Business Viability of Soybean Processing Units in Mandsaur District of Madhya Pradesh

BUSINESS VIABILITY OF SOYBEAN
PROCESSING UNITS IN MANDSAUR

DISTRICT OF MADHYA PRADESH
BY
SARMAN LAL CHAUDHARI

B.Sc. (Ag.) Hons.
PROJECT REPORT SUBMITTED TO

ACHARYA N. G. RANGA AGRICULTURAL UNIVERSITY
IN PARTIAL FULFILMENT OF THE REQUIREMENTS
FOR THE AWARD OF THE DEGREE OF
MASTER OF BUSINESS ADMINISTRATION

(AGRIBUSINESS MANAGEMENT)
CHAIRPERSON: Dr. SEEMA
SCHOOL OF AGRIBUSINESS MANAGEMENT

COLLEGE OF AGRICULTURE
RAJENDRANAGAR, HYDERABAD-500 030
ACHARYA N. G. RANGA AGRICULTURAL UNIVERSITY
2014
CERTIFICATE
Mr. SARMAN LAL CHAUDHARI has satisfactorily prosecuted the course of
project and that project report entitled “BUSINESS VIABILITY OF SOYBEAN
PROCESSING UNITS IN MANDSAUR DISTRICT OF MADHYA PRADESH”
submitted is the result of original research work and is of sufficiently high standard to
warrant its presentation to the examination. I also certify that neither the project report
nor part thereof has been previously submitted by him for a degree of any university.
(Dr. SEEMA)
Date: Chairperson
CERTIFICATE
This is to certify that the project report entitled “BUSINESS VIABILITY

OF SOYBEAN PROCESSING UNITS IN MANDSAUR DISTRICT OF
MADHYA PRADESH ” submitted in partial fulfilment of the requirements for the
degree of ‘Masters of Agribusiness Management’ of the Acharya N. G. Ranga
Agricultural University, Hyderabad, is a record of the bonafide project carried out by
Mr. SARMAN LAL CHAUDHARI under our guidance and supervision.
No part of the project report has been submitted by the student for any
other degree or diploma. The published part and all the assistance and help
received during the course of the investigations have been duly acknowledged by
the author of the project report.
(Dr. SEEMA)
Chairman of the Advisory Committee
Project report approved by the Student Advisory Committee
Chairperson : Dr. SEEMA

Professor & Head
School of Agribusiness Management
College of Agriculture
Rajendranagar, Hyderabad – 500030
Member : Dr.P. RADHIKA

Associate Professor
School of Agribusiness Management
Member : Shri M.H.V.BHAVE

Associate Professor
Department of Statistics & Mathematics
Date of final viva- voce
LIST OF CONTENTS
Chapter No. Title Page No.
I INTRODUCTION
II REVIEW OF LITERATURE
III MATERIAL AND METHODS
IV RESULTS AND DISCUSSION
V SUMMARY AND CONCLUSIONS
LITERATURE CITED
APPENDICES
LIST OF TABLES
Table No. Title Page No.
1.1 India in world soy industry (2012-13)
4.1 Investment details of the selected large scale soybean processing unit
4.2 Investment details of the selected medium scale soybean processing unit
4.3 Investment details of the selected small scale soybean processing unit
4.4 Details of the processing cost of the selected large scale soybean
processing unit
4.5 Returns from processing of soybean in to soy oil and soy meal from the
selected units
4.6 Details of the processing cost of the selected medium scale soybean
processing unit
4.7 Returns from processing of soybean in to soy nuggets and soy flour
from the selected units
4.8 Details of the processing cost of the selected small scale soybean
processing unit
4.9 Returns from processing of soybean in to soy milk and tofu from the
selected units
4.10 Financial feasibility analysis in the selected soybean processing units
4.11 Problems faced by the selected soybean processing units (10 point scale)
4.12 Ranking of constraints faced by the selected soybean processing units

LIST OF ILLUSTRATIONS
Fig No. Title Page No.
1.1 Soybean growing areas in India
3.1 Map of Mandsaur district
4.1 Image of soybean seeds
4.2 Images of soy oil
4.3 Images of soy meal
4.4 Images of soy nuggets
4.5 Images of soy flour
4.6 Images of soy milk
4.7 Images of tofu (soy paneer)

Acknowledgement
It is by the lavish and boundless blessing of the Almighty that I have been able to
complete my studies successfully hitherto and present this humble piece of work for
which I am eternally indebted.
Fervently and modestly, I extol the genuine cooperation, inspiration, advice and
affection offered to me by the Chairman of my Advisory Committee Dr.Seema,
Professor & Head, School of Agribusiness Management, College of Agriculture,
Rajendranagar, ANGRAU, Hyderabad right from the initiation of the work to shaping of
the manuscript.
I am greatly beholden beyond words to express my deep sense of gratitude and a
great privilege to work under the able and highly exceptional guidance of
Dr.P.Radhika, Assistant Professor, School of Agribusiness Management, College of
Agriculture, Rajendranagar, ANGRAU, Hyderabad for her brilliant counsel,
constructive suggestions.
I equally owe my deep sense of gratitude to Sri. M.H.V.Bhave, Associate
Professor, Department of Statistics and mathematics and member of my Advisory
Committee for his invaluable guidance, suggestions and support during my course of
study.
I feel immense pleasure in extending my deep sense of gratitude to
Dr.A.Janaiah, Member, Board of Management, Acharya N.G. Ranga Agricultural
University, Hyderabad for his cooperation.
I express my heartfelt love and affection from the inner core of heart to my
beloved father and mother, for their blessings, inspiration, encouragement and moral
support to achieve the pinnacle of success in my life. It remains less even if I say a lot
about them.
I owe much to my loving sisters and brothers for their everlasting unparalleled
affection, co-operation, constant encouragement and moral support. They have been my
source of confidence and motivation all through my life.
It is time to surface out genuflect love and affectionate gratitude to my dearest friends
Rajeshwar, Hari Narayan, Pramod, Suresh, Bharat, Anju, Sonam, Dipen Shanti, and
Sarfraz Alam for their unhesitating help and constructive criticisms throughout my
educational career.
I would like to extend thanks to all my teachers, batch mates and juniors for
sharing their ideas, joy and sorrows throughout the period of my study over here. Words
are not enough to express my heartfelt thanks to my seniors Sumer, Pavan, Hemant, Deep
Narayan, Manish, Madhu, Kapil, Aditya and Nitesh for their moral support timely, which
instilled in me confidence to proceed forward.
I am very much delighted to express my indebtedness to non-teaching staff of
SABM Rajkumar, Anand, Victoria, Anusha and others for their constant co-operation at
various stages of the study and immense help as when needed in completion of project
report. I wish to extend my thanks to one and all those have contribution even in a small
way in the completion of my project work.
Finally I am very much thankful to Acharya N. G. Ranga Agricultural University
and Indian Council of Agricultural Research for the financial support received to pursue
MBA(Agribusiness).
Though many have not been mentioned, none are forgotten.
Hyderabad (Sarman Lal Chaudhari)

DECLARATION
I, SARMAN LAL CHAUDHARI, hereby declare that the project report
“BUSINESS VIABILITY OF SOYBEAN PROCESSING UNITS IN MANDSAUR
DISTRICT OF MADHYA PRADESH” submitted to the Acharya N.G. Ranga
Agricultural University for the degree of Master of Agribusiness Management is
the result of the original project work done by me. I also declare that no material
contained in the project report has been published earlier in any manner.
Place: Hyderabad (SARMAN LAL CHAUDHARI)
I. D. No. RMBA/2012-26
Date:
AUTHOR : SARMAN LAL CHAUDHARI
TITLE OF THE BUSINESS VIABILITY OF SOYBEAN PROCESSING UNITS

:
PROJECT WORK IN MANDSAUR DISTRICT OF MADHYA PRADESH
DEGREE : MBA (ABM)
FACULTY : AGRICULTURE
DEPARTMENT : SCHOOL OF AGRIBUSINESS MANAGEMENT
CHAIRPERSON : Dr. SEEMA
UNIVERSITY : ACHARYA N.G. RANGA AGRICULTURAL UNIVERSITY
YEAR OF
: 2014
SUBMISSION
ABSTRACT
Soybean (Glycine max (L) Merrill) is an important oilseed crop in the World. It is
known as the ‘golden bean’, ‘miracle crop’ etc., because of its several uses. India’s rank
was fifth in soybean production (14.67 million metric tonnes) in the world in 2012-13.
Soybean production is mainly confined to Madhya Pradesh, Rajasthan, Maharashtra,
Andhra Pradesh, Karnataka, Uttar Pradesh and Chhattisgarh. The area under the crop in
Madhya Pradesh during 2012-13 was 60.32 lakh hectares and the production was 78.00
lakh tonnes with productivity of 1293 kg/ha -1. In Madhya Pradesh major soybean producing
districts are Ujjain, Devas, Shajapur, Sehore, Indore, Ratlam, Balaghat, Chhindwara,
Gwalior, Bhopal, Jabalpur, Itarasi, Sagar, Mandsaur, Datia, Rewa and Satna. In Mandsaur
district, soybean crop is being grown by large number of farmers on an area of 2.7 lakh
hectares as situated in the fertile land of Malwa Plateau . The soybean processing unit is the
main industry of this district.
The beans can be processed in a variety of ways. Common forms of processed

soybean include soy oil, soy meal, soy flour, soy milk, tofu, soy lecithin and soy nuggets. It
has been estimated that nearly 85 per cent of soybean produced in the country is processed
and nearly 40 per cent of it is processed in Madhya Pradesh alone. Therefore soybean
processing is an important sector in Madhya Pradesh.
The study was conducted in Mandsaur districts of Madhya Pradesh with the
following objectives:
1. To study the investment pattern of small, medium and large scale soybean
processing units in the study area.
2. To estimate the cost and returns pattern of selected soybean processed products in
Mandsaur districts.
3. To understand the business viability of the selected units.
4. To find out the constraints faces by the processors
For the study, 8 small, 5 medium and 2 large processing units were selected from
Mandsaur district of Madhya Pradesh. Thus, a total sample size of 15 processing units
formed the basis for analysis of investment pattern, cost and return, economic feasibility
and constraints faces by processors. The results are presented here under.
Regarding the investment pattern, the total capital requirement for large, medium
and small scale processing units were Rs. 10,08,18,500, Rs. 5,00,15,000 and Rs. 94,18,700
respectively. It is obvious that as the plant size increases the capital requirement also
increases. The total cost and return in processing of 1028 tonnes of soybean into soy oil and
soy meal in large scale unit worked out and is around Rs. 38,489.09 per tonne per year.
Thus, the net returns per year amounted to Rs. 21,126.67 per tonne. The total cost of
processing of 440 tonnes of soybean into soy nuggets and soy flour in the medium scale
unit was Rs. 54,123.46 per tonne per year and is against the net return of Rs. 27,921.99 per
tonne per year. Similarly, In the small scale processing unit the total cost incurred was Rs.
2,07,308.27 per tonne per year from processing of 15 tonnes of soybean into soy milk and
tofu and net return was Rs. 1,57,491.73 per tonne per year. In concern of the business
feasibility, the NPV of large scale soybean processing unit at 14 per cent discount rate was
around Rs.7,91,92,444.17 with IRR of 65.64 per cent and the BC ratio 1.42. Whereas for
the medium scale unit NPV, IRR and BC ratio were Rs. 4,50,78,550.63, 63.06 per cent and
1.40 respectively. Similarly, Rs.1,00,05,197.01, 94.13 per cent and 1.73 were the NPV,
IRR and BC ratio of small scale processing unit. Thus the BC ratio of all the processing
units were greater than one, showing their favourable financial position and viability of
business.
With regard to the constraints faced by the processors, Non availability of quality
produce, erratic power supply, fluctuation in soybean prices were found to be the major
constraint in the processing of soybean into different processed products. The other
problems faced by the processing units are lack of suitable transport facility and less
awareness among the consumers regarding soy processed products, maintenance of
machinery, storage facility and non availability of cost effective technology.
The study suggested an overall improvement in supplying quality of raw material,

awareness regarding processed product by using suitable promotional techniques,
development of cost effective technology and proper arrangement for storage and
transportation. Since the Processing and value addition is profitable over raw soybean,
farmers and small entrepreneurs may be encouraged to take up value addition to soybean.
SYMBOLS AND ABBREVIATIONS
The following abbreviations shall be used both for singular and plural units.
% : Per cent
@ : At the rate of
& : And
et al. : and other people
Rs. : Rupees
l : Litre
Fig. : Figure
ha : Hectare
Kg : Kilogram
BCR : Benefit Cost Ratio
MT : Metric Tonnes
No. : Number
S. No. : Serial Number
Viz. : Namely
i.e. : that is
t : Tonne
NPV : Net Present Value
IRR : Internal Rate of Return
e.g. : For example, for instance
ha : Hectare
TPA : Tonnes Per Annum
VAT : Value Added Tax
US$ : United State Dollar
SOPA : Soybean Processors Association of India
dept. : Department
Kg ha-1 : Kilogram Per Hectare
t ha-1 :
Tonne Per Hectare
etc. : and so on; and other people/things

