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2nd Draf





Government of Pakistan


11.1 Project Economics 12
11.2 Project Financing 12
11.3 Project Cost 12
11.4 Machinery and Equipment 13
11.5 Furniture and Fixture 13
11.6 One Time Earthworm Cost 13
11.7 Raw Material Requirements 14
11.8 Human Resource Requirement 14
11.9 Overhead expenses for 6 months 14
11.10 Space Requirement 14
11.11 Revenue Generation 15
13. Annexure 17
14. Key Assumption 19

Table List of Tables Pages
1 Project Economics 11
2 Project financing 11
3 Total Project Cost 11
4 Machinery & Equipment 12
5 Furniture and fixture 12
6 One Time Earthworm Cost 12
7 Raw Material Cost 13
8 Human Resource 13
9 Overheads Expenses 13
10 Space Requirement 14
11 Revenue of the Project 14

This information memorandum is to introduce the subject matter and provide a general idea and
information on the subject. Although, the material included in this document is based on data/
information generated from experiments and field testing by a team of relevant scientists;
however, it is based upon certain assumptions which may differ from case to case. The contained
information may vary due to any change in any of the concerned factors, and the actual results
may differ accordingly from the presented information. The PARC and its employees do not
assume any liability for any financial or other loss resulting from this memorandum in
consequence of under taking this activity. The prospective user of this memorandum is
encouraged to contact qualified consultant/technical expert, especially designated focal person(s)
of this enterprise for reaching to an informed decision.


The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs in
project identification for investment. The project pre-feasibility may form the basis of an
important investment decision and in order to serve this objective, the document/ study covers
various aspects of project concept development, start-up, and production, marketing, finance and
business management. The document also provides sectoral information, brief on government
policies and international scenario, which have some bearing on the project itself. The purpose of
this document is to facilitate potential investors in Vermicompost Production, Packaging &
Marketing business by providing them a holistic as well as a micro view of business with the
hope that such information as provided herein will help the potential investors in crucial
investment decisions. The need to come up with pre-feasibility reports for undocumented or
minimally documented sectors attains greater imminence as the research that precedes such
reports reveal certain thumbs of rules; best practices developed by existing enterprises by trial
and error, and certain industrial norms that become a guiding source regarding various aspects of
business set-up and it’s successful management. Apart from carefully studying the whole
document one must consider critical aspects provided later on, which form basis of any
Investment Decision.

Prime Minister’s Youth Business Loan Programme, for young entrepreneurs, with an allocated
budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide subsidized financing at 8%
mark-up per annum for one hundred thousand (100,000)beneficiaries, through designated
financial institutions, initially through National Bank of Pakistan (NBP) and First Women Bank
Ltd. (FWBL). Loans from Rs. 0.1 million to Rs. 2.0 million with tenure up to 8 years inclusive of
1 year grace period, and a debt: equity of 90: 10 will be disbursed to SME beneficiaries across
Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan, Gilgit, Baltistan, Azad
Jammu & Kashmir and Federally Administered Tribal Areas (FATA).

