A BUSINESS PLAN ON BIO DIESELUNDER THE GUIDANCE OF: PROF.SWAPAN
DASGUPTA SUBMITTED BY:AMAN SINGHANIA DEEPAK DHIMAN KARAN ARORA
JIGAYSA GAUTAM SIDDARTH SINGHAL SANDEEP KUMAR PIYUSH AGARWAL SAHIL
AGARWAL NISHANT JHA RAJA VASISHTA
THE INTERNATIONAL INSTITUTE OF PLANNING AND MANAGEMENT
NEW DELHI
AcknowledgementWe are thankful to Prof. Swapan Dasgupta for
giving us this opportunity to make a Business Plan. It is our great
pleasure to express our profound sense of gratitude to our
respected Guide professor for his constant help and precious
suggestions to enhance the quality of the report. We are grateful
to all the faculty members, for their valuable suggestions for the
successful completion of our report. At last, but not the least, we
thank all my friends those who have guided us, supported us and
helped us in completing our work on time.
Table of Contents:Background and PurposeCompany Summary Company
Ownership Company History
ObjectiveShort term Long term Mission Statement
Market Analysis
SWOT AnalysisStrengths Weakness Opportunity Threat
Marketing PlanProduct Price
Promotion Place Technology
MarketingMarketing Strategy Competitive Edge Sales Strategy
Sales forecast
Financial Plan and ProjectionResources Financial statement and
projection Business Ratios
Organization and ManagementForm of Business Equity Position Key
personnel HR strategy
Critical Risks and Contingency Plan
Bibliography
Executive Summary:
1 General: Company has proposed to set up a new plant for
BioDiesel. The manufacturing unit is at Industrial area. The
capacity of the new plant will be 1,000 liters of biodiesel per
day. 2 Factory site: It is proposed unit will be set up at
industrial area. 3 Raw material: The basic of raw material for
manufacture of bio diesel is Vegetable oils, Methanol and Caustic
potash. The arrangement for the assured supply of local raw
material like
vegetable oil seeds like jatropa, Mahuwa and karanj are being
done. The other raw material required for manufacture of bio diesel
or methanol and caustic potash, which will made available from the
market. 4 Schedule of project implementation : The estimated
implementation period for the complete plant is around 20 week.
Presently the land is fully develop for industrial purpose. Basic
engineering design, detail engineering design equipment layout
drawing are ready. Civil/Architectural design, is to be done. 5
Management and Technical Expertise: The company is promoted by a
dynamic enthusiastic and enterprising person who is a qualified and
experienced having good experience in this line. 6. We expects to
raise Rs.7700000 of its own capital. This provides the bulk of the
current financing required. Indian group anticipates sales of about
Rs.3924000 in the first year, Rs.4768000 in the second year, and
Rs.5971000 in the third year of the plan. Indian group should break
even by the fourth month of its operation as it steadily increases
its sales.
PURPOSE AND SCOPE
The business never comes into existence without any purpose.
There is the common purpose for every business, that is; profit.
Adding this to our purpose, the company put more emphasis on
satisfying its customers by providing the high-quality products and
good services to its customers so that the company should be known
more for its services. It would be unsatisfying, to be in business
with the only reason that of making money. A company needs profits
to continue, but profits are not what the business is for.
No business sticks to the same strategy that what it adapted
initially. With the change in the business environment, it needs to
change its policies or strategies. An Biodiesel for business
benefits in many ways as it is the most powerful an incredible
source of cost-efficiency, an environmentally friendly
,eco-friendly renewable source of energy and pretty much a
requirement today. Today, people expects (especially the
clients/customers) to change according to the world and also now
has become more responsible towards environment.
The purpose for setting up an Biodiesel business is by analyzing
its future demand and more dependency towards the eco friendly fuel
and energy. The first and the main purpose is to maximize share
holders wealth. Biodiesel can help reduce our dependence on foreign
oil and help us leverage our fossil fuel supply. It can also help
reduce green house gas emission , as well as public health risk
associated with air pollution. Secondly, it widens up the market
and enhances the availability of the product, i.e., 24/7. It
basically enhances the scope of the business, by increasing the
market range and extending the customer base, lower cost of
development, outperforming the competitors, convenient for the
customers.