Chapter I
INTRODUCTION
Soybean (Glycine max (L) Merrill) is a farm crop that belongs to the family of
Fabaceae. It is an annual herbaceous plant which is bushy and erect with leafy plant
structure. Its height is 40 –100 cm. The number of seeds per pod is 2 – 5. Soybean
grows well in warm and moist climate. Soil temperature of 15.5 0C or above favours
rapid generation and vigorous seeding growth. The crop cycle is of about 3 months.
Seeds are sown from the beginning of July, the plants develop pods during mid July and
the crop is harvested in the mid of September or early October.
Soybean is cream coloured, oval shaped and is of the size of common pea.
Soybean is a kharif crop. Soybean is richest, easiest and cheapest available source of
protein. The processed soybean is the largest source of protein feed and second largest
source of vegetable oil in the world. Soybean oil is widely used as edible oil whereas its
meal is mainly used in animal feed industry.
The soybean is an environment friendly grain legume, which is also called as the
Golden bean of 20th century because of its several uses. The term ‘the miracle bean’ is
synonymously also used for. The crop has wide geographical adaptation and unique
chemical composition with an unmatched composition of an excellent source of protein
and oil. It contains about 43 per cent of good quality protein, 21 per cent carbohydrates,
5 per cent minerals, 8 per cent moisture, 19 per cent fat, 4 per cent fiber and reasonable
amounts of vitamins and minerals. Apart from the utilization of soybean as vegetable, it
is also used in oil industry where it occupies first place in the world oil production. It
has tremendous potential to meet the protein-calorie malnutrition of the ever increasing
Indian population. Soy based food products are also suitable for diabetic patients as they
contain less carbohydrates and low unsaturated fatty acid. Soy protein is also good to
people who are allergic to animal protein. Due to higher protein content it is also known
as ‘the bone less meat’. It is one of the most economical protein sources in the world
and much cheaper than the animal flesh.
Importance of soybean crop
Soybean is one of the major oilseed crops in the world accounting for 27 % of
the total oil seed production in the world and 85% of the world’s production is crushed
for oil extraction. World soybean production during 2012-13 was 281.7 million metric
tonnes. The major soybean producing countries in the world are United States of
America with 85.7 million metric tonnes (30.43%) ranks first in production of soybean
followed by Brazil with 79.82 million metric tonnes (28.34 %), Argentina with 53.27
million metric tonnes (18.91%) and China with 18.49 million metric tonnes production
(6.6%). China is the largest importer and United States is the largest exporter of
soybean in the world (www.faostat.fao.org).
India ranks fifth in soybean production in the world with 14.67 million metric
tonnes production (5.21 per cent). Though commercial production of soybean began in
1969-70, soybean production is mainly confined to Madhya Pradesh, Maharashtra,
Rajasthan, Chhattisgarh, Karnataka, Tamilnadu, Uttar Pradesh and Andhra Pradesh.
After 1972, India’s soybean production began to skyrocket i.e. from 0.032 million
hectares and 0.014 million metric tonnes in the year 1969-70 to 10.80 million hectares
and 14.67 million metric tonnes in 2012-13 and the productivity has also increased from
a mere 426 kg/hectares to 1353 kg/hectares in 2012-13 (www.indiastat.com).
In India, soybean is mainly cultivated during kharif season as rainfed crop and to
some extent in rabi season under irrigated condition. In India, Madhya Pradesh (MP)
has the largest area for production of soybean (55.63%) followed by Maharashtra
(38%), Rajasthan (9%), Chhattisgarh (3%), Karnataka (1.5%), Tamilnadu and other
states of nation (www.indiastat.com).
Table 1.1 India in World Soy Industry (2012-13)
(In million tonnes)
Sl. Particular Global India % share

No.
1. Soybean Production 281.7 14.67 5.2
2. Soybean Trade 78 0 0
3. Soya Oil Production 42 1.6 3.8
4. Soya Oil Imports 9 1 11
5. Soya Oil Exports 9 0 0
6. Soya Meal Production 150 7 4.7
7. Soya Meal Exports 52 3.5 6.7
8. Soya Meal Imports 52 0 0
Source : Soybean Processers Association (SOPA)
The figures in the above table show that the share of India in the world soybean
production is 5.2 per cent, in soy oil production it is 3.8 per cent whereas it imports
about 11 per cent of the total soy oil of the world. India contributes to 4.7 per cent of
soy meal production and 6.7 per cent of soy meal exports.
Soybean production is mainly confined to Madhya Pradesh, Maharashtra,

Rajasthan, Andhra Pradesh, Karnataka, Uttar Pradesh and Chhattisgarh. Out of 14.67
million tonnes, Madhya Pradesh produces 7.80 million tonnes contributing
approximately 53.13 per cent to total production of India followed by Maharashtra with
4.67 million tonnes and Rajasthan with 1.46 million tonnes. The average yield of
soybean in India is about 1353 kg/ha, compared with 2300–2800 kg/ha in other
countries (www.indiastat.com).
The area under the crop in Madhya Pradesh during 2012-13 was 60.32 lakh
hectares and the production was 78 lakh tonnes with productivity of 1293 kg/ha. In
Madhya Pradesh major soybean producing districts are Ujjain, Devas, Shajapur, Sehore,
Indore, Ratlam, Balaghat, Chhindwara, Gwalior, Bhopal, Jabalpur, Itarasi, Sagar,
Mandsaur, Datia, Rewa and Satna (www.mpkrishi.org).
Sources : www.mapsofindia.com
* Highlighted areas are soybean cultivating regions in India.
Fig: 1.1 Soybean Growing Area in India *

India has a population of 1217 million (2011 census) people. Forty per cent
population are vegetarian who derive their protein from pulses, cereal and milk and to
some extent from oilseeds such as groundnut, sesame and soybean. In general, the
quality of the protein eaten by the population is poor. Better quality proteins from egg,
meat and aqua products are costly and only a small proportion of the population have
access to them. About 30 per cent of the Indian population is below the poverty line and
does not have enough purchasing power for good quality dietary proteins. It is therefore
important to provide them with an alternative source of dietary protein that is financially
affordable and soybean meets this requirement. Hence, for India, on option is to make
use of soybean as a protein source to augment the conventionally available protein
supply at a cost/price that is affordable by all, especially those with lower incomes. In
India, the cost of 1 kg protein from full-fat soya flour is just US$ 1.5, as compared to
US$ 4, US$ 5, US$8, US$10, US$12 and US$18 from split pulses (dal), egg, milk,
chicken, fish and meat, respectively.
It is a versatile crop with innumerable possibilities of improving agriculture and

supporting industry. Indian soybean processing units has capabilities to process soybean
for food, feed, pharmaceutical and industrial applications. Present utilization pattern of
soybean in India is that 80 per cent is used for oil extraction, 10 per cent for seed and
only 10 per cent for food and feed but it contributes about 12% to the domestic edible
oil pool and country earns substantial foreign exchange through export of soy-meal.
1.1 FUTURE OF SOY PRODUCTS IN INDIA
The beans can be processed in a variety of ways. Common forms of processed

soybean include soy meal, soy flour, soy milk, tofu, soy lecithin, soy oil and textured
vegetable protein (TVP). TVP is made into a wide variety of vegetarian foods, some of
them intended to imitate meat. Soybeans are processed to produce a texture and
appearance similar to other foods (e.g., butter, ice cream, milk, yogurt, cheese, olive oil,
ground beef, peanut butter, potato chips, etc.) and are readily available in most
supermarkets.
With the increasing health consciousness among the general public soybean’s
use is gaining acceptance in the form of textured vegetable protein popularly known in
India as soy badi or soy nuggets, soy fortified wheat flour for making nutritious chapatis
and also for other uses. Soy biscuits made from blends of soybean and wheat flour are
also available in the market. These products are penetrating into the diet of the Indians.
Here it is important to mention that adding soy protein with cereal protein in
any form, improves the quality of the protein and the resultant product by increasing its
nutritional value. The same thing happens when soy protein is admixed with
cow/buffalo milk. Because of the non availability of soy milk and tofu everywhere in
the country, this products usage is confined only to its local area of production. But this
soy milk is lactose free, dairy free and relevant to certain consumers with lactose
intolerance or daily protein allergy. It requires extensive promotional activities at the
national level to make it popular. Being mainly the country of vegetarian people, India
has indeed a very great potential for soy products. The very large vegetarian population
of this region promises a bright future for soy foods. Its higher nutritional as well as
medicinal value combined with affordable price is increasing the demand for soy
processed foods.
1.2 Soybean processing unit in India and Madhya Pradesh
The major share of soybean production in India comes from Madhya Pradesh,
Maharashtra and Rajasthan. So majority of soy processing units are situated in these
states. It has been estimated that nearly 85 per cent of soybean produced in the country
is processed and nearly 40 per cent is processed in Madhya Pradesh alone. Therefore,
soybean processing is an important sector in Madhya Pradesh. There are more than 130
soybean processing units in Madhya Pradesh out of more than 370 across the country
but most of them are engaged in processing soybean for oil, de-oiled cake (DOC) and
lecithin. Only a few are engaged in making value added products indicating
apprehensions on viability of investments in soybean value added products. With the
increasing level of awareness of the people with regard to the soybean value added
products, the demand for the products is also on the raise. In this regard, there is need to
understand the financial implications of processing of various value added products of
soybean. Therefore, in the present study, an attempt is made to find out the financial
feasibility and profitability of processing soybean value added products in Mandsaur
district of Madhya Pradesh with the following specific objectives.
1.3 OBJECTIVES OF INVESTIGATION
processing units.
2. To estimate the cost and returns pattern of selected soybean processed products.
4. To find out the constraints faced by the processors in the procurement,
processing and marketing.
1.4 SCOPE OF THE STUDY
The study was conducted in Mandsaur district of Madhya Pradesh. The study
mainly concentrates on initial investment pattern, cost and returns, business viability
and constraints involved in processing of soybean value added products. Three types i.e.
large, medium and small scale soybean processing unit have been taken into
consideration. It is noticed that most of the large soy processing units are involved in
soy oil and soy meal processing and medium scale unit are involved into production of
soy nuggets and soy flour whereas small scale is producing mainly soy milk and soy
paneer (Tofu). Hence, this study throws light on various financial aspects involved in
processing of value added products of soybean and critically examines economic
feasibility of processing unit. It would also throw light on constraints in production and
would be a guide to the processers to choose their plant size.
1.5 LIMITATIONS OF THE STUDY
The study pertained to the owners of the private processing units who were
generally suspicious of the motives of any investigation because of fear of taxation.
Therefore, the investigator had to face certain drawbacks in ascertaining the accuracy of
some data. Great care was taken in eliciting the required information as accurately as
possible. Single person’s research is always confronted with various bottle necks and
hence the present study was not an exception to these inherent limitations. This study
was confined to a particular region and to specific units and hence conclusions drawn
are applicable only to such units where similar conditions exist.The present study was
undertaken in Mandsaur jurisdictions of Madhya Pradesh and both qualitative and
quantitative data were collected from different soy processing units in a very limited
period of time and for a limited sample size. Hence, generalization of the results has to
be attempted carefully.
1.6 STRUCTURE OF THE PROJECT REPORT
The study is presented in six chapters as follows:
I. Introduction: The importance of the study, problem setting and

objectives are covered.
II. Review of literature: The available and relevant literature is thoroughly
reviewed.
III. Material and Methods: The methods and materials encompassing
sampling, data collection, analytical tools, concepts and terms are
explained.
IV. Results and Discussion: The results and discussion covering the
important aspects such as investment, cost and return, Benefit Cost ratio
and constraints in processing are covered.
V. Summary and Conclusions: Summary and conclusions are presented
along with suggestions for improving the business viability of processing
of soy foods.
Sources : www.mapsofindia.com
* Highlighted areas are soybean cultivating regions in India.
Fig: 1.1 Soybean Growing Areas in India *

Chapter II
REVIEW OF LITERATURE
In this chapter an attempt is made to critically review the literature of the past
research work done relevant to the present study. For any investigation, the findings of
earlier studies may possibly give insight of the problem and sets direction for the
research. Such a review would help the researcher to organize the research on proper
lines and bring about refinement in the study. A brief account of the previous work done
on the study is and compiled to enable better understanding of issues concerned to the
present study under the following sub heads.
2.1 Studies on Investment patterns for setting up Agro Processing units.

2.2 Studies on cost and returns of Agro Processing units.
2.3 Studies on financial feasibility of Agro processing units.
2.4 Studies on constraints faced by Agro processing units.
2.1 Studies on Investment patterns for setting up Agro Processing units
Singh (2013) studied an economic evaluation of investment on Aonla (Embalica

officinalis G.) processing units in Pratapgarh district of Uttar Pradesh. It was observed
that on an average, the size of the land for establishing the small scale unit was 325
sq.mts and it amounted to Rs.3.75 lakhs whereas the same for medium scale unit was
675 sq.mts which amounted to Rs.8.50 lakhs. The cost of the building which was of the
size of 150 sq.mts for small scale units and 275 sq.mts for medium scale units worked
out to Rs. 7.25 lakhs and Rs. 11.65 lakhs respectively. Altogether the total capital
requirement for land and building is around Rs.11.00 lakhs and Rs. 20.15 lakhs for
small and medium scale aonla processing units respectively. The availability of
equipment for small scale units and medium scale units vary in number and size. The
expenditure for these equipment worked out to Rs. 4, 49,000 and Rs. 9,35,000 for small
size and medium size processing units respectively. In medium scale units which
includes miscellaneous expenditure of Rs. 65,000. A total expenditure of Rs.16.09 lakhs
and Rs.30.15 lakhs had been incurred toward fixed investment for small and medium
scale units. Thus the detail of investment requirement clearly indicates that they
increase with increase in the size of the processing unit.
Paila (2009) studied assessment of processing and marketing channels of cashew
nut in Palasa region of Andhra Pradesh. The study revealed that the total fixed capital
investment was Rs.3, 85,173.00 and Rs.5, 98,990.00 in small and large scale units
respectively. The investment on land and buildings accounted highest investment
followed by machinery and equipment, the proportion of investment on land and
building in the total fixed investment was higher in large scale unit than the small scale
unit, which constitutes about 77.74 and 78.98 percentages for small and large scale units
respectively. The comparison between the large scale, and small scale processing units
revealed that, the total fixed capital investment was comparatively much higher in large
scale unit.
Siddaram (2004) studied Management of dairy processing units: A case of

