BULK MILK COOLING UNITS

1. Introduction:

1.1 The Indian dairy industry is contributing significantly to the country's economy, besides improving the health standard by increasing the nutritional value of the food. India occupies first position in the world having a total bovine population of 288 million compared to the world's total bovine population of 1420 million. As per 1992 livestock census, the country has about 62.90 million breedable cows and 42.46 million breedable buffaloes. There has been a major improvement in milk production which increased from 17 million tones in 1951 to 74.7 million tonnes during 1998-99 and the growth was maximum between 1980 and 1990. Uttar Pradesh, Punjab, Madhya Pradesh, Rajasthan, Maharashtra, Gujarat, Andhra Pradesh, Haryana, Tamil Nadu and Bihar contributed to the extent of 85 percent of the total milk production in the country. Today, India is number one producer of milk in the world. The present per capita availability of milk is 212 gms as against the ICMR recommendation of 250 gms.

1.2 Recognizing the importance of the sector, the notable programmes taken up by GOI are key village schemes, intensive cattle development projects, crossbreeding projects through bilateral assistance, operation flood programme and technology mission. In 1970 under the aegis of National Dairy Development Board, "Operation Flood" programme was launched to modernize the dairy sector and flood the 4 metro cities with milk from dairy cooperatives. By the end of September, 1999, 82000 village milk producers cooperatives were organised through 102 lakh farmers and with an average rural milk procurement of 13.13 million liters per day. Another step was taken in 1988, to augment rural income by launching Technology Mission on Dairy Development (TMDD), which aims at applying modern technology to improve productivity, reduce costs of operation and thus ensure greater availability of milk and milk products.

1.3 With the liberalization of the Indian economy in 1991, the dairy sector too was delicenced. However, on June 9, 1992 GOI notified Milk and Milk Products Order (MMPO), according to which, a dairy handling more than 10000 liters of milk per day or 500 MT milk solids per annum need to be registered. The registering authority shall be an officer of the State Government or Union Territory in respect of units handling upto 75000 liters/day, or 3750 MT of milk solids per annum, where the entire milkshed of the unit lies within a State / Union Territory. In case of those units, which are handling more than 75000 liters of milk per day or 3750 MT of milk solids per annum, the registering authority is Department of Animal Husbandry and Dairying ,Ministry of Agriculture, Govt. of India, New Delhi.

1.4 Dairy products form one of the fastest growing segments in the livestock product export. The major products exported are malted milk foods, ghee and cheese (to some extent) to the countries like Bangladesh, UAE, Nepal, Sri Lanka, Bahrain and Oman. The export performance during the years 1980-81 to 1995-96 was quite satisfactory. Subsequently, there is a fall in exports of milk products. As per the APEDA estimates, the export of milk and milk products to currently existing markets would increase to Rs.285 million and to new markets to Rs. 155 million. Thus the exports is likely to touch Rs.440 million by the turn of the century. The GATT agreement further gave a boost to the dairy industry, as India has a comparative cost advantage in regard to milk production. NABARD has been actively involved in credit disbursement for various investments under dairy sector. It also encourages development of new products through its research and development funds besides guiding various entrepreneurs in new areas of business and technology.

1.5 Having made a significant stride in production and processing, our country is topping the Globe as the highest milk producer. Now it the time to upgrade the quality of milk in similar quantum to provide hygienically safe milk and milk products to the consumers. The sole criterion for determining quality should no longer be FAT/SNF but should also be bacteriological quality of the milk, which is possible only by the proper handling of milk from the udder of the animal to the super market shelf. Since the ambient temperature in our country is as high as 45o C, improvement of Raw milk quality is possible only by the careful milking conditions and its prompt cooling to 4oC or below.

1.6 The best alternative to the present collection system of milk is cooling of milk immediately after milking by Bulk Cooling Tanks. The usage of such tanks have become popular in the recent past because it not only helps in increasing the shelf-life of milk but also provides systematic and simple way of the procurement of milk . Also ensures procurement of more Milk by covering untapped farther areas for Milk Collection.

