Thursday, 17 November 2011




Importanc e of Edible Oil in the country's economy:
Oilseeds and edible oils are two of the most sensitive agricultural commodities in the country. India contributes about 9% of the world oilseeds production, about 7% of the global production of protein meal and is the 4th largest edible oil economy in the world. The total area under oilseed cultivation in the country stood at 22.78 million ha. in 2001-02. The corresponding production was 22.80 million tonnes. Madhya Pradesh is the leading oilseed producing state in the country and accounts for 21.36% of the total oilseed production in the country. The other leading oilseed producing states are Gujarat (17.79%), Rajasthan (15.03%), Maharashtra (10.70%), and Andhra Pradesh (7.76%). The rest of the states account for the remaining 27.36% of the total production. Oilseeds, edible and non edible oil play an important role in the agricultural economy of the country. Groundnut, rapeseed/ mustard, soyabean, sunflower, sesame, nigerseed, safflower, castor and linseed are the nine major oilseeds sources for obtaining edible and non edible grade oils. The secondary sources are coconut, cottonseed, rice bran, solvent extracted oils from tree and forest origin.
Apart from oilseeds, the byproducts obtained during the processing operation viz. deoiled cakes, oilmeals and other minor oil products are also of high economic value. India is one of the leading oilmeal exporter in the world. Its share in the world oilmeal export market is about 7%. The export of oilmeals, oilseeds and minor oils for the financial year 2000-2001 stood at 29.07 lakh tons. In terms of value, realisation it stood at Rs. 3393 crore.
Net Availability of Edible Oil/Import/Actual Consumption:
There has been a persistent gap between demand and domestic availability of edible oils. The Government, with a view to avoiding scarcity of this item and consequential rise in prices, has been allowing import of edible oils. The net availability of edible oils from all domestic sources, actual consumption and import during the period from 1996-97 to 2001-02 are as under :
    ( Lakh MT)
( Nov.- Oct.)
Production of oilseedsNet availability of edible oils from domestic sourcesImportsTotal availability
* Source : SEA of India
As can be observed from the above table, there has been fluctuations in production of oilseeds and consequently net availability of edible oils from domestic sources, import and total availability. The table given below shows the yield vis-a-vis world average and the highest yield in the world for the FY 2000-01
Productivity of Oilseeds in the Country
(Tonne/ Hectare)
OilseedsIndiaWorld AverageHighest
Soyabeans0.862.313.34 (EU-15)
Cotton seeds0.591.062.11 (Australia)
Groundnut0.581.012.08 (China)
Sunflower0.641.171.73 (EU-15)
Rapeseed/ Mustard0.751.512.98 (EU-15)
Source: (Oil World ,August 2001)
Important Factors Responsible for Low Production of Edible Oils :
A number of factors seem responsible for this situation. They are as follows:
  • Only about 20% of the oilseed crops are being produced under irrigated conditions. Thus the extent and spread of rainfall has a critical role in production.
  • There is limitation of land availability.
  • Lack of availability of Hybrid/HYV seeds. The availability of quality seeds is grossly inadequate to meet the requirement.
  • Susceptibility of oilseeds to pests and diseases.
  • Oilseeds production is yet to receive the desired priority in the agricultural extension set-up in the country.
Potential and Production of Oils from Secondary Sources:
A large proportion of oils from secondary sources is lying unexploited. The potential and current production of oils from secondary sources are as follows:
   (Lakh MT) 
ItemPotential*ProductionUntapped potential
Rice bran954
Cotton seed8.853.8
Oils from tree origin615
Note : * Based on production of oil-bearing materials.
The very fact that there is such a large potential of oil still lying unexploited shows the imperative need to harness technology and take appropriate incentive measures for maximizing oil production in the country.
Oil Extraction and Expression Methods:
In order to get high quality edible oil, various processing techniques are used. The process of obtaining oil from seeds involves the separation of oil from oil-bearing material by mechanical means, chemical means, etc. A typical oil extraction process is as follows:
Grinding or rolling
Pressing  -- oil cakes
Refining  --   impurities
Purified Edible Oil
Description of sequence operations:
Storage: The seeds, nuts, or plant tissue containing the oil must be properly stored and prepared for extraction to maintain the high quality of the final product. If the oil bearing material is dry, it must be stored so that it remains dry for optimal extraction and quality of the oil. If the oil bearing material is wet- plant tissue, it should be processed for oil extraction immediately after harvest so that the storage time is kept to a minimum. Oils in the presence of water deteriorate rapidly, forming free fatty acids and rancid off-flavors.
Cleaning: After the oil bearing material has been taken out from storage, the first step in preparing them for oil extraction is to clean them. Cleaning is done so that the oil is not contaminated with foreign materials and that the extraction process can proceed as efficiently as possible. During the process inspection of the seeds is carefully done to remove stones, sand, dirt and spoilt seeds. Dry screening technique is often used to remove all material that is over or under sized. Some times washing is also resorted to but it must be avoided as the plant tissue will have to be dried at a later stage.
Dehulling: During the process the outer seed coat of the oil seed is removed. A power operated dehuller is generally used for the operation. Removal of the outer seed coat is necessary as it does not contain oil and inclusion of it in the unit operations makes the oil extraction process less efficient. Some seeds such as groundnut can be shelled by hand. Some other such as sun flower seeds, are usually hulled in machines. Still others, like safflower and colza, cannot be shelled.
Grinding or rolling: Seed is not usually pressed whole, since oil extraction is more efficient if the seed is in smaller particles. Herein lies the relevance of the grinding process. Grinding is the process for reducing the particle size. Small motor powered hammer mills are used for the unit operation. Another alternate process used for reduction of particle size is rolling the oilseeds to produce flakes for oil extraction. Many large scale commercial plants find this the most effective approach. With large oilseeds it may be necessary to grind the seed first, and then put the pieces through the flaking rollers.
Heating: It is the final step for preparing the raw material for oil extraction. Heating leads to increased oil yield. Heating helps in killing those enzymes present in the plant tissue which have a deteriorating effect on oil quality. Moreover, if oilseed cake is to be used for feed or feed, heating is useful as it increases protein availability.
Sometimes oil bearing material is pressed without being heated . Oil extracted in this way is called cold press oil.
Pressing: During processing, the conditioned oil seeds/ oil bearing material is pressed using a lever press, hydraulic press or a mechanical expeller to remove the oil.
Refining: The process is used when lower quality feed stock is used for oil extraction. It helps in removing undesirable cloudiness, color and flavor from the extracted oil.
Status of Vegetable Oil Industry in India:
The status of the Vegetable Oil Industry in the country in FY 2001-02 is summarised below:
Vegetable oil Industry Data in the country for FY 2001-02:
Type of Vegetable Oil IndustryNo. of UnitsAnnual Capacity
( Lakh Metric Tonnes)
Capacity Utilization
Oilseed Crushing Units1,50,000 (Approx.)425 (In terms of Oil Seeds)10 - 30 %
Solvent Extraction Units
356 (In terms of Oil-bearing material)46 %
Refineries (attached with Vanaspati units)
18 (In terms of Oil)30 %
Refineries attached with solvent extraction plant
25 (In terms of Oil)35 %
Vanaspati Units23059 ( In terms of vegetable oil production)41%
(Source: Directorate of Vanaspati, Vegetable Oil and Fats)
Oil seeds crushing units include crushing units in the small scale / unorganized sector as also in the organised sector. The capacity utilisation generally ranges from an average of 10% for the ghanis (small scale sector) to around 30% in case of the expellers in the organised sector. Some of the important reasons for low capacity utilization in the oilseed processing industry in the country is as follows: Unrestricted growth of the industry consequent upon de-licensing of the vegetable oil industry has lead to creation of capacity totally incommensurate with availability of raw materials. Use of obsolete technology. Presence of very low margin because of stiff competition, inefficiency of operations etc. Speculative nature of the trade in the sector. Fragmentation of capacities, poor scale economies, large idle capacity.