agricultural implements manufacturing units in Hubli-Dharwad. The study revealed that
plant, machinery and equipments formed major component of investment accounting
for 50.12 per cent of investment followed by building and civil structures (33.35 per
cent) and cost of land (9.02 per cent) and infrastructure facilities to the extent of 6.69
per cent. The investment on plant, machinery and equipments was Rs. 150.36 lakhs
followed by building and civil structures at Rs. 100.05 lakhs followed by cost of land to
the extent of Rs. 27.05 lakhs. Investment on infrastructure facilities, office and fixtures
and miscellaneous fixed assets contributed to an extent of 7.51 per cent, envisaging total
investment of Rs. 300.03 lakhs in the co-operative processing unit. Investment on
infrastructure facility structures, office fixtures and miscellaneous fixed assets
contributed to an extent of 7.49 per cent, envisaging total investment of Rs. 500.98
lakhs in private processing unit.
Manjunath (2003) compared the private and public sector fruits and vegetable
processing units in Bangalore district of Karnataka. He indicated that the capital
investment was higher on plant and machinery (80.58%) in private sector whereas in
public sector, it was 74.65 per cent.
Joshi et al. (1999) studied the capital investment in the home, cottage, small and
large scale mango pulp making units in South Konkan region. In these, the fixed capital
accounted to the tune of Rs.1.01 lakh, Rs.1.6 lakh, Rs.1.8 lakh, and Rs.20.7 lakhs
respectively. The working capital accounted for Rs.2.25 lakhs, Rs.11.35 lakhs, Rs.4.34
lakhs and Rs.21.03 lakhs respectively. The working capital was more in proportion than
fixed capital in all the categories. Analysis also indicated that processing of mango pulp
was more economical as indicated by higher scale efficiency than all other categories.
Dev (1998) in his study on management appraisal of cashew processing industry

in Uttar Kannad found that the total capital investment directly varied with the size of
the unit. Further, he concluded that the total capital investment was Rs. 117.5 lakhs for
large scale units and 36.32 lakhs for small scale units, wherein the marketing capital
accounted for about 25 per cent of the total capital investment with the majority of the
fixed capital investment of 80% was on building and machinery.
Teggi et al. (1998) studied the costs involved in jaggery production in Bijapur
district. The investment required for establishing jaggery processing unit with a capacity
of one ton per day was around Rs.97,000. The share of the shed in total investment was
maximum (29%) followed by investment on land (21%) and cane crusher (20%). The
investment made on jaggery processing unit was repaid with in a short span of one year.
Sakia and Talukdar (1996) studied the economic potentialities of commercial

processing firms at farm level for major spices in Nagaon district of Assam. It was
observed that the average capital investments in commercial processing units were Rs.
1.20 lakhs, Rs. 0.94 lakhs and Rs. 0.78 lakhs and investment in machinery and
equipment was highest followed by opportunity cost of own land.
Rachapal and Darshan (1996) conducted the study to examine performance of

cooperative sector infrastructure in Punjab market canneries. The study showed that the
gross value of the fixed assets stood at Rs. 152.77 lakhs. The depreciation accumulated
was Rs 92.13 lakhs. The present value of fixed assets was computed at Rs. 60.64 lakhs.
Kalse et al. (1996) found that the Initial investment for the establishment of oil
industries, dal mills and cotton ginning industries was Rs. 3.19 lakhs and 5.63 lakhs
respectively. The cost of machinery was the major item contributing 61.43 per cent and
59.12 per cent in dal mill and cotton ginning industry respectively. The average capacity
utilization of oil industry, dal mill and cotton ginning industry was 41.67 per cent, 71.20
per cent and 47.79 per cent, respectively
Maurya et al. (1995) in their study on economics of production and processing

of Aonla in Varanasi district of Uttar Pradesh worked out the cost of Aonla processing
plant and its establishment. The total establishment cost (fixed cost) per quintal was Rs.
8.00. It was the highest for depreciation, (Rs. 3.40/q) followed by interest on fixed
capital (Rs. 2.50/q), insurance (Rs. 1.00/q), maintenance cost (Rs. 0.60/q) and electricity
and water charges (Rs. 0.50/q).
Singh et al. (1994) while studying the economics of marketing and processing of
pulses in Bhundelkhand region (Uttar Pradesh), estimated that of the total cost,
land/building accounted for the highest share (51.97 %) followed by machinery and
equipment (40 %), electricity fitting (4.72 %) and other fixed capitals (3.31 %) in arhar
processing plant. In case of grain processing unit land/building, machinery, electricity
and other fixed capital accounted for 50.26, 42.19, 4.77 and 2.78 per cent, respectively.
Amrutha (1994) studied economics of processing paddy into rice, Poha,

Murmura and popped rice in Chitradurga and Dharwad districts of Karnataka state. The
results showed that the capital investment on rice mill, poha mills, murmura mills and
popped rice units was Rs. 17, 92,250, Rs 5, 33,225, Rs. 16,740 and Rs. 20,786
respectively.
Venkatasheshaiah (1992) evaluated the groundnut processing units in Andhra

Pradesh. It was found that there was a direct relationship between the total capital
invested and the size of oil mills. It is also indicated that the capital requirement per
quintal of oil production was Rs 161.01 in baby expeller mills, Rs 112.24 in 2-chamber
expeller mills and Rs 83.86 in 3-chamber expeller mills.
Nagesh (1990) in his study on investment in production and marketing of cashew

in Karnataka, indicated that the capital investment was the highest in building (72.81 %)
followed by machinery and equipments (15.42 %) and land (11.77 %) at an overall level
of the units. Further, it was observed that the processing units utilized only 55.80 per
cent of their capacity.
2.2 Studies on cost and returns of Agro Processing units
Eliot Rebelson (2013) studied the business viability and potential of

Millet/Sorgum processing unit in DSR, Hyderabad. The study indicates that the
processing of sorgum into jowar flakes incurred processing cost of Rs.3,68,061.67 and
the gross return obtained was Rs 4,85,760. Therefore a net return of Rs.1,17,698.33 was
obtained from the processing of Jowar seed into Jowar flakes. The BCR obtained was
1.20 indicating its profitability. For multigrain Atta, the total cost of processing was Rs
10,77,818.93 per annum and the gross return worked out to Rs 12,44,760. Therefore a
net return of Rs.1,66,941.07 per annum was obtained. It is seen that for every rupee of
investment in Multi Grain Atta Processing, about Rs.1.09 was obtained as returns,
indicating its profitability. In the case of Jowar biscuit processing, total cost of the
processing was Rs 3,79,266.67 and the gross return estimated to be Rs.4,85,760. The
price of Jowar Biscuit, during the study period was Rs.15,000 per quintal. Therefore a
net return of Rs.1,06,493.33 was obtained from the processing with BCR of 1.05
indicating its profitability.
Kumar et al. (2012) studied the economics of jaggery production in Karnataka

during the year 2006-07. The study was undertaken in Belgaum district of Karnataka.
They revealed that the cost of establishing jaggery processing unit with a capacity of
one ton per day was Rs. 1,68,347. The total cost of jaggery production including
marketing cost was Rs. 14.57 lakh per year of which, the raw material cost accounted
for 72.97 per cent. The returns from jaggery processing unit per year was Rs. 16.19
lakhs with a net margin of Rs. 1,61,715 for producing 140 tones of jaggery. Positive
NPV and very high IRR indicated the financial viability of jaggery processing units in
the study area.
Changule (2010) studied the profitability of aonla processing units in

Maharashtra. The unit as a whole consisted of eight aonla product enterprises in which
raw aonla was processed of about 60 quintals in 75 days per annum. As a result, the net
profit of unit as a whole was Rs 2,26,020.05 in which aonla – murraba, candy
enterprises were dominant. The cost of production of aonla – murabba was Rs 30.02 per
kg which was lowest among all the aonla products.
Kumar and Chinnappa (2010) studied on economic analysis of cashew

processing in Karnataka. The study was done to investigate the processing aspects of
cashew nut in Karnataka based on primary data collected from 30 cashew processing
units spread over Udupi and Dakshina Kannada Districts of Karnataka. The data were
analysed using descriptive statistics, investment measures and break even analysis.
Investment feasibility of cashew processing units was done using discounted cash flow
techniques such as Net Present Value, Benefit Cost Ratio and Internal Rate of Return.
They found that variable cost of processing of cashew nut was Rs. 48,844 per ton of
which the cost of raw materials constituted major item with 81.01 per cent. The
marketing costs and fixed costs were in the order of Rs. 3862 per ton and Rs. 2289 per
ton, respectively. The total cost of processing inclusive of variable cost, marketing cost
and fixed cost was Rs. 54,433 per ton. Processing units obtained net returns of Rs.3,
880, Rs.3, 537 and Rs.3, 009 per ton in large, medium and small size units, respectively.
Business ratios indicated that the medium and large size units were more efficient
compared to the small size units. Investment on cashew processing was economically
viable as indicated by results of Net Present Value, Benefit Cost Ratio and Internal Rate
of Return. Further, scope for increasing the efficiency and reducing the cost of small
processing units was observed.
Sharma and Pandey (2008) studied the costs and net profits from Guava
processing in Uttar Pradesh in the year 2004-05. The cost of processing guava into jam
and jellies was estimated at Rs. 3,96,482 per year, the gross returns obtained from
selling it worked out to Rs. 5,28,750 per year and the net returns obtained were Rs
1,32,268 per annum. It was observed that the processing of guava was more profitable
than selling it raw.
Deorukhakar et al. (2007) in their study in Sindhudurg district of Maharashtra,

worked out costs and returns structure and employment potential in kokum (Sardinia
indicia) processing units. The study revealed that processing of kokum into kokum
syrup was more profitable than kokum algal and kokum rind. The processing of kokum
into kokum syrup resulted in gross returns of Rs 3780 per quintal at a cost of Rs 2440/-,
thereby yielding net returns of Rs 1339.63 per quintal. On the other hand, kokum rind
and kokum algal yielded net returns of Rs 604.91 and Rs 476.33 per quintal.
Meena et al. (2006) conducted a study to examine the economic viability of

different sizes of chilli processing units in Jodhpur district, Rajasthan, India. The data
was gathered from 12 processing units in the district during 2000-01. Results showed
that the cost of processing per quintal of chilli was Rs. 180.06, Rs. 167.30, Rs. 234.42
for small, medium and large processing units, respectively. Margin of processors
increased with an increase in the size of processing unit. Value addition by investment
of rupee as processing cost and returns to per rupee investment, also increased with an
increase in size of processing unit. All the processing units were operating above the
break-even quantity, but failed to utilize their installed capacity.
Shaheen and Gupta (2004) in their study on economics and potential of apple
processing industry in Kashmir province of Jammu and Kashmir state found that
average per quintal processing cost of concentrated apple juice was computed at Rs.
2807.13, while the net return was Rs. 2189.23 per quintal. They also found that at least
four processing plants with a processing capacity of 50000 MT per annum can be
established in Kashmir, where the raw material is more than sufficient to run them at
full capacity.
Singh et al. (2003) conducted a study to find out the techno-economic feasibility
of processing of aonla products, like the preparation of aonla pulp based products (jam,
squash, sauce) and non pulp based candy (segmented). They found that the per litre
processing cost of squash and cost of 1 kg candy was much lower than that the cost of 1
litre sauce and one kg jam.
Wadkar et al. (2001) studied the economics of fruit processing unit of kokum in
Ratnagiri district of Maharashtra. The study revealed that, in kokum processing industry,
on an average 317.07 MT of fresh fruits were used to get dried kokum rind and Amrit
kokum, and 685 kg of fresh fruits were used to produce kokum butter. The per factory
total capital investment made towards processing of dried Kokum rind, Amrit kokum
and Kokum butter accounted to Rs.1,04,418/-, Rs.3,73,385/- and Rs.2,73,807/-
respectively. The cost of processing of one quintal of dried kokum rind was
Rs.2,143.91/- and of 100 bottles of Amrit kokum was Rs.2,031.68 and cost of
processing per tin (10 kg) of kokum butter was Rs.1, 482.14. The study had also
identified three marketing channels for the distribution of kokum products viz., (1)
Producer- consumer, (2) producer- wholesaler- retailer- consumer and (3) producer-
contractor- retailer- consumer. The cost of marketing worked out to Rs.3.90 per kg of
dried kokum rind, Rs.6.30 per litre of Amrit kokum and Rs.14.20 per kg of kokum butter.
Marketing cost items includes octroi, transport and sales tax paid on kokum products.
Kulkarni (1999) conducted a study on production, marketing and processing of

soybean in Belgaum district of Karnataka state. He worked out the total cost incurred in
the processing soybean was 10,404.47 per tonne, out of which 96.6 per cent was the
variable cost and 3.4 per cent was the fixed cost. The gross return per tonne of oil was
29000 and for oil cake 7000 per tonne. The net return per tonnes of output was Rs.
665.53. The B: C ratio for the unit was 1.06.
Srinivasa et al. (1996) in their study on economics of processing of cashewnut in