HISTORYIndian Group is incorporated in Delhi. It is equally
owned and managed by its four partners. Mr. Aman Singhania and
Mr.Nishant Jha have extensive experience in sales, marketing and
management, and Mr.Karan Arora Singh brings experience in the area
of finance and administration. Mr.Siddarth Singhal is experienced
in the area of Human Resource. Indian group started as a
manufacturer of toiletry and cosmetics in the year 1994. Today,
Indian Group is a Rs 500 crore group of companies. The plants and
production activities of the group are currently spread across West
Bengal, Pondicherry, Assam, Gujarat, Orissa, Uttaranchal and
Himachal Pradesh.
Recently, Indian group has signed a MoU for a Cement and Power
Plant in Chhattisgarh. Indian group has grown from West Bengal and
will continue to be a part of the accelerated industrial growth of
the State. Its Bio-diesel Project is another step in the
direction
Objective:Short term:The facilitys production will contribute to
fulfilling the objectives set by the Indian Administration to
encourage the penetration of biofuels in the market. Last January
1st legislation on the obligatory nature of the use of biofuels in
transport came into effect. It establishes that 3.4% of the overall
energy content of gasoline and diesel fuel sold in India for
transport in 2009 should come from biofuels, and 5.83% in 2010 (in
the first semester of 2008 the percentage was 1.47%).
The legislation sets a minimum objective of 2.5% for 2009. This
applies to both biodiesel in relation to conventional diesel, and
bioethanol in relation to gasoline, and the difference can be made
up to a total of 3.4% with any of the two biofuels. For 2010 the
minimum objective for each biofuel increases to 3.9% and the
overall figure to 5.83%. In the specific case of biodiesel, and in
the light of overall fuel consumption figures for transport in
India, this means that a minimum of 740,000 metric tons of
biodiesel should be incorporated into the system in 2009 and
1,070,000 mt in 2010. The production from this facility will,
therefore, represent 27% and 17% of these targets respectively.
Long term:Profit Maximization: The main objective is to achieve
the break even point as soon as possible and we expect that we will
be able to achieve profit within one and half years. Because the
main motive of every business is profit earning. In the long term,
our company will aim at maximizing its profits margins and
simultaneously providing best quality efficiently to its clients.
Market Leadership: Our Company will aim at achieving market
leadership in manufacturing of world class Biodiesel.
VISION, MISSION AND VALUES Vision of IOG
A major diversified , trans-national , integrated energy
company, with national leadership and a strong environment
conscience ,playing a national role in oil security and public
distribution.
Mission of IOG To achieve international standard of excellence
in all aspects of energy and diversified business with focus on
customer delight through values of product and services, and cost
reduction. To maximize creation of wealth ,value and satisfaction
for the stakeholders. To attain leadership in developing, adopting
and assimilating state of art technology for competitive advantage
. To provide technology and services through sustained Research and
Development. To foster a culture of Participation and Innovation
for employee growth and contribution. To cultivate high standard of
business ethics and Total Quality Management for a strong Corporate
Identity and brand equity. To help enrich the quality of life of
the community and preserve ecological balance and heritage through
a strong environment conscience.
Values followed at IOG Care Innovation Passion Trust
Market Analysis:OVERALL MARKET The U.S and global The U.S. and
global markets for biodiesel growth, details major feedstock
trends, and provides 5 to 10 year forecasts for biodiesel demand,
consumption and production. Europe, China, India and Brazil are
also covered as case studies. Proprietary forecasts developed for
this study are also used to produce 2020 "scenarios" for the U.S.,
Europe, China, India and Brazil. We finds the biodiesel industry is
entering a new era of transition to alternative feedstocks,
emerging technologies, and revised government policies favoring
sustainable feedstocks and fuels. Each of these transitions offers
considerable challenges and growth opportunities for biodiesel
developers, producers, feedstock producers, and entrepreneurs.
The global markets for biodiesel are entering a period of rapid,
transitional growth, creating both uncertainty and opportunity. The
first generation biodiesel markets in Europe and the US have
reached impressive biodiesel production capacity levels, but remain
constrained by feedstock availability. In the BRIC nations of
Brazil, India and China, key government initiatives are spawning
hundreds of new opportunities for feedstock development, biodiesel
production, and export" said Biodiesel 2020 author Will
Thurmond
SPECFIC MARKET India is a lucrative market of biodiesel.
Jatropha is an alternative, but palm oil seems better to us.
Firstly, the jatropha yields are likely to be low and secondly,
these will be time-taking. As for palm oil, he said, Palm stearin
is a good option. At Rs 22,000 per tonne, palm stearin is much
cheaper than diesel. It is also expressed serious concerns over the
shortage in oilseeds production in India, which makes the country
increasingly dependent on imports to meet its demand. It is needed
to understand that high minimum support price for cereals and
grains is not required anymore; its a thing of the past. Instead,
which is need to focus on oilseeds, Tag of a developing country
with a huge energy demand (it was standing at the fifth position in
terms of energy consumption in the world in 2007) has forced India
to depend on other
countries for fuel (oil), increasing the risk exposure of the
country to the volatility of crude oil prices in the international
market. Feeling the heat of shooting oil prices, India commenced
its biofuel journey in 2003. Currently, ethanol dominates the
Indian biofuel sector, however, biodiesel is also expected to join
the commercial stream soon as the phase one of pilot projects has
already been completed. So being at the initial stage, but with
huge potential in terms of production, the Indian biofuel industry
will prove to be a good option for biofuel producers, says
"Emerging Biofuel Market in India, a recent research report on the
Indian biofuel industry Ethanol dominates the world biofuel market
and its production is expected to grow at a CAGR of around 6%
during 2008-2017. - Worldwide biodiesel production is expected to
grow at a CAGR of over 5% from 2008 to 2017. - Ethanol production
of India is likely to attain a CAGR of slightly over 2% during the
period 2008-2017. - Increased ethanol use is expected to supersede
the production during the forecasted period. Domestic ethanol
consumption in India is projected to expand at a CAGR of around
6.5% during 20082017. - Indias total biodiesel requirement is
projected to grow to 3.6 Million Metric Tons in 2011-12, with the
positive performance of the domestic automobile industry. - Similar
to Brazil and the US, the Indian automobile industry has huge
potential for the flexfuel vehicles
COMPETITVE FACTORS AND MICRO ENVIRONMENTAL INFLUENCEBiodiesel
growth from non-food feedstocks is gaining traction around the
world," China recently set aside an area the size of England to
produce jatropha and other non-food plants for biodiesel. India has
up to 60 million hectares of non-arable land available to produce
jatropha, and intends to replace 20% of diesel fuels with
jatropha-based biodiesel. In Brazil and Africa, there are
significant programs underway dedicated to producing non-food crops
jatropha and castor for biodiesel." Second Generation
Opportunities
As the Europe and US markets transition to larger plants,
alternative feedstocks and 2nd generation technologies, the
Biodiesel 2020 study predicts a consolidation among smaller, first
generation producers from 2008-2010, accompanied by a series of
mergers and acquisitions in the field. "From 2008 through 2020, a
series of transitions in the biodiesel industry will create winners
and losers," said Thurmond. "Biodiesel producers that are best able
to evolve and adapt to transitions in technology, markets,
feedstocks and government policies are most likely to succeed over
the long term." Opportunities and Outlook The initial results from
the study Biodiesel 2020: A Global Market Survey find that new
developers, farmers, feedstock providers, producers, and investors
who can meet growing demands for supply are expected to benefit
from this emerging market. In addition, this study finds key
advantages in the future will be available to producers and
investors to supply future needs with new and improved
technologies; alternative feed stocks with higher yields such as
jatropha and algae biodiesel; production scalability and
flexibility options; supply chain, distribution and co-location
strategies; innovative risk management strategies; and
industry-friendly government targets and tax incentives committed
to promoting the awareness and growth of the industry. With an eye
on the future, Biodiesel 2020: A Global Market Survey provides
forecasts and scenarios to the year 2020 for the U.S. and European
markets as well as the "big emerging markets" of China, Brazil and
India. For Brazil, China and India, the study includes long-term
forecasts and year 2020 scenarios, each measuring growth in the
diesel and biodiesel markets, as well as focusing on the potential
for biodiesel growth.
SWOT ANALYSIS
Strengths: -
- There are favourable climate and environmental conditions
(esp.high quality of soil) to rape cultivation in the Podkarpacie
region - Large , unexploited production potential of agriculture
and rural areas (resource of land and workers) -Possibility of
assign large areas of appropriate soil for rape cultivation -
Possibility of gradual filling the gap after resigning from sugar
beet or other, unprofitable, cultivation - The prospects of
reducing the area of waste land - Low charges and surplus of
manpower ( competitive price of rape and rape oil), - The custom of
rape cultivation in he part of the province - The demand for the
product (rape) from the local processing industry - Producers
organizations connected to the issues of rape processing
chain(production processing, purchase-distribution) - The rational
rotation and improvement of soil productive quality has been
understood - Existing production plants for rape processing into
oil(processing capacity of the order of 30 thousand of tons per
year) machines installed have the following features: small space
for work; - Low electric energy usage, - High efficiency of work -
No air pollution, - Low costs of operating and keeping in -
Technical readiness state - long overhaul life between medium
repair, that is 1000 tons - Low price - Good users opinions -
Uniformed fleet all rape producers work with the same installations
- Normalized product is being received : - Oilseed cake
- Cold press method -preferences of delivery Hot pressing gives
worse physical chemical product parameters - Constant recipients
provides steady sale - Efficient advisement in rape cultivation and
sale area, - Functioning producer group - Well developed system of
rape purchase - Existing rape processing plants - Flourishing
non-governmental organizations of RRE promotion and development -
Well developed system of agricultural advisement - The ability of
obtaining funds for projects
Weakness:- Distraction (scattering of a sector) of rape oil
production - Intercepting part of farmers income by agents working
on the market ( purchase is made by external subjects) - Threat of
unverified varieties of rape appearance on the market
- Predominance of the reluctant attitude among the farmers(
small farms owners) and rural Inhabitants - Low level of education
among the agricultural producers - The current technology used
gives lower oil yield (30% in comparison to competitive 35%) what
lowers the competitiveness of the product - High purchase price of
rape - Banks are not engaged in supporting the rape processing and
purchase in the Podkarpacie region - Slow processes of adjusting to
changing developmental conditions( low rate of restructuring in the
region) - Low capital resources of farmers - Distant relation of
farms with the market ( the unmarketable farms mostly), - Lack of
entrustment and common reluctance towards joint venture(
undeveloped social capital) -Large young educated people migration,
(the human capital deciding of the competitiveness of the region) -
The partnership between public and private sectors is not developed
in the region - Self-government and inhabitants are not
satisfactory educated in abilities and needs of development and
using the renewable resources energy
Opportunity:In India agricultural and dairy sectors have
achieved remarkable successes over the last three and a half
decades. Besides being one of the world's largest producers of
biodiesel, and providing much needed diesel security to the
nation.
The accomplishments of the green and white revolutions have,
however, not been matched by concurrent developments in supply
chain management, and in new technologies for better processing,
preservation, and storage of food. Pockets of shortages and near
starvation, substantial wastages due to spoilage, quality
deficiencies, and inadequate returns to the farmer are still very
much in evidence. The initial results from the study Biodiesel
2020: A Global Market Survey find that new developers, farmers,
feedstock providers, producers, and investors who can meet growing
demands for supply are expected to benefit from this emerging
market. In addition, this study finds key advantages in the future
will be available to producers and investors to supply future needs
with new and improved technologies; alternative feed stocks with
higher yields such as jatropha and algae biodiesel; production
scalability and flexibility options; supply chain, distribution and
co-location strategies; innovative risk management strategies; and
industry-friendly government targets and tax incentives committed
to promoting the awareness and growth of the industry
Threat:Numerous transport biofuel substitutes, including
traditional fuel and alternative and New generation fuel( heading
towards hydrogen generation)
Relatively high price of transport biofuel production in EU in
comparison e.g. spirit in Brazil or to costs of output of the
barrel of crude oil (8-12 USD/barrel) problems with EN14214 norm in
case of biofuel produced for own use (limited advantageous
ecological effect) Insufficient profitability or lack of
it(production profitability appears in case of larger production
scale) Improving the image of 1st generation biofuel demands
incurring high costs necessarily Uncertainty of sale Constance,
seasonal sale in case of esters Uncompleted legal environment
(revision of the excise directive causes anxiety). Unsatisfactory
RRE promotion, Energy and fuel companies monopoly (controlled
access to distribution channels) Development of large companies
(out of the region) basing on bio-material (reducing the province
to material producer only) Dynamically evaluating market of
biocomponents able to eliminate small material producers Import of
biocomponents to biofuel production Higher competitiveness of
producers from other regions Limited access to fund for biofuel
market development Not efficiently developed business supporting
structure Unsatisfactory cooperation between economy practice and
theoretical works Low fund on the R&D area in Poland in
contrast to other EU countries
PRODUCT AND ITS DEVELOPMENTProduct description and specification
The proposed to be made in a new plant is BioDiesel is a
domestically produced, Renewable fule that can be manufacture from
vegetable oils, animal fats, or recycled restaurant oils. Bio
diesel is safe, Biodegradable, reduces serious air pollutants such
as particulate, carbon monoxide, hidro carbon and air toxic. Blends
of 20% Biodiesel with 80% petroleum diesel can generally be used in
unmodified diesel engines. Bio diesel can also be used in its pure
from (be 100), But it too may require certain engine modification
to avoid maintenance and performance problem. Biodiesel is a
cleaner burning diesel replacement fuel made from natural,
renewable sources such as new and used vegetable oils and animal
fats. Just like petroleum diesel, Biodiesel operates in
compressionignition engines. Blends of 20% Biodiesel (mixed with
petroleum diesel fuels) can be used in nearly all diesel equipment
and are compatible with most stronger and distribution equipment.
These low lavel blend (20% and less) generally do not require any
engine modification. Biodiesel can provide the same pay load
capacity and as diesel. Using Bio Diesel in a conventional diesel
engine substantially reduced emissions of unburned hidro carbons,
carbon monoxide, sulfates, and particulate matter. These reduction
increased as the amount of biodiesel blended in diesel fuel
increased. The best emissions reduction are seen with be 100. The
use of biodiesel increased the solid carbon fraction of particulate
matter (since the oxygen in biodiesel enable more complete
combustion to c 02) and reduce the sulfate fraction ( Biodiesel
contains less 24 ppm sulfur), while the soluble or hydrocarbon,
fraction stayes the same or increase. Therefor, biodiesel work will
with new technologies such as diesel oxidation catalysts (which
reduce the soluble fraction of diesel particulat but not the solid
carbon fraction). Emissions of nitrogen oxide increased with the
concentration of biodiesel in the fuels. Some biodiesel produce
more nitrogen oxide than others, and some additive have shown
promise in modifying the increases. More R&D is needed to
resolve this issue.
Bio Diesel has Physical properties very similar to conventional
diesel. Bio diesels Physical characteristic: Specific gravity
Kinematic viscosity 40*c Catane Number Higher heating value Sulfur,
wt % Cloud point *C Pour point *C Iodine Number Lower heating value
0.87 to 0.89 3.7 to 5.8 46 to 70 16928 to 17996 0 to 0.0024 -11 to
16 -15 to 13 60 to 135 15,700 to 16,735
Biodiesel is packed in 35 Kg. carboys, 225 kg. MS Barrels and
Bulk in Tankers.
Production Prcoess of making Bio DieselBiodiesel fuel can be
made from new or used vegetable oils and animal fats, which are
nontoxic, biodegradable, renewable resources. Fat and oil are
chemically reacted with an alcohol (methanol is the usual choice)
to produce chemical compound non as fatty acid methyel esters. Bio
Diesel is the name given to these esters when they are intended for
use as fuel. Glycerol (Used in pharmaceuticals and cosmetics among
other market) is produced as a coproduct. Bio Diesel can be
produced by a verity of esterification technologies. The oil and
Fat are filtered and preprocessed to remove water and contaminants.
If free fatty acid are present, they can be removed or transferred
in to biodiesel using sepecial pretreatment technology. The
pretreated oils and Fats are than mixed with an alcohol (usually
methanol) and a catalyst (usually sodium or potassium hydroxide).
The Oil molecules are broken apart and reformed into esters and
glycerol, which are than shaprated from each other and purified.
Approximately 55% of the Biodiesel industry can be use any Fat or
oil feed stock, including recycle cooking oil. The other half of
the industry is limited to vegetable oils, the latest expensive of
which is gatropa oil. The Gatropa oil industry has been the driven
force behind biodiesel commercialization because of large
production capacity, product surplus , and declining price. Similar
issue apply to the recycled oils and animal fats industry, even
though these feed stock are less expensive than Gatropa oil based
on combined resource of both industry, there is enough of the feed
stock to supply 1.9 Billion gallons of biodiesel (under policies
designed to encourage biodieses use).
Biodiesel Production Process
Resource RequirementRaw Material (Jatropha seed and oil):
Selection of improved germ-plasm material for quality and quantity
of oil ; Selection of the bio-crop for production of Biodiesel i.e
Jatropha curcas & others; Developing agro-technologies for
different agro-climatic regions; Total chemical analysis of all
potential non-edible oils with special reference to Jatropha Curcas
Oil. Production Technology : Research efforts for perfecting an
efficient chemical/ catalyst conversion process ; Development of
Bio-catalyst i.e. Lipase catalyzed esterification ; Development of
Heterogeneous Catalyst i.e. use of smart polymers ; Alternate uses
of by-products i.e. glycerol and meal cake. Utilization as Fuel :
Data generation & Production of bio-diesel from all possible
feed stocks ; Response of different available additives and their
dosages on the bio-diesel ; Effect of bio-diesel on elastomers,
corrosion etc ; Stability of Bio diesel - Oxidation stability,
Thermal Stability and Storage Stability; Engine Performance and
emissions based on different feedstock based Bio-diesels ;
Toxicological Studies and Tests to check Adulteration Plants in
operation/ under construction Different technologies are currently
available and used in the industrial production of bio-diesel,
which is sold under different trademarks. For example, there are
the Italian processes Novamont, and the French IFP. A number of
units are manufacturing bio-diesel worldwide. These units are using
sunflower oil, soybean oil, rapeseed oil, used-frying oil, Jatropha
oil, etc. as a source of triglycerides . Out of 85 plants
identified, 44 plants were in Western Europe with Italy as the
leading country with 11 plants, 29 plants in Eastern Europe, 8
plants in North America and 4 plants in the rest of the world.
Overall capacity grew from 111,000 tons in 1991 to 1,286,000 in
1997. USA is the fastest growing newcomer and a number of companies
are emerging there. Additional capacities are expected in Japan and
the palm oil producing countries, Indonesia and Malaysia. Actual
production grew from 10,000 tons in 1991 to 661,000 tons in 1997.
France is the leading producer with 227,000 tons (in 1996).
Blending of Esters & Diesel Blending conventional Diesel Fuel
(DF) with esters (usually methyl esters) of vegetable oils is
presently the most common form of bio-diesel. The most common ratio
is 80% conventional diesel fuel and 20% vegetable oil ester, also
termed B20, indicating the 20% level of bio-diesel; There have been
numerous reports that significant emission reductions are achieved
with these blends and no engine problems were
reported in larger-scale tests with B20. Another advantage of
bio-diesel blends is the simplicity of fuel preparation, which only
requires mixing of the components. Ester blends have been reported
to be stable. One limitation to the use of bio-diesel is its
tendency to crystallize at low temperatures below 0C. causing
problems in fuel pumping and engine operation. One solution to this
problem may be the use of branched-chain esters, such as isopropyl
esters. Another method to improve the cold flow properties of
vegetable oil esters is to remove high-melting saturated esters by
inducing crystallization with cooling, a process known as
winterization. Storage & handling of Bio-Diesel: As a general
rule blends of bio-diesel and petroleum diesel should be treated
like petroleum diesel. Though the flash point of bio-diesel is
high, still storage precautions somewhat like that in storing the
diesel fuel need to be taken. Based on experience so far, it is
recommended that bio-diesel can be stored up to a maximum period of
6 months. Bio-diesel vegetable methyl esters contain no volatile
organic compounds that can give rise to poisonous or noxious fumes.
There is no aromatic hydrocarbon (benzene, toluene, xylene) or
chlorinated hydrocarbons. There is no lead or sulphur to react and
release any harmful or corrosive gases. However, in case of
bio-diesel blends significant fumes released by benzene and other
aromatics present in the base diesel fuel can continue. Engine
Development & Modifications The use of unrefined vegetable oil
leads to poor fuel atomization due to high viscosity resulting in
poor combustion and also more gum formation in fuel injector, liner
etc. The results of emissions of using unrefined vegetable oils
were unfavorable and were also accompanied by deposit formation .
Therefore, it is necessary to esterify the vegetable oil for use in
engines. However, these problems can be addressed by use of a
suitable additives package. Engine oil dilution is a potential
problem with biodiesel since it is more prone to oxidation and
polymerization than diesel fuel. The presence of biodiesel in
engine could cause thick sludge to occur with the consequence that
the oil becomes too thick to pump. Engine oil formulations need to
be studied to minimize the effect of dilution with biodiesel. It
must be noted that the light duty diesel engines are sufficiently
different from heavy duty diesel engines in many aspects and one
should not expect that the emission behavior of the two types of
engines would be same. This fact should be kept in mind while
transferring conclusions of studies done on one type of engine to
other type of engines.
Quality AssuranceSpecifications and Quality Standards for
Bio-fuels ASTM has issued bio-diesel standard D 6751 in December
2001, which covers the use of pure bio-diesel (B100) into
conventional diesel fuel up to 20 % by volume (B20). This replaces
the provisional specification PS 121 issued in1999. Austria (ON C
1191), France (JO), Italy (UNI 10635) and Germany (DIN E 51606) had
issued bio-diesel standards in 1997, Sweden in 1996 and a common
draft standard EN 14214 for the European Union has also been
announced. The new Italian bio-diesel standard, which will replace
UNI 10 635, has been finalized and will be released this year for
public. The
standards for Bio-Diesel in India are under formulation and are
proposed to be based on standards adopted by European Union. It is
necessary that the approval of Vehicle, Engine and Fuel Injection
manufactures is taken before finalizing standards and implementing
fuel change.
MarketingOne of our unique selling points will be quality
control. We have appointed one of the worlds leading testing
companies to oversee all of our quality control procedures. They
will also act as consultants for the quality control procedures and
specification testing. They will design, build and commission the
QC laboratory and when the production is started, oversee it on our
behalf. They will also look after quality control and EN 14214
testing schemes. Biodiesel Production India will oversee the
implementation of the Laboratory to ensure compliance with best
practice and the EN 14214 standard. We will invest in excess of
Rs175,00000 in our laboratory to ensure that our Biodiesel is of
the highest quality, and at all times satisfies the EN 14214
specification. Our Biodiesel will be sold as pure Biodiesel (B100),
but there will be no visible product differentiation communicated
to the customer. In this case Biodiesel is usually sold only as a
cheaper fuel and environmental advantages are ignored. Another
strategy is to blend Biodiesel in refineries into fossil Diesel up
to 5% and sell it anonymised at fuel pumps (Our third strategy is,
our Biodiesel is sold as a 100% pure fuel (B100) and is
differentiated as a quality product, which is highlighted by a
quality seal at the pump, where informative product information
flyers are distributed to the customer This strategy will be
targeted at transport fleets and buses. This is also a defense
strategy against poor Biodiesel quality produced by home brewers
not meeting the European EN14214 standard
Sales and marketing strategy.The Company will target operators
of fleet and transportation companies. Geographically, the company
will initially concentrate car manufacturers. To insure rapid
growth, the company plans to sell Biodiesel distributors at a small
discount compared to regular diesel. In the first 3 years, the
Company's output is expected to grow in accordance with the growth
of the export market (around 30% yearly). The Company plans to
start producing about 400 metric tons per month in the first 8
months of operation. This output will be increased by 5% in
subsequent years
Financial Plan and Projection:ResourcesIndian group expects to
raise Rs.7700000 of its own capital. This provides the bulk of the
current financing required.
Financial statement and projection
Pro forma Profit and loss:As the Profit and Loss table shows,
Indian group expects to continue its steady growth in profitability
over the next three years of operations.
2008
2009 Rs.4768000
2010 Rs.5971000
SalesDirect cost of sales
Rs.3924000
Rs.2260800
Rs.2758400
Rs.3438000
Other
0 -----------------
0 -----------------Rs.2758400
0 ------------------Rs.3438000
Cost of Goods sold
Rs.2260800
Gross MarginGross Margin%
Rs.1663200 42.38%
Rs.2009600 42.14%
Rs.2533000 42.42%
ExpensesPayroll Sales and Marketing expenses Depreciation
Utilities Other Rs.756000 Rs.40000 Rs.200000 Rs.150000 0
------------------Total Operating Expenses Rs.1146000 Rs.800000
Rs.50000 Rs.210000 Rs.160000 0 ----------------Rs.1220000 Rs.850000
Rs.60000 Rs.230000 Rs.170000 0 ----------------Rs.1265000
EBIT Interest Taxes incurred
Rs.517200 0 Rs.206880
Rs.789600 0 Rs.315840
Rs.1268000 0 Rs.507200
Net profit Net Profit/Sales
Rs.310400 7.91%
Rs.473760 9.93%
Rs.760800 12.74%
Pro forma Cash Flow2008 Cash received Cash from Operations Cash
Sales Subtotal cash from operations Additional cash received Sales
Tax, VAT, HST/GST Received New Current Borrowing New Other
Liabilities (interest-free) New Long-term Liabilities Sales of
Other Current Assets Sales of Long-term Assets New Investment
Received Subtotal Cash Received Expenditures Expenditures from
Operations Cash Spending Bill Payments Subtotal Spent on Operations
Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out Principal
Repayment of Current Borrowing Other Liabilities Principal
Repayment Long-term Liabilities Principal Repayment 2009 2010
Rs.3924000 Rs.3924000 0 0 0 0 0 0 0 0 Rs.3924000 2008 Rs.756000
Rs.1146000 0 Rs.206880 0 0 0
Rs.4768000 Rs.4768000 0 0 0 0 0 0 0 0 Rs.4768000 2009 Rs.800000
Rs.1220000 0 Rs.315840 0 0 0
Rs.5971000 Rs.5971000 0 0 0 0 0 0 0 0 Rs.5971000 2010 Rs.850000
Rs.1265000 0 Rs.507200 0 0 0
Purchase Other Current Assets Purchase Long-term Assets
Dividends Subtotal Cash Spent Net Cash Flow Cash Balance
0 0 0 Rs.2108880 Rs.1815120 Rs.500000
0 0 0 Rs.2335840 Rs.2432160 Rs.500000
0 0 0 Rs.2622200 Rs.3348800 Rs.500000
Balance Sheet:The following is a projected Balance Sheet for
MFFC.Pro Forma Balance Sheet 2008 2009 2010
Assets Current Assets Cash Other Current Assets Total Current
Assets Long-term Assets Long-term Assets Depreciation Total
Long-term Assets Total Assets Liabilities and Capital Current
Liabilities Accounts Payable Current Borrowing Other Current
Liabilities Subtotal Current Liabilities Long-term Liabilities
Total Liabilities Paid-in Capital Retained Earnings Earnings
Rs.500000 Rs.1500000 Rs.2000000 Rs.6000000 Rs.300000 Rs.5700000
Rs.7700000
Rs.800000 Rs.150000 Rs.2300000 Rs.6000000 Rs.400000 Rs.5600000
Rs.7900000
Rs.1000000 Rs.150000 Rs.2500000 Rs.6000000 Rs.500000 Rs.5500000
Rs.8000000
Rs.206880 0 0 0 Rs.206880 0 Rs.206880 0 Rs.310400
Rs.315840 0 0 0 Rs.315840 0 Rs.315840 0 Rs.473760
Rs.507200 0 0 0 Rs.507200 0 Rs.507200 0 Rs.760800
Total Capital Total Liabilities and Capital
Rs.7182720 Rs.7700000
Rs.7110400 Rs.7900000
Rs.6732200 Rs.800000
Business Ratios: Ratio Analysis Sales Growth Gross Margin
Current Quick 2008 0.00% 55% 11.57 11.57 2009 15.50% 58% 15.86
15.86 2010 15.50% 59% 17.06 17.06
ORGANISATION AND MANAGEMENTIndian group managed by four
partners. Since each state has specific laws on the formation and
dissolution of partnerships, as well as laws regarding the legal
responsibilities of each partner, business owners are well advised
to consult an attorney and a tax accountant before establishing a
partnership. A partnership is relatively simple to establish and
does not require the same amount of record keeping as a
corporation. Another advantage of a partