Entrepreneurship Development Project

on
Tea Processing (Mini Tea Factory)

Submitted by
HARSHAD YASHWANT AHIRE
Roll No :237
Batch :H

Guided By
DR. SYED GOUS

Submitted to
Dr. D.Y. Patil University
School Of Hospitality and Tourism Studies
2019-2021
 CERTIFICATE

This is to certify that Mr. HARSHAD YASHWANT AHIRE student of

third year with roll no: 237, batch: H has successfully completed
entrepreneurship project. This project contains all the necessary
records required for the partial full filling of the course.

Internal examiner: external examiner:

SHTS Director:
 ACKNOWLEDGEMENT

It gives me immense pleasure to submit my project entitled Tea Processing (Mini Tea Factory). I
would like to take this opportunity to express my heartiest gratitude to those who have been directly or
indirectly involve in successfully completion of this project.I would like to express my sincere and
whole heartily thanks to respected ma’am Mrs. Poonam Bajaj faculty in charge of Entrepreneurship for
giving me an opportunity to accomplish the project and also giving her valuable time, guidance and
suggestions for making this successful. I would like to take this opportunity to express my deepest
gratitude to our respected ma’am Mrs. Vandana Mishra Chaturvedi Director of SHTS for giving hand
toward us.

Place :Navi Mumbai Signature of Student

 THE PROJECT AT A GLANCE

Sl. No. Particulars Description

A. Project Description
1. Proposed Project Mini CTC Tea Factory Unit
2. Capacity of the Plant/Unit  Processed CTC Tea : 100 Ton
(At 100% Capacity)
3. Year-wise Capacity Utilisation Yr 01 Yr 02 Yr 03 Yr 04 Yr 05
50% 60% 70% 70% 70%
B. Project Cost
1. Land Rs. 4,00,000.00
2. Civil Works & Buildings Rs. 27,44,000.00
3. Plant & Machinery Rs. 26,40,000.00
4. Fixed Assets Rs. 3,39,000.00
5. Pre-operative Expenses Rs. 3,96,000.00
6. Contingency & Escalation Rs. 3,06,000.00
7. Margin for Working Capital Rs. 1,75,000.00
Total Rs. 70,00,000.00
C. Means of Finance
1. Equity @ 40% Rs. 28,00,000.00
2. Loan from Bank @ 60% Rs. 42,00,000.00
Total Rs. 70,00,000.00
D. Financial Benchmarks
1. Break Even Point (at Operating 42.50%
Capacity on Third Year)
2. Average DSCR 1: 1.80
3. Internal Rate of Return 18.00%
E. Basic Assumptions
1. Power Connection and Rate Per 40 HP: Rate: Rs. 6.00/- Per Unit
Unit
2. Interest Rate Term Loan: 8%; WC Loan: 12%
3. Repayment Period 6 Years including moratorium period of 1 Year.
 INTRODUCTION

Tea Processing is a crucial industrial activity in India. This is so because India is one
of the major producer, consumer and exporter of tea. Tea is a natural beverage brewed
from the young leaves of an evergreen plant Camellia sinensis.
Tea gardens and tea industries are largely covering a major part of India. The crop is
grown in the certain districts located in Assam, West Bengal, Kerala, Karnataka and
Tamil Nadu and to some extent in Tripura, Uttar Pradesh and Himachal Pradesh.
Though, tea is commercially cultivated in 16 states in India, of which, Assam
(52.0%), West Bengal (21.9%), Tamil Nadu (14.6 %) and Kerala (7.1%) are
accounted for more than 95% of the total tea production. Other traditional and non-
traditional states where tea is produced in small extents are Tripura, Karnataka,
Uttaranchal, Himachal Pradesh, Arunachal Pradesh, Manipur, Meghalaya, Mizoram,
Nagaland, Sikkim, Odisha and Bihar. Tea production in smallholding has been
growing worldwide.
The Tea Board has recently decided to approve setting up of mini and micro factories
by the small tea growers within their plantation areas, with an aim to improve
plucking standards and retain garden freshness. This is expected to help improve the
quality of tea processed from green leaves of small tea gardens, as the time needed for
transporting green tea leaves from the gardens to factories will be reduced. It will also
help retain the garden freshness of the green leaves.
Considering the potential market opportunity of such units, the present detail project
report has been developed. The main objective of such initiative is to productively
utilize the abundantly available resources of the local area and to enable uninterrupted
supply of the products to market throughout the year.
A detailed analysis has been carried out considering mainly the aspects mentioned
below:
Market and demand of the products.

Requirements of miscellaneous assets for the project.

Estimation of installed capacity and operation pattern.

Consumables, power & utilities and manpower requirements etc.

Estimation of the cost of the project and working capital requirements.

Means of Finance

Estimation of cost of operation, profitability and fund flow statements etc.

Implementation Schedule.

The total Project cost is estimated at Rs. 70.00 Lakhs

The various profitability estimates and other financial indicators worked out as given
in the following pages are up to the satisfaction level.
 PROJECT DESCRIPTION

The proposed project is that of setting up of a Tea Processing unit at suitable location.

The key products of the proposed project are as follows;

 Processed CTC Black Tea

Mini tea processing factories would reduce difficulty of marketing green tea leaf. The
mini and micro factories will open up a huge chain of employment opportunities at
the garden level.

The proposed project would procure the raw materials locally. After processing, the
products would be supplied to the market through distributors/ wholesalers/retailers.
 Market potential

India secures top position in the production of tea after China. Tea found in India is categorized into 3
types namely Assam tea (highest cultivation), Darjeeling tea (Superior quality tea) and Nilgiri tea
(subtle and gentle flavors). India is largest producer and major consumer of tea. Of the total production,
India accounts for 3/4th domestic consumption of tea. In 2016, India produced 1,267.36 million kg of
tea, all being available for packaging in one or the other forms. India also exports tea and in 2017 the
total tea exports increased by 6.3%. Major tea importing countries in 2017 were Russia, United States,
United Kingdom, Egypt, Iran, Saudi Arabia, Germany, Morocco, Japan, France, UAE, Canada,
Vietnam, Netherlands, and Kazakhstan. The growing demand for tea for its aroma and quality is
majorly driving the India tea industry. Major tea production regions, Assam and Darjeeling, are
undergoing through the border stress that negatively impacts the tea industry. Moreover, India has
experienced the declining trend in tea industry in 2017, majorly due to the government policies such as
GST and Demonetization, but in the coming years from 2018, the tea industry is expected to remerge
and flourish. Goldstein Research analyst forecast that the India tea industry outlook is set to reach USD
1 billion by 2025, growing at a CAGR of 5.8% over the forecast period (2017-2025).

India Tea Industry Outlook Segmentation

By Tea Type

o Yellow Tea
o Green Tea
o Black Tea
o Puer Tea
o Oolong Tea
o White Tea

Black Tea accounted for largest market share of 32.9% in 2017. Over the forecast period Black tea is closely followed
by green tea market share on the back of its growing demand for its health benefits.
By Product Type

o Packaged Tea
o Read-to-Drink Tea

By Packaging Type

o Tea Bags
o Tea Pouches
o Tea Containers

By Geography

o Northern India {Market Share (%), Market Size (USD Billion)} India Tea Industry Outlook
o North Eastern India {Market Share (%), Market Size (USD Billion)} India Tea Industry Outlook
o Central India {Market Share (%), Market Size (USD Billion)} India Tea Industry Outlook
o Eastern India {Market Share (%), Market Size (USD Billion)} India Tea Industry Outlook
o Western India {Market Share (%), Market Size (USD Billion)} India Tea Industry Outlook
o Southern India {Market Share (%), Market Size (USD Billion)} India Tea Industry Outlook
 MARKET PROSPECT

Tea is India’s primary beverage with almost 85% of total households in the country
consuming tea. Demand supply gap has been increasing in India in recent years.
While tea consumption has been growing at 3-3.5% every year, there has been no
significant increase in plantation land in the last few years as per the market survey
report. Tea trading in India is done in two ways - auction and private selling. Market
reports are obtained from six major auction centres in India - Kolkata, Guwahati,
Silguri, Cochin, Coonoor and Coimbatore where bulk trading is carried out through
the suctions held in these centres.

The Cottage made CTC Tea has great demand among the consumers due to its special
manufacturing process, which imparts its quality and aroma. Besides, cottage organic
Tea (CTC and Orthodox), Green-Tea also has great market potential. Therefore, few
cottage tea factory could be set up in concentrated tea growing areas that will have a
steady market for its products.

Market Promotion plays a vital role for the generation of the potential customers
therefore, application of marketing strategies are recommended. Marketing plan of the
proposed project may include good quality maintenance, promotional campaign like
offering special discounts, referrals, advertisement and tying up with buying houses.
 TECHNOLOGICAL PROCESS

The process of manufacturing CTC tea comprises of the following different process.

Spreading the leaf on Withering Trough:

The collected green Leaf is spread upon the

withering trough, while spreading due emphasis is laid upon to remove source and old
dried leaves so that it will help to minimize the presence of stalks and help in
producing fine tea.

