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MINERAL

WATER

PRODUCTION

MINERAL WATER PRODUCTION 2017

1 Complied by: iBEST Consultancy Services, 2017

Abbreviations and Definitions

Short Form Elaboration

KL / kl Kilo litre

km Kilo metre

KVA, kva Kilo Volt Ampere

kw Kilo watt

Lacs, lakh 100,000

m, M Metre

mio Million

mm Milli metre

MoEA Ministry of Economic Affairs of the Royal Government of Bhutan

Nu Ngultrum (Currency Unit of Bhutan)

pa Per annum

PET Polyalkylene Terepthalate

S.No., Sr. No. Serial Number

sq m Square metre

TDS Total Dissolved Solids (measure of the mineral content of water)



1 Executive Summary This report is a detailed feasibility study on the Mineral Water Production in Bhutan. Bhutan has

the potential to produce mineral water domestically as the major raw material, water, is available

in plenty. This water is available from the numerous snow and rain fed streams that abound in

the country, as well as from a large number of natural springs. The water from such natural

springs universally commands the highest price as packaged natural mineral water.

Mineral water consumption has grown exponentially over the past years. This growth is due to

the efforts of many corporations to promote the need to drink "healthy" mineral water rather than

packaged drinking water.

The report presents in detail the justification of the project, market analysis of Mineral Water,

resources required, and technology used, plant location, cost presentation and financial analysis.

(i) Justification of the Project: A large amount of Mineral water is imported every year in

Bhutan for households, official use, Hotel and for event management. Water, the principal raw

material for Mineral water, is available in Bhutan.

(ii) Market Analysis: Water is extensively used in Bhutan for industrial purpose, official use

and in households as well. There is a great scope of producing Mineral water in Bhutan with

the availability of raw material and to overcome export brands such as Parle’s Bisleri, Coca-

Cola's Kinley and PepsiCo's Aquafina. They are priced in the range of Rs. 10 - Rs. 20 a litre

in Bhutan.

(iii)Resources required: The main raw material for production of Mineral Water is water. Apart

from this, the unit requires electricity, which is also easily available in Bhutan.

(iv) Technology required: The business required high capacity technologies. However technical

details have been provided along with necessary financial analysis.

(v) Plant Location: As per the research on detailed Feasibility Report on Mineral Water

Project in Bhutan under MoEA , the selected plant location are shown blow in the table:

Table 1: Selected Plant Location

Ranking Location Score Dzongkhag

1 Demola Bridge 74.8 S/J

2 Demola (Marthang) 72.3 S/J

3 25 km Milestone N of Samdrup Jongkhar

Town

70.7 S/J

4 Eusuna 70.0 Paro

5 Aipoly Top Spring 69.1 Sarpang

(Source: Detailed Feasibility Report on Mineral Water Project – Bhutan Report B: EUSUNA,

Department of Small and Cottage Industries, Ministry of Economic Affairs)



The Project is justified by the proven quality of the spring water for being classed as ‘Natural

Mineral Water’ - a valuable resource without optimal utilization. It is also justified by the high

ranking.

(vi) Cost Presentation and Financial Analysis:

Table 2: Project Summary

No. of Shift: Two (6 hours per shift ) per day

Working Days in Year: 320

Source of Financing Financial Institute @ 12%

Fixed Cost 4114751

Working Capital 213442

Total Investment Cost 4328193

Break Event Point (BEP) 432632

Return On Investment (ROI) 15%

Pay Back Period 2 Years and 0 Month



TABLE OF CONTENTS

Abbreviations and Definitions ......................................................................................................................... 1

1 Executive Summary ..................................................................................................................................... 2

1.1 Business Model Canvassing ............................................................................................................. 6

2 Justification of the Project ......................................................................................................................... 7

2.1 The need for the project .................................................................................................................... 7

2.2 Competition Analysis ......................................................................................................................... 7

3 Market Analysis............................................................................................................................................. 7

3.1 Structure of the industry .................................................................................................................. 8

3.2 Demand vs. Supply .............................................................................................................................. 8

3.3 Pricing & Marketing Strategies ................................................................................................... 10

3.4 Competitiveness of the project .................................................................................................... 11

3.5 SWOT ANALYSIS ............................................................................................................................... 11

3.6 Special attributes desired by target customers .................................................................... 11

3.7 Packaging & Transportation ........................................................................................................ 12

3.8 Assessment of Comparative Advantage ................................................................................... 12

4 Resources ..................................................................................................................................................... 12

4.1 Sources of inputs including water .............................................................................................. 12

4.2 Comparative analysis of critical inputs/ success factor .................................................... 13

4.3 Sources of raw Material ................................................................................................................. 13

4.4 Assess the availability of manpower & skills ......................................................................... 13

4.5 Assess the need for the skill development .............................................................................. 13

5 The Plant ....................................................................................................................................................... 14

5.1 Choice of technology ....................................................................................................................... 14

Manufacturing process ................................................................................................................................... 14

5.2 Source of technology ....................................................................................................................... 15

5.3 Rate of Consumption of power, fuel, utilities & consumables ......................................... 16

5.4 Raw Material Consumption .......................................................................................................... 16

5.5 Man power requirement and organization chart ................................................................ 16

6 Plant Location & Infrastructure with layout ................................................................................... 17



6.1 Raw Material Availability .............................................................................................................. 17

6.2 Availability of Electricity ............................................................................................................... 17

6.3 Availability of Land and transportation facilities ................................................................ 17

6.4 Communication Facilities .............................................................................................................. 17

7 Financial Analysis ...................................................................................................................................... 18

7.1 Total Project Capital Costs ............................................................................................................ 18

7.2 Working Capital Costs..................................................................................................................... 19

7.3 Cost of Production per unit ........................................................................................................... 19

7.4 Human Resource cost ..................................................................................................................... 20

7.5 Project Profit and Loss Statement .............................................................................................. 21

7.6 Projected Cash Flow Statement .................................................................................................. 21

7.7 Projected Balance sheet statement............................................................................................ 22

7.8 Financial Ratio Analysis ................................................................................................................. 23

7.8.1 Interest on Loan ....................................................................................................................... 23

7.8.2 Break Even Point ...................................................................................................................... 23

7.8.3 Return on Investment ............................................................................................................ 24

7.8.4 Net Present Value and Internal Rate of Return ............................................................ 24

8 Final Finding and Recommendation .................................................................................................. 24

8.1 Conclusion ........................................................................................................................................... 24

References ............................................................................................................................................................ 25

Annexure ............................................................................................................................................................... 26



1.1 Business Model Canvassing

Key Partners

REDCL

Bank

Loden

Foundation

Self-Funding

Key Activities

Production of

Mineral water

Value

Propositions

Quality of

mineral

Water at

reasonable

price

Customer

Relationship

Delivering the

products promptly

according to the

demand, offering

certain percentage

of discount during

bulk purchase

Customer

Segments

Wholesaler

Retailer

Consumer

Key resource

Water

PET Bottle

Channels

Website,

Social Media

Word-of-

Mouth(Offline)

Cost structure

Staff salary

wages for part time workers

Revenue Streams

Selling and supplying the finished

products to different groups of customers.



2 Justification of the Project

2.1 The need for the project

There is no commercial utilization at present of the natural mineral water of Bhutan,

while the worldwide demand for it is increasing rapidly.

There is no significant industry in selected Dzongkhag, at present, in this range of

investment.

The site has high visual publicity since it is on the main air – road link to highway and

with the rest of the world.

The setting up of the project will generate revenues for the state.

2.2 Competition Analysis At present there are five competitors for the proposed business within Bhutan that is:

Bhutan Argo Industries Limited, Thimphu, Mountain Spring Water

Bhutan Milk and Agro Private limited Chukha Phuntsholing,

Bhutan Himalaya,

Kurjey Drupchu, Bumthang

VEEN Water, Samtse.

Selchu Mineral Water, Place name

3 Market Analysis Due to the increase in awareness brought about by advertising, consumers have started

demanding for mineral water and are ready to pay the higher prices mineral water commands

over ordinary drinking water. Market analysis of major world market reveals that ‘Made in

Bhutan’ Mineral water can find ready markets in Japan, South Korea, Taiwan, Thailand,

Indonesia, Bangladesh and India.

Bhutan Agro being government’s project they have big and advanced mineral water plant and

they are able to capture the market. Bhutan milk and Agro Private limited is also having its share

in the market. Therefore, under the loan ceiling of BTN 1,500,000 it’s very much difficult to

purchase the mineral water plant and the necessary miscellaneous fixed assets. The minimum

amount required just to buy the simple mineral water plant is BTN 40,000,000 and moreover it

requires huge number of skilled workers to run the plants.

Therefore, it would not be possible to penetrate the market because almost half of the market is

covered by Bhutan agro and moreover figure 1 shows that, there is also Multi National Company

Coca-Cola's ‘Kinley’ mineral water is covering the Bhutanese market and having tough

competition with Bhutan Agro mineral water.



Figure 1: Market share of Packaged Drinking Water



3.1 Structure of the industry

The Key Stakeholders

For Bhutan, marketing system for mineral water production can be said to comprise of following

stakeholders:

Importers: The person or firm that imports PET Bottles from other countries.

Wholesaler: Intermediary entity in the distribution channel that buys large quantity of Mineral

water from the manufacturers and resells it to retailers.

Retailers: Businesses that buy mineral water from wholesalers and sell it to end users.

End Users: End users are those who buy mineral water from retailers and are the consumers.

3.2 Demand vs. Supply

The mineral water consumers believe that natural mineral waters have medicinal or other health

properties and the long term demand supply positions becomes more market and segment driven

with brand and segments playing a bigger role in consumer’s choice of water.

The demand for purified water becomes more during summer season. As the drinking water is

dirty and if such water is consumed, the body suffers from water borne diseases. Due to this, it

has become imperative to process and bottle safe potable water for the mankind in prevailing

conditions. The other factors such as the health effect of specific minerals, place or origin of

Market Share Packaged Drinking Water

Kinley 35 %

Bisleri 34 %

G.C.Beverage 12 %

PepsiCo 10 %

Other 9 %

Kinley Bisleri G.C.Beverage PepsiCo Other



water, packaging and brand perception attached with water purity, will play major roles in

creating the demand from consumers.

The table 3 shows the gap between demand and supply of mineral water. The product is widely

accepted in offices, restaurants and hotels, airport, bus stands, schools and hospitals and even in

house-holds. So there is good scope for establishing the mineral water production in the country.

Table 3: Demand & Supply of Mineral water

Year Demand

(Million

Litre)

Supply Total Demand Supply

Gap Domestic Supply Import % Million

litre per

year % Million litre

per year

% Million litre

per year

% Million litre

per year

2005-06 180.00 5.00 9 1.00 1.80 6.00 10.80 94.00 169.20

2006-07 201.60 4.96 10 1.50 3.02 6.46 13.02 93.54 188.58

2007-08 225.79 5.31 12 2.00 4.52 7.31 16.52 92.69 209.28

2008-09 252.89 5.14 13 2.00 5.06 7.14 18.06 92.86 234.83

2009-10 283.23 5.30 15 2.50 7.08 7.80 22.08 92.20 261.15

2010-11 317.22 5.04 16 2.50 7.93 7.54 23.93 92.46 293.29



Table 4: Total Mineral Water Production & Supply Trend – Bhutan

Production Capacity: 36 million Litre per year

Year Production

Capacity

(%)

Production

(million litre

per year)

Expected

Export to

India

Domestic

Consumption

Expected Export to other

Countries

(Excluding India)

1st 60 21.60 13.00 0.80 7.80

2nd 70 25.20 13.50 0.80 10.90

3rd 80 28.80 15.00 0.95 12.85

4th 80 28.80 15.00 0.95 12.85

5th 80 28.80 16.00 0.95 11.85

6th 80 28.80 16.00 0.95 11.85

7th 80 28.80 16.00 0.95 11.68





Figure 2: Total Mineral Water Production & Supply Trend – Bhutan

Years

Production

million litre per

year

Projected export

to India

Domestic

Consumption

Projected export to

other countries

(Excluded India)



3.3 Pricing & Marketing Strategies The quality of the product, its price and its brand image are the basic issues for consumers.

It often occurs that the consumer buying a product because it is satisfied with it does not

change his preference even when its price increases. The table 5 shows the cost of items and

selling price.

Table 5: Cost of items

S. No. Costing Items (One Litre) Cost (Rs.)

1 Cap Cost 0.25

2 Bottle Cost 1.25-2.25

3 Treatment Cost 0.10-0.25

4 Label Cost 0.15-0.25

5 Carton Cost 0.50

6 Transportation Cost 0.10-0.25

7 Other (tape and cases) 0.25

8 Total Cost (Excluding Labor, Marketing and Tax) 2.60-4.00

Selling Price 10.00-20.00

0.00

5.00

10.00

15.00

20.00

25.00

30.00

1 2 3 4 5 6 7

M

in

er

al

W

at

er

M

illi

on

lit

re



3.4 Competitiveness of the project

The project advocates setting up a production unit of mineral water. The mineral water produced

from this proposed unit would compete against imported supplies. The unit aspires to deliver

quality products at prices that are in keeping with the market. It is therefore expected that there

would be a demand pull at the customer end which can be further strengthened through

innovative promotional strategies. The demand pull is estimated to be significant ensuring

lowering of costs through economies of scale.

3.5 SWOT ANALYSIS

STRENGTH

Accessibility to the target markets Takes advantage of new technologies Unique benefits not offered by competitors

WEAKNESS

Inadequate fund to set up the business Inadequate technical expertise

OPPORTUNITY

Current trends towards illness prevention and cautions and protective parenting

Growing market demand for mineral drinking water

Large, international markets available

THREAT

Existing, well- recognized competition in the marketplace

No brand recognition, no public awareness or notoriety

The SWOT analysis of Mineral Water Production:

Part of what is going to count as positives for Mineral Water Production Company is the vast

experience of our management team. The product is accessibility to the target markets which will

help in promotion of the business. The large national distribution network and the excellent

customer service count as a strong strength for the business. A major weakness is being new

mineral water Production Company and not having the financial capacity to set up the business.

The inadequate technical expertise with the advance technologies is also a major weakness to the

company. It is the fact that almost every individual from all over the world can afford mineral

water and they drink it regularly. As a result of that, we did feasibility studies so as to position

the business to take advantage of the existing market for mineral water and also to create own

new market. The major threat is the existence of well recognized competition in the market

place. Another threat is the arrival of a new bottled water production company in same location.

3.6 Special attributes desired by target customers In general customers would prefer the following:

High Quality Graded Mineral Water

They would prefer an affordable price

Ready availability and Nutritional Value of the mineral water



3.7 Packaging & Transportation

Bottled water is sold in a variety of packages such as 500 ml bottles, one litre bottles and even

20 to 50 litre bulk water packs. Method of packaging has adopted based upon safety of the

products, their hygiene and their undamaged delivery to the end user. The bottle packaging

design is kept so as to withstand the rough handling and jerks during transportation over rough

terrain. A factor of safety has been built into the carton construction by providing higher wall

thickness.

To ensure greater protection in cardboard cartons (five ply) have been selected for packaging 12

bottles, against the option of shrink wrapping, with due consideration being given to

international standards of packaging. For indigenous consignments dispatch by truck, simple

stacking of the cartons will be done within the truck body enclosure. At present Bhutan Agro

Industrial Limited is exploring markets in South East Asia.

3.8 Assessment of Comparative Advantage In Bhutan, the Mineral water will not attract any production and/or sales tax and the raw

material import from India or other countries, of PET bottles and caps, PVC labels, cartons,

shrink film etc. will not be subject to import duties. There is a further advantage of Bhutan over

India in terms of excise duty and electricity tariff.

4 Resources The major inputs to the project are Technological Inputs, Water, Power, Raw Material,

Consumables and Human Resource. These inputs are detailed in the following pages with regard

to their availability, required quantities, costs and the comparative analysis of certain critical

inputs.

4.1 Sources of inputs including water

Water

The water suitable for classification as ‘Natural Mineral Water to IS: 13428:2000’ is available at

the location at a flow rate of 30 litres per minute, which is sufficient to enable commercial

exploitation to the extent of 25 litres per minute.

Power

The total load is estimated at 200kva and the total power consumption costs are estimated at Nu.

6.50 Lacs per annum, based on the cost of Nu. 1.45 Per unit (kwh). Sufficient electrical power is

available at a short lead distance in the area.



4.2 Comparative analysis of critical inputs/ success factor

Technological Inputs - The technology for this project is well established with advance

system. Technological inputs are required on certain processes, for which special precautions

have been dictated by international standards.

Electric power - All the machinery requires power for its operation. Economy in transformer

and cabling costs would be achieved if the power were made available at 11 kv. The total

power consumption costs are estimated at Nu. 6.50 Lacs per annum, based on the cost of Nu.

1.45 per unit (kwh).

Skilled worker: having skilled workers in the company will help in minimization of wastage

and maximization of profit.

4.3 Sources of raw Material The main resource for the business is Water. The water suitable is for classification as ‘Natural

Mineral Water to IS: 13428:2000’ and it is available at the location where flow rate is 30 litres

per minute, which is sufficient to enable commercial exploitation to the extent of 25 litres per

minute.

The another main raw material required is PET bottles and this will be imported from India along

with bottle caps, adhesive stickers and packaging materials. Cartons may be developed

progressively in Bhutan. Details of raw materials are given in annexure.

4.4 Assess the availability of manpower & skills The organization required to have a trained and disciplined team, skilled in multi-tasking and

capable of high productivity. The experience level required is highest at the management levels

and skilled labour categories, and reduces progressively through the ranks to the unskilled levels.

The availability of both skilled and unskilled labour can be hired from India.

4.5 Assess the need for the skill development The skill development programs envisage exposure to industry best practices, hygiene, quality

management practices. Training is a continuous process and its importance cannot be

overemphasized. As the workforce is mostly unskilled, there is a need to develop their skills

according to the need of the industry. Workshops or on-site short term trainings may be

organized by the expertise on such field to impress upon the plant team, the importance of

quality, systematic operation, improvements in bottling practice. Training may also be organized

at the technical institutes in Bhutan or India.



5 The Plant

5.1 Choice of technology

Manufacturing process

Raw water is purified by passing it through sand filter and Activated carbon filter. Excess

hardness is reduced by softener and the softened water is passed through micron filters to make it

sparkling clear. To make it bacteria free water is passed through ultraviolet light radiation.

Packing of the water is done by Bottling System comprising of the facilities of Bottling system

comprising of the facilities of Bottle rinsing, Filling and capping, bottled mineral water is packed

in the cartons.