Vermicomposting is as a bio-oxidative process in which earthworms interact intensively with
microorganisms and other fauna within the decomposer community, accelerating the stabilization
of organic matter and modifying its physical and biochemical properties. The action of the
earthworms in this process is physical or mechanical. Physical participation in degrading organic
substrates results in fragmentation, thereby increasing the surface area of action, turnover and
aeration. On the other hand, biochemical changes in the degradation of organic matter are carried
out by microorganisms through enzymatic digestion, enrichment by nitrogen excrement and
transport of inorganic and organic materials.
The selection of suitable earthworm species for Vermicomposting is an important step of the
overall process. Out of the thousands of species of earthworms, only a few are suitable for
vermicomposting of organic wastes. The epigeic species of earthworms are widely used for
vermicomposting of different organic wastes. Eisenia fetida is the most widely used earthworm
species for vermicomposting due to its well-established potential for the vermicomposting of
compostable organic materials such as agricultural wastes and animal manures.
In Pakistan, huge amount of organic wastes, e.g., municipal solid waste, cattle manure and
poultry manure etc., are available for composting as a substitute for chemical fertilizers.
Animal wastes are important resources that are used to supplement organic matters and improve
soil conditions. Average-size cattle produce 4 to 6 tonnes of fresh dung per year. In Pakistan and
some other developing nations, a significant fraction of cattle dung is used as cooking and
heating fuel after making its bricks (Figure 1) However, burning of dung cakes causes serious
health and environmental problems. The burning of animal dung for cooking results in higher
indoor particle concentrations. Smoke from animal dung-based cooking stoves contains carbon
monoxide, fine particulates, nitrogen dioxide and hydrocarbons, all at concentrations far in
excess of what is considered unsafe in outdoor air. Long-term exposure to airborne particulate
matter has been associated with increased rates of acute respiratory infections, chronic
obstructive lung disease and cancer (USEPA 2008). On the other hand, once the dung is burnt,
the nutrients present in it are lost forever. Another important use of cattle dung is its conversion
into compost to be used as manure in agricultural fields. For this purpose, cattle dung is heaped
in the open and allowed to degrade naturally without any amendments. This process takes 6 to 9
months, and still dung is not stabilized which may attract termites in the fields after its
application. Further, this method is a major cause of odor and fly problems in rural areas.
Vermicomposting merely controls the conditions so that materials decompose faster.
Vermicomposting and its use offers several potential benefits including improved manure
handling, enhanced soil tilth and fertility, and reduced environmental risk. With good
management, it produces a minimum of odors. It is quite different from the original materials
that it was derived from. It is free of unpleasant odors, is easy to handle, and can be stored for
long time. It has a variety of uses which make it a valuable and saleable product. For all of these
reasons, vermicomposting is attracting the attention of farmers, waste-generators, public
officials, and environmentalists. When applied to cropland, compost adds organic matter,

improves soil structure, reduces fertilizer requirements, and reduces the potential for soil erosion.
One of the most attractive features of vermicomposting is that there is a market for the product.
Potential buyers include home gardeners, landscapers, vegetable farmers, turf growers, operators
of golf courses, and ornamental crop growers. The price of compost varies considerably because
it is often viewed as a waste product. A bulk vermicompost price ranges Rs. 10 -20 per kg and
average about Rs.15 per kg. The price depends on the local market, compost quality, and the raw
materials used.
The project of vermicompost production, processing, packaging and marketing envisages the
farming of collection of raw material, composting followed by packaging and then distribution or
supply directly to the farmers, commercial nursery growers market. The proposed business will
start with 500 T/annum initially and can be up-scaled according to the availability of raw

Composting production units are proposed to be located in areas where enough (500 tonnes)
degrade waste is available in urban and rural areas. The composting can be done in all zones of
Pakistan and this technology has huge potential in intensive farming agriculture areas of the
country. Installed capacity 500 T/cycle, initial utilization is 50 %. In first year total production of
5000 bags each containing 25 kg of compost for one cycle. Total Cost Estimate is Rs. 1,780,000
for first year with fixed investment Rs. 1,210,000 and working capital Rs. 570,000. From second
year two cycles can be produced and 10000 bags will be obtained from two cycles. Given the
cost assumptions IRR and payback are 87 % and 2.69 years respectively. Whereas NPV of this
project is 19,323,524.
The most critical considerations or factors for success of the project are;
1. Production of quality product according to the international standards and for marketing
needs registration with Government of Punjab.
2. Networking of compost suppliers/dealers from all over the country would be necessary to
meet any requirement or shortfall.


