Bannu Sugar Mill

CHAPTER – 1

INTRODUCTION

As our country is basically an agricultural country, establishment of the development of

the country. This sector play key role in the economy of Pakistan. Other sector are also

equally important like industry etc, to achieve the target of economic development

according to the planning commission of second five years plan.

The sugar industry in Pakistan is the second largest agro based industry after textiles.

Pakistan is an important cane producing country and is ranked fifth is the world largest

producer of sugarcane terms of acreage and the 12th in sugar production.

The area under sugarcane cultivation is about 4% of the total cropped area in Pakistan.

Its share in value added of agriculture is 3.7% and GDP are 0.8% respectively. The

sugar sector constitute 4.2% of manufacturing. The sugar industry employs over 1.5

million people.

There are 88 sugar mills working in the country of which 46 are in Punjab, 34 in Sindh

and 8 in Khyber Pakhtunkhwa.

Without having industrial background are cannot achieve the desire growth. Industrial

development has itself a wide range and broad spectrum of development is its different

fields such as the economic uplift to sugar industry etc.

The objective for the establishment of these mills was to develop the area to provide

employment to the local people and to higher the living standard of the natives.

Background of Bannu Sugar Mill

The Bannu sugar mills Ltd. Is 20 Km away from the Bannu city on the Bannu D.I.

Khan road near Sarai Naurang on the west side on Khyber Pakhtunkhwa.

Bannu Sugar Mills was being sanction by Pakistan Industrial Development Corporation

(P.I.D.C.) in 1960. The construction work was started in 1962 and completed in the

beginning of 1965 at the capital cost of Rs.26.50 millions including the foreign

exchange component (Currency) of Rs.14.05 millions. Immediately, after its

completion, the first trial crushing was started.

The mill was running under PIDC management till 1984 and it remained for about 19

years under the control of PIDC.

At last on 2nd February 1984 the mills was purchased by honorable senator Sayyed Pir

Abbas Shah from the same period the mill was running under the control of the said

senator upto 1997. But due to its financial crises the mill as resold to Haji Kabir Khan

in 1997 who is its present owner. The existing management has well established the

mills and produced the highest production for the last 13 years.

Plant capacity

The current cane crushing capacity of the plant is 6000 metric tons. Normal crushing

season starts for 120 days.

CHAPTER – 2

OBJECTIVES OF THE PROJECT

1. The main and important objective of this project was to increase the sugar

production in the country.

2. To increase the employment opportunity in the concerned area (Bannu).

3. The third objective of this project was to improve the financial as well as the

economic condition of the farmer.

CHAPTER – 3

RESEARCH METHODOLOGY

Different ways and techniques are used to conduct this research. This research is based

on secondary data only. Secondary data is collected from balance sheet as well as from

different official fields of Bannu sugar mill. The relevant data is also collected from

books and teachers.

Research is a difficult job. It needs physical and mental strength. During research

process every individual have to face some problems, but it is necessary to work whole

heartedly. I tried my best to collect as much information as possible. I am thankful to

all the organization and other employees of the organization who help me in collection

of all the relevant data.

To analyze the data various statistical techniques such as percentage and benefit/cost

ratio and various computer programs are used.

I got the data personally from bannu sugar mill and my advisor help me throughout this

process.

CHAPTER – 4

COST AND BENEFIT ANALYSIS OF BANNU SUGAR MILL

The study of bannu sugar mills aim in reaching the fact that whether the mill is going in

profit and loss. The mill has incurred some fixed cost as well as variable cost, for

production purpose some of the raw material available locally and some is imported

from the other parts of the country. Maximum of the labor employed in the mill are

locals the marketing of the products is through the different commission agents in the

different cities of Pakistan.

We start with the discussion of the expenditure side of the mill first.

Expenditure

The expenditure include the cost on:

1. Building

2. Machinery and equipments

3. Raw material

4. Labor cost

5. Administrative cost

6. Transportation, selling and distribution expenses

7. Excise duty

8. Miscellaneous cost

1. Building

Land plays a very important role in determining the cost of production as a factor of

production. The mill occupied 850 kanal of land. A mill cannot be established of land

but requires a large area of land. This is the truth that the government provided land

freely for the establishment of the sugar mill, which reflect the interest free availability

of land effected the cost of production.

The different types of building for the mill were:

a. Factory

b. Building and roads

c. Residential building

d. Others

The cost of building and roads valued at 1st October, 2011 is original cost Rs. 40.8

million. Factory equipment valued as at 1st October, 2012 Rs. 13.9 million.

Depreciation cost for the building and roads has been calculated at the rate of 7% and

5% and for factory equipment of 15% and for other is 2%. By 1st October, 2012 the

valued cost of the factory building as are Rs. 40.8 million and depreciation for the year

is Rs. 1.2 million.