1.7 As per the latest Draft Codex International Code of Hygienic Practice for Milk and Milk Products from Codex Secretariat, if the milk is not processed within two hours of milking, it is required to be cooled to a temperature below 7oC. Therefore, the Dairies who have to market their milk and milk products in International Market will have to comply with the Codex International Code of Hygienic Practice and cold chain will become a must for them. The initial capital investment will pay back in the long run, as the system will eliminate the use of milk cans, milk Sourage, reduction in transportation cost, better return etc.

2. Objectives:

The financial assistance is extended for purchase of bulk milk coolers with the following objectives.

  1. To enhance the keeping quality of milk and also to avoid economic losses to farmers due to spillage/sourage of milk.
  2. To produce improved quality products for export as well as to meet the domestic requirements.
  3. To reduce the transportation cost by regulating transportation of the milk on alternative days and also through reduction in expenditure on purchase and maintenance of cans.

3. Potential areas:

Bulk Milk Cooling Units were introduced by the Milk Cooperative Unions of Kaira, Baroda and Mehsana districts in Cooperative Sector and in private sector by Dynamix Dairy in Maharashtra and Nestle in Punjab. The scheme has potential to finance in almost all the operation flood programme(OFP) districts and also to some extent in non- OFP districts.

4. Beneficiaries:

Village Milk Cooperative Societies of Cooperative Milk Union or Milk Collection Centres of private Dairies.

5. Project Details:

  1. Components: The components of Bulk Milk Cooling Unit comprises of bulk coolers, DG set, accessories such as water heater, water storage tanks etc.
  2. Capacity :The capacity of Bulk Milk Cooling Units is ranging from 300 to 5000 litres.
  3. Specifications: The specifications of different models manufactured by two firms are given in table 1.
  4. Equipment suppliers: The machinery should be as per BIS standards and are presently manufactured in the country by Alfa Laval, IDMC, PRAJ, etc. The addresses of few manufacturers are given in Table II for guidance of entrepreneurs/bankers.
  5. Processing: The operations involve collection and chilling of milk to a temperature of 4 o C
  6. Advantages:
    1. Elimination of souring/curdling of milk because of cooling at the collection centre itself.
    2. Adulteration of milk and spillage from cans can be eliminated during transport.
    3. Transportation cost of milk can be brought down by regulating transportation to the main dairy either on alternative days or once in a day.
    4. Saving of initial investment on purchase of cans and subsequent maintenance cost (Repairs, cleaning etc.)of those cans.
    5. Improved quality of milk can be supplied to the main dairy to manufacture quality products for domestic as well as export markets.
    6. Flexibility in milk collection time results in increase in volume of milk collected at the centres.
    7. Farmers will get better returns for the quality of milk.
    8. Chilling at the Main dairy can be avoided.

6. Technical Collaboration: Since the process is simple no technical collaboration is envisaged for the project, however the Milk Unions/Private Dairy Plants would be providing guidance to the societies/collection centres in purchase and installation of Bulk Milk Coolers, and also training of manpower in operations and maintenance. 

 

7. Capital Cost: The capital cost varies with the capacity and the specifications of the Bulk Milk Coolers. However, two models have been considered i.e. 2000 and 5000 litres capacity, whose unit costs are Rs. 6.35 lakhs and 14.45 lakhs respectively. The detailed unit cost is given in the Annexure I. It is assumed that the space available in the existing collection centre/cooperative society will be sufficient to install the equipment and accordingly no cost on civil structures is considered. In case if the civil structures are required to be considered, the same may be considered under project cost.

8. Economics of the project:

Based on the various techno economic parameters furnished in Annexure II, the economics of the project has been worked out and presented in Annexure III A and B for two different models. The items of income include reduction in souring/curdling of milk, spillage and pilferage of milk, saving of expenditure on transportation, purchase and maintaince of cans and chilling cost received from the union while the expenditure includes the operational cost of cooler (fuel/power), repairs, maintenance and additional manpower. In case if the unit is financed along with Automatic Milk Collection Station, the existing staff of the society will be sufficient to manage the unit. No additional expenditure on manpower is required.

