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POTATO CHIPS MAKING

INTRODUCTION: India is one of the largest producers of potato. Besides being used as a daily food item in various vegetable preparations, potato today increasingly finds use in the form of chips or wafers as snacks food. The potato chips and wafers are popular processed food items that give considerable value addition to potatoes. MARKET POTENTIAL: The main consumers of potato chips and wafers are families especially in urban and semi-urban areas. Besides, hotels, restaurants, canteens, army establishments require potato chips in significant quantities. The leading brands are Lays, Binnies, Uncle chips, Ruffles, Bingos. These are priced at around Rs 20.00 per pack of 90 gm i.e. around Rs 220/- per kg. It should be possible for tiny units in small urban areas to sell potato chips at around Rs 170/- per kg. and this would enable them penetrate in the market. In urban areas, the per capita consumption of potato chips or wafers may be conservatively taken Kg. per annum. The annual demand in a town having a population of 2 lakh is estimated at 100000 Kg per year. A tiny unit could be set up with a capacity of 10000 to 15000 kg. In a town with a population of 2 lakhs, if there are two units, they would be catering to only 25 to 30% of the demand. Hence, there are good prospects for potato chips units especially near the potato growing areas. PLANT CAPACITY: A capacity of 9000 kg per annum and annual output of 6300 kg is suggested on the following basis. Processing capacity per day : 240 Kg. Average yield of wafer/chip : 12.5% Daily production per single shift of 8 hours : 30 Kg. Effective working days per year : 300 days Annual production capacity : 9000 kg. Capacity utilization : 70% Annual output : 6300 kg. RAW MATERIALS: Fresh potatoes are the main raw materials. Besides, edible oil is required as a frying medium and additives such as salt and flavouring agents are required. Consumable is mainly packing material i.e. polythene bags. The annual requirement of potato and edible oil corresponding to the annual production of 6300 tonnes per year is as follows: Fresh Potato : 50,000 kg. Edible oil : 4,000 Ltrs. The annual production of potato in the north-eastern region is about 9.42 lakh tones per year. It is grown mainly in Assam, Meghalaya, Tripura, Nagaland and Arunachal Pradesh. The State-wise production is as follows: Lakh tones/year 2004-05___ Assam : 5.89 Meghalaya : 1.49 Tripura : 1.06 Nagaland : 0.20 Manipur : 0.01 Sikkim : 0.33 Mizoram : 0.04 Arunachal Pradesh : 0.40 Total 9.42 lakh tones.

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PROCESS : The main process steps in the production of potato chips are

(A. Visual inspection and sorting of potatoes; (B. Washing; (C. Peeling and trimming; (D. Slicing and cutting; (E. Washing, sorting and dewatering; (F. Frying; (G. Cooling, salting and packing.

MACHINERY: The main equipment required are

(A. Potato peeling machine cap. 40/50 kg per hour with 0.5 HP motor. (B. Slicing machine with arrangement to adjust thickness of slice complete with

motor etc. (C. Blancher (D. Spin dryer to extract excess moisture cap.4kg/charge taking 3 to 4 minutes

complete with motor. (E. Deep fat fryer (F. Electric polythene bag sealing machine upto 30cm wide. (G. Weighing machine.

INFRASTRUCTURE: The main infrastructure requirements are Shed : 1000 sq.ft. Power : 2.5 KW Water : 1600 ltrs/day. LOCATION: Keeping in view the availability of potatoes, the following locations are suggested. Assam : Barpeta, Mankachar, Tezpur, Lakhimpur Dibrugarh, Jorhat, Nagaon, Silchar. Meghalaya : Shillong, Tura, Williamnagar, Nongstoin, Jowai. Tripura : Agartala Arunachal Pradesh : Tawang Nagaland : Kohima, Mokokchung. Sikkim : Rumitek, Dentam, Brang, Somgochoo TOTAL CAPITAL REQUIREMENT: The total capital requirement including fixed capital and working capital is estimated at Rs 4.29 lakh as follows. Of this, the project cost comprising fixed capital and margin money on working capital is Rs 3.59 lakh. (Rs. lakhs)

(A. Fixed Capital: Land and Building On rent Plant & Machinery 2.25 Misc. Fixed Assets 0.50 Preliminary & Pre-operative expenses 0.45

Total (A) 3.20 B. Working Capital:

Raw materials 7 days 0.12 Packing material 2 months 0.08 Stock of finished goods 7 days 0.19 Working expenses 1 month 0.16 Receivables 15 month 0.54

Total (B) 1.09 Grand Total (A+B) 4.29 lakh

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Note: Working capital may be financed as Bank Finance: 0.70 lakh Margin Money: 0.39 lakh MEANS OF FINANCE: Promoters contribution and equity assistance (35%) Rs 1.26 lakh Term Loan (65%) Rs 2.33 lakh Total Rs 3.59 lakh OPERATING EXPENSES The annual operating expenses are estimated at Rs 9.25 lakh as given below: (Rs. lakh) Raw materials and consumables Potato 50,000 kg. 2.34 [ (a) 33000 kg @ Rs 4/kg. for 8 months and (b) 17000 kg @ Rs 6/kg. for 4 months] Edible oil 4000 Ltrs

@ Rs 55/Ltr. 2.20 Additives, flavours, chemicals 0.40 Packing materials Polythene bags, tin containers 0.50 Utilities 0.40 Wages & salaries 1.50 Rent 0.36 Other overheads 0.40 Selling expenses @ 5% on sales 0.53 Interest on term loan @12% 0.28 Interest on bank finance @15% 0.11 for working capital Depreciation 0.23 Total 9.25

SALES REALIZATION: Sales realization of 6300 kg of Potato chips @ Rs 170/- per kg would be Rs 10.71 lakh. PROFITABILITY: Based on the sales realization and the operating expenses, the profit (pre-tax) at rated capacity would be Rs 1.46 lakh per year. This works out to a return on investment of 34%. The plant would break even at about 46% of the rated capacity. HIGHLIGHTS: The major highlights of the projects are as follows: Total Capital requirement : Rs 4.29 lakh Promoters contribution : Rs 1.26 lakh Annual Sales realization : Rs 10.71 lakh Annual operating expenses : Rs 9.25 lakh Annual Profit (Pre-tax) : Rs 1.46 lakh Pre-tax return on sales : 14% Break-Even Point : 46% Number of persons employed : 4 Nos.

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MACHINARY SUPPLIER: 1. M/s Gardeners Corporation, 2. M/s Hindustan Engineering Co., 6, Doctors Lane, 25/31, Ropewalk Street, (Near gole Market) Rampart Row. Post Box No. 299, Fort, New Delhi 110 001. Mumbai 400 023 3. M/s Raylons Metal Works, 4. M/s Prakash Machine Tools, J.B. Nagar, 5, Khetra Das Lane, Kondivitta Lane, (Besides Broadway Hotel), Andheri, Kolkata 700 012 Mumbai 400 059 5. M/s B. Sen Barry & Co. 65/11, Rohtak Road, Karol Bagh, New Delhi 110 005.