Legal and regulatory Framework Governing Oil Seed Processing Industry:
Some of the important regulatory mechanism governing the oilseed processing industry in the country are as follows:
1. Edible Oils Packaging (Regulation) Order, 1998
2. Vegetable Oil Products (Regulation) Order, 1998
3. Solvent Extracted Oils, De-oiled Meal and Edible Flour (Control) Order, 1967
4. Pulses, Edible Oilseeds and Edible Oils (Storage) Control Order, 1977
These Control Orders provide for "in-process" surveillance in respect of the quality, packaging, labelling, production, oils used in vanaspati, etc. through regular inspection of the manufacturing processes, factory records, drawal of samples, etc. 
Need for improved edible oil expellers:
The average oil recovery percentage in traditional oil ghanis is between 20-25%. Due to low recovery, wastage and process losses in the form of residual oil content in the deoiled cakes is also quite high. The residual oil content in the oil cakes is to the tune of 12-14%. Drudgery during the unit operation is also an important factor which accentuates the problem. Storability and shelf life of the oilcakes is also of a shortened duration in case of ghanis. Therefore there is an immediate need for technological improvement of the ghanis so that oil recovery percentage and the process losses are minimized. Tapering screw type mechanical oil expellers suitably meet the requirement. The oil recovery percentage in case of mechanical oil expellers is around 35-37%. The residual oil content in the oilcakes is between 6-8%. The energy requirement for unit oil extraction is comparatively low in this case of mechanical oil expellers than traditional ghanis. Handling and storage of oilcakes obtained from mechanical oil expellers is much more convenient than the same obtained from traditional ghanis.
Development of small scale edible oil extracting units using improved mechanical oil expellers is yet to take a proper shape. In the absence of village level edible oil processing unit, the farmers have to travel great distances for selling the cleaned and graded rapeseed/ mustard seed. This leads to increased transportation and handling losses. Thus there is a need to develop suitable cleaning, grading, storing cum village level edible oil processing facility for bringing about noticable development of the sector. Value addition and generation of gainful and sustainable employment opportunities are the other possible benefits arising out of this agro processing industry.