Similarly the valued cost of residential and others are 14.9 million and depreciation

cost for the year 2012 is 2.5 million.

2. Machinery and equipments

Machinery and plant effects the cost of production upto a great extent. The machinery

for bannu sugar mill has been imported from West Germany, Italy and England.

The total original cost of the machinery by 2011 and 2012 was Rs. 240.1 million and

244.5 million. The depreciation cost of the machinery has been calculation at the rate of

6.47% and 7.18%.

In values the depreciation cost for the year was Rs. 9.4 million. Beside the machinery

tools and equipment, some other requirements necessary for the mill were also

facilitated for example furniture, fixtures fitting, electrical fitting, official equipment

motor vehicles and cycles arms etc.

Furniture and fixture fitting cost 2.3 million. Depreciation for these items was

calculated at the rate of 10% and the total depreciation for the year in value was Rs.

0.06 million office equipment cost Rs. 2.5 million. Depreciation at the rate of 10% for

the year was Rs. 0.2 million.

3. Raw materials

The raw material consumed is provided locally. The important centers from which raw

materials is supplied to the Bannu sugar mill are:

1. Bannu

2. Dera Ismail Khan

The total cost upon raw material during 2011 was Rs. 281.2 and during 2012 was Rs.

253.5 million.

Table 1: Fixed assets (in million)

Particular As at 1.10.2011

Addition Adjustment As at 30.9.2012

Land 1.7 43810 0 1.7

Building & roads

40.8 0 0 40.8

Railway sidngs 0.7 0 0 0.7

Plant and machinery

240.1 4444611 0 244.55

Weight bridge 3.8 234565 0 4.1

Electric installation

2.6 0 0 2.6

Factory equipment

3.9 0 0 3.9

Furniture fixture

2.3 960 0 2.3

Office & other equipments

2.5 0 0 2.5

Water supply 1.7 0 0 1.7

Vehicles leased hold assets vehicles

4.7

0

0

14998500

0 4.7

15

Rupees 309.4 5771099 0 305.1

Source: BMS

LABOUR COST

Labour is second future of production and is very important in determining the cost of

production of labour is skilled, trained, educated. They will work efficiently and

honestly and thus cost of production will be minimized and vice versa.

Total labour employed in Bannu Sugar Mills are out of which 60 % are unskilled and

40 % are skilled 92 % of the total labour force is from Bannu and Lakki district.

Total cost from of salaries wages benefits was Rs 5488319 during 2002 and Rs. 4.7

million during 2003. Besides wages, salaries and benefits other expenditure are as

under see below:

Table 2: Cost of sales

Years 2012 2011

Raw Materil consumed 253.5 281.2

Packing material 2.62 3.3

Chemical consumed 2.9 2.6

Store and spares consumed 4.8 4.6

Power oil & lubricant consumed 8.4 3.6

Cane carriage 34.4 41.2

Salaries wages & benefits 15.1 16.2

Cane incidentals 3.1 3.8

Repair and maintenance 0.5 1.7

Insurance 0.82 0

Development cess 0.83 0.91

Deprecation 13.3 11.2

340.2 370.4

Work in process 1.5 2.3

Operning 0.4 1.5

Closing 2.5 0.81

Fininshed goods 13.6 5.9

Opening 142.6 13.6

Closing 129.1 7.7

208.6 363.5Source: BMS

ADMINISTRATIVE COST

Administrative cost is also a greater part of the cost of production.

The management has get greater importance in today world, as the division of labour

and specialization principle is applied in the production function. A large number of

labors are employed in mill. Their management is not a simple task.

Experienced people are employed in the factories and the mill to get advantage of their

services. The remuneration and other facilities to attract them. The administrative

expense of the Bannu sugar mill has given in following table.

Table -3:

Adminstative 2012 2011

Salaries wages & benefits 4.7 5.5

Electicity charges 0.5 0.8

Repairing & maintenance 0.2 0.9

Vehicle running & maintenance 1.6 1.7

Entertainment mess cahrges 0.85 0.71

Telephone postage & telegram 0.41 0.33

Rate & taxes 0.32 0.21

Insurance 0.32 0.26

Traveling & conveyance 0.11 0.13

Printing & stationary 0.15 0.15

Charity & donaiton 0.16 0.15

Audit fee 0.17 0.17

Legal & professional charges 0.34 0.11

Fee & subscription 0.075 0.071

Inauguration caremoney 0.001 0.006

Newspaper & periodical 0.0134 0.00882

Deffered revenue expenses 0 2.66

Fine & penalties 0 0.14

Depreciation 0.56 0.589

Sundries 0.29 0.24

10.71 14.9Source: BMS

Excise duty

Production of the different industries are subject to industries this duty is levied upon

the products when they are finally disposed off from the production center. The cost on

the products of the bannu sugar mills was Rs. 0.2 million for 2002 and Rs. 0.3 million

2003.