Figure 3: Manufacturing process of Mineral water

Raw water to be processed is collected in tanks. A known quantity is pumped into the above tank

where the water is dozed with alum for coagulation with heavy metals or insoluble matters. The

water after coagulation is allowed to settle for an hour. The water is then passed through sand

filters for trapping of undisclosed impurities. The water after sand filtrations is passed through

Carbon filters for removal of odor, color and also for de-chlorination. It is then passed through

series of micro fillers comprising 5 micron, 1 micron and 0.4 micron filter followed by

ultraviolet disinfection system for terminal disinfection. Packing is done in PET bottles of 1 litre

capacity through an automatic rinsing, filling, and capping machine fitted with an Ozone

generator. The bottles after capping are shrink wrapped (Optional) and packedin corrugated

boxes of one dozen each.



5.2 Source of technology

Plant and machine supplier:

SS Source Feed Pipe

1. SAW Pipes Ltd.

Jindal centre 12, Bhikaji Cama Place,New Delhi -110066, India

Tel: 91-011-26188340-50

Fax: 91- 011- 41659169

Email: [email protected]

HDPE Pipes

Jyoti Polyvinyl Limited

Mr. Rahul Jain

33-B Anand Nagar Society, B.P.C. Road

Baroda-390005, Gujarat

Tel: 0265-22333953, 2333885

Fax: 0265-2335954

Water Treatment Plant

Environmental Products (India) Pvt Ltd

Mr.R. S. Nair (Managing Director)

160/3 Rajani House, Opp. Don Bosco High School, L.T.Road,

Borivili (W) Mumbai -400091

Tel: +91 22 28333601

Fax: + 91 22 28331506


Website: www.epipl.com

Bottle Preform Injection Moulding Machines

Ferromatik Milacron India Limited

Northern Region Office: 209/29, Link Road Lajpat Nagar-III,

New Delhi-110 024

Tel: +9111 29839102, 29839188,

Fax: +9111 29832065


Website: www.milacronindia.com

PET Blow Moulding Machine

ARTEK Enterprises Pvt. Ltd. (Ranasons)

Mr.Kishore Mengnani

505 Madhuban Building, 55 Nehru Place,New Delhi-110 019

mailto:[email protected]



Tel: +9111-51618378 / 79, 26484672-73

Fax: +9111-26216934

E-mail: [email protected]

Rinser-Filler –Capper Machine

Gujarat Ion Exchange and Chemicals Ltd.

Mr Vyomesh Patel(Managing Director)

T-14, Balaji Center, Opp. Gurukul Tower

Drive-In Road, Memnagar, Ahmedabad – 380052

Gujarat, India

Marking Machine

ERP Marketing Pvt. Ltd.

Mr. A.K.Gupta

17, 1st Fl, Purohitji ka Bagh,M.I.Road ,Jaipur – 302001

Mobile: +91 9829019029

Telefax: +91141 2362477

5.3 Rate of Consumption of power, fuel, utilities & consumables

Power Consumption - For this project about 225 KVA (180KW) connections will be

required. Depending on the requirements of equipment to be installed in the facility, single-

phase or three-phase service may need to be installed by the power company.

Water Consumption - The water requirement for cleaning and washing will be approximately

10,000 liters per day based on the processing capacity of the plant. Water is mostly required

for washing and also in various unit operations during processing.

5.4 Raw Material Consumption The main consumables are laboratory chemicals, oils, lubricants and machine consumables such

as water filter elements and ultra-violet lamps, workmen’s clothing and miscellaneous cleaning

and office supplies. These requirements will be sourced from equipment suppliers and existing

local channels.

5.5 Man power requirement and organization chart A total strength of 23 heads is envisaged at the full two shift operation of the plant. Local labour

will be available for the plant from surrounding villages and skilled labour will initially be

required from India to train them. Staffing requirements will be met by Bhutanese, but senior

management and marketing executives may be recruited from India.



6 Plant Location & Infrastructure with layout The location of a plant is determined on the basis of proximity to raw materials, availability of

infrastructure and distance to market outlets.

6.1 Raw Material Availability Other than the water itself, the only raw material inputs are for its packaging in bottles.

The other items are more economically bought out from manufacturers in India who specialize in

this work.

6.2 Availability of Electricity Electricity is readily available from the grid. Incidentally, Mongar dzongkhag has a hydro power

plant on the Kurichhu River.

6.3 Availability of Land and transportation facilities

It is proposed to lease 2,500 sq m of land at the location below the spring for setting up the

Treatment Plant at a location. Public transport is available for employees but charter

arrangements may be worked out with public bus companies to suit the factory shift timings.

6.4 Communication Facilities Bhutan Telecom Limited, Tashi InfoComm Limited, Samden Tech and Drukcom are the four

Internet Service Providers (ISPs) in the country. Bhutan Telecom Limited is the sole provider of

fixed-line telecommunication services while cellular mobile services are provided by Bhutan

Telecom Limited and Tashi InfoComm Limited. With the exception of Bhutan Telecom, all

other ISPs are private sector ventures.