Investment components of an improved rapeseed/ mustard oil expelling unit:
The various investment components of a modern 240 MT/annum of rapeseed/mustard seed processing plant are as follows:
Land and site development:
The land requirement for establishing an improved rapeseed/ mustard oil expelling unit will depend upon the installed capacity of the unit and the method of drying and conditioning of the seeds prior to the oil extraction process. Generally 0.50 acre of non agricultural land is required for establishing an improved rapeseed/ mustard oil expelling unit having an installed processing capacity of 240 MT /annum. The land should be with proper elevation. Low lying areas should be avoided, else proper land filling, compaction and consolidation should be done. Availability of suitable drainage facility, road linkages and communication facility should also be ensured. The layout of the edible oil processing plant should be done in a manner that helps in smooth operation of various unit operations in tandem to bring about optimal capacity utilization. Additional area will be required for sundrying and conditioning of the rapeseeds/ mustard seeds. The model tentative cost of land and land development charges has been considered at Rs. 2.50 Lakh ( Rs. 1.00 Lakh being the cost of the land and the remaining Rs. 1,50,000/- being the cost incurred for site development such as construction of fencing, internal roads and drainage system etc.)
Civil construction:
Various civil structures required are as follows:
1. Raw material storage unit
2. Finished goods storage unit
3. Processing area
4. Office cum administrative space
5. Store room for oil cakes
6. Machinery spare parts store room
7. Toilet cum space requirement for
8. Miscellaneous space (Drying Platform)
The size and civil cost of these structures depend on the production capacity of the project . The civil structures and estimated cost for the model rapeseed/ mustard oil expelling unit is as follows:
Civil Structures
    ( Rs. Lakh)
S.No.ItemQuantity ( in sq.m)Unit Cost
(Rs./ sq.mts.)
Total Cost
1Raw material storage unit503,5001.75
2Finished goods storage unit503,5001.75
3Processing area303,5001.05
4Office cum administrative space503,5001.75
5Store room for oil cakes503,5001.75
6Machine spare part store room253,5000.88
7Toilet cum space requirement for sanitation153,5000.53
8Miscellaneous space (sun drying)1001,5001.50
9Total  10.95
ICAR institutes, State Agricultural Universities, research institutions have developed suitable technologies for extraction of edible oil using mechanical oil expellers. Some of the important institutes are CFTRI , Mysore, GBPAU, Pantnagar, TNAU etc. It is desired that technical assistance for installation and operationalization of the expellers and associated machinery is sought from well established manufacturing agencies having proven track record. Provision for training of machine operators and back up support may also be ensured.
Plant and Machinery:
The details of the nature and type of plant and machinery, their capacity, power consumption, level of automation varies upon the market needs, nature and type of the end products and the investment capacity of the entrepreneur.
The details of plant and machinery for the model project are as follows:
Plant & Machinery 
      (Rs. Lakh)
S.No.ParticularsQuantity (Nos.)Power requirement (HP)Capacity of the machineRate (Rs.)Amt.
(Rs. Lakh)
1Pre cleaner for cleaning the oilseeds11300 kg/ hr18,0000.180
2Cans and trays for handling oilseeds5 20 kg handling capacity per tray2,0000.100
3Batch type solar dryer2 100 kg/hr15,0000.300
4Tapering screw type mechanical oil expeller having a capacity of 100 kg/ hr with 10 HP AC - 3 phase motor110100 kg/ hr85,0000.850
5Filter press15100 kg/ hr 25,0000.250
6Steel drums for storing edible oil and sedimentation of impurities20 50 kg holding capacity per steel drum3,0000.600
7Measuring cans of various capacities  Lumpsum15,0000.150
8Weighting balance1 5 kg capacity3,5000.035
9Funnels for filling moulded poly carbonate bottles6 2 bottles / minute 1000.006