Andhra Pradesh indicated that the processors have to bear the processing cost of Rs.
124.22 per 80 kg of raw nuts, out of this total cost, raw material cost of Rs. 50.77 was
incurred which formed 40.89 per cent and labour cost was Rs. 72.81 accounted to 58.61
per cent of total processing cost.
Ramkumar (1996) used business ratios in his studies on economics of paddy
processing in Ranga Reddy district of Andhra Pradesh. He worked out total assets
turnover (Rs. 3.10), return on assets (Rs.0.30), returns per Rs.1000 of working capital
costs (Rs.1115.07), net profit margin (9.84%), cost benefit ratio (1.10), capital
turnover(Rs.0.81), return on capital employed (Rs. 0.08) and return on Rs. 1000 of
investment for the private rice mills. He revealed that the raw material was the major
cost component in the rice processing units, amounting to Rs.586.51 per quintal and
Rs. 541 per quintal in private and co-operative rice mills respectively which accounted
for 78.61% and 81% of total costs respectively. The net return per quintal of rice
realized from private and co-operative rice mills were Rs.81.50 and Rs.71.96
respectively.
2.3 Studies on financial feasibility of Agro processing units
Sharma (2013) studied the business viability and potential of guar (cluster bean)
industry in India. The study revealed that Benefit Cost Ratio obtained was 1.11 for the
plant having processing capacity of 5000 TPA guar seed. The NPV and IRR for the
investment were found to be Rs.1101.04 lakh and 72.53 per cent respectively at 14 per
cent discount rate showing the financial feasibility of investment. The Pay Back Period
for the investment was 2 years 24 days. From study it was concluded that The guar gum
processing is a profitable business for the investors and it can be seen by good Benefit
Cost Ratio (1.11) and lower Pay Back Period. The investment is also financially feasible
as represented by NPV and IRR of the investment.
Kakade et al. (2011) studied the financial feasibility of grapes winery units in
Maharashtra. About 32 grape winery units were selected from Pune, Nasik and Sangli
districts. In order to know the financial feasibility of project, the evaluation measures
used were net present worth, benefit cost ratio, and internal rate of return. The result
revealed that present worth of benefit was Rs. 651.47 lakh while present worth of cost
was Rs. 439.93. Thus, net present worth was Rs. 211.54 lakh. Benefit cost ratio was
found to be 1.48 and while, the internal rate of return (IRR) was found to be 65.50 per
cent.
Jaiswal (2009) studied the economics of production and value addition to

soybean In Madhya Pradesh. He made compare between two soya processing units.
Where a unit was processing soybean into soy milk and tofu and other for processing
raw soybean into soya flour. The net present value (NPV) at 14 per cent discount rate,
in case of soymilk and tofu unit (Rs 22,30,823) was more than soy flour (Rs 7,24,137).
Similarly benefit cost ratio (BCR) at same discount rate was more in case of soy milk
and tofu unit (1.42) than soy flour unit (1.17) indicating profitability of converting
soybean into soymilk and tofu was more than soy flour. He also observed that payback
period (PBP) in both soy processing units was less, only 3 years in case of soymilk and
tofu unit and 6 years in soy flour unit. The internal rate of return (IRR) was more in case
of soymilk and tofu unit 75.25 per cent to 37.25 per cent in soy flour unit.
Shiva kumara (2008) conducted study on production and marketing of

vermicompost in Karnataka: A case study of Dharwad District. To examine the
financial feasibility in vermicompost production, NPV, BC ratio, IRR and PBP were
worked out. The study revealed that the net present value was Rs 99827, benefit cost
ratio at 12 per cent discount rate was 3.44, internal rate of return was 38 per cent and
payback period was 1.71 years. This indicated the economic feasibility of
vermicomposting enterprise
Sundarevarodarayan and Ramanathan (2008) reported that B C ratio and IRR for
new plantations were 1.42 and 34.36 per cent, while for old plantations it was 1.06 and
17.17 per cent respectively. Further, they suggested that need to create an awareness to
adopt improved varieties (HYV) which not only reduce the cost of cultivation but also
increase the net income among the different size group of farmers.
Gondalia et al. (2007) studied the economic evaluation of investment on aonla

orchard in Gujarat. The study found that establishment of aonla orchard involves high
investment, but the annual net returns are also quite high, after the third year of
plantation. The values of economic parameters, viz. NPV, BCR, IRR and PBP have
been found to be Rs 652652, 5, 25, 65.03 percent and 55 months, respectively at 10
percent discount rate. Under varying cost and return situations, values of all these
feasibility parameters have satisfied the acceptance rules for the investment proposition.
Gobbi and Casasola (2003) examined the financial feasibility of investing in

silvopastoral systems on 20% of the area of a conventional livestock farm in Esparza,
Costa Rica. The findings from an ex-ante benefit-cost analysis indicated that the
investment was financially viable with an incremental net present value of US$1613
and an internal rate of return of 20%, if only livestock production was considered.
Investment feasibility was directly related to improvements in the productive and
reproductive parameters of the livestock herd caused by the incorporation of
silvopastoral systems.
Jayesh (2001) used NPV, IRR, BCR and PBP for analysing the financial
feasibility of pepper and cardamom plantations in Kerala and Karnataka. The financial
feasibility analysis revealed that the investment in pepper and cardamom plantations in
the states of Kerala and Karnataka was economically sound even under the risks of
increase in costs and decrease in returns.
Patil et al. (2000) evaluated the economic feasibility of teak plantation in Nagpur
forest circle in Maharashtra state. For testing the economic viability, project evaluation
techniques were used. The benefit cost ratio, net present value, profitability index,
payback period and internal rate of return (at 12% discount rate) were 5.77, Rs. 102275,
9.49, 9 years and 34.24 per cent, respectively, while the corresponding figures at 15 per
cent discount rate were 4.198, Rs. 52003, 6.30, 9 years and 33.24 per cent. This
indicated that all the parameters of economic feasibility test turned out to be favourable,
thereby justifying investment in teak plantations, which was found to be economically a
viable proportion.
2.4 Studies on constraints faced by Agro processing units
Sen (2013) studied profitability of different value added products of Soybean: a

case study of Kota district in Rajasthan. In which he observed the constraints faced by
processing units. In case of soya flour units constraints with respect to product character
is the first major constraint, whereas constraints involved in processing is a the second
major constraint. The constraints related to marketing, infrastructure facility, return,
procurement of raw material and distribution was ranked as III, IV, V, VI and VII
respectively. In soya milk and tofu units distribution related constraints are the major
one followed by processing constraint with rank II. Whereas, constraints related to
product character, procurement of raw material, marketing, infrastructure facility and
returns were assigned rank III, IV, V, VI and VII respectively. In soya nugget unit
constraints related to processing got first rank, whereas the constraint in the
procurement of raw material is a second major constraint. Infrastructure facility, product
character, marketing, distribution and returns constraints have obtained rank of III, IV,
V, VI and VII respectively.
Srivastava et al. (2009) conducted study on economic analysis of marketing of
soybean in Mandsaur district of Madhya Pradesh. The study revealed that the soybean
growers were deprived of their due share in consumer rupee because the producers were
forced to sell their produce to intermediaries under financial obligations and the soybean
growers were unable to store their produce owing to lack of proper storage facilities.
The other reasons were prevalence of malpractices in the market, day to day fluctuation
in the price of soybean, lack of market yards and high charge of transportation.
Chinnappa and Nagaraj (2009) studied on costs and constraints in marketing of

arecanut in four taluks, namely Channagiri, Honnali Bhadravathi and Tarekere of
Karnataka. The problems of higher of transportation cost and shortage of transportation
facilities were two major constraints confronting the arecanut growers. They suggested
that concerted efforts are required by the agencies such as APMC's, co-operative
marketing societies involved in arecanut marketing to arrange for cheap and efficient
transport facilities during peak periods of production. They also suggested to extend
support price to arecanut.
Singh (2008) found that the major problems faced by processing sector were, low
productivity of raw materials leading to high unit price of final products, lack of storage
infrastructure leading to wastage and increasing unit price of finally available quantity,
lack of trained human resource, inadequate knowledge of material and lack of market
intelligence and inadequate cold storage and refrigerated transport facility of the fresh as
well as processed commodities which needs to be solved immediately for the growth of
processing sector.
Yadav and yadav (2007) studied the prevailing practices of post harvest handling
and management (focusing on processing, pre-cooling, grading, packaging, transport,
storage and marketing) of horticultural produce (including fruits and vegetables) in the
north eastern region of India: Assam, Arunachal Pradesh, Manipur, Meghalaya,
Mizoram, Nagaland, Sikkim and Tripura. Postharvest handling, processing and
marketing constraints were enumerated. Some thrust areas, like poor marketing,
transportation, cold storage facility and absence of insurance facility were identified as
problems in post-harvest technology for value addition.
Rangasamy and Dhaka (2007) found that the economic efficiency of dairy plants
is severely influenced by a variety of constraints at 3 important value addition stages of
milk procurement, processing and manufacturing and distribution of dairy products.
This study was conducted to compare the constraints faced by cooperative and private
dairy plants at these vital value addition stages. Some of the members of the cooperative
society selling the milk to private milk vendors and some of the collection centers
taking the inadequate quantity of milk were the very serious problems faced by
cooperative and private dairy plants, respectively. Underutilization of transport vehicles,
underutilization of chilling centres and underutilization of plant at milk processing and
manufacturing levels were the most serious constraints faced by both the cooperative
and private dairy plants. Encouraging value addition, effective sales promotion and
advertisement strategy and also focusing on consumer-oriented market research and
development were some of the suggested strategies.
Raghuwanshi et al. (2006) from their study on price spread and constraints of
marketing of soybean in Sehore district of Madhya Pradesh revealed that the higher
transportation rates, lack of farmers organization, low price during the peak period,
distance from mandi and lack of information about warehouses were the major
constraint faced by the most of producers and thus they needed special attention for
their solution.
Banafar et al. (2004) in his study on constraints in soybean production,

marketing and processing in Sehore District of Madhya Pradesh found that the major
problems faced by processing sector were as the need for large number of labours which
leads to increment in the cost of processing, reduced recovery due to improper pre
milling treatment, lack of storage infrastructure leading to wastage and increasing unit
price of finally available product. The problem related to marketing was lack of arhatia
for sale of produce, inclination of seller towards commission agent, price settlement for
poor quality product, etc. The production constraints included lack of trained human
resource, untimely availability of HYV, disease and pest infestation etc.
Veerkar et al. (2001) studied constraints in kokum processing industry. They

have mentioned that 60 per cent of the processing units have mentioned high transport
charges and non-availability of the raw material as the common problem. On the other
hand, 70 and 80 per cent of the processing units faced the problem of non-availability of
labour and capital respectively. Similar problems were also found in the Amrit kokum
and kokum butter processing units. To overcome the problem, more than 70 per cent
kokum processors suggested that they should be provided with long term financial
assistance at lower rate of interest by the financial institutions.
Sreelatha (2000) in her study on economic analysis of production and processing
of oil palm in Nellore district of Andhra Pradesh revealed that the production problems
of oil palm faced by the farmers were shortage of power supply and price fluctuations.
Patel et al. (1997) in their study on marketing efficiency of Anand vegetable market in
Gujarat reported that lack of storage facilities, delay in payment of sale proceeds, high
cold storage charges, monopoly of few middlemen and need of timely display of these
perceptive products etc. were the major problems faced by the cabbage and cauliflower
growers.
Ansari (1990) studied the organization and management in co-operative sugar

mills in Uttar Pradesh and concluded that the sugar co-operatives of Uttar Pradesh area
were in the grip of a number of management problems at various levels. The nature of
the cooperatives multiplies their complexity. Lack of professionalization of
management was mainly responsible for this state of affairs besides other things such as
vested interests of office bearers.
Srivastava (1989) in their study titled Agro processing industries: potential,

constraints and task ahead assessed the constraints faced by agro-processing industries.
The factors such as age old technology, over utilization of energy, lack of economies of
scale in production and increased marketing cost were identified as the major problems
faced in agro-processing.
Hemchand (1989) studied the economics of processing units in Narasinghpur

district (MP) and found that the main problems of arhar processors were ; inadequate
availability of raw materials, short supply of power leading to underutilization of the
plant, declining output, inefficient utilization of machinery and labour and problems of
transportation of processed material to different destinations.
Chapter III
MATERIAL AND METHODS

This chapter presents the description of the study area, nature and method of data
collection, sampling procedure and analytical tools applied in attaining the objectives of
the study. The specific objectives pertain to the analysis of soybean processing unit by
evaluating initial capital investment, costs and returns and constraints. The chapter is
presented under the following sub headings.
3.1 Description of the study area.

3.2 Sampling procedure.
3.3 Nature and sources of the data.
3.4 Analytical techniques employed.
3.5 Concepts and terms used in the study.
3.1 DESCRIPTION OF STUDY AREA
3.1.1 Location and Geographical Area
The study was conducted in Mandsaur district of Madhya Pradesh. It lies between
the parallels of latitude 230 45' 50" North and 250 2' 55" North, and between the
meridians of longitude 740 42' 30" East and 750 50' 20" East. Mandsaur district forms
the northern projection of Madhya Pradesh from its Western division, i.e.,Ujjain
Commissioner's Division. The district is an average size district of Madhya Pradesh and
is a highly industrialised district. It extends for about 142 km from North to South and
124 km from East to West and spread in the total area of 5521 km² with a population of
1,339,832 in 2011. The district is bounded by two districts namely Neemuch in the
West-North and Ratlam district of Madhya Pradesh bounds it in the South. It is also
surrounded by Pratapgarh, Chittorgarh, Kota, Jhalawar districts of Rajasthan.
3.1.2 Topography
Mandsaur is one of the Western districts of Madhya Pradesh and is something like
a dumbell in shape. The country slopes gently and smoothly Northward from the high
table land of Malwa plateau in Madhya Pradesh towards Mandsaur. It is well watered
drained by Shivna river flowing from the centre.
3.1.3 Demography
As of 2001 Indian census, Mandsaur has a population of 116,483. Males constitute

52% of the population and females 48%. Mandsaur has an average literacy rate of 71%,
higher than the national average of 59.5%: male literacy is 78%, and female literacy is
64%. In Mandsaur, 13% of the population is under 6 years of age. In 2011, Mandsaur
has population of 1,339,832 of which male and female were 681,439 and 658,393
respectively. The most common language is Malvi (Rajasthani and Hindi Mixed). The
slate pencil industry is the main industry of the district.
3.1.4 Climate and rainfall
The climate of this district is generally dry except in South-West monsoon. Year
may be divided into four seasons. The cold season is from December to February. This
is followed by the hot season from March to the middle of June. Thereafter the South-
West monsoon season starts and continues upto about the middle of September. In this
district there is rapid increase in temperatures after February. The month of May is
generally the hottest month with the mean daily maximum temperature at 39.8 0 C. and
the mean daily minimum at 25.40 C. Days are intensely hot in summer and hot dust-
laden winds which blow during this season add to the discomfort. On individual days in
the summer session and in June before the onset of the monsoon the day temperatures
often go up above 450 C. January is the coldest month with the mean daily maximum
temperature at 35.00 C. and mean daily minimum at 9.30 C. The average annual rainfall
in the district is 786.6 mm. The rainfall in the Districts in the region round
about Sitamau- Mandsaur- Malhargarh , and in general increases in the Northern part of
the district from the West towards the East. Due to congenial climate, it is also famous
for large production of opium around the world.
Fig: 3.1 Map of Mandsaur District
3.2 SAMPLING PROCEDURE
3.2.1 Selection of region
Mandsaur district of Madhya Pradesh was selected for the study as the district is
one of the major producers of soybean in the Madhya Pradesh and majority of the
soybean processing units are located in this district.
3.2.2 Selection of the processing units
For the study two large, five medium and eight small scale processing units
involved in producing various processed products were purposively selected from
Mandasaur district of Madhya Pradesh. Thus a total sample size of fifteen processing
units formed the basis of the study.
3.3 NATURE AND SOURCES OF DATA
Both primary and secondary data was collected for this study. The primary data
on the investment details, cost and returns in processing, constraints in procurement,
processing and marketing etc. were collected from the processors of the selected units
with the help of well designed pretested questionnaire prepared specifically for the
purpose. The information on the area, production and other details of soybean
production and processing were obtained from the secondary sources like the records of
the selected units, previous reports, journals, state agriculture departments, websites etc.
3.4 ANALYTICAL TECHNIQUE EMPLOYED
The data collected from primary and secondary sources were analyzed in
multiple stages. The data were subjected to statistical analysis through the following
techniques.
3.4.1 Tabular analysis
The data collected were presented in tabular form to facilitate easy comparison.
The simple tabular analysis was employed for analysis of the capital investment, cost
and return structure and constraints in soybean processing. Constraints faced by the
soybean processing units were calculated by the opinion survey method through the
response of respondents regarding particular problem. The data was summarized with
the help of statistical tools like averages and percentages to obtain meaningful results.
3.4.2 Functional analysis
For the project feasibility analysis the discounted cash flow technique which has
an advantage of reducing cash flow to single point of time was used to facilitate the test
of feasibility. The discounting procedure estimate the present value of an amount either
received or paid out in the future. The discounting factor permits the determination of
the present value and has found application in evaluation of project. Three financial
feasibility techniques were used in the study to evaluate the feasibility of investment in
soybean processing units viz; Net Present Value (NPV), Internal Rate of Return (IRR)
and Benefit Cost Ratio (BCR).
3.4.2.1 Net Present Value (NPV)
It is believed to be more meaningful measure of the long term investment proposal

and useful in comparing the other investment proposal. Net Present Value is the
discounted value of all cash inflows, net of all cash outflows of the project during its life
period. Generally, higher the net present value, better would be the investment. In
calculating the Net Present Value, the present value of benefits was considered at a
discount rate of 14 per cent. Net Present Value criterion is presented below
∑
( )
Where,
Rt = Cash inflow in the t th year (in Rs),
Ct = Cash outflow in the t th year (in Rs),
I = Discount rate 14 % per annum,
t = Present age of processing unit (in years), and
T = Expected life of processing unit (in years).
3.4.2.2 Benefit Cost Ratio (BCR)
The benefit cost ratio of an investment is the ratio of the discounted value of all
cash inflows to the discounted value of all cash outflows during the life of soybean
processing units. It is worked out by discounting the future gross returns and cost during
the life period of processing unit at the rate of 14 per cent.
( )
( )
∑ and ∑
( ) ( )
Where,
Bt = Benefit from unit in the t th year,
Ct = Cost of unit in the t th year,
I = Rate of discount (14% per annum),
t = Age of unit (in years), and
T = Economic life of unit (in years).
3.4.2.3 Internal Rate of return (IRR)
The rate at which the Net Present Value of the project is equal to zero is called
Internal Rate of Return (IRR) to the project. The internal rate of return is arrived at,
through interpolation technique by using different discount rates so as to see that net
present value is equated to zero. The net cash inflows were discounted to determine the
present worth by the following interpolation technique
Present worth of cash

Difference flow at the lower
Internal Rate of = Lower discount + between two X discount rate
_____________________
Return rate discount rates
Absolute difference
between the present
worth of the cash
flow at the two
discount rates
3.4.3 Problem Rating Method
In this method, problem faced by the processor is expressed in ten point scale.
Two extremities of a condition namely the condition of no problem with one score point
and the condition of a severe problem with a maximum of ten score point. Processors
were asked to rate the individual problem as perceived and experienced by them in
various processing and related activities in the range of one to ten to depict the exact
severity of the problem.
The problems so identified were categorized into seven broad groups and for
each group the ratings were expressed in percentages based on scores of the individual
problems in that specific group and ranked accordingly. The formula used for this
purpose is given as.
Total actual score

_______________________
Percentage score = X 100
Total maximum score
3.5 CONCEPTS AND TERMS REFERRED IN THE STUDY
Depreciation cost: The depreciation was calculated by straight-line method. It was

worked out by dividing the purchase value of machinery, equipment, vehicles and
building by its life period.
Fixed cost: The fixed cost is the cost associated with the owning of fixed resources
which incurred on the fixed assets. The fixed cost includes depreciation, administrative
charges, insurance premium etc.
Interest on fixed capital: It is the interest on the fixed cost and is calculated at 10 per
cent per annum.
Interest on working capital: This was calculated on the entire working cost of the
processing unit at the prevailing interest rate of 12.5% per cent per annum.
Other fixtures: It includes almirahs, lockers and electrical installations etc.
Processor: Processor is a person who processes the raw soybean by mechanical means.
He is a person who purchases raw soybean from the wholesalers/village
traders/producers, then converts it into different value added product and sell the
products to the next intermediary in the marketing channel.
Raw material costs: The price paid by the unit, as value of soybean purchased, formed
the raw material costs. It was the total value of soybean utilized in producing processed
soy products.
Soy flour: It is made by roasting the soybean, removing the coat, and grinding into
flour. Soy flour is manufactured with different fat levels.
Soy meal: It is a solid residue bi-product produced after the extraction of soy oil, also
known as De-oiled cake. Soy meal is a significant and cheap source of protein for
animal feeds and many prepackaged meals.
Soy milk: It is made by soaking soybean and later on grinding them with water. The
fluid which results after straining is called soymilk.
Soy nuggets: It is a textured soy protein made from defatted soy flour, also called as
soy chunks. It is often used as a meat analogue or meat extender. It is quick to cook,
with a protein content equal to that of meat.
Soy oil: It is one of the most widely consumed vegetable oil extracted from the seeds of
the soybean by crushing it.
Tofu: It is a nutritious product made by coagulating hot soy milk with some food grade
chemicals such as calcium chloride, magnesium chloride, calcium sulphate, acetic acid
and citric acid etc. It is also known as soy paneer.
Variable cost: The expenses that vary proportionately with the level of processing
activities or volume of output of any business. It includes cost of raw material
(soybean), chemicals, packaging, wages for casual workers, electricity and fuel charges
etc.
Small scale soybean processing industry: where the initial investment in plant and
machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore.
Medium scale soybean processing industry: where the initial investment in plant and
machinery is more than Rs.5 crore but does not exceed Rs.10 crore.
Large scale soybean processing industry: where the initial investment in plant and
machinery is more than Rs.10 crore.
Fig: 3.1 Map of Mandsaur District
Chapter IV
RESULTS AND DISCUSSION

In accordance with the pre-determined objectives of the study, this chapter deals
with the presentation and description of results emerged from the research work. For
better understanding and convenience, the results are presented under the following sub-
heads.
4.1 Assessment of investment costs of small, medium and large scale unit.
4.2 Cost and returns for various processed products of soybean.
4.3 Business feasibility analysis of soybean processing units.
4.4 Constraints associated with processing of soybean.
4.1 INVESTMENTS IN THE SELECTED SOYBEAN PROCESSING

UNITS
4.1.1 Investment details of the selected large scale soybean processing unit
The large scale soybean processing unit requires huge initial investment. It
requires a minimum of 3-4 months time to set up the plant and start the activities. It is
seen from the Table 4.1 that the total fixed capital investment was Rs. 10,08,18,500
and the major investment items are on land, machinery, equipment and building. The
investment on land was Rs. 5,79,36,000 which accounts for 57.47 per cent of the total
investment cost, whereas the investment on building and machinery and equipment
worked out to Rs. 1,34,78,000 (13.37 per cent) and Rs. 1,52,57,500 (15.13 per cent)
respectively. The investment on vehicles accounted to 8.14 per cent of the total cost
whereas the investment on other fixtures contributed to 5.89 per cent to the total cost.
Table 4.1 Investment details of the selected large scale soybean processing unit
S.No Particulars Amount (Rs.) Percentage (%)

1. Land 57936000 57.47
2. Building 13478000 13.37
3. Machinery and equipment 15257500 15.13
4. Vehicles 8210000 8.14
5. Other fixtures 5937000 5.89
Total Fixed Capital 100818500 100.00
4.1.2 Investment details of the selected medium scale soybean processing unit
The details of investment of medium scale soybean processing unit are given in
the Table 4.2. The total investment costs in medium scale soybean processing unit
worked out to Rs. 5,00,15,000. The investment on land amounted to Rs. 3,01,07,000
with 60.20 per cent of total investment cost. The investment on machinery and
equipment worked out to Rs. 73,43,000 (24.49 per cent) whereas the investment on
building amounted to Rs. 64,43,000 (12.88 per cent) and investment on other fixtures
amounted to Rs. 12,14,000 (2.43 per cent) of the total investment cost respectively. The
cost of vehicles worked out to Rs. 49,08,000 (9.81 per cent).
Table 4.2 Investment details of the selected medium scale soybean processing unit

1. Land 30107000 60.20
2. Building 6443000 12.88
4. Vehicles 4908000 9.81
4.1.3 Investment details of the selected small scale soybean processing unit
The details of investment of small scale soybean processing unit are given in the
Table 4.3. From the table it is observed that the major investment costs in small soybean
processing unit was on land whereas the total investment was Rs. 94,18,700. The
investment on land, building and machinery and equipment worked out to Rs. 45,80,300
(48.63 per cent), Rs 25,82,600 (27.42 per cent) and Rs. 15,31,000 (16.25 per cent)
respectively. It is seen that the expenditure on vehicles and other fixtures was Rs.
6,24,000 (6.63 per cent) and Rs.1,00,800 (1.07 per cent) of the total investment cost
respectively.
Table 4.3 Investment details of the selected small scale soybean processing unit

1. Land 4580300 48.63
2. Building 2582600 27.42
4. Vehicles 624000 6.63
4.2 COST AND RETURNS OF VARIOUS SELECTED PROCESSED

PRODUCTS OF SOYBEAN
All the costs incurred by the processing unit from the point of procurement of
raw materials till the produce is brought to the marketable condition are grouped under
two broad heads, viz ,fixed cost and variable cost which together constitutes the total
processing cost. There is huge difference among the processing cost of large, medium
and small size of processing unit as the capital requirement is different to produce
different products. The large scale units are producing mainly soy oil and soy meal
whereas medium size units are involved in the production of soy nuggets and soy flour.
The small processing units produce soy milk, and soya paneer (tofu) mainly as per their
convenience and availability of capital.
4.2.1 Processing cost and returns from the selected large scale soybean processing
unit
The cost of large scale soybean processing unit is given in the Table 4.4.
Processing is the important function in soybean as it makes it suitable for consumption.
The economy of the processors depends upon the capacity of the plant utilized along
with the efficient exploitation of the product. The processing cost for two products i.e.
soy oil and soy meal, of processing units is presented in the Table 4.4. The total
processing cost worked out was Rs. 38,489.09/tonne. The total processing cost is
divided into variable cost and fixed cost. The variable and fixed cost incurred is
estimated as Rs. 34,079.97/tonne (88.54 per cent) and Rs. 4,409.12/tonne (11.46 per
cent) in large processing units respectively. Of the total variable cost, the cost of raw
material and chemicals (Rs. 26,021.40/tonne) was the major cost component which
constituted about 67.61 per cent of the total processing cost. The next important variable
cost incurred was interest on working capital estimated around Rs. 3,786.66/tonne
which contributed about 9.84 percent of the total processing cost. Beside these, soybean
processing machineries requires consistent and long hours of electricity supply for
continuous processing. The electricity and fuel charges, wages for labour, transportation
cost and cost of packing material were about Rs. 1,089.49/tonne (2.83 per cent), Rs.
992.22/tonne (2.58 per cent), Rs. 749.03/tonne (1.95 per cent) and Rs. 466.93/tonne
(1.21 per cent) respectively. The other variable cost items were storage charges,
spoilage cost and repair and maintenance charges on which the expenditure incurred by
large processors combinedly constituted about 1.95 per cent of total processing cost.
The total fixed cost constituted about 11.46 per cent of total cost. The main component
of fixed costs of large processing unit was salary to permanent employees which was
about Rs. 1,432.20/tonne constituting 3.72 per cent. The depreciation on the machinery,
equipment and vehicles was valued at Rs. 1,424.61/tonne (3.70 per cent). The
depreciation on building was Rs. 504.98/tonne (1.31 per cent) for large scale processing
unit. The interest on fixed capital was evaluated @ 10 per cent which worked out to Rs.
400.83 contributing about 1.04 per cent of total processing cost. The other components
of fixed cost are administrative charges, insurance premium, license fee and other
charges.
Table 4.4 Details of the processing cost of the selected large scale soybean
processing unit
Amount Amount
S. No. Particulars %
(Rs./year) (Rs./Tonne)
Variable cost
1 Cost of raw materials and chemicals 26750000 26021.40 67.61
2 Cost of packing materials 480000 466.93 1.21
3 Storage charges 321000 312.26 0.81
4 Electricity and fuel charges 1120000 1089.49 2.83
5 Transport cost 770000 749.03 1.95
6 Wages for labour 1020000 992.22 2.58
7 Repairs and maintenance 214000 208.17 0.54
8 Telephone charges 39420 38.35 0.10
9 Sales tax/market cess/mandi tax 43100 41.93 0.11
10 Spoilage costs 236000 229.57 0.60
11 Others 148000 143.97 0.37
12 Interest on working capital @ 12.5 % 3892690 3786.66 9.84
Total variable cost 35034210 34079.97 88.54
Fixed cost
1 Depreciation on building 519120 504.98 1.31
2 Depreciation on machineries and vehicles 1464500 1424.61 3.70
3 Administrative charges 392700 382.00 0.99
4 Payment to permanent labour 1472300 1432.20 3.72
5 Insurance premium 22400 21.79 0.06
6 License fees 15500 15.08 0.04
7 Others 234000 227.63 0.59
8 Interest on fixed capital @ 10 % 412052 400.83 1.04
Total fixed cost 4532572 4409.12 11.46
Total processing cost 39566782 38489.09 100.00
Total processed quantity (Tonnes) 1028
The large scale soybean processing unit processed about 1028 tonnes per year,
working 8 hours a day and 250 days in a year. As indicated in the Table 4.9. total cost of
the processing was Rs. 38,489.09/tonne and the gross return worked out to Rs.
59,615.76/tonne. Therefore a net return of Rs. 21,126.67/tonne was obtained from the
processing of soybean into soy oil and soy meal. Thus, for every rupee of investment in
processing of soybean, about Rs. 1.55 was obtained as returns, indicating its
profitability.
Table 4.5 Returns from processing of soybean into soya oil and soy meal from the
selected units
S.No. Particulars Unit Soyoil Unit Soymeal Total