Withering: The process of withering involves partial removal of moisture from fresh
leaf and is carried out in order to condition the leaf physically for subsequent
processing. Besides, some chemical changes also take place during withering and
these are independent of the physical process. Thus, withering involves (a) Physical
wither and (b) Chemical wither. While the physical wither can be completed even in
3-4 hours, however for completion of the chemical wither, a period of 12-16 hours is
required as such the withering trough can’t normally be used more than once a day.
Withering is carried out either by Natural Withering or by Trough withering system.
The green leaves that are spread upon the wire mess of withering trough are charged
with cold and warm air through an axial flow fan so that the moisture content is
reduced to the desired level. Generally the level of reduction in moisture depends
upon the grades and quality of tea, which is to be manufactured.

Rolling/Rotorvane:

The withered leaf are rolled to rupture the leaf cells and release of enzymes and to
give a twist to the leaf. It is achieved by processing withered leaf in Rotorvane.
During rolling operation chemical changes among the principal constituents of leaf
start as soon as the juice of leaf is squeezed out in contact with the air. The chemical
changes are caused by the enzyme present in the leaf. The enzyme brings about
chemical changes but it does not change itself. Generally, leaf is rolled in Rotorvane
before send to further processing.
 Operating on C.T.C Machines:

After the leaves are rolled, they are put into the
C.T.C machine (i.e. cutting, tearing and curling machine). This machine cuts the leaf
into uniform size with maximum cell distortion leading to quicker and more even
oxidation during fermentation. The C.T.C machine is comprised of two rollers rotating
in opposite directions at the arranged speed. The speed of the two rollers are different,
one of the roller is fast rotating at a speed of around 675 revolutions per minute,
whereas the slow roller rotates at a speed of 60 to 73 revolutions per minute. Generally,
a constant clearance between the rollers is maintained. The roller segment is in sharp
condition, which cut the leaves three times. During the process it is specifically seen
that leafs are not heated as it destroys briskness and quality.

Fermenting:

After processing in the C.T.C machine the leaf are fermented. Fermentation of the tea
leaf is a very important process in Tea manufacture for briskness, strength, colour and
quality largely depend upon it. The duration of fermentation varies according to rise
and fall of temperature.

A temperature of 76’F to 78’F represents the ideal temperature of the fermenting room
and it takes roughly between 1 to 2 hours in the fermenting process. The leaf processed
in C.T.C is spread on the fermenting floor or fermenting bed of fermenting machine.
Generally, they are spread at a thickness of half an inch. Fermentation begins as soon as
the juice of the leaf come into contact with the air enzyme present in the leaf being
about chemical changes among the constituents of the leaf cell such as latechins
(polypheno’s) and caffeine. When the leaf become bright red in the fermenting room it
is the best time to transfer to the drying room for firing.
Drying:

After the requisite level of fermentation CTC leaf is transferred to the drying room
where the leaf is fed on the trays of mechanical dryers and fermented leaf is fired at an
inlet temperature of 200’F to 220’F to arrest fermentation process and to remove
additional moisture present. The exhaust temperature being 120’F to 135’F. The
thickness of spreading of CTC leaf being one fourth of inch. The fair revolution of the
quality drying machine should be 350 and the tray speed is 200. The final moisture
contained of the tea is kept at around 3%.

Sorting:

The sorting process of the tea leaf is very simple. At first tea is pass through the sorter
for separation of grades, during this process tea is also made free from any foreign
material, fibre and other proper grading which depend largely on size of tea. After
grading tea is packed in tea chest/jute bags of standard size and sent to the auction
centre.
 QUALITY CONTROL AND STANDARDS

The Tea being an agriculture product, it is necessary to clean it from

impurities/foreign or unwanted material such as dust, fiber, wooden particle, small
stones and sand including small glass pieces, ferrous and non ferrous particles, paper,
plastics shreds, dead insects etc that may come from field or processing factory. These
alien particles do often get mixed at various stages of production and owing to the
lack of modern facilities at Tea factories these impurities can go unnoticed in Tea.

NO OBJECTION CERTIFICATE: The No objection Certificate (NOC) must be

obtained to commence and complete the construction of the factory and installation of
all machinery items as prescribed by Tea Board of India. The rules and regulations
under Tea Act 1953, the Tea (Marketing) Control Order -2003, the specifications of
the FSSAI and other rules and regulations imposed by the other Departments of the
Local, State and Central Governments must be followed.

