 69387

= 32.62% 26.68% 23.57% 21.10% 19.24%

COST OF CAPITAL

Capital Cost Amount Proportion

56
 Debt 9.5% 9710 51%

Equity 19% 9560 49%

WACC = (cost of debt) (1 tax rate) (proportion) + (cost of equity) (proportion)

= (0.095) (1 0.15) (0.51) + (0.19) (0.49)

= 0.0412 + 0.0931

= 0.1343

= 13.43%

Internal financial rate of return

Years Ash in flow Discount PV Discount PV

factor at 60 factor at 70

57
 % %
1 11984 0.624 7290 0.59 7071
2 12754 0.391 4988 0.35 4464
3 14144 0.244 3451 0.2 2829
4 15523 0.153 2375 0.12 1863
5 17095 0.095 1624 0.07 1197
6 17095 0.06 1026 0.04 684
7 17095 0.037 632 0.02 342
8 17095 0.023 393 0.01 171
9 17095 0.015 256 0.01 171
10 29669 0.009 267 0.005 148
Total 153846 4464

X= (amount of low interest-initial cash flow) *(high interest-low interest)

(Amount of low interest-amount of high interest)

X= (22502-19270) * (70-60)
(22502-18940)

X= (3232) * (10)
(3562)

X=0.907

IRR = Low interest rate +X

IRR = 60% +9.07%

IRR = 69.07%

Net Present Value (NPV)

Year Cash Flows Discount Factor PV

(13.43)
1 11984 0.882 10569

58
 2 12574 0.778 9923
3 14144 0.686 9703
4 15523 0.605 9391
5 17095 0.534 9129
6 17095 0.471 8052
7 17095 0.415 7094
8 17095 0.366 6257
9 17095 0.323 5522
10 29669 0.285 8456
Total 153846 77002

Net present value = Present value of future cash flows-initial investment

NPV = 862-19270
= 57732

Profitability Index

Cash outflows = 19270

PV of future Cash inflows = 77002

Profitability Index = PV of future cash inflows/Cash out flows

= 77002/19270
= 3996

PAYBACK PERIOD WITHOUT DISCOUNTING

Years cash inflows cumulative cash flows

0 19270 (b) -
1 ( a) 11984 11984 ( c )

59
2 12754 (d) 24738
3 14144 38882
4 15523 54405
5 17095 71500
6 17095 88595
7 17095 105690
8 17095 122785
9 17095 139880
10 29669 169549

Payback period formula

a + (b c)/ d

1 + (19270 11984) /12754

1 + 7286/12754

1 + 0.5712

1.5712years

PAYBACK PERIOD WITH DISCOUNTING

Years cash inflows cumulative cash inflows

0 19270 ( b) -
1 ( a) 10569 10569 (c )
60
2 9923 ( d) 20492
3 9703 30195
4 9391 39586
5 9129 48715
6 8052 56767
7 7094 63861
8 6257 70118
9 5522 75640
10 8456 84096

Pay back period

a +( b-c )/ d

1 + ( 19270 10569) / 9923

1 + 8701 / 9923

1 + 0.8768

1.8768

61