9. Financial Analysis:

The cash flow statement covering the Benefit Cost Ratio (BCR) Net Present Worth (NPW) and Internal Rate of Return (IRR) has been worked out for the project and presented in Annexure IV. For the models of 2000 litres and 5000 litres, the BCR is 1.237:1 and 1.341:1, NPW is Rs. 2.141 lakhs and Rs. 6.013 lakhs and IRR is 27.97 % and 32.08 % respectively. The entire bank loan can be repayable in nine / eight years without any grace period and accordingly the repayment has been fixed at nine / eight years for the model project.(Annexure V)

10. Financial assistance:

Bulk Milk Cooling units of various sizes would be considered for refinance support by National Bank. Therefore all participating banks may consider financing this activity subject to their technical feasibility, financial viability and bankability.

11. Lending Terms and other requirements:

11.1 Margin Money: The society or Milk collection centre should normally meet 25% of the project cost either out of their own resources or through subsidy.

11.2 Interest rate: Interest rate will be as determined by the financing bank.

In the present case we have considered interest rate of 15%

11.3 Security: As stipuilitated by the RBI

11.4 Insurance: The financing bank may ensure that the society takes adequate insurance cover for the asset

11.5 Repayment period: Depends upon the gross surplus generated, it may be upto 8 -9 years without any grace period.

12 Special terms and conditions:

The special terms and conditions of the project are given in Annexure VI.

Annexure - I

Unit cost, Bank loan and margin money - Bulk Milk Cooling unit

(Rs. in lakhs)

S.No.

Particulars

Models

 

 

2000 lit.

5000 lit.

 

 

 

 

1

Cost of Bulk Milk Cooler with DGset

6.15

14.15

 

 

 

 

2

Installation and commissioning

0.20

0.30

 

 

 

 

3

Total cost

6.35

14.45

 

 

 

 

4

Margin Money (20%)

1.27

2.89

 

 

 

 

5

Bank loan (80%)

5.08

11.56

Annexure - II

Techno-economic parameters - Bulk Milk Cooling Units

Sr.

No.

Particulars

Model

 

 

2000 liters

5000 liters

 

 

 

 

A

Income

 

 

1

Installed capacity (liters per day)

2000

5000

2

Capacity utilisation (%) First year

Second year

Third year

onwards

70

80

90

60

70

80

3

Reduction in souring and curdling of milk as %

of milk procured

1.00

1.00

4

Saving in income due to reduction in

souring / curdling (Rs./lit of sour milk)

2.65

2.65

5

Reduction in spillage and pilferage

in cans during transportation as % of

milk procured

1.00

1.00

6

Cost of raw material - Milk (Rs./lit.)

10.6

10.6

7

Payment received from unions for

chilling of milk (Rs./lit)

0.10

0.10

8

Saving in investment and repair of cans

(Rs./lit.)

0.04

0.04

9

Saving in transportation cost of milk

(Rs./lit.)

0.10

0.10

 

 

 

 

B

Expenditure

 

 

1

Power and fuel consumption (Rs.)

0.07

0.06

2

Repairs and maintanance (Rs.)

0.02

0.01

3

Manpower - one person (Rs.per month)

1500

1500

 

 

 

 

C

Others

 

 

1

Depreciation (%)

10

10

2

Interest rate (%)

15

15

3

Repayment period (years)

9

8

Annexure - III (A)

Income and expenditure - Bulk Milk Cooling Unit (2000 lit./ unit)

(Rs. in lakhs)

Sr.No

Particulars

Years

 

 

 

I

II

III

IV

V

VI

VII

VIII

IX

Milk procurement (in litres / day)

1400

1600

1800

1800

1800

1800

1800

1800

1800

A

Income :

 

 

 

 

 

 

 

 

 

1

Due to reduction in souring and curdling of milk (@ 1%)

0.135

0.155

0.174

0.174

0.174

0.174

0.174

0.174

0.174

2

Reduction in spillage

(@ 1%)

0.542

0.619

0.696

0.696

0.696

0.696

0.696

0.696

0.696

3

Payment received from milk union for chilling

(@ Rs.0.10 / liter)

0.511

0.584

0.657

0.657

0.657

0.657

0.657

0.657

0.657

4

Saving in repairs and replacement of cans

@ Rs.0.04 / liter

0.204

0.234

0.263

0.263

0.263

0.263

0.263

0.263

0.263

5

Net saving on transportation cost of milk @ Rs.0.10 / liter

0.511

0.584

0.657

0.657

0.657

0.657

0.657

0.657

0.657

B

Total income

1.903

2.175

2.447

2.447

2.447

2.447

2.447

2.447

2.447

C

Expenditure

 