7 Financial Analysis

7.1 Total Project Capital Costs

Table 7: Project Capital Costs

PARTICULARS Forex.

Component Domestic

Component Total Cost

Land ( lease) 2500 Sq.Meters/ 27,001 Sq.ft

27,001

Total

Plant & Machinery

Raw Water Storage Tank 1 42,250

Transfer pump 1 50,000

Cartridge filter 4 40,000

UV Light 1 4,000

Ozone Recirculation Tank and Pump 1 1,500

Mineral water filling machine 1 550,000

Bottle Washer 1 63,000

Sand Filter 1 45,000

Labelling Machine 1 65,000

Optional( Wrapping Machine Packing) 1 126,000

Automatic Capping Line 1 550,000

Softner 1 120,000

Chemical and Microlab Setup 1 250,000

Total

1,906,750 1,906,750

Vehicle (Two Delivery van)

1,300,000 1,300,000

Miscellaneous Fixed Assets:

Computer 5 125,000

Office Furniture:

627,500

Stationary

3,500

workers Uniforms

15,500

Electrical Fittings

7,000

Signboard

2,500

Total Cost

781,000 781,000

Preliminary Expenses

100,000 100,000

Total Project Startup Cost

4,114,751



7.2 Working Capital Costs

Table 8: Working Capital Costs

WORKING CAPITAL

Particulars Monthly Yearly

Advertising 3,000 36,000

Delivery Expenses 1,500 18,000

Inventory Purchases 192,842 2,314,100

Miscellaneous 2,000 24,000

Rent or Lease 13,500 162,000

Utilities & Telephone 600 7,200

Total 213,442 2,561,300

7.3 Cost of Production per unit

Table 9: Cost of Production per unit

Year 1 Year 2 Year 3 Year 4 Year 5

Total Units 600,000 630,000 661,500 694,575 729,304

Cost of Production 247,200 259,560 272,538 286,165 300,473

Unit Cost of Production 0.41 0.41 0.41 0.41 0.41



Estimated cost of one litre mineral water of Bhutan:

Table 10: Costing item

S. No. Costing Items(One Litre) Cost (Nu.)

1 PET Bottle 1.76

2 Corrugated Boxes 0.71

3 Cap Cost 0.25

4 Body Label 0.45

5 Shrink Holographic Cap Seals 0.19

6 BOPP Tape Roll 0.03

7 Consumables 0.17

8 Utilities 0.15

9 Wages & Salaries Incl. Benefits 1.00

10 Factory Overheads 0.15

11 Administrative Expenses 0.07

12 Interest & Depreciation 0.95

13 Selling & Distribution Expenses 0.67

14 Freight Cost 0.67

Total Unit Cost of Production 7.22

Ex-works Price 9.00

Selling Price Nu. 10/- to Nu. 20/-

7.4 Human Resource cost The manpower is a critical input for the success of the project. The quality of the human resource

contributes the most to the success of the organization and there is need for recruiting the best for

the project, particularly in the initial stages. There is no problem visualized in recruiting

personnel from India with the requisite experience in water treatment and bottling operations.

This may be done through advertising for the positions in both Bhutanese and Indian media.



7.5 Project Profit and Loss Statement

Table 11: P&L A/c

INCOME STATETMENT PROJECTION FOR 5 YEARS

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Revenue 7,200,000 7,560,000 7,938,000 8,334,900 8,751,645

Cost of Goods Sold 2,344,100 2,461,300 2,584,375 2,713,629 2,849,265

Gross Profit / (Loss) 4,855,900 5,098,700 5,353,625 5,621,271 5,902,380

Expenses 2,561,300 2,689,360 2,823,838 2,965,065 3,113,273

Net Operating Income / (Loss) 2,294,600 2,409,340 2,529,787 2,656,206 2,789,107

30% BIT On NOI 688,380 722,802 758,936 796,862 836,732

Net Income / (Loss) after BIT 1,606,220 1,686,538 1,770,851 1,859,344 1,952,375

7.6 Projected Cash Flow Statement

Table 12: Cash Flow Statement

Projected Cash Flow Statement


Beginning Cash

Balance 4,852,142 9,722,782

14,172,74

4

19,542,57

9

Accts. Rec.

