Project Profile on Mott MacDonald

Potato processing -Fabricated Potato Chips iNDEXTb

Sector Agro and Food Processing

Sub - sector Food Processing
Project No. AF-23
Project Title Potato processing - Fabricated Potato chips

Project Description
The proposed project envisions setting up of a Fabricated Potato chips manufacturing unit in the
state, using potato powder as raw material. Such premium quality fabricated potato chips of
international brand (“Pringle”) is being imported in India at premium price and finds ready market of
foreign tourist and NRI / NRG coming to India. The proposed project is suggested keeping in view the
development of contract farming and ready availability of quality potatoes for Chips manufacturing in
Gujarat.

Product Application
Fabricated potato chips offer consistent quality, taste and find ready market against conventionally
prepared potato chips. They have wide application in the processed and snack food industries, with
the development of different flavors meeting regional and global taste preferences.

Market & Growth Drivers

Global potato production for the year 2005 was around 322 million MT, of which China dominated the
world by contributing around 23%, followed by Russian federation, India, USA and Germany.
Netherlands dominate the world in
export as well as import of India USA
Russian
8% 6%
potatoes, exporting around 170000 Federation Germ any
11% 3%
MT valued US $ 498 million and
importing around 1650000 MT China
valued at US $ 208 million in the 23%

year 2004-2005.
Others
France, Germany, Egypt and USA 49%
are the other leading exporters of World Potato production - 2005, FAO statistics
potatoes. The countries importing
substantial quantum are Germany, USA, Algeria and Brazil.
Indian snack food industry is one of the largest snack markets in the world growing at the rate of 10%
and estimated at INR 15300 million. Potato chips contribute around 85% and by far the largest
product category within snacks.
The average annual value of imports of potato products in India remained at US $ 1.19 million up to
year 2003, while in the year 2004 Indian imports was estimated at US $ 3.48 million from USA,
Netherlands, New Zealand, Italy and Canada.

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Potato processing -Fabricated Potato Chips iNDEXTb

“Pringle” a reputed brand of Fabricated Potato chips from USA, finds ready market in India with
visibility on shelf of all reputed retail chain stores. India offers good opportunity for similar product with
variation in flavors and tastes as per regional preference.
Growth Drivers
 Increasing consumption of fast food and snacks foods such as potato chips and French fries in all
class of people is boosting the market for fabricated chips.
 Changing societal trends, increasing nuclear families, aging population and people looking for
more convenient snacking and pleasure food with less indulgence.

Why Gujarat?
 Gujarat produced around 9.78 Lac MT of potatoes from 43268 hectare cultivated in the year
2004-05.
 Rapidly growing food processing industry in Gujarat offers opportunity for newer products from
potato powder and flakes.
 Gujarat offers availability of technical / skilled manpower for Food processing industry.
 Easy availability of industrial land with basic facilities (power, water, fuel and drainage etc.) in
potato producing areas.

Technology/Process
Fabricated Potato chips can be manufactured either by using potato powder or farm fresh potatoes.
The manufacturing process using potato powder is briefly summarized below:
- Potato powder of suitable fineness is mixed with various ingredients,
- This powder is cooked and extruded into sheet.
- Products are sheeted, rotary cut and fried.
- Uniform size shapes are die-cut from extruded sheet where low pressure extrusion provides a
variety of shape with consistent density and continuous operation.
- Controlled temperature continuous frying is done to get uniform quality and golden yellow
appearance with consistent Crispy taste.
- Automatic packaging in Nitrogen filled moisture proof boxes or in colorful Multilayer Plastic film
Pouches for longer shelf life.
- Packing of Pouches and boxes in Cartons for Marketing.
Another technique used for production of fabricated potato chips is thru using farm fresh potatoes, the
process of which is briefly summarized below:
- As per the company norms the potatoes bought from farm are made to pass thru a quality test.
- The potatoes are then passed thru a conveyor where they are de-stoned and then peeled.
- The peeled potatoes are then washed with cold water.
- A slicer then cuts the potatoes into thin slices. The slices are again washed in cold water in order
to purge any released starch content.
- The slices are then passed thru a chemical solution in order to augment its colour if required.
- The slices are then fried and salted, and passed through a conveyor belt so as to drain excess oil.
The chips are then cooled and sorted. The figure below shows the whole process in sequence.

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Potato processing -Fabricated Potato Chips iNDEXTb

Source: Madehow

Raw Material
The principle raw materials required for making Potato fabricated chips are potato, salt, spices,
preservatives, edible oil, flavors and hard coke. Since Gujarat is one of the leading states producing
potatoes availability of raw material in sufficient quantity will not pose a bottle neck for the unit.
Potato production and area per hectare are summarized in the following table in giving an overview of
raw material availability in the state.

Area and Production of Potatoes in Gujarat

Sr. Year Area (Hectares) Production (MT)

1 2001-02 40,163 978358

2 2002-03 35,794 780001

3 2003-04 31,211 704099

4 2004-05 43,268 978182

5 2005-06 40,992 1088530

Source: Department of Agriculture Statistics, Gandhinagar, Government of Gujarat

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Kheda, Banaskantha, Mehsana, Sabarkantha and Anand are major potato producing districts in
Gujarat. It can be observed that there is difference in area and productivity every year, the reason
being fluctuations in rain fall.