WASTE MANAGEMENT: Tea industry does not pose any threat to the
environment. The industry does not generate much waste. It has been seen that a
significant portion of the waste are being re-used in some way or the other. However,
the industry should take up certain measures/actions, which may be useful in
improving & maintain the environmental performance of the industry.The overall
measures/actions that the industry may take up with an aim to improve the
environmental performance of the industry are as follows:
 Maximum re-circulation / re-use of the wastes.
 Conservation of domestic water.
 Quality control laboratory should monitor the residence of pesticides in
finished
tea.
 Generally finished tea is packed in poly-bags and these poly-bags are placed in
jute bags for final delivery. It is suggested that the plastics used for such
packaging should be of food grade in nature.
 Tea industries may try to use food grade jute bags instead of odourless jute
bags as are currently being used.
 Attempts should be made to use organic fertilizers and pesticides in place of
chemical fertilizers and pesticides.
 Attempt should also be made to optimize the use of fertilizers and pesticides
during tea production.
 Periodic (once in six months) monitoring of a few selected water sources
around the tea garden should be made.
 Periodic monitoring of health condition of workers both in garden and factory
should be made.

EFFLUENT DISPOSAL: Disposal of any effluent out of the project unit should be
treated with recycling facility or dumped in such a way that these does not cause
hazard in the vicinity of the site.

ENERGY CONSERVATION: Proper care should be taken in running the

machineries and equipment to avoid over run and high electricity consumption. The
machineries selected for the plant should be most energy efficient for economical
production.
 CONSUMABLES, POWER

AND UTILITY

The major consumables required are as follows;

1. Green Tea Leaves

2. Packaging Bags/ Boxes

POWER:

The total requirement of power for the project is 34.34 KW. The total power supply
would be distributed in the following way;

Plant & Machinery - 29.84 KW

General Lighting - 4.50 KW

The details requirement is shown in Appendix-C2.

UTILITY:

WATER: Constant flow of water would be necessary in the operation of the plant.
Water would be obtained from bore well and can be stored in an overhead tank, from
where it will be supplied to the required areas. Process water should be free of mud
and suspended particles. It should be available at a pressure of 3 Kg/sq.cm.

OTHER UTILITIES: Other utilities includes fuel etc. those should be locally
available. Detail expenditure against the head is shown in Appendix- C2.
 INSTALLED CAPACITY

In assessing the proposed plant capacity, due consideration has been given to
technological and financial factors, marketing considerations, availability of
consumables, infrastructure facilities and economic viability. The detailed
requirement of the plant and machineries to achieve the plant capacity is assessed by
the unit technician. While arriving at the requirement of various type of equipment
and machinery required for the unit, due considerations has been given to the
following points.

a) Minimum Wastage
b) High Productivity
c) Maximum flexibility in operation
d) Adequate stock by provision wherever necessary

The installed production capacity of the unit per annum is as follows;

Processed CTC Tea - 100 Ton

For the purpose of carrying out this economic viability of the proposed project, it is
assumed that the plant will operate at following efficiencies during the first 5(Five)
years.
 BASIS AND PRESUMPTIONS

While deriving figures and projections in this Project report, following Basis and
Presumptions have been made.

The project is based on a single shift basis and 200 days of working schedule in a
year, working for 8 hours a day, 25 days a month.

The project cost and other projections etc. have been made on present market
conditions and the sources available within our sources only and therefore it may vary
on account of market fluctuations and with different suppliers and qualities.

The cost of machinery and equipment/materials indicated refer to a particular make

and the prices are approximate to these prevailing at the time of preparation of this
report.

Power rate is assumed at Rs.6.00 per unit and monthly fixed rental charges.

Water would be made available through bore well facility at the project site.

Manpower requirement for the project has been planned considering the size of the
unit.

Interest rates considered is 8% on term loan and 12.00% on Working capital loan for
financial assistance.

For repayment, a period of 6 years is planned with moratorium period of one year.

Insurance charges have been considered Lump Sum.

Repair and maintenance have been calculated at reasonably.

Depreciation shown has been calculated on Straight Line Method.

Non-refundable deposits, Preparation of detailed project report fees, Architecture fees,

traveling & Convenience amount, Know-how & Engineering fees, Application
processing fees, trial production, fees etc are considered under pre-operative
expenses.

Break Even Point & Rate of Return is calculated on optimum production condition
findings.

At the plant site, availability of unskilled labour is not a problem. Skilled and
unskilled labourcan be recruited for operating the plant. Initial training will be
required for smooth and efficient running of the plant. It is felt that the skilled
manpower available locally having some experience in operation can be recruited to
satisfy the manpower need.

Project would be set up at a site that is well connected by road and there is adequate
supply of power and water.