 

 

 

 

 

 

 

 

1

Electricity and fuel consumption

(@ Rs.0.07 / liter)

0.358

0.409

0.460

0.460

0.460

0.460

0.460

0.460

0.460

2

Repairs and maintenance (@ Rs.0.02 / liter)

0.102

0.117

0.131

0.131

0.131

0.131

0.131

0.131

0.131

3

Man power cost @ Rs.1500 per month

0.180

0.180

0.180

0.180

0.180

0.180

0.180

0.180

0.180

D

Total Expenditure

0.640

0.706

0.771

0.771

0.771

0.771

0.771

0.771

0.771

E

Gross surplus

1.264

1.470

1.676

1.676

1.676

1.676

1.676

1.676

1.676

Annexure - III (B)

Income and expenditure - Bulk Milk Cooling Unit (5000 lit./ unit)

(Rs. in lakhs)

Sr.No

Particulars

Years

 

 

I

II

III

IV

V

VI

VII

VIII

 

Milk procurement (in litres / day)

3000

3500

4000

4000

4000

4000

4000

4000

A

Income :

 

 

 

 

 

 

 

 

1

Due to reduction in souring and curdling of milk (@ 1%)

0.290

0.339

0.387

0.390

0.390

0.390

0.390

0.390

2

Reduction in spillage

(@ 1%)

1.161

1.354

1.548

1.548

1.548

1.548

1.548

1.548

3

Payment received from milk union for chilling

(@ Rs.0.10 / liter)

1.095

1.278

1.460

1.460

1.460

1.460

1.460

1.460

4

Saving in repairs and replacement of cans

@ Rs.0.04 / liter

0.438

0.511

0.584

0.584

0.584

0.584

0.584

0.584

5

Net saving on transportation cost of milk @ Rs.0.10/liter

1.095

1.278

1.460

1.460

1.460

1.460

1.460

1.460

 

Total income

4.079

4.759

5.439

5.439

5.439

5.439

5.439

5.439

B

Expenditure

 

 

 

 

 

 

 

 

1

Electricity and fuel consumption

(@ Rs.0.06/ liter)

0.657

0.767

0.876

0.876

0.876

0.876

0.876

0.876

2

Repairs and maintenance (@ Rs.0.01 / liter)

0.110

0.128

0.146

0.146

0.146

0.146

0.146

0.146

3

Man power cost

@ Rs.1500 per month

0.180

0.180

0.180

0.180

0.180

0.180

0.180

0.180

 

Total Expenditure

0.947

1.074

1.202

1.202

1.202

1.202

1.202

1.202

C

Gross surplus (A-B)

3.132

3.684

4.237

4.237

4.237

4.237

4.237

4.237

Annexure - IV (A)

Financial analysis - BCR, NPW and IRR - Bulk Milk Cooling Unit of 2000 liters

(Rs. in lakhs)

Sr.

No

Particulars

Years

 

 

I

II

III

IV

V

VI

VII

VIII

IX

 

 

 

 

 

 

 

 

 

 

 

1

Capital cost

6.35

-

-

-

-

-

-

-

-

2

Recurring cost

0.640

0.706

0.771

0.771

0.771

0.771

0.771

0.771

0.771

3

Total cost

6.99

0.71

0.77

0.77

0.77

0.77

0.77

0.77

0.77

4

Benefits

1.903

2.175

2.447

2.447

2.447

2.447

2.447

2.447

2.447

5

Depreciated value

-

-

-

-

-

-

-

-

0.635

6

Total benefits

1.903

2.175

2.447

2.447

2.447

2.447

2.447

2.447

3.082

7

Net benefits

-5.086

1.470

1.676

1.676

1.676

1.676

1.676

1.676

2.311

8

Discount Factor @ 15%

0.870

0.756

0.658

0.572

0.497

0.432

0.376

0.327

0.284

9

Present Worth of Costs @ 15% DF

6.078

0.534

0.507

0.441

0.383

0.333

0.290

0.252

0.219

10

Present Worth of Benefits @ 15% DF

1.655

1.645

1.609

1.399

1.217

1.058

0.920

0.800

0.876

11

Net Present Worth @ 15% DF

2.141

 

 

 

 

 

 

 

 

12

Benefit Cost Ratio (BCR)

1.237:1

 

 

 

 

 

 

 

 

13

Internal Rate of Return (IRR)

27.97%

 

 

 

 

 

 

 

 

Annexure - IV (B)

Financial Analysis - BCR, NPW and IRR - Bulk Milk Cooling Unit of 5000 liters

(Rs. in lakhs)

Sr.

No

Particulars

Years

 

 

I

II

III

IV

V

VI

VII

VIII

 

 

 

 

 

 

 

 

 

 

1

Capital cost

14.45

-

-

-

-

-

-

-

2

Recurring cost

0.947

1.074

1.202

1.202

1.202

1.202

1.202

1.202

3

Total cost

15.1

1.07

1.20

1.20

1.20

1.20

1.20

1.20

4

Benefits

4.079

4.759

5.439

5.439

5.439

5.439

5.439

5.439

5

Depreciated value

-

-

-

-

-

-

-

2.89

6

Total benefits

4.079

4.759

5.439

5.439

5.439

5.439

5.439

8.329

7

Net benefits

-11.018

3.684

4.237

4.237

4.237

4.237

4.237

7.127

8

Discount Factor @ 15%

0.870

0.756

0.658

0.572

0.497

0.432

0.376

0.327

9

Present Worth of Costs @ 15% DF

13.388

0.812

0.790

0.687

0.598

0.520

0.452

0.393

10

Present Worth of Benefits @ 15% DF

3.547

3.598

3.576

3.109

2.704

2.351

2.045

2.723

11

Net Present Worth @ 15% DF

6.013

 

 

 

 

 

 

 

12

Benefit Cost Ratio (BCR)

1.341:1

 

 

 

 

 

 

 

13

Internal Rate of Return (IRR)

32.08%

 

 

 

 

 

 

 

Annexure - V (A)

Repayment schedule - Bulk Milk Cooling Unit of 2000 liters

(Rs. in lakhs)

Year

Bank Loan Beginning

Outstanding End

Gross surplus

Payment of interest

Repayment of principal

Total repayment

Net Available

DSCR

 

 

 

 

 

 

 

 

 

1

5.080

4.880

1.264

0.76

0.200

0.962

0.302

1.313

 

 

 

 

 

 

 

 

 

2

4.880

4.480

1.470

0.73

0.400

1.132

0.338

1.298

 

 

 

 

 

 

 

 

 

3

4.480

3.830

1.676

0.67

0.650

1.322

0.354

1.268

 

 

 

 

 

 

 

 

 

4

3.830

3.180

1.676

0.57

0.650

1.225

0.452

1.369

 

 

 

 

 

 

 

 

 

5

3.180

2.530

1.676

0.48

0.650

1.127

0.549

1.487

 

 

 

 

 

 

 

 

 

6

2.530

1.880

1.676

0.38

0.650

1.030

0.647

1.628

 

 

 

 

 

 

 

 

 

7

1.880

1.230

1.676

0.28

0.650

0.932

0.744

1.798

 

 

 

 

 

 

 

 

 

8

1.230

0.600

1.676

0.18

0.630

0.815

0.862

2.058

 

 

 

 

 

 

 

 

 

9

0.600

0.000

1.676

0.09

0.600

0.690

0.986

2.429

 

Avg.DSCR

=

1.628

 

 

 

 

Annexure - V (B)

Repayment schedule - Bulk Milk Cooling Unit of 5000 liters

(Rs. in lakhs)

Year

Bank Loan Beginning

Outstanding End

Gross surplus

Payment of interest

Repayment of principal

Total repayment

Net Available

DSCR

 

 

 

 

 

 

 

 

 

1

11.560

10.760

3.132

1.73

0.800

2.534

0.598

1.236

 

 

 

 

 

 

 

 

 

2

10.760

9.560

3.684

1.61

1.200

2.814

0.870

1.309

 

 

 

 

 

 

 

 

 

3

9.560

8.160

4.237

1.43

1.400

2.834

1.403

1.495

 

 

 

 

 

 

 

 

 

4

8.160

6.560

4.237

1.22

1.600

2.824

1.413

1.500

 

 

 

 

 

 

 

 

 

5

6.560

4.960

4.237

0.98

1.600

2.584

1.653

1.640

 

 

 

 

 

 

 

 

 

6

4.960

3.360

4.237

0.74

1.600

2.344

1.893

1.807

 

 

 

 

 

 

 

 

 

7

3.360

1.760

4.237

0.50

1.600

2.104

2.133

2.014

 

 

 

 

 

 

 

 

 

8

1.760

0.000

4.237

0.26

1.760

2.024

2.213

2.093

Avg.DSCR

 

=

1.637

 

 

 

 

ANNEXURE VI

Special Terms and Conditions - Bulk Milk Cooling Units

The financing bank may ensure that:

  1. the milk union/ dairy identifies the societies/ milk collection centres whose milk collection is about 1400-1800 litres and 3000-4000 litres per day for installing 2000 litres & 5000 litres capacity bulk milk cooling units taking into consideration of the likely acceptance of the dairy farmers for the shift in the system.
  2. the union/ dairy guides the society for purchase and installation of BMCU.
  3. the union/ dairy trains the secretary and other staff of the society/ milk collection centre in the operation and maintenance of BMCU.
  4. the society/ milk collection centre enters into an annual contract with the equipment supplying firm for maintenance of BMCU.
  5. the society/ milk collection centre insures the BMCU, provided the insurance coverage is available.
  6. the milk union/ dairy explores the possibility to get subsidy from other agencies for purchase of BMCU by the societies/milk collection centres.
  7. the union/ dairy provides tie-up arrangement for the repayment of bank loan.
  8. the union provides adequate compensation to the societies/ milk collection centre to meet the chilling cost of milk.
  9. the union/ dairy gives better price for good quality chilled milk supplied by the society/milk collection centre.

Appendix I

Technical specifications of bulk milk coolers

------------------------------------------------------------------------------------------------------------------------------------------------Particulars De Laval Models Indian Dairy Machinery

Dx2000 IBT2000 DxC5000 2000 5000L

------------------------------------------------------------------------------------------------------------------------------------------------

1. Basis of Design ISO 5708 ISO 5708 ISO 5708 N.A. N.A.

2. Types of Cooling Direct Direct Direct Direct Direct

   
System

3. Shape of Tank Open type Horizontal Horizontal Open Closed

    Semi- Semi- cylindrical Horizontal Horizontal

    cylindrical cylindrical

4. Compressor type Hermetic Hermetic Hermetic Hermetic Hermetic

5. No. of compressors One One Two One Two

6. No. of fans Two Two Four N.A. N.A.

7. Power supply Three phase Three phase Three phase Single Phase Three Phase

    415V,50Hz 415V,50Hz 425V,50Hz 220V, 50 Hz 415 V,50Hz

8. Connected load 6.92 kw 6.92 kw 12.75 kw N.A. N.A.

9. Voltage stabilizer 10 KVA 10 KVA 20 KVA 10 KVA 20 KVA

10. Temperature From 35 C From 35 C From 35 C From 35 C From 35 to 4 C to 4 C to 4 C to 4 C to 4 C

11. Cooling time 3 hours 3 hours 3 hours 3 hours 3 hours

12. Diesel Generator 10 KVA 10 KVA 10 KVA 10 KVA 10 KVA

Appendix II

List of major suppliers of Bulk Milk Coolers

1. De laval Agri (India) Ltd.

    Plot No. 7, Shri Shivaji Housing

    Society, Senapathi Bapat Road

    Pune - 411 016, Maharashtra, India

2. Indian Dairy Machinery Company Ltd.

    GIDC Estate

    Vithal Udyognagar - 388121

    Gujarat, India

3. New Dairy Engineering and Trading Company Pvt. Ltd.

    B-8/5, Badli Industrial Estate

    Phase I, Delhi - 110042,

    India

4. Praj Industries Ltd.

    917/17, British Library Lane

    Off Fergusson College Road

    Pune - 411004

5. Inda Stainless Fab tech Pvt. Ltd.

    # 439 SIDCO Industrial Estate

    Ambattur

    Chennai-600098