Transportation, selling and distribution expenses

Transportation, selling and distribution expenses, when the product are finally made

ready for use or consumption it again requires costs to be incurred they are transported

from the production units to the markets.

Again these commodities are not only consumed locally, but they are consumed at

other places also, for example the different items produced at Karachi not only

consumed by the people of Karachi, but they are used and demanded by people

throughout Pakistan not only they are marketed locally but they are exported abroad

also, this the selling of the final goods requires different cost to be borne, for example

payments to the commission agents cost on transpiration free samples publicity etc.

The commission agents are at all over the world. Besides the expenditures upon there

commission agents cost are also incurred on travelling, outward flight changes free

samples, Discount on cash sales publicity and miscellaneous. The detail of

transportation selling and distribution expenses has been given in table.

MISCELLANOUS EXPENDITURE

Miscellaneous expenditure includes the cost incurred on minor things, which has not

given separate heading. Miscellaneous expenditures under administrative expenses are

given in the below table

Miscellaneous expenditure

Selling & distribution 2012 (Ruppes) 2011 (Ruppes)

Salaries & wages 0.23 0.21

Loading & unloading 0.21 0.65

0.44 0.86

Sales

The income from the sales of sugar and molasses during 2002 and 2003 all as in the

below table.

Sales

Sugar 209.5 400.4

Molasses 4.4 26.6

213.8 427.1

Less sales tax 325.3 64.5

181.4 362.5

Source: BMS

Income from sugar during 2011 was Rs. 400.4 and during 2012 was Rs. 209.5, and

income from molasses during 2011 was Rs. 26.6 an during 2012 4.4 million.

OVER ALL PROFET AND LOSS

The important principle governing the mind of entrepreneur is earning of maximum

profit uphill none we have discussed in detail the various items of expenditures like

fixed cost operating costs variable costs, marketing cost etc. Similarly we have

explained the various products of the sugar mill like molasses and sugar etc. Which all

the source of income to the mill the given balance sheet table no shows the profit and

loss account of the sugar mill for the year 2011 and 2012

Net sales during 2011 and 2012 were Rs 362.5 and Rs 363.5 and Rs 208.6 during 2011

and 2013 respectively.

During 2011 the administrative costs were Rs 14.9 and during 2012 the administrative

costs were Rs 10.7 respectively.

Selling and distribution costs during the year 2011 and 2012 were Rs 0.86 and 0.43 in

2011 Rs 6.9 financial expenses in 2011 Rs 6.9 in 2012 Rs. 10.7.

ENOCOMIC IMPACTS OF THE BANNU SUGAR ON DISTRICT LAKKI AND

BANNU

Bannu Sugar Mill was established in 1964. This was the first industrial plant in Bannu

district the underlying objective of the mills was to develop for this distant and

backward area of N.W.F.P. The important economic effects of the mill upon district

Bannu and Lakki are as follow.

1. INDUSTRIAL

The first and most important effect of the mill upon the locality near that lime the

people of this area were completely unknown to industry by establishing this mill the

inhabitants of this area became families with expect of industry and they felt the

necessity of there types of mills in the locality. This •t was the effect that originally this

mill was established by “Pakistan industrial Development Corporation” but seen after it

completion it was given to private limited company.

2. ECONOMIC DEVELOPMENT OF THE AREA

The role of this mill is also very important in the economic development of the

districts. As a result when it develop these particular districts economically, it will help

in overall development of the country the capital invested in this mill being profit to the

invested in this mill being profit to the investors that is again used for investment

purpose and hence aggregate investment increases this was the result of the Bannu

Sugar Mill.

A fixed proportion of the excise duty from the mill is used for the building and roads in

the area.

3. EMPLOYMENT ARGUMENTS

This mill has employed majority of the people slugging to district Bannu and Lakki

Marwat. This mill net provides employment to the people who are directly employed in

the mill as labour, but also provide indirect employment to the people. The raw

material used some portion of that is produced locally the people who produce this item

material they have also got indirect employment in this mill.

4. STANDERED OF LIVING

The southern district of the N.W.F.P were relatively more backward as compared to the

other districts and still it is so the standard of living of the people was too much how

about 900 labour have got employment in this mill 95 % of there labour are from

Bannu and Lakki districts. They get purchasing power and use the articles of their

needs.

Besides these effects on districts this mill produce molasses, sugar etc. It has provided

their items to the local market. IT also brings balance between the demand and supply

of the above product in the country.

CHAPTER – 5

SUGGESTION AND CONCLUSION

According to my research (An economic analysis of Bannu Sugar Mill) there are few

reasons in the way of high productivity of this mill, which are discussed previously.