Organic solid waste management by employing earthworms has multifarious role to play in a
developing country like Pakistan. Hundreds of tonnes of biodegradable organic wastes are being
generated in cities and towns in the country, creating disposal problems. Firstly, this waste can be
converted into valuable compost by applying vermicomposting technology. This approach
reduces pollution and provides a valuable substitute for chemical fertilizers. Secondly, the
manure is produced in a shorter duration of time of 16 weeks and is fully matured, homogenous
matter. Thirdly, the programme provides job opportunities for the unskilled labor force. Finally, it
is the best way of guarding the environment. Vermicompost (compost produced by the activity of
selected species of earthworms) has been adjudged as the best source of organic amendments to
soil. Using vermicompost can fulfill the requirements for organically grown products.
This process is profitable at any scale of operation, provided proper process parameters are
maintained. Municipal Corporations and Councils are encouraging entrepreneurs by providing
required land and the waste matter from all sources free of cost near the waste dumping sites.
This scheme gives details of making compost from bio-degradable organic waste using vermin-
castings. It is assumed that the land and the waste material are free of cost to the entrepreneurs.
This unit will be profitable even if the land is taken on lease.
Prospect for Vermicomposting to be used for soil amendment/ conditioner and potting material
for commercial nurseries and horticultural crops (vegetables growing in tunnel farming). All
processing facility will be at one place
Technology: Vermicomposting production and processing required tools and
equipments/machinery for collection (loading & unloading), pre-decomposition, shredding,
mixing, drying, sieving and packaging. The proposed unit requires basic composting equipments
(list attached). Working hours per day 8 hours. Working days in a year 360 days.
Project components:
There are four key steps during the typical composting process. These include: feedstock pre-
processing where the feedstock is treated and blended to achieve a mix with desired overall
characteristics, the active composting important for pathogen kill, the curing necessary to obtain
a mature and stable product, and the post-processing required to meet quality criteria for sale and
distribution of the product.
Required compost plant facilities
Compost plants mainly consist of the following facilities;
(a) Receiving area & Material Recovery Facility (MRF)
(b) Windrow decomposing facility
(c) Compost maturating facility
(d) Sieving and storage facility
(e) Landfill site for residue
(f) Site office
(g) Workers restroom
(h) Security facility
(i) Leachate treatment facility
(j) Fence
(k) Gate
(l) Buffer zone
(m) Access road

Production Capacity per cycle for first year

 Plant capacity = 5000 bags per cycle
 Capacity utilization = 50 %
 Annual sales of finished product = 10000 bags (Per bag 25 kg)
 Value/bag Rs. = 375/bag
Location: Suburbs of cities and villages near dumping site can be ideal locations for practice of
composting on a small to medium scale, from the point of view of availability of raw material

and marketing of the produce. Unit may also be located in areas with concentration of fruits and
vegetables markets. The proposed business can be done in all villages, cities / Towns of Pakistan.
Target Market: In addition to local markets enormous export market to other countries.
Wholesale customers include:
 Farmers
 Gardeners
 Nurseries
 Landscapers
 People with related businesses (who need worms, compost or castings)
 Businesses who need systems designed
 Schools, Collage- private, public and charter
Employment Generation: The proposed project will provide direct employment to 10 people.
Financial analysis shows the unit shall be profitable from the very first year of operation.

Individuals considering entering the composting industry must carefully consider the following
1. Networking with the farmers of livestock (sheep, goat, cattle and poultry) union and
Municipal Corporation for availability of raw material.
2. Consistent supply of raw material and quality/quantity of compost at production facility.
3. Availability of skilled manpower
4. Wholesaler contracts
5. Network of dealers and direct access to the farmers, NGOs and community organization
and commercial nursery growers in the country.


For this project it is assumed that the production will start from plant production capacity of 500
T/cycle and its utilization capacity of 50%. The initial total production would be 125 tons per
cycle based on the above mentioned assumptions.