Collections 720,000 756,000 793,800 833,490 875,165

Loan Proceeds 4,328,193

Sales & Receipts 6,480,000 6,804,000 6,480,000 7,501,410 7,876,481

Other:

Total Cash

Inflows 11,528,193 7,560,000 7,273,800 8,334,900 8,751,645

Available Cash

Balance 11,528,193

12,412,14

2

16,996,58

2

22,507,64

4

28,294,22

4

Advertising 36,000 37,800 39,690 41,675 43,758

Bank Service

Charges - - - - -

Credit Card Fees

Delivery 18,000 18,900 19,845 20,837 21,879

Inventory

Purchases 2,314,100 2,429,800 2,551,300 2,678,900 2,812,800

Miscellaneous 24,000 25,200 26,460 27,783 29,172

Rent or Lease 162,000 170,100 178,605 187,535 196,912



Utilities &

Telephone 7,200 7,560 7,938 8,335 8,752

Other: - - - - -

Subtotal 2,561,300 2,689,360 2,823,838 2,965,065 3,113,273

Other Cash

Out Flows:

Capital Purchases 4,114,751

Subtotal 4,114,751 - - - -

Total Cash

Outflows 6,676,051 2,689,360 2,823,838 2,965,065 3,113,273

Ending Cash

Balance 4,852,142 9,722,782

14,172,74

4

19,542,57

9

25,180,95

1

7.7 Projected Balance sheet statement

Table 13: Balance Sheet Statement

Projected Balance Sheet For 5 Years


Assets

Cash & Bank 4,852,142 9,722,782 14,172,744 19,542,579 25,180,951

Accounts Receivable 720,000 756,000 793,800 833,490 875,165

Prepaid Expenses 770,001

Other Current Assets

Total Current Assets 6,342,143 10,478,782 14,966,544 20,376,069 26,056,115

Net Fixed Assets 2,843,038 2,453,825 2,064,613 1,675,400 1,286,188

Other Assets

Total Assets 9,185,180 12,932,607 17,031,156 22,051,469 27,342,303

Liabilities & Capital

Accounts Payable 4,116,406 8,649,153 13,529,028 19,326,486 25,389,928

Total Current Liabilities 4,116,406 8,649,153 13,529,028 19,326,486 25,389,928

Long-Term Notes Payable 3,462,554 2,596,916 1,731,277 865,639 (0)

Total Long-Term Liabilities

3,462,554 2,596,916 1,731,277 865,639 (0)

Total Liabilities 7,578,960 11,246,069 15,260,305 20,192,125 25,389,928

Owner's Equity

- - - -

Net Profit 1,606,220 1,686,538 1,770,851 1,859,344 1,952,375

Total Capital 1,606,220 1,686,538 1,770,851 1,859,344 1,952,375

Total Liabilities & Capital

9,185,180 12,932,607 17,031,156 22,051,469 27,342,303



7.8 Financial Ratio Analysis

7.8.1 Interest on Loan

Table 14: Interest on Loan


Interest 483,213 397,971 301,917 193,682 71,720

Loan Principle 672,126 757,369 853,422 961,657 1,083,619

Loan Balance 3,656,067 2,898,698 2,045,276 1,083,619 0

EMI 1,155,339 1,155,339 1,155,339 1,155,339 1,155,339

7.8.2 Break Even Point

Table 15: BEP

Time Unit Start Unit

Increment Unit Price

Unit Cost Variable

Total Fixed Costs

Month -

50,000

13

4

3,344,750

BREAK EVEN X BREAK EVEN Y LABEL

432,632 5,191,584 break even unit =432632

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

- 100,000 200,000 300,000 400,000 500,000 600,000

Units

BREAK EVEN ANALYSIS

Sales Fixed Total Cost break even unit =355095



7.8.3 Return on Investment

Table 16: ROI

RETURN ON INVESTMENT Service Year 1 Year 2 Year 3 Year 4 Year 5

1 Litre Bottled (1000 ml) 40% 105% 110% 116% 121%

Half litre (500 ml) 27% 70% 73% 77% 81%

Total ROI 66% 175% 183% 193% 202%

7.8.4 Net Present Value and Internal Rate of Return

Table 17: NPV & IRR

Net Present Value (NPV) 14,925,130

Internal Rate of Return (IRR) 109%

8 Final Finding and Recommendation

There is no adverse impact on the environment. However, an environment management plan is to

be cast integrally with the Quality Management System for the plant, to ensure that there is no

carelessness in management of wastes. There is a considerable improvement in the socio-

economic environment, due to generation of direct employment of 23 persons as well as indirect

employment for several more for provision of support services for the plant.

8.1 Conclusion With rapid urbanizations and industrialization in the country, the risk of contamination of water

sources is very high. To ensure that the general public has access to safe drinking water; the

water bottling line will set up. The bottling line equipped with batteries of filters, micro filters,

Ultra filtration and Ozonation and online testing equipment renders water safe for drinking.

Currently more than half of the market is covered by Bhutan Agro Industries Limited where they

are distributing their products everywhere. Bhutan Agro being government’s project they have

big and advanced mineral water plant and they are able to capture the market. Bhutan milk and

Agro Private limited is also having its share in the market.