Their problems are really very alarming, which must be cured in time in proper way.

Following measures should be taken to solve these problems.

1. We can increase our production by gaining them incentives, it means more and

more loan facilitated the result would be increase in production.

2. To increase our productivity we must try to use the best quality of fertilizers,

which improve the quantity, and quality of race materials.

3. Complication system should be introduces so those main dealers of raw

materials it means due to their competition production will increase.

4. Research and development station should be established so that with the help of

their station we can increase our sugar production.

5. Leveling of the land is useful factor for the greater production.

6. In every zone mode demonstration from should be introduced in order too

familiar the farmers with modern scientific techniques.

7. The management of the mill should restart the scheme of pesticides loan to the

farmer in order to control the disease of sugar cane in time.

8. Train workers should be appointed in order is improve the work standard.

9. The management should provide proper transportation and housing facilities.

10. The foreman and supervisor should delegate their authority to press the workers

to perform their duties.

11. Modem and new instrument should be provided to the laboratory.

The government should also take the following steps in order to overcome these

problems.

1. The price of sugar is very low as compare to other crops and this is the basic

reason due to which the formers are not ready to grow the sugar cane. To

encourage the formers the government may fix a reasonable rate of sugar cane.

2. There is no proper transpiration means due to which the transpiration cost is

often high so the government should introduce a good transportation system by

making new roads in order to over come this problem.

3. The government must introduce the modern method of agriculture.

4. There should be proper arrangements to control the disease in time by providing

pesticides and insecticides with the cooperation of agriculture department.

PROBLEM OF THE BANNU SUGER MILL

I visited the Bannu Sugar mill personally and during my visit I found many problems

which are discuss as below.

The Bannu Sugar mill has facing the following problems.

1. The testing materials, which are used in the industries, are not easily and

cheaply available.

2. The research laboratory of the mill is not modern and not covers the need of the

mill.

3. The administrative authority of the mill cannot cooperate with the worker,

which super the productivity of the mill.

4. The foreman and supervisor are not delegating their authority properly to

process the worker to perform their duties regularly and properly.

5. The short supply of sugar cane because of the following reasons.

6. Cultivation of improper sugar can visit.

7. The fertilizer which are used is not of good quality.

8. Improper planning of land.

9. Non availability of drugs to material to the mill is low and they not cover the

need of the mill.

10. Non availability of drugs to control the various types of diseases.

11. The availability of raw material to the mill is low and they not cover the needs

of the mill.

12. There is no proper system of providing loan to the farmers.

13. The improper and heavy transportation cost.

14. High excise duty and export taxes on the imports of technology.

15. Low rates offered by Bannu Sugar mill as the compared to other mill.

16. No training facility is available for employees of the project.

17. The condition of the working place is bed, which effect the efficiency of labour.

18. Due to the lack of market expansion it also effect the productivity of the mill.

19. Another most important problem, which is facing by this Bannu sugar mill, is

unskilled labour force.

The above problems which we are discussed are the more serious problems which are

facing that Bannu Sugar Mill and there problems arc the obstacle in the way low

productivity and these problems needs due to attention by the concerned authorities.

CONCLUSION

Conclusion of the research on “An economic analysis of Bannu Sugar mill is that the

industry of and kind play a vital role in the development of a area and it has very

positive effect on the social and economic life of the area.

Thus it is concluded from our study that without the development of this sector

development of the area of locality is impossible the sugar mill is basically agro based

industry and it plays very important role in the economic development the Bannu Sugar

Mill also providing loan facilities in cash form or in kind from the kind form loan

facilities are the provision of fertilizers, seeds ansectiades and pesticides.

Low yield or production of cane and sugar is great challenge to fast growing population

of Pakistan.

The Bannu Sugar Mill employed round 2000 employers when they get job. There will

be increase in national income than automatically their consumption pattern will also

change they will use better cloth, food and necessities of life. It will improve the

economic development of the area.

The production capacity of Bannu sugar mill is 3 lack begs annually and each begs

contains 50 Kilogram.

It is hoped that the administration of the Bannu Sugar Mill will expand the plant in near

future.

BIBLIOGRAPHY

1. Ahmad Jamil (1974) Nature Of Pakistan Economy.An approach to economic

problems of Pakistan.(Kiffayat Academy Karachi,page 111)

2. Khan Ali Asghar (1972) Pakistan Agriculture Economics. National book

Foundation.

3. Government of Pakistan (1998) planning Commission, Finance division,

Islamabad.

4. J.P. Thi Jsee (Nov. 1987) Report on Sugar Crops in Pakistan.

5. M. Asghar Qureshi (1984) Sugar CANE & sugar Industry in Pakistan.

6. National Commission On Agriculture the July 16,1987. Documents Provided by

the CBA of Bannu Sugar Mill (2002-03).