Suggested Plant Capacity & Project Cost

Suggested Capacity for Fabricated Potato chips plant is 1500 tons out put per annum
The indicative project Cost for the proposed unit is INR 50 million (US $ 1.11 million).
Estimated Project cost & Means of finance
Sr. No. Cost of project INR in million
1 Land and Land development 4.20
2 Building 1500 Sq. mt. 6.75
3 Plant & Machinery 10 MT per day finished product line 27.00
4 Misc. Fixed Assets 2.50
Preliminary & Pre-operative
5 3.00
Provision for contingencies 2.55
6
7 Total Fixed Assets 46.00
8 Margin Money for working capital 4.00
Total 50.00

Means of Finance
9 Promoters contribution 14.30
10 Term loan 35.70
Total 50.00

As indicated above the proposed project will require approx. 6000 Sq. mt of land and proposed built
up area for proposed unit will be approx. 1500 sq. mt. The unit will have installed capacity of 1500
TPA considering 150 working days in a year. Total estimated fixed cost of the project in INR 46.00
million and INR 4 million will be as working capital margin, which will make estimated capital cost of
INR 50 million. The proposed unit will cater to domestic and international demand so the Debt equity
ratio of 2.5:1 is suggested. Thus, the estimated term loan amount would be of INR 35.70 million and
Equity will be INR 14.30 million.

Plant and Machinery Required

The proposed project would require the following basic as well as necessary plant and machinery:
List of Plant and Machinery

Sr. No Particulars Quantity Supplier/Technology Provider

1 Potato peeler Automatic 4 Honey Comb Products, Ahmedabad

Economode Food Equipment (India)

Private Ltd.. Mumbai

2 Power operated Slicer 2 Ambica Boiler & Fabricators, Ahmedabad

Hind Pulverizer works, Ahmedabad

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Potato processing -Fabricated Potato Chips iNDEXTb

Sr. No Particulars Quantity Supplier/Technology Provider

3 Cutting machine 2 Kanchan Metals Pvt Ltd, Kolkata

Dornow food technology GmbH, Germany

4 Salting drum 4 Economode Food Equipment (India)

Private Ltd.. Mumbai

5 Hydro extractor to extract moisture 2 Economode Food Equipment (India)

Private Ltd.. Mumbai

6 Continuous fryer Line 2 Spantek Food Machines, Pune

Economode Food Equipment (India)

Private Ltd.. Mumbai

8 Continuous Filling / Weighing line 2 Economode Food Equipment (India)

Private Ltd.. Mumbai

9 Automated Bag sealing machine 4 Ajinomoto India Pvt Ltd, Chennai

10 Thermic Fluid heater for Frying oil 1 Thermax Ltd-Pune,

bath heating at controlled
temperature

Utilities
The unit would necessitate utilities like water, electric power and fuel for cooking of potatoes and
frying of Potato chips. 30 KL / day water, 150 HP power and 5 MTPD Coal or equivalent FO as fuel,
would be a basic requirement for the proposed unit.

Estimated Man Power Required

Estimated total manpower requirement for the proposed unit is 20 persons, that will include 3 people
at managerial grade, 8 people staff in the manufacturing section, 2 persons in quality control and 7
other staff members for other departments including purchase and marketing assistants.

Suggested Location
The suggested locations for the proposed potato processing unit for powder and flakes manufacturing
are Banaskantha, Kheda, Rajkot, Sabarkantha, and Anand districts.

Project Time Line

The proposed project will have cumulative period of 10-12 months of which 5 to 6 months would entail
obtaining the obligatory clearances from various authorities.

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Potato processing -Fabricated Potato Chips iNDEXTb

Financial Indicators
Based on the profitability projections worked out for the proposed project, key financial indicators are
as summarized below:

Key Financial Indicators

st nd rd
Sr. No Financial Ratios 1 Year 2 Year 3 Year
A Break-Even Point in % capacity 42.75 38.32 34.02

B Debt-service Coverage Ratio 1.70 2.04 2.65

C Average DSCR 2.13

D Return on Investment (ROI) 23.72 % 27.51 % 34.10%

E IRR for 10 Years Project period 47%

As perceived from the Project cost and Means of finance table, the suggested Debt Equity Ratio for
the proposed project is 2.5:1. The IRR (Internal Rate of Return) for the proposed project is approx.
47% projected for a period of 10 years.

Clearances required
The proposed unit will have to register itself with Secretariat of Industrial Approvals (SIA), Ministry of
Industries and Government of India, by filing Industrial Entrepreneur’s Memorandum (IEM), as it will
have plant and machinery investment of more than INR 10 million.

The most critical aspect of this product will be its shelf life for export consumers and hence there will
be need for stabilizers and preservatives meeting FDA regulations in consuming countries and Codex
standards followed by them.
Being an EOU the unit will have to follow strict quality standards as accepted in the countries where
export is to be made. It is obligatory to meet provisions under the PFA act for all ingredients and
quality aspects for marketing product in Indian market
The unit will get EOU registration from RBI, DGFT and with APEDA as registered manufacturer
exporter to avail export incentives.

Agencies to be contacted

Industrial Extension Bureau

Mott MacDonald India

Gujarat Agro Industries Corporation Ltd.

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