Therefore, under the loan ceiling of BTN 1,500,000 it’s very much difficult to purchase the

mineral water plant and the necessary miscellaneous fixed assets to start up the mineral water

production. The minimum amount required just to buy the simple mineral water plant is BTN

40,000,000 and moreover it requires huge number of skilled workers to run the plants. Therefore,

it would not be possible to penetrate the market because almost half of the market is covered by

Bhutan agro and also Multi National Company Coca-Cola's ‘Kinley’ mineral water is covering

the Bhutanese market and having tough competition of mineral water in the market.



References Small industries service institute. 2003. Packaged drinking water/Mineral water.

Kolkata - 35 (w. B.)

Detailed Feasibility Report on Mineral Water Project – Bhutan Report B: EUSUNA.

Department of Industry the Department of Industry, Ministry of Economic Affairs of the

Royal Government of Bhutan

Detailed Feasibility Report on Mineral Water Project – Bhutan Report A: DEMOLA.

Department of Industry the Department of Industry, Ministry of Economic Affairs of the

Royal Government of Bhutan

www.allibaba.com

www.indiamart.com



Annexure Different sources across Bhutan have been tested and they were ranked as follows:

SL. No.

Dzongkhag Survey Ref. No.

Location Rank Remarks

I Thimphu 1 Thrinleygang Excluded as advised

2 Goenchhu (Goenekha) Rejected due to habitation near the source

II Punakha

3 Lobesa 15

4 Koma Tshachhu 18

III Wangdue Phodrang

5 Tiki Zampa 9

6 Rakhe Zam Rejected due to foul smell/taste

7 Basachhu Rejected due to habitation

IV Paro 8 Eusuna, Chuzom Paro Road 4

9 Shari Village Rejected due to insufficient flow from source

10 Nemi Zampa (Below Dzong) Rejected due to habitation

11 Below Taktshang Rejected due to low TDS

12 Jangtoena Village Rejected due to habitation near the source

V Samtse 13 Bhotedhara 11

14 Chengmari – Dhapper 10

15 Chengmari Village Rejected due to low TDS/habitation

16 Kuchidiana Rejected (river water)

17 Panidhara Rejected due to low TDS and habitation near the source

18 Darankhola Rejected due to low TDS

19 Hungay Village Rejected due to low TDS and habitation near the source

VI Sarpang 20 Simsar Pokhari, Noon Pani 13

21 Kami Khola Rejected due to low TDS and habitation near the source

22 Jigmecholing village, Surey 16 Rejected in chem. analysis

23 Box Cutting 14

24 Gelephu Tshachhu Rejected due to foul smell/taste

25 Activated Charcoal Factory Rejected due to low TDS and insufficient flow from source

26 Aipoly Upper Source 5

27 Aipoly Lower Source 8



S. No.

Dzongkhag Survey Ref. No.

Location Rank Remarks

VII

Samdrup Jongkhar

28 Ngelong Rejected due to insufficient flow from source

29 Ngelang Chiloo 12

30 30/1 Culvert Lamsarong 7

31 25 km N of SJ Town 3

32 Marthang 0 Rejected due to insufficient flow from source

33 Marthang Bridge 6

34 Demola 2

35 Demola Bridge 1

VIII Chhukha 36 C Adit of Tala Power Station 17

(Source: Detailed Feasibility Report on Mineral Water Project – Bhutan Report B: EUSUNA.

Department of Industry the Department of Industry, Ministry of Economic Affairs of the Royal

Government of Bhutan)

TOTAL OPERATIONAL EXPENDITURES

Particulars Year 1 Year 2 Year 3 Year 4 Year 5

Advertising 36,000 37,800 39,690 41,675 43,758

Delivery Expenses 18,000 18,900 19,845 20,837 21,879

Health Insurance

Inventory Purchases

2,314,100 2,429,800 2,551,300 2,678,900 2,812,800

Miscellaneous 24,000 25,200 26,460 27,783 29,172

Rent or Lease 180,000 189,000 198,450 208,373 218,791

Utilities & Telephone

6,000 6,300 6,615 6,946 7,293

Total Expenses 2,578,100 2,707,000 2,842,360 2,984,513 3,133,694



Misc. Fixed Assets

Sl. No. Particulars Units Cost Amount

1 Office Furniture

a Writing Table 10 3,500 35,000

b Wooden Chair 30 2,500 75,000

c File Rack 4 3,000 12,000

d Telephone 2 3,250 6,500

e Computer with Accessories 7 25,000 175,000

f Laptop 2 32,000 64,000

h Lab Instruments 1 200,000 200,000

i Fire Fighting Equipments ( set) 1 60,000 60,000

Total 627,500

2 Workers Uniforms

a Apron 25 350 8,750

b Primeway Rubber Hand Gloves 30 100 3,000

c Safty halmet 25 150 3,750

Total 15,500

Grand Total 643,000

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