1 Quantity processed Tonne 195 Tonne 833 1028
2 Quantity produced Kilograms 175000 Kilograms 812000
3 Price Rs./kg 95 Rs./kg 55
4 Total cost Rs./year 39566782
5 Total cost Rs./tonne 38489.09
6 Gross return Rs./year 16625000 Rs./year 44660000 61285000
7 Gross return Rs/tonne 85256.41 Rs./tonne 53613.445 59615.76
8 Net return Rs./year 21718218
9 Net return Rs./tonne 21126.67
10 BC ratio 1.55
4.2.2 Processing cost and returns of the selected medium scale soybean processing
unit
The processing cost of medium scale processing unit is worked out and
presented in the Table 4.6. It is evident from the data that the total annual processing
cost of Rs. 54,123.46/tonne was incurred to produce soy nuggets and soy flour. The
fixed cost was estimated as Rs. 6,632.20/tonne which accounted to 12.25 per cent of
the total processing cost. The variable cost amounted to Rs. 47,491.26 /tonne
accounting for 87.75 percent of total processing cost. It was worth noting that,
amongthe variable cost items, cost of raw material constituted more than half of the
total cost of processing. The cost of raw materials and chemicals were the major
component of variable cost and it worked out to Rs. 35,409.09/tonne (65.42 per cent).
The other major component of variable cost was interest on working capital, which
accounted for Rs. 5,276.81/tonne i.e 9.75 per cent of total cost. The other items of
expenditure was electricity and fuel charges which amounted to Rs. 1,909.09/tonne
contributing to 3.53 per cent of total cost. Other costs, which followed, were wages to
labour, transportation charges, cost of packing material and storage charges which
amounted to Rs. 1,479.55/tonne (2.73 per cent), Rs. 1,204.55/tonne (2.23 per cent), Rs.
772.73/tonne (1.43 per cent), and storage charges Rs. 506.82/tonne (0.94 per cent) per
annum respectively. Among the fixed cost components, payment to the permanent
employees was the major cost contributing factor with Rs. 2,222.73/tonne (4.11 per
cent). The other items of fixed cost were depreciation on machinery and vehicles,
depreciation on building, interest on fixed capital and administrative charges which
accounts for Rs. 2,061.31/tonne (3.81 per cent), Rs. 698.07/tonne (1.29 per cent), Rs.
602.93 (1.11 per cent) and Rs. 572.73/tonne (1.06 per cent), per annum respectively.
Table 4.6 Details of the processing cost of the selected medium scale soybean
processing unit
Amount Amount
S.No. Particulars %
Variable cost
3 Storage charges 223000 506.82 0.94
5 Transport cost 530000 1204.55 2.23
6 Wages for labour 651000 1479.55 2.73
10 Spoilage costs 113000 256.82 0.47
12 Others 136000 309.09 0.57
13 Interest on working capital @ 12.5% 2321795 5276.81 9.75
Fixed cost
6 License fees 10500 23.86 0.04
7 Others 179000 406.82 0.75
8 Interest on fixed capital @ 10% 265288 602.93 1.11
Total fixed cost 2918168 6632.20 12.25
Total processed quantity(Tonnes) 440
The Table 4.7 shows that the gross returns (Rs. 82,045.45/tonne) obtained from
the medium scale processing unit were nearly three times of net returns (Rs.
27,921.99/tonne). The benefit cost ratio was high (1.52) indicating the profitability of
converting soybean into soya nuggets and soy flour. It can be observed from the data
collected from the units that 440 tonnes of soybean have to be processed with working
of machine for 8 hours in a day and 250 days in a year to get 266 tonnes of soya nuggets
and 152 tonnes of soy flour.
Table 4.7 Returns from processing of soybean into soya nuggets and soy flour from
the selected units
S.No. Particulars Unit Soy nuggets Unit Soy flour total

2 Quantity produced Kilograms 266000 Kilograms 152000
3 Price Rs./kg 90 Rs./kg 80
7 Gross return Rs/tonne 85500 Rs./tonne 76000 82045.45
10 BC ratio 1.52
4.2.3 Processing cost and returns of the selected small scale soybean processing
unit
The structure of costs incurred by processors in converting raw soybean into soy
milk and tofu is presented in the Table 4.8. The total cost of processing of 15 tonnes of
soybean worked out to Rs. 2,07,308.27/tonne, out of which Rs. 1,69,161/tonne (81.60
per cent) was towards variable inputs, while Rs. 38147.27/tonne (18.40 per cent)
towards fixed inputs. Among variable cost components, the cost of raw material and
chemicals was Rs. 45,133.33/tonne significantly constituted about 21.77 percent of the
total processing cost. The cost on packing material was Rs. 25,666.67/tonne (12.38 per
cent) which formed the next major component of processing cost. The electricity and
fuel charges, interest on working capital, transportation cost, storage charges, and
wages to casual labour were Rs. 22,066.67/tonne (10.64 per cent), Rs. 18,795.67/tonne
(9.07 per cent), Rs. 16,866.67/tonne (8.14 per cent), Rs. 13,226.67/tonne (6.38 per
cent) and Rs. 11,533.33/tonne (5.56 per cent) respectively. Whereas Among the fixed
cost components, depreciation on machineries and vehicles and depreciation on
building were the major cost contributing items having share of Rs. 12,366.67/tonne
(5.97 per cent) and Rs. 10,589.33/tonne (5.11 per cent) respectively. The other fixed
costs items were payment to permanent labour, interest on fixed capital and other
charges which accounts for Rs. 7,200/tonne (3.47 per cent), Rs. 3,467.93/tonne (1.67
per cent), and Rs. 2180/tonne (1.05 per cent), per annum respectively.
Table 4.8 Details of the processing cost of the selected small scale soybean
processing unit
Amount Amount
S. No. Particulars %
Variable cost
3 Storage charges 198400 13226.67 6.38
5 Transport cost 253000 16866.67 8.14
6 Wages for labour 173000 11533.33 5.56
10 Spoilage costs 32000 2133.33 1.03
11 Others 123000 8200.00 3.96
12 Interest on working capital @ 12.5% 281935 18795.67 9.07
Fixed cost
6 License fees 5000 333.33 0.16
7 Others 32700 2180.00 1.05
8 Interest on fixed capital @ 10% 52019 3467.93 1.67
Total fixed cost 572209 38147.27 18.40
Total processed quantity (Tonnes) 15
As indicated in the Table 4.9, from 15 tonnes of raw soybean were processed,
from which 75600 litres of soya milk and 7800 kg of tofu was produced. The gross
returns worked out to Rs. 5,04,000/tonne per year from soya milk and
Rs.1,56,000/tonne per year from tofu, considering the average market price of Rs. 60
per litre of soya milk and Rs. 120 per kg of tofu. Thus, the net returns per year
amounted to Rs. 23,62,376. In other words, Rs.1,57,491.73 was obtained as net returns
for every tonne of soybean processed into soya milk and tofu. Further, for every rupee
of investment in soya milk and tofu processing, about Rs 1.76 was obtained as returns,
indicating its profitability.
Table 4.9 Returns from processing of soybean into soy milk & tofu from the
selected units
Soy
S. No. Particulars Unit Unit Tofu total
milk
2 Quantity produced Litres 75600 Kilogram 7800
3 Price Rs./litre 60 Rs./kg 120
7 Gross return Rs/tonne 504000 Rs./tonne 156000 364800
10 BC ratio 1.76
4.3 BUSINESS VIABILITY OF THE SELECTED SOYBEAN

PROCESSING UNIT
To assess the financial feasibility of investment in soybean processing units,

parameters such as Net Present Value (NPV), Internal Rate of Return (IRR) and Benefit
Cost Ratio (BCR) were estimated.
A perusal of the given Table 4.10 shows the comparison between three types of
soya processing units. Soybean processing unit whether small, medium or large scale,
once established continues to generate returns at least upto 15 years. To establish
soybean processing unit, the initial investment depends on the capacity of the plant. The
costs and returns were analyzed carefully to test the worthiness of investment in
processing enterprise. In analyzing the investment feasibility, the establishment costs,
maintenance costs and gross returns from the soybean processing units were considered
and discounted at 14 per cent discount rate since it represents the opportunity cost of the
capital. Small, medium and large scale processing units having a processing capacity of
20 TPA, 500 TPA and 1500 TPA of raw soybean respectively were taken for the study
to assess the financial feasibility. The stream of cost and returns were used for analysis
purpose.
The financial feasibility of small, medium and large scale processing units was
calculated on overall basis i.e. for all the products manufactured in small, medium and
large scale units respectively.
The Net Present Value (NPV) criterion helps to evaluate the benefits accrued
and costs incurred during the project life. The advantage of NPV is that it gives an idea
about surplus and varies with level of investment and discount rates. In this study, NPV
was calculated to indicate the money that would be generated by a project at a given
discount rate. It is an absolute measure by discounting the net cash inflows. The NPV of
small scale soybean processing unit at 14 per cent discount rate was Rs. 1,00,05,197.01
and for medium scale it was Rs. 4,50,78,550.63 whereas for large scale unit NPV
worked out to Rs. 7,91,92,444.17. The formal selection criterion of NPV is to accept all
the projects with positive values. Applying this principle, the Net Present Value of
soybean processing units clearly indicates financial feasibility of investment of small,
medium and large scale processing units.
Benefit-Cost (BC) Ratio is another tool for appraising the worthiness of

investment and it helps to ascertain the profitability of an enterprise. In production of
various value added products, initial investment was made to establish the soybean
processing units and maintenance costs incurred during subsequent years of
establishment. The decision in BC Ratio frame work is to select the projects where the
ratio is more than one. The BC ratio of the small, medium and large scale processing
unit confined to 1.73, 1.40 and 1.42 respectively at 14 per cent discount rate, which is
more than unity indicating the worthiness of investment on these units.
Internal Rate of Return (IRR) is suggested to be very suitable measure for

evaluating the profitability of investment on different projects. The IRR is the rate of
discount at which the net present worth of project is zero or the discounted costs are
equal to the discounted returns. It is superior over the other measures since it takes into
consideration the reinvestment opportunities of enterprises during the life span. The
formal selection criterion of IRR is to accept the projects with IRR more than the
opportunity cost of capital. The Internal Rate of Return being 94.13 per cent for small
scale and 63.06 per cent for medium scale whereas 65.64 per cent for large scale
soybean processing units and higher than the interest rate at which the processors could
borrow from lending agencies and invest on these units. In other words, it is the average
earning power of money invested on soybean processing units during its life span. Since
IRR was more than the opportunity cost of capital, it clearly indicated that investment
on soybean processing units is financially feasible and economically viable.
Table 4.10 Financial feasibility analysis in the selected soybean processing units
S.No. Particulars Units Value

Large scale Medium scale Small scale
unit unit Unit
1 Net Present Value (NPV) Rupees 79192444.17 45078550.63 10005197.01
2 Benefit Cost Ratio (BCR) - 1.42 1.40 1.73
3 Internal Rate of Return (IRR) Per cent 65.64 63.06 94.13
4.4 CONSTRAINTS FACED BY THE SELECTED SOYBEAN