Vermicomposting is considered to be a small and medium scale business in Pakistan. There are
three types of products known in the market, one is vermicompost (soil amendment/
conditioner), vermiwash liquid biofertilizer (foliar spary) and wormicultures (Worms) can be
sold as live product. Following areas have been identified where significant opportunities for
 Federal Area/ tertiary
 FATA, Gilgit Baltistan
 Azad Jummu & Kashmir (Muzarabad, Mirpur, Rawalakot etc.)
 Punjab
 Khyber Pakhtonkhuwa

 Sindh


Organic solid waste management by employing earthworms has multifarious role to play in a
developing country like Pakistan. Hundreds of tonnes of biodegradable organic wastes are being
generated in cities and towns in the country, creating disposal problems. This waste can be
converted into valuable compost by applying Vermicomposting technology. While looking at
major bio-products markets and demand, all major cities such as Karachi, Lahore, Faisalabad and
Rawalpindi etc. are attractive local markets. It may be exported to the other countries Middle
East, Saudi Arabia, Turkey, African countries and Russian States etc. Vermicompost can be
preparation with any types of biodegradable wastes e.g:
1. Crop residues.
2. Weed biomass
3. Vegetable waste
4. Leaf litter
5. Hotel refuse
6. Waste from agro-industries
7. Biodegradable portion of urban and rural wastes


Phase 1 Processing involving collection of wastes, shredding, mechanical separation of the metal,
glass and ceramics and storage of organic wastes.
Phase 2 Pre digestion of organic waste for twenty days by heaping the material along with cattle
dung slurry. This process partially digests the material and fit for earthworm
consumption. Cattle dung and biogas slurry may be used after drying. Wet dung should
not be used for vermicompost production.
Phase 3 Preparation of earthworm bed. A concrete base is required to put the waste for
vermicompost preparation. Loose soil will allow the worms to go into soil and also while
watering; all the dissolvable nutrients go into the soil along with water.
Phase 4 Collection of earthworm after vermicompost collection. Sieving the composted material
to separate fully composted material. The partially composted material will be again put
into vermicompost bed.
Phase 5 Storing the vermicompost in proper place to maintain moisture and allow the beneficial
microorganisms to grow.

Phases of vermicomposting

Vermicompost is nothing but the excreta of earthworms, which is rich in humus and nutrients.
We can rear earthworms artificially in a brick tank or near the stem / trunk of trees (especially

horticultural trees). By feeding these earthworms with biomass and watching properly the food
(bio-mass) of earthworms, we can produce the required quantities of vermicompost.

Material flow for the conventional composting process

A detailed financial model has been developed to analyze the commercial viability of
Vermicomposting, Packaging & Marketing under the ‘Prime Minister’s Youth Business Loan’
program. Various cost and revenue related assumptions along with results of the analysis are
outlined in this section.

11.1 Project Economics

All the figures in this financial model have been calculated for vermin-compost annual
production of 5000 bags of vermin-compost each containing 25 kgs. The following table shows
internal rate of return and payback period.
Table 1 - Project Economics
Description Details
Internal Rate of Return (IRR) 87 %
Payback Period (yrs) 1.72

Net Present Value (NPV) Rs. 19,323,523.42

Returns on the scheme and its profitability are highly dependent on quality of vermin-compost
suitable location, good farming practices and availability of trained staff. The project will not be
able to cover the potential demand of consumers and recover payments, if these factors are not
efficiently managed and will also lead to increased operating cost.

11.2 Project Financing

Following table provides details of the equity required and variables related to bank loan:
Table 2 - Project Financing
Description Details
Total Equity (10%) Rs.178,000
Bank Loan (90 %) Rs. 1,602,000
Markup to the Borrower (%age/annum) 8%
Tenure of the Loan (Years) 08
Grace Period (Years) 01

11.3 Project Cost

Following is the total project cost proposed for the business of vermin compost.
Table 3: Project Investment
Capital Investment Amount Rs.
Capital Cost (one time investment) 1,210,000
Total working capital 570,000
Total Project cost 1,780,000
11.4 Machinery and Equipment
Following table provides list of machinery and equipment required for production and packaging
of vermin-compost.
Table 4: Machinery and Equipment

