1

1.1

MUSHROOM PROCESSING
Introduction

Mushrooms are gradually becoming popular as they are rich in minerals and vitamins and
very low on fat and sugar. Fresh mushrooms have very limited life and hence they need to be
consumed within few hours. But processing and canning increases their shelf life to few
months.
It is also known to have medicinal values and certain varieties of mushrooms can inhibit
growth of cancerous tumor. The productivity of mushroom is higher than any crop. Food,
nutritional and medicinal values apart, mushroom growing can be efficient means of waste
disposal (agricultural, industrial and family wastes), since it can use the wastes as medium of
growth. Hence, it could be considered as eco-friendly.
In India only three types, namely, button, oyster and straw mushrooms are commercially
cultivated. Button mushroom accounts for 90 percent of India's production of mushrooms.
About 38 percent of the total world production of mushrooms is button mushroom. Further,
mushroom growing is highly labour intensive and requirement of land are is comparatively
low.
1.2

Objective

The primary objective of the model report is to facilitate the entrepreneurs in understanding
the importance of setting up unit of Button Mushroom, technology and financial parameters of
various components for preparation and submission of project proposal to bank for sanction
of long term loan. This model report will serve as guidance to the entrepreneurs on starting
up such a new project and basic technical knowledge for setting up such a facility.
1.3

Raw Material Availability

The most crucial raw material will be good quality fresh mushrooms. Shelf life of fresh
mushrooms is few hours and hence the location has to be very close to the cultivation area.
Prior arrangements with some cultivators for regular supply must be made. Future planning
may include mushroom cultivation for captive consumption. Salt and citric acid will be
required in small quantities.
1.4

Market Opportunities

Mushrooms are very popular in most of the developed countries and they are becoming
popular in many developing countries like India. Applications and market for mushrooms is
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growing rapidly in India because of their nice aroma, nutritious values, subtle flavour and
special taste. Many exotic food preparations like soup, vegetables, pickles etc. are made
from them. They are also used for garnishing, to prepare many varieties of gravy and for
stuffing several food preparations. But they are still considered as up-market product and
their consumption is limited to urban and semi urban areas. Fresh mushrooms have very
limited shelf life but processed and canned mushrooms have fairly long shelf life and can be
sold even at far off places. Star hotels, exclusive restaurants, certain caterers are the bulk
consumers and a firm tie-up for regular supply with some of them is advisable. The product
can be sold even through departmental stores, super markets etc.
Mushrooms The Medical Boom
For thousands of years, Eastern cultures have revered mushrooms as both food and medicine. It
has more than 50 species with healing properties, when used as medicine. Mushrooms are made
into soup or tea, or taken as a tonic or elixir and in various other forms in culinary dishes. Studies
conducted over the past 30 years--mostly in Asia--have provided data suggesting that mushrooms
or substances extracted from mushrooms may aid in the treatment of certain types of cancer,
boost the immune system and reduce the risk of coronary heart disease. Much of this research
has focused on mushrooms.

1.5
1.5.1

Project description
Applications

Mushroom is an exotic and nutritious source of vegetarian food and is also easy to digest. It
is considered as a suitable substitute for meat and eggs. There are many varieties of
mushroom and most of them are edible. It is a universal product and MP has been
considered as a likely location.
Mushrooms are used to make soups, pickles, vegetables etc. and they are also used as
additives in many food preparations. As a matter of fact, they are considered as a vegetarian
delicacy all over the world and their consumption is increasing in India as well. Their
household use is picking up but they are consumed in large quantities in star hotels and
restaurants. Hence, firm tie-up with some of them is advisable.
1.5.2

Availability of know how and compliances

CFTRI, Mysore, has successfully developed the technical know-how. Compliance under the
PFA Act is mandatory.

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1.5.3

Capacity of the Project

The capacity of the plant is 300 MT per annum.