PROCESSING UNITS
In order to analyse the problems faced by the processing units, a questionnaire

was developed in order to document the problems faced by the units in processing of
soybean into various processed products. The Tables 4.11 and 4.12 show the list of
various problems faced by the different soy processing units along their scores with
rankings.
The processing units considered for the study faced similar kind of problems,
but the extent of severity varied from unit to unit and therefore, the ranking of each
problem varied with the unit. The problems faced by the units regarding infrastructure
facilities, procurement of raw material, processing, product character, distribution,
marketing and returns etc. are discussed here under.
4.4.1 Constraints with respect to Infrastructure facilities
Proper infrastructure is the requirement for any processing unit. Under

infrastructure facility, problems associated with location of unit, non-availability of
land, uninterrupted power supply, unavailability of water and non availability of
approach road have been condidered.
The selected large scale units have given an average rank of seven to the problem
of power supply indicating that it is a major constraint for them. The next major
constraint mentioned by them was non availability of land which was the high medium
level problem. The constraint like unavailability of water was ranked as medium
intensity problem with a ranking of five. Location and approach road constraints were
given lower rankings indicating that their intensity were less medium and very less
respectively.
With regard to the medium scale units, the problem of power supply was ranked
as a high intensity constraint. Other constraints like non-availability of land, shortage of
water and poor approach road were given a ranking of five each indicating its medium
intensity whereas location problem was less significant.
The small scale units have given a rank of five for location and power supply as
a constraint indicating the medium intensity of the problem. Unavailability of water and
land was the next major constraint ranked as four. The other problems were lack of
approach road which was ranked as low intensity problem.
4.4.2 Constraints with respect to procurement of raw material
Raw material is the basic need of any processing unit for the successful running
of the business. Availability of right quantity of required quality material at the right
time is the prerequisite for any processing unit. Constraints associated under this head
like non availability of raw material, wide fluctuation in soybean prices, non-availability
of quality produce, transportation facility and transportation cost have been studied.
The large units have given an average rank of eight to the problem of non-
availability of quality produce indicating that it as a major constraint. Fluctuation in
soybean prices was given rank six indicating their medium high intensity. Other
constraints like non availability of raw material, transport facility and its cost were
given a rank of two, three and four respectively indicating their very less, low and less
medium intensive problem respectively.
The medium scale units have given a rank of seven for the constraint of non
availability of quality produce indicating high intensity of the problems. Fluctuation in
soybean prices was the next major constraint of high medium intensity followed by non-
availability of raw material, transport facility and transport cost with rank of four each
which indicates as low medium intensity problem.
With respect to small scale units, lack of transport facility was given a ranking of
eight indicating that it is a high intensity constraint. Transportation cost was given a
rank of six indicating their medium high intensity. Fluctuation in soybean prices and
non-availability of raw material were given rank five indicating that they are medium
intensity problems. The constraint of non availability of raw material was given a rank
three indicating it as low intensity constraint.
4.4.3 Constraints with respect to processing
The constraints like non availability of cost effective technology, non-availability

of labour and issues of maintenance of machinery etc. are considered under this
subhead.
The large scale units have given an average rank of seven for non-availability of
cost effective technology indicating that it was a major constraint faced by them. Other
constraints like maintenance of machinery and non-availability of labour were given a
rank of six and five indicating high medium and medium intensity of the constraints
respectively.
The selected medium scale units have given a average rank of six for
maintenance of machinery indicating the medium high intensity of the constraint. Non
availability of cost effective technology and non-availability of labour with a rank five
each were indicating its medium intensity problem.
The small scale units have given an average rank of eight for the constraint of non
availability of cost effective technology indicating it as a major constraint. Maintenance
of machinery was given a ranking of five indicating medium intensity of the constraint.
Another constraint such as non availability of labour was given a rank three indicating
as low intensity constraint.
4.4.4 Constraints with respect to product character
Constraints associated with the product character such as handling of product,

storage of product and pest and rodent problem are studied under this subhead.
The study of the selected large scale units have given an average rank of six for
pest and rodent problem and handling of product and machinery indicating that it is a
major constraint for them. Storage of product was given a rank of five indicating that it
is a problem of medium intensity.
The medium scale unit have given a rank of five to storage indicating that it is a
major constraint for them. Handling of product was given a ranking of four indicating
that it is the next major constraint with less medium intensity. Pest and rodent problem
were given a ranking of three indicating low intensity of the constraint.
The small scale unit have given a average rank of eight to the constraint of storage
indicating it as a major constraint. Handling of product was the next major constraint
with average rank of five indicating medium intensity nature of problem whereas pest
and rodent was ranked as very low intensity problem.
4.4.5 Constraints with respect to distribution
Constraints associated with distribution were classified into two heads namely
non availability of transport facilities and high transportation cost.
The large scale units have given a rank of five to the constraint of high
transportation cost indicating that it is a medium intensity problem. Non availability of
transport facility was ranked as four which indicates less medium intensity problem.
The medium scale units have given a rank of four for the constraint high
transportation cost indicating that it is less medium constraint for them. Non availability
of transporting vehicle was given a ranking three indicating low intensity of the
constraint.
The small scale units have given a rank of eight for the constraint high
transportation cost indicating that it is high intensity constraint for them. Lack of
transport vehicle was given a ranking of six indicating high medium intensity of the
constraint for concerned units.
4.4.6 Constraints with respect to marketing of soybean processed products
Under the problems associated with marketing no proper market, high costs in
promotion and low awareness among consumers have been identified.
The large scale units have given an average rank of six for no proper market
indicating it as constraint of high medium intensity. Low awareness among consumers
was ranked as medium intensity problem with a ranking of five. Other constraint like
high cost involved in promotion was given rank of four indicating it as less medium
intensity constraint.
The medium scale units have given a rank of seven for the constraint of no proper
market indicating it as moderate high intensity. Low awareness among consumers is the
next major constraint with rank of six indicating it as a high medium intensity problem
followed by high cost in promotion with a rank of four showing a less medium intensity
constraint.
The small scale units have given an average rank of eight to the constraint low
awareness among consumers indicating that it was high intensity constraint for them.
No proper market was ranked as seven indicating moderate high intensity of constraint.
High cost in promotion was ranked as low intensity problem with a ranking of three.
4.4.7 Constraints with respect to returns
The large and small scale units ranked them as four indicating that it is less
medium intensity constraint whereas medium scale unit have given an average rank of
three to returns indicating that it was a low intensity constraint.
4.4.8 Overall ranking of the constraints faced by soybean processing units
The ranking given for various constraints listed under each major category have
been summed up and for each rank category overall ranks were assigned, separately for
large, medium and small scale soybean processing unit.
In case of large scale units, processing was the first major constraints, whereas
product character was the second major constraint. Marketing, infrastructure facility,
procurement of raw material, distribution and returns constraints were ranked III, IV, V,
VI and VII respectively.
In case of medium scale units, marketing was the first major constraint followed
by infrastructure facility which was the second. The processing, procurement of raw
material, product character, distribution and returns constraints were assigned ranks of
III, IV, V, VI and VII respectively.
In case of small scale units, constraint of distribution stood first, whereas the
constraint of marketing was the second. Procurement of raw material, processing,
product character, Infrastructure facility and returns constraints stood at ranks III, IV, V,
VI and VII respectively.
Table 4.11 Problems faced by the selected soybean processing units (10 point scale)
Large scale Medium Small scale

S. No. Problems
unit scale unit unit
A. Infrastructural facility
1. Location 4 4 5
2. Non availability of land 6 5 4
3. Erratic power supply 7 8 5
4. Non availability of water 5 5 4
5. Improper approach road 2 5 3
Total 24 27 21
B. Procurement of raw material
1. Availability of raw material 2 4 3
2. Fluctuation in soybean prices 6 6 5
3. Non availability of quality produce 8 7 5
4. Transport facility 3 4 8
5. Transportation cost 4 4 6
Total 23 25 27
C. Processing
1. Non availability of cost effective 7 5 8
technology
2. Non availability of labour 5 5 3
3. Maintenance of machinery 6 6 5
Total 18 16 16
D. Product character
1. Handling 6 4 5
2. Storage 5 5 8
3. Pest & rodent problem 6 3 2
Total 17 12 15
E. Distribution
1. Non availability of transport 4 3 6
vehicle
2. Transportation cost 5 4 8
Total 9 7 14
F Marketing
1. Not proper market 6 7 7
2. High cost in promotion 4 4 3
3. Low awareness among consumers 5 6 8
Total 15 17 18
G. Returns 4 3 4
Total 4 3 4
On a scale of 10, 10 – Extreme high, 9- very high, 8-high, 7-moderate high, 6-high
medium, 5-medium, 4-less medium, 3-low, 2-very low and 1-no problem.
Table 4.12 Ranking of constraints faced by the selected soybean processing units
Large scale unit

Medium scale unit Small scale unit
Point
Maximum Point Point
Description scored
score Percentage scored Percentage scored Percentage
S.No. of problem by Rank of Rank of Rank of
point of point by of point by of point
problem problem problem problem
scored problem scored problem scored
A Infrastructure
50 24 48 IV 27 54 II 21 42 VI
facility
Procurement
B
of raw 50 23 46 V 25 50 IV 27 54 III
material
C Processing
30 18 60 I 16 53.3 III 16 53.3 IV
D Product
30 17 56.7 II 12 40 V 15 50 V
character
E Distribution
20 9 45 VI 7 35 VI 14 70 I
F Marketing
30 15 50 III 17 56.67 I 18 60 II
G Returns
10 4 40 VII 3 30 VII 4 40 VII
Fig: 4.1 Image of soybean seeds
Fig: 4.2 Images of soy oil
Fig: 4.3 Images of soy meal
Fig: 4.4 Images of soy nuggets
Fig: 4.5 Images of soy flour
Fig: 4.6 Images of soy milk
Fig: 4.7 Images of tofu (soy paneer)
Chapter V
SUMMARY AND CONCLUSIONS
5.1 SUMMARY
Soybean (Glycine max (L) Merrill) is an important oilseed crop in the World. Its
large scale cultivation is concentrated in a few countries such as USA, Brazil,
Argentina, China, India, Paraguay and Canada, which together produces about 95 per
cent of the world's 281.7 million metric tonnes of annual soybean production (2012-13).
India ranks fifth in soybean production in the world with 14.67 million metric tonnes
production (5.21 per cent).
Soybean production is mainly confined to Madhya Pradesh, Maharashtra,

Rajasthan, Andhra Pradesh, Karnataka, Uttar Pradesh and Chhattisgarh. Out of 14.67
million tonnes, Madhya Pradesh produces 7.8 million tonnes contributing
approximately 53.17 per cent to total production of soybean in India followed by
Maharashtra with 4.67 million tonnes and Rajasthan with 1.47 million tonnes.
Madhya Pradesh has emerged as the Soy state of the country with a share of
over 55.63 per cent in area and 53.17 per cent in production. The area under the crop in
Madhya Pradesh during 2012-13 was 60.32 lakh hectares and the production was 78
lakh tonnes. In Madhya Pradesh, major soybean producing districts are Ujjain, Devas,
Shajapur, Sehore, Indore, Ratlam, Balaghat, Chhindwara, Gwalior, Bhopal, Jabalpur,
Itarasi, Sagar, Mandsaur, Datia, Rewa and Satna.
Soybean proved to be a fortune crop in terms of edible oil production, export

earnings and rural prosperity. It is also known as the ‘golden bean’, because of its
several uses. Soybean contains about 43 per cent of good quality protein, 21 per cent
carbohydrates, 5 per cent minerals, 8 per cent moisture, 19 per cent fat, 4 per cent fiber
and reasonable amounts of vitamins. The beans can be processed in a variety of ways.
Common forms of processed soybean include soy oil, soy meal, soy flour, soy milk,
tofu, soy lecithin, and Textured Vegetable Protein (TVP). With the increasing health
consciousness among the general public, soybean’s use is gaining acceptance in the
form of textured vegetable protein popularly known in India as soy badi or soy nuggets,
soy fortified wheat flour for making nutritious chapattis and also for other uses. It has
been estimated that nearly 85 per cent of soybean produced in the country is processed
and nearly 40 per cent is processed in Madhya Pradesh alone. Therefore soybean
processing is an important industry in Madhya Pradesh. It has been observed that most
of the processing industry in the state is engaged in processing of soybean into soy oil
and very few firms are in the business of converting of soybean into different value
added products of soybean. So in this study an attempt is made to analyze the
profitability of different types of processed products of the soybean.
The study was under taken with following specific objectives:
processing units in the study area.
2. To estimate the cost and returns pattern of selected soybean processed products
in Mandsaur district.
4. To find out the constraints faced by the processors in the procurement,
processing and marketing of soybean.
The data has been collected through personal interview method from soybean
processors with the help of pre-tested schedules designed for the purpose. For the study
two large, five medium and eight small scale processing units involved in producing
various processed products were selected from Mandsaur districts of Madhya Pradesh
purposively.
Various analytical tools were employed for analysis of collected data. Tabular
analysis was done by working out simple averages and percentages. For analysis of cost
of processing of different soy value added products, all costs incurred in the processing
of soybean i.e. variable costs and fixed costs were considered to arrive at the total cost.
Total cost for establishing processing unit and operational cost for processing of
soybean processed product was analyzed and then total returns were calculated. The
data were compiled, tabulated and analyzed using Benefit-Cost-Ratio (BCR), Net
Present Value (NPV), and Internal Rate of Return (IRR) and other suitable statistical
tools and techniques to obtain the feasibility of establishing soybean processing unit.
For constraints in processing of soybean, problem rating method was used.
MAJOR FINDINGS OF THE STUDY
Economic efficiency and Financial Feasibility of the large scale

soybean processing units
The precise scanning of large scale processing units which processed mainly soy
oil and soy meal was done to assess the economic efficiency of soybean processing unit.
It was found in the study that establishment of large scale unit requires huge investment.
In the findings of research, the initial investment of processing unit was Rs.
10,08,18,500 in which major investment was on land (Rs. 5,79,36,000) followed by
machinery and equipments (Rs. 1,52,57,500) and building (Rs. 1,34,78,000)
respectively.
The processing cost of soy oil and soymeal was combinedly calculated on yearly
basis. Out of total processing cost (Rs. 38,489.09/tonne) the major share was spent on
purchase of raw material (Rs. 26,021.40/tonne) which accounted for 67.61 per cent of
the total processing cost. Other major cost were interest on working capital (9.84 per
cent), salaries to permanent employees (3.72 per cent), depreciation on machineries and
vehicles (3.70 per cent), electricity and fuel charges (2.83 percent) and wages for daily
labour (2.58 per cent) etc.
The gross return (Rs. 59,615.76/tonne) was more than two times of net returns
(Rs. 21,126.67/tonne).The returns structure of the large processing unit revealed that
Benefit Cost Ratio was 1.42 for the plant having processing capacity of 1500 TPA
soybean. The NPV and IRR for the investment were found to be Rs. 7,91,92,444.17 and
65.64 per cent respectively at 14 per cent discount rate showing the financial feasibility
of investment. Thus it can be analyzed that investment pattern in large processing plant
is financially feasible and profitable for investors.
Economic efficiency and Financial Feasibility of the medium scale