Description Quantity Amount Rs.
Power driven chaff cutter 1 30,000
Weighing Machine Platform type 1 10,000
Water Pump and pipes for water 1+3 140,000
Tools & Implements 4 20,000
Pre-operative Expenses (installation and 10,000
operational cost of machines)
Total 210,000

11.5 Furniture and Fixture

Following table provides list of Furniture and Fixture required:

Table 5: Furniture & Fixture and its cost

Description Unit
Furniture and Fixture 50,000/- 50,000/-
Total 50,000/-

11.6 One Time Earthworm Cost

The earthworm will be put for one time and they will keep on multiplying for rest of the

Table 6: One Time Earthworm cost

Description Unit
Earthworm Investment 30,000/ 150,000/-
Total 150,000/-

11.7 Raw Material Requirements

Table 7: Cost of Raw material/ cycle
Description Quantity Value Rs.

Bio -degradable waste provided by 500 Tonnes (Rs. 150/T) 75,000
vegetable and fruit market yard and
municipal market
Cow dung Manure 125 Tonnes (Rs 200/t) 25,000
Total 100,000

11.8 Human Resource Requirement

Table 8: Human Resource Requirement for six months first year
Designation No @ Rs. Value Rs.
Manager 1 20,000/month 120,000
Helper 2 10,000 each/month 120,000
Total 240,000

The table above provides details of human resource required to run a vermicomposting
Production, Packaging and Marketing Company. Salaries of all employees are estimated to
increase 10% annually.

11.9 Overhead expenses for 6 months

Table 9: Overhead Expenses for first year
Description Amount
fuel expenses 50,000
packing material 20,000
Promotion expenses 50,000
Tractor and trolly rent 50,000
communication 10,000
Utility bills 30,000
Cash in hand 20,000
Total 230,000

11.10 Space Requirement

Land will be taken on lease for the period of 10 years. And number of pits and sheds constructed
on the piece of 1 acre land is 50.

Table 10: Space Requirement

Description No Total cost Rs.

Land (Leased @ 40000/annum) 1 Acre 400,000
Construction of pits & sheds 50 Pits 400,000
Total 8,00,000

11.11 Revenue Generation

Table 11: Revenue Generation for first year

Product Unit Sales Price First Year
(Bags) (Rs./Unit) @ Rs.15/- Production (Rs)
25 kg 5000 375 1,875,000


There are many local suppliers of packaging machinery working at Lahore, Faisalabad,
Gujranwala, Karachi and other cities who could be contacted for obtaining packaging machinery;
however, during the course of study for this pre-feasibility we have contacted the following local

Contacts for Vermicomposting from outside country;

D. Vidya Sagar
Address:# 532, ii main road,Gandhi Nagar,KOLAR,Karnataka state,INDIA,Postal Code - – 563
Contact-No: office : +91-8152-225370 Mobile:+91-9243436266 :+91-9844160038
FAX: +91 8152224146
Online contact with Vermi-technology Unlimited at

Vermicomposting/Vermi-culturing Technology Consultant and Trainer

1. Dr. Arshad Ali

Land Resources Research Institute (LRRI),
National Agriculture Research Centre (NARC)
Park Road, Islamabad
Tel: +92-51 9255060, +92-51-8443124
Cell: 03335966626
2. Dr. Tariq Sultan
Principal Scientific Officer
Soil Biology & Biochemistry Program,
Land Resources Research Institute (LRRI),
National Agriculture Research Centre (NARC)
Park Road, Islamabad

Tel: +92-51 9255060, +92-51-8443181
Cell: 0343-8559901
3. Syed Ishtiaq Hyder
Scientific Officer
Soil Biology & Biochemistry Program,
Land Resources Research Institute (LRRI),
National Agriculture Research Centre (NARC)
Park Road, Islamabad
Cell: 03325323177
4. Mr. Najmul Hassan
Research Assistant (Vermicompost Expert)
Soil Biology & Biochemistry Program,
Land Resources Research Institute (LRRI),
National Agriculture Research Centre (NARC)
Park Road, Islamabad
Tel: +92-51 9255060, +92-51-8443181, 0300-6791195