1.5.4

Manufacturing process

Fresh mushrooms are washed in cold water and then blanched in boiling water for around 34 minutes. Then they are dehydrated in drier and packed.
It is advisable to pre-treat fresh mushrooms in a solution containing brine to prevent
discoloration.
Packing is very critical as formation of moisture contaminates mushrooms very quickly.
Hence plain cans and brine of 2% salt and 0.2% citric acid are used for packing. The cans
are exhausted at 19O C for 7-8 minutes, sealed and processed under pressure for around
half an hour. Yield of final product depends up on the quality of dryer, manufacturing process
employed, moisture content in fresh mushrooms and moisture required in the final product.
Hence, average yield is taken at 25%.
There are latest innovations in cost effective methods of drying and concentrated mushroom.
1.6

Different forms for drying

Freeze Drying: In this technology, the most superior method is Vacuum freeze
drying system, in which water is evaporated by sublimation from ice phase to
vapour at low temperature resulting in dried product close to fresh product and
quick in rehydration. The main limitation of this system is its high energy cost.
Therefore it can be used for high value products like mushrooms only.

Vacuum Drying: In this, heat sensitive products are dried under vacuum at low
temperature. The product is superior to air-drying and sun drying. This method is
widely practiced due to its fair product quality and economics.

Microwave drying: This is the latest system emerging in dehydration as the

product quality is superior quite similar to freeze drying. The cost of microwave
drying is lower than that of freeze drying.

Hot air drying: This system is simple hot air circulation over the product.
Evaporation is by controlled temperature heating so that water is gently
evaporated as it reaches the surface by osmosis.

Sun drying: This is an age-old traditional drying system and solar energy is utilized
at low Cost. This takes the longest time and the risk of product deterioration during
drying is high. Sanitary methods have been developed and in some cases solar

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heat are utilized by using solar cells/MS plates and air is circulated in closed
chambers by fan. Improvements in this system will further reduce energy cost.
The Latest trends in drying technology are combination treatments of high temperature flash
drying of product having high moisture, followed by closed hot air cross flow drying or
vacuum drying /Microwave drying/freeze drying. The technology selected for premier
Mushrooms is extractions of soluble solids vacuum concentration (5 fold foaming of
concentrate) and Vacuum drying (Powder concentrate with 5 per cent moisture).
1.7
1.7.1

Project component and cost

Plant and machinery

Major components of the projects and their costs are described in the table hereunder:
PARTICULARS
LAND & BUILDING
Land
Land Development
Land Area
Building
Production Block
Build up Area
Contingencies
PLANT & MACHINERY
Baby Boiler
Tray type dehydrator
Can Seamer
Can reforming with rubber rollers
Exhust box
Steam Jacketed ketteles
Weighing Scales
Lab equipments
Contingencies
MISCELLANEOUS FIXED ASSETS
Miscllaneous asset
Contingencies
PRE-OPERATIVE EXPENSES
Establishment
Preoperative Interest
Security Deposits
TOTAL

Unit

300

250.00

Total
10.50
0.75

300

500.00

1.50

SqM

150
10%

5,000.00

Nos
Nos
Nos
Nos
Nos
Nos
Nos
LS

1
1
1
1
1
1
2
1
20%

100,000.00
100,000.00
50,000.00
30,000.00
25,000.00
50,000.00
50,000.00
50,000.00

LS

1
20%

250,000

1
1
1

212,000
36,500
160,000

7.50
0.75
6.06
1.00
1.00
0.50
0.30
0.25
0.50
1.00
0.50
1.01
3.00
2.50
0.50
4.09
2.12
0.37
1.60
23.65

SqM

Qty

Cost/unit

The cost of the various components will depend on the location of the project. Item wise
assumptions are as under:

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1.8

Plant and Machinery

The main machineries required for mushroom processing unit are as under:

Baby Boiler

Tray type dehydrator

Can Seamer

Can reforming with rubber rollers

Exhaust box

Steam Jacketed kettles

The total cost of plant and machinery is Rs. 6.06 lakhs.