The economic efficiency of medium scale processing unit which processed

mainly soy nuggets and soy flour was analyzed. The initial investment requirement of
processing unit was Rs.5,00,15,000 in which major investment was on land (Rs.
3,01,07,000) with 60.20 per cent of total investment cost followed by machinery and
equipments (Rs.73,43,000) with 14.68 per cent.
The processing cost of medium soybean processing unit was estimated on yearly
basis. Out of total processing cost (Rs. 54,123.46/tonne) the major share was occupied
by cost of raw material (Rs.35,409.09/tonne) which accounted for 65.42 percent. Other
major costs were interest on working capital (9.75 per cent), wages to permanent
employees (4.11 per cent), depreciation on machineries & vehicles (3.81 per cent) and
electricity & fuel charges (3.53 per cent) etc.
The gross return (Rs. 82,045.45/tonne) was approximately three times of net
returns (Rs.27,921.99).The returns structure of the medium processing unit revealed that
Benefit Cost Ratio was 1.40 and the NPV for the investment was found to be Rs.
4,50,78,550.63 (at 14 per cent discount rate) and IRR 63.06 percent, and shows the
financial feasibility of investment. Thus it can be analyzed that investment pattern was
financially feasible and profitable for investors.
Economic efficiency and Financial Feasibility of the small scale

The analysis was done to assess the economic efficiency of small scale soybean
processing unit. It was found that the establishment of small unit which processed
mainly soy milk and tofu requires significant amount of investment. The initial
investment of processing unit was Rs. 94,18,700 in which the major investment
component was land (Rs. 45,80,300) with 48.63 per cent of total investment followed
by building and machinery and equipments was (Rs. 25,82,600) with 68.62 per cent and
Rs. 15,31,000 with 16.25 per cent of total investment cost respectively.
The total cost of processing was found to be Rs. 2,07,308.27/tonne per year. Out
of the total processing cost, the major share was due to raw material and chemicals (Rs.
45,133.33/tonne) which accounted for 21.77 per cent. The other major components are,
cost of packing material (12.38 per cent), electricity and fuel charges (10.64 per cent),
interest on working capital (9.07 per cent), Transportation cost (8.14 per cent), storage
charges (6.38 per cent) and depreciation on machinery and vehicles (5.97 per cent) etc.
The gross return (Rs.3,64,800/tonne) was more than two times of net returns
(Rs. 1,57,491.73/tonne). The Benefit Cost Ratio was 1.73 and the NPV for the
investment was found to be Rs. 1,00,05,197.01 (at 14 per cent discount rate) and IRR
94.13 per cent. Thus it can be analyzed that investment pattern in small processing plant
is financially feasible and profitable for investors.
Constraints faced by soybean processors
In case of large processing units, processing was the first major constraint,
followed by the product character. Marketing, infrastructure facility, procurement of
raw material, distribution and return constraints have obtained ranks of III, IV, V, VI
and VII respectively.
In medium scale processing units, marketing was major constraint followed by

infrastructure facility. The constraints related to processing, procurement of raw
material, product character, distribution and returns were assigned rank III, IV, V, VI
and VII respectively.
In small scale units, constraints of distribution stood first, whereas the constraint
of marketing was a second. Procurement of raw material, processing, product character,
Infrastructure facility and returns constraints have obtained rank of III, IV, V, VI and
VII respectively.
5.2 CONCLUSIONS
It may be concluded from the study that there is an immense scope for
expansion of soybean processing business in Mandsaur district of Madhya Pradesh as
well as in other similar areas in India. The cost of processed product of soybean is
though higher but due to good demand in the market, the returns are also very high
which resulted in good net margin to the processors. It was found in the study that in
the process of value addition, raw materials was the major cost incurred by the units.
The soybean processing is a profitable business for the investors and it can be
seen from the good BCR of different products which indicates that for all units there are
good returns. The investment is also financially feasible as represented by NPV and
IRR. The constraints faced by the large scale units is non availability of quality
produce, erratic power supply, fluctuation in soybean prices and non-availability of cost
effective technology. Erratic power supply, non-availability of quality produce,
maintenance of machinery and less awareness among the consumers were the major
constraints in the medium scale processing unit. Whereas lack of transportation
fascility, non-availability of cost effective technology, storage problem, high transport
charges, less awareness among the consumers and lack of market were identified as
major constraints in the small scale soybean processing unit.
5.3 SUGGESTIONS AND POLICY IMPLICATIONS
1. In view of feasibility of investment in soybean units, potential entrepreneurs

may be encouraged to establish the units for widening the soybean processing
industry.
2. Processing units can tie up with the selected soybean growers for getting quality
raw material for processing units so that the growers and processors will get
benefitted as availability of quality raw material is a major constraint faced by
the processing units.
3. Proper branding and marketing of different soy value added products should be
done to increase their market.
4. Government can encourage the soybean processing industry to hold soybean
food festival in various cities of the country to increase its consumption.
5. The use of soy processed product is mostly restricted to the limited part of
country. The scientific community can bring awareness on the nutritional value
and other benefits of soy process products.
6. For popularizing soya processed products, processing units can increase their
expenditure on advertising and other promotion measures for improving its
acceptance.
7. Government can provide subsidy on setting up the processing plants and ensure
uninterrupted power supply and water.
8. Krishi Vigyan Kendra (KVK) is a link between farmers and agriculture experts.
Workshops can be organized by the KVK’s for creating awareness about the
benefits of soybean processing so that farmers can start their own processing
units at the farm level at least a small scale unit.
9. Since soya tofu is a similar product to paneer (cheese), awareness can be created
about its utility as an alternative to paneer.
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APPENDIX-A
Cash flow statement of large scale soybean processing unit
Gross Return Net Return Discounting Discounted Discounted Gross Discounted Net
Years Cost (Rs.)
(Rs.) (Rs.) Factor @14% Cost (Rs.) Return (Rs.) Return (Rs.)
1 39566782 0 -39566782 0.87719298 34707703.51 0 -34707703.51
2 35034210 61285000 26250790 0.76946753 26957686.98 47156817.48 20199130.50
3 35034210 61285000 26250790 0.67497152 23647093.84 41365629.37 17718535.53
4 35034210 61285000 26250790 0.59208028 20743064.77 36285639.8 15542575.02
5 35034210 61285000 26250790 0.51936866 18195670.85 31829508.6 13633837.74
6 35034210 61285000 26250790 0.45558655 15961114.78 27920621.57 11959506.79
7 35034210 61285000 26250790 0.39963732 14000977.88 24491773.31 10490795.43
8 35034210 61285000 26250790 0.35055905 12281559.55 21484011.68 9202452.13
9 35034210 61285000 26250790 0.30750794 10773297.85 18845624.28 8072326.43
10 35034210 61285000 26250790 0.26974381 9450261.269 16531249.37 7080988.10
186718431.3 265910875.5 79192444.17
Net Present Value (NPV) = Rs. 7,91,92,444.17
Internal Rate of Return (IRR) = 65.64%
Benefit Cost Ratio (BCR) = 1.42

APPENDIX-B
Cash flow statement of medium scale soybean processing unit
Gross Return Net Return Discounting Discounted discounted Gross Discounted Net
Year Cost (Rs.)
(Rs.) (Rs.) Factor @14% Gost (Rs.) Return (Rs.) Return (Rs.)
1 23814323 0 -23814323 0.877192982 20889757.02 0 -20889757.02
2 20896155 36100000 15203845 0.769467528 16078912.74 27777777.78 11698865.04
3 20896155 36100000 15203845 0.674971516 14104309.42 24366471.73 10262162.31
4 20896155 36100000 15203845 0.592080277 12372201.25 21374098.01 9001896.76
5 20896155 36100000 15203845 0.519368664 10852808.11 18749208.78 7896400.67
6 20896155 36100000 15203845 0.455586548 9520007.116 16446674.37 6926667.26
7 20896155 36100000 15203845 0.399637323 8350883.435 14426907.34 6076023.91
8 20896155 36100000 15203845 0.350559055 7325336.347 12655181.88 5329845.53
9 20896155 36100000 15203845 0.307507943 6425733.638 11101036.74 4675303.10
10 20896155 36100000 15203845 0.26974381 5636608.454 9737751.524 4101143.07
111556557.5 156635108.2 45078550.63

APPENDIX-C
Cash flow statement of small scale soybean processing unit
Gross Return Net Return Discounting Discounted Discounted Gross Discounted Net
Year Cost (Rs.)
(Rs.) (Rs.) Factor @14% Cost (Rs.) Return (Rs.) Return (Rs.)
1 3109624 0 -3109624 0.87719 2727740.35 0 -2727740.35
2 2537415 5472000 2934585 0.76947 1952458.45 4210526.32 2258067.87
3 2537415 5472000 2934585 0.67497 1712682.85 3693444.14 1980761.29
4 2537415 5472000 2934585 0.59208 1502353.38 3239863.28 1737509.90
5 2537415 5472000 2934585 0.51937 1317853.84 2841985.33 1524131.49
6 2537415 5472000 2934585 0.45559 1156012.14 2492969.59 1336957.45
7 2537415 5472000 2934585 0.39964 1014045.74 2186815.43 1172769.69
8 2537415 5472000 2934585 0.35056 889513.80 1918259.15 1028745.34
9 2537415 5472000 2934585 0.30751 780275.27 1682683.46 902408.20
10 2537415 5472000 2934585 0.26974 684451.99 1476038.13 791586.14
13737387.8 23742584.82 10005197.01

Business Viability of Soybean Processing Units in Mandsaur District of Madhya Pradesh

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BUSINESS VIABILITY OF SOYBEAN

PROCESSING UNITS IN MANDSAUR

SARMAN LAL CHAUDHARI

PROJECT REPORT SUBMITTED TO

MASTER OF BUSINESS ADMINISTRATION

CHAIRPERSON: Dr. SEEMA

SCHOOL OF AGRIBUSINESS MANAGEMENT

Mr. SARMAN LAL CHAUDHARI has satisfactorily prosecuted the course of

project and that project report entitled “BUSINESS VIABILITY OF SOYBEAN

PROCESSING UNITS IN MANDSAUR DISTRICT OF MADHYA PRADESH”

This is to certify that the project report entitled “BUSINESS VIABILITY

Project report approved by the Student Advisory Committee

Chairperson : Dr. SEEMA

Member : Dr.P. RADHIKA

Member : Shri M.H.V.BHAVE

Chapter No. Title Page No.

III MATERIAL AND METHODS

IV RESULTS AND DISCUSSION

V SUMMARY AND CONCLUSIONS

Table No. Title Page No.

1.1 India in world soy industry (2012-13)

4.12 Ranking of constraints faced by the selected soybean processing units

Fig No. Title Page No.

1.1 Soybean growing areas in India

3.1 Map of Mandsaur district

4.1 Image of soybean seeds

4.2 Images of soy oil

4.3 Images of soy meal

4.4 Images of soy nuggets

4.5 Images of soy flour

4.6 Images of soy milk

4.7 Images of tofu (soy paneer)

Hyderabad (Sarman Lal Chaudhari)

I, SARMAN LAL CHAUDHARI, hereby declare that the project report

“BUSINESS VIABILITY OF SOYBEAN PROCESSING UNITS IN MANDSAUR

DISTRICT OF MADHYA PRADESH” submitted to the Acharya N.G. Ranga

Agricultural University for the degree of Master of Agribusiness Management is

Place: Hyderabad (SARMAN LAL CHAUDHARI)

TITLE OF THE BUSINESS VIABILITY OF SOYBEAN PROCESSING UNITS

DEGREE : MBA (ABM)

DEPARTMENT : SCHOOL OF AGRIBUSINESS MANAGEMENT

CHAIRPERSON : Dr. SEEMA

UNIVERSITY : ACHARYA N.G. RANGA AGRICULTURAL UNIVERSITY

The beans can be processed in a variety of ways. Common forms of processed

The study suggested an overall improvement in supplying quality of raw material,

et al. : and other people

BCR : Benefit Cost Ratio

S. No. : Serial Number

NPV : Net Present Value

IRR : Internal Rate of Return

e.g. : For example, for instance

VAT : Value Added Tax

US$ : United State Dollar

SOPA : Soybean Processors Association of India

Kg ha-1 : Kilogram Per Hectare

etc. : and so on; and other people/things

(In million tonnes)

Sl. Particular Global India % share

Soybean production is mainly confined to Madhya Pradesh, Maharashtra,

Fig: 1.1 Soybean Growing Area in India *

It is a versatile crop with innumerable possibilities of improving agriculture and

1.1 FUTURE OF SOY PRODUCTS IN INDIA

The beans can be processed in a variety of ways. Common forms of processed