10Moulded polycarbonate bottle capping cum sealing machine1112 seals / minute5,0000.050
11Electricals ( internal lighting and other purposes) 3 Lumpsum

12Taxes and duties (@5% -against sales tax declaration)   Lumpsum0.090
13Packing and forward charges   Lumpsum0.050
14Erection and commissioning charges   Lumpsum0.250
15Total 20 hp  3.411
Electrical and other items:
The various machines have to be connected to electrical motors of suitable power ratings for supplying power to them. Accordingly AC -3 Phase motors of different power ratings, varying from 1 HP to 10 HP will be required for powering the various unit operations of the improved rapeseed/ mustard oil processing unit. The total cumulative rating of all these motors will be in the vicinity of 20 HP. The cost of the electrical motors have been included along with the cost of plant and machinery. However, a cost of Rs. 50,000/- has also been considered for internal wiring and associated electrical work.
Miscellaneous fixed assets:

A cost of Rs. 1.50 Lakh under miscellaneous fixed assets has been considered for meeting the expenses for office furniture, office equipment, fixtures, firefighting and first aid equipment etc.
The total connected load for the aforementioned unit will be in the tune of 20 HP or 14.92 kW. Accordingly a a suitable power connection of 20 KVA is required.
Water requirement by the unit is minimal and may be in order of 500 litres /day. The same will be mostly required for domestic comsumption purpose. A suitable source of water supply may be arranged.
Standby diesel engines, generator sets and other utilities
Suitable standby power arrangement (DG sets of 20 KVA) may be made under the project. Accordingly a cost provision of Rs. 1 lakh has been made.
Provision for fire fighting:
Necessary provision for fire fighting equipment may be made while installing the unit. Provision for the same has been made under the miscellaneous fixed assets head.
Provision for Insurance:
Necessary provision for insurance may be made while installing the improved rapeseed/ mustard oil processing unit. Accordingly a provision for insurance @ Rs. 25,000/- per annum (lumpsum) has been made.
A 5% contingency provision is made for unforseen expenses.
Organizational setup:
A minimum of four permanent employees: one accountant cum store keeper, two plant operators and one watch and ward person are required for the unit. Besides one skilled and 5 unskilled workers are required under the scheme.
Eligibility of borrowers:
The borrowers can be proprietary and partnership firms, cooperatives, joint stock companies, corporations, APMC boards, growers associations , NGOs, PVOs etc.
The repayment schedule has been calculated considering the tenure of term loan to be 9 years , inclusive of a grace period of 1 years. However, banks are free to decide upon the repayment schedule depending upon the net cash flow statements and availability of adequate coverage to repay the term loan installment.
Interest rates for ultimate borrowers:
Banks are free to decide the rate of interest within the overall RBI guidelines. However, for working out the financial viability and bankability of the model project, we have assumed the rate of interest as 12% p.a.
Interest rate for refinance from NABARD:
As per the circulars issued by NABARD from time to time
Banks may take a decision as per RBI guidelines
Results of financial analysis are as under:
The financial analysis of the investment on the improved rapeseed/ mustard oil processing unit having an installed capacity of 240 MT/ annum has been attempted and is placed from Annexures I to VIII. The project has a margin money component of 25% with the rate of interest on term loan and working capital as 12% p.a. and 13% p.a. respectively. For this project, the financial indicators of the investment are as under:
Net Present Value @ 15% DF (NPW) = Rs. 8.98 lakh
Internal Rate of Return (IRR) = 27.55 %
Benefit Cost Ratio (BCR) = 1.05:1
Average Debt Service coverage Ratio (DSCR) = 1.61:1
Model project on Rapeseed/ Mustard Oil Expelling Unit
Capacity @ 240 MT/ annum 