13. Annexure
1. Income Statement

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Sales (Revenues) 1875000 4125000 4537500 4991250 5490375 6039413 6643354 7307689 8038458 8929473
Raw Material
Bio -degradable waste
provided by vegetable
and fruit market yard and
municipal market 75,000 82500 90750 99825 109807 120788 132867 146153 160769 176846
Cow dung Manure 25,000 27500 30250 33275 36603 40263 44289 48718 53590 58949
Fuel expenses 50,000 55000 60500 66550 73205 80525.5 88578 97435 107179 117897
Packing material 20,000 22000 24200 26620 29282 32210 35431 38974 42872 47159
Tractor and trolley rent 50,000 55000 60500 66550 73205 80526 88578 97436 107179 117897
Promotion expenses 50,000 55000 60500 66550 73205 80526 88578 97436 107179 117897
Total B 270,000 297,000 326,700 359,370 395,307 434,838 478,321 526,154 578,769 636,646
Gross Profit 1605000 3828000 4210800 4631880 5095068 5604575 6165032 6781536 7459689 8292828
Salaries 240,000 264000 290400 319440 351384 386522 425175 467692 514461 565907
Utilities 30,000 33000 36300 39930 43923 48315 53147 58462 64308 70738
communication 10,000 11000 12100 13310 14641 16105 17716 19487 21436 23579
Depreciation 65000 65000 65000 65000 65000 65000 65000 65000 65000 65000
Cash in hand 20,000 22000 24200 26620 29282 32210.2 35431 38974 42871 47158
Repair & Maintenance 10
% 0 66,000 72600 79860 87846 96630 106293 116923 128615 141476
Interest on Loan 128160 128160 113797 98285 81531 63438 43897 22793 0 0
Sub - Total 493160 589160 614397 642445 673607 708221 746659 789331 836692 913861
Operating Income 1111840 3238840 3596403 3989435 4421461 4896353 5418373 5992205 6622997 7378966
Tax 375459 449175 532006 623042 723217 865381 1005522 1159650 1358834
Net Income 1111840 2863380 3147228 3457429 3798419 4173136 4552993 4986682 5463347 6020133
II. Summary Statistics

0 Period Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Initial Project
1,780,000 0 0 0 0 0 0 0 0 0 0
Fixed Cost 1,210,000 0 0 0 0 0 0 0 0 0
Working capital 570,000 1385000 1517000 1654940 1806674 1973581.4 2157179.54 2359137.49 2581291.24 2825660.37
Total Cost (Fixed
+ working 1,780,000 1385000 1517000 1654940 1806674 1973581.4 2157179.54 2359137.49 2581291.24 2825660.37
Interest on loan 128160 128160 113796.8 98284.5461 81531.3109 63437.8168 43896.8432 22792.5916 0 0
Total cost
inclusive interest
1,908,160 1,513,160 1,630,797 1,753,225 1,888,205 2,037,019 2,201,076 2,381,930 2,581,291 2,825,660
Revenue from
1,875,000 4125000 4537500 4991250 5490375 6039412.5 6643353.75 7307689.13 8038458.04 8842303.84
Salvage value of
Gross Profit
1,875,000 4,125,000 4,537,500 4,991,250 5,490,375 6,039,413 6,643,354 7,307,689 8,038,458 8,929,473
Net cash flow
(Inflow – -33,160 2,611,840 2,906,703 3,238,025 3,602,170 4,002,393 4,442,277 4,925,759 5,457,167 6,103,813
Payback Period 1.72
NPV 19,323,523
IRR 87%
BCR 2.69

14. Key Assumption

Particulars Assumption

Sales Price Growth Rate 10%

Increase in cost of raw material 10%

Increase in utilities 10%

Debt/Equity Ratio 90:10

Depreciation on Machinery 10%

Depreciation on Office furniture & fixture 10%

Loan Period 8

Grace Period 1

Loan installments Annually

Financial charges (interest rate) 8%