Page | 12
 Total cost and means of Finance

TOTAL PROJECT COST:

The Capital cost of the project has been estimated on the basis of installed capacity
assuming 200 working days per annum. The total cost of the Project including margin
for working capital has been estimated at Rs. 70,00,000.00 as detailed in Annexure-
A.

LAND, BUILDING AND CIVIL WORKS:

The approximate cost of civil works including Leveling, Building, Electrification,

Water Supply, Sanitation and Drainage etc will be Rs. 31,44,000.00.

PLANT & MACHINERY:

The total cost of Plant & Machinery has been estimated at Rs. 26,40,000.00as detailed
in Appendix-A2.

PLANT EXPENDITURE:

The total cost on Plant expenditure includes admissible taxes, transportation,

insurance of the machineries and installation etc. has been included as detailed in
Appendix-A2.

FIXED ASSET:

The cost of Misc. Fixed Assets has been estimated at around Rs. 3, 39,000.00 as
detailed in Appendix-A3. These include cost of furniture and fixture’s and office
equipment.

PRELIMINARY & PRE-OPERATIVE EXPENDITURE:

An expenditure of Rs. 3, 96,000.00 has been earmarked on this account, as detailed in

Appendix- A4.

CONTINGENCY AND ESCALATION:

This has been calculated @ 5% on Civil Work, Plant & Machinery and Misc. Fixed
Assets to provide safeguard against escalation of prices or any other unforeseen
expenditure. The total amount works out to Rs. 3,06,000.00.

WORKING CAPITAL ESTIMATES:

The details of the Working Capital requirements of the proposed unit have been
shown in Annexure-C. In arriving at the working capital estimates, various
components vis Administrative Expenses/Consumables and Working Expenses have
been taken on the basis of usual norms. The Working Capital requirement is proposed
to be met from project margin money and cash credit loan borrowings from the
financial institution.

Page | 13
MEANS OF FINANCE:

The Proposed Project Cost of Rs. 70.00 Lakhs would be financed under MSME
development schemes of financial institutions/commercial banks, in the following
manner as shown below.

1. LOAN FROM BANK/FI @ 60% = 42.00 LAKHS

2. PROMOTERS CONSTRIBUTION @ 40% = 28.00 LAKHS

TOTAL = 70.00 LAKHS

DEBT-EQUITY RATIO:

Based on the above financing pattern, the Debt-Equity ratio of the Project is 1.5:1.

Page | 14
 ECONOMIC VIABILITY
AND
FINANCIAL ANALYSIS

COST OF PRODUCTION:

The cost of production has been estimated annually for the first five years of
operation. The various cost components taken into account are cost of administrative
expenses, consumable stores, utilities, wages and salaries, repairs and maintenance,
insurance, interest rates, taxes etc. depreciation. The detailed cost of production has
been shown in Annexure-D.

REPAIR & MAINTENANCE:

Cost under Repair and Maintenance expenses have been assessed by charging 1% on
Land & Building, 2% on Machineries and 1.5% on Fixed Assets on first year with
increase of 2% on subsequent years as detailed in Appendix-D1.

ADMINISTRATIVE EXPENSES:

This has been considered in the cost and profitability statement under other expenses
etc.

SELLING EXPENSES:

This has been considered in the cost and profitability statement under other expenses
etc.

DEPRECIATION:

In calculating the cost of operation, depreciation has been calculated under straight
line method after absorbing the pre-operative and contingencies expenses as shown in
Appendix-D4.

FINANCIAL CHARGES:

The interest on proposed term loan amount of Rs. 42.00 Lakhshas been calculated@
8% being the rate of interest. The interest calculation for various years after
considering the repayments due in respective years has been shown in Appendix-D3.

SALES REALISATION:

The total annual income of the Project is shown in Appendix-D2. Based on 70%
capacity utilisation, total turnover is estimated at Rs. 91.00 Lakhs on third year, the
sale for other years are estimated at different capacity utilisation as shown in
Appendix-D2.

Page | 13
NET PROFIT:

The proposed project is expected to generate profit from the first year of operation
itself and will gradually increase with increase in capacity utilisation.

INTERNAL ACCRUALS:

The net profit after tax with depreciation added back would make up sufficient
internal accruals to meet the term loan, working capital loan repayment obligations
without any liquidity problems.

FINANCIAL ANALYSIS:

The break-even point of the proposed project is 42.50%at 70% operating capacity on
third year as shown in Annexure-F.

The DSCR of the project has been worked out in Annexure-H with an average of
1:1.80, which is considered quite satisfactory to meet the repayment and interest
obligations in respect of the term loan.

The internal rate of return of the project works out to 18.00 %, which is
satisfactory.