Model project on Rapeseed/ Mustard Oil Expelling Unit
Capacity @ 240 MT/ annum
1Margin Money of the promoters of the project (@25% of the TFO)5.43
2Term Loan from the bank (@75% of TFO)16.29
 Total Financial Outlay (TFO)21.72
Model project on Rapeseed/ Mustard Oil Expelling Unit
Capacity @ 240 MT/ annum 
  (Rs. in Lakhs)
Installed capacity( Kg/ hr)100  
Days of operation per annum300  
No. of shift per day1  
Duration of a shift8hr 
Capacity utilization   
Year 1 of operation65%  
Year 2 of operation70%  
Year 3 of operation and onwards75%  
Average oil recovery percentage36.00%  
Wastage and other process losses2.00%  
Sales realization    
Sale Price of Mustard oil 4600.00Rs/ quintal 
Sales price of oil cakes650.00Rs/ quintal  
Cost of Production   
Cost price of Mustard Seeds1500.00Rs/ quintal  
Electricity and power charges300.00Rs/MT 
Repair and maintenance charges5.00%of the cost of fixed assetsat 100% capacity utilization
Accountant cum store keeper cost ( 1 person)4000.00Rs/ month 
Cost of plant operators (2 nos.)3000.00Rs/ month 
Security Guard (1 person)2500.00Rs/ month 
Loading charges of raw material (oilseeds)15.00Rs/ MT/ annumat 100% capacity utilization
Loading charges of byproducts (oilseed cakes)10.00Rs/ MT/ annumat 100% capacity utilization
1.50Rs/ kg  
Fixed assets16.86Lakhs 
Depreciation ( on WDV basis)   
On Building and other civil structures5% of capital cost on building and civil structures
On Plant and machinery10% of capital cost on plant and machinery
On miscellaneous fixed assets10% of capital cost on other miscellaneous fixed assets
Interest Rates   
Interest on term loan (%per annum)12.00% being PLR+2.50%
Interest rates on working capital13.00%   
Tenure of bank loan9years  
Grace period1year 
Comprehensive insurance and other taxes ( Rs/ annum)25000Lumpsum per annum  
No. of months of operation in a year12months   
Total working capital requirement (Rs.)435431.60at 60% capacity utilization for a 1 month WC cycle  
Tax rate from 1st to 5th year of operation0%   
From 6th to 10th year of operation27.45%   
From 11th year of operation onwards36.60%  
Annexure-IV - Repayment Schedule 
 Model project on Rapeseed/ Mustard Oil Expelling Unit
Capacity @ 240 MT/ annum
      (Rs. Lakh)
Year NoLoan outstanding at the beginning of the yearPrincipal RepayableInterest repayableTotal RecoveryLoan out-standing
at the
end of the year
Equal instalments 2.036 

1 comment:

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