1.9

Building

The construction of main production block will cost Rs. 8.25 lakhs.
1.10 Miscellaneous Assets
A provision of Rs. 3 lakhs would take care of all the requirements.
1.11 Preliminary & Pre-operative Expenses
A provision of Rs. 4.09 lakhs take care of pre-production expenses like establishment,
professional charges, security deposits etc.
1.12 Working Capital Assessment
ITEMS
STOCK OF RAW MATERIAL &
PACKING MATERIAL
SUNDRY DEBTORS
TOTAL
MARGIN
MPBF
INTEREST ON WC

Year 1

Year 3

Year 5

3.90
18.23
22.13
5.53
16.60
1.83

5.21
24.30
29.51
7.38
22.13
2.43

5.21
24.30
29.51
7.38
22.13
2.43

1.13 Means of Finance

EQUITY CAPITAL
MOFPI SUBSIDY
TERM LOAN
FINANANCIAL INSTITUTIONS
-Payable half yearly Installments
TOTAL

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25%

50.00

10

10.00%
1.50

25.00%
25.00%

7.29
7.29

50.00%

14.59

100%

29.18

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1.14 Cash flow statement

PARTICULARS
SOURCES OF FUNDS
EQUITY CAPITAL
SUBSIDY
NET PROFIT
(INTEREST ADDED BACK)
DEPRECIATION
PRELIMINARY EXP.W/O
INCREASE IN TERM LOAN
INCREASE IN BANK
BORROWINGS-WC
TOTAL

Year 1

Year 3

Year 5

Year 7

3.21

9.37

7.76

6.07

1.15
0.58
-

1.15
0.58
-

1.15
0.58
-

1.15
0.58
-

16.60
21.54

3.32
14.42

9.49

7.80

1.15 Projected balance sheet

PARTICULARS
LIABILITIES
EQUITY CAPITAL
RESERVES & SURPLUS
TERM LOAN
BANK BORROWINGS-WC
TOTAL

Year 1

Year 3

Year 5

Year 7

7.29
7.22
13.09
16.60
44.20

7.29
15.06
7.09
22.13
51.57

7.29
25.53
1.09
22.13
56.04

7.29
33.61
22.13
63.03

Year 1
121.50
116.55
88.92
27.64
4.95
(0.07)
(0.07)

Year 3
162.00
150.90
117.11
33.78
11.10
6.00
6.00

Year 5
162.00
152.51
117.11
35.39
9.49
4.99
4.99

Year 7
162.00
154.20
117.11
37.08
7.80
3.63
3.63

1.16 Profitability statement

Particulars
INCOME
EXPENDITURE
VARIABLE
FIXED
GROSS PROFIT
PROFIT BEFORE TAX
RETAINED PROFIT

1.17 Key Indicators

NET PRESENT VALUE at current Inflation (Rs. in lakhs)
INTERNAL RATE OF RETURN %
AVERAGE DSCR
BREAK EVEN POINT %
PAY BACK PERIOD ( YEARS)

43.10
33.34
1.67
91.90
3.91

1.18 Manpower Requirement

PARTICULARS
SUPERVISORY STAFF
Manager
Accountant & Marketing Officer
WORKERS
Production Supervisors
Skilled Workers
Semi-Skilled Labour

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NO.
1
2
2
4
6

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1.19 Assumptions
Project & Financing
Contingencies on Building
Contingencies on Equipment
Term Loan
Rate of Interest on Term Loan
Subsidy Considered
Subject to ceiling
Expected time of Installation
Moratorium
CAPACITY
Rated Capacity Per Annum
80% of Installed capacity
Number of Operational Days
DAYS
Working Hours Per day
Hrs
CAPACITY UTILIZATION
Year I
Year II
Year III
SALES PRICE
W S Price
OTHER EXPENSE
Commission
Marketing Expenses
POWER
Connected Load
HP
DEPRICIATION AS PER COMPANYS ACT
BUILDING
PLANT & MACHINERY
MISC. FIXED ASSETS
LAND & SITE DEVELOPMENT
MAINTENANCE
BUILDING
PLANT & MACHINERY
MISC. FIXED ASSETS
LAND & SITE DEVELOPMENT

Months
Months
TPA

10%
20%
50%
10%
25%
4
6
300
300
16
75%
85%
100%
54000
7.5%
2.5%
40
3.34%
10.34%
7.07%
1.63%
1.00%
3.00%
2.00%
1.00%

The actual cost of projects may deviate on change of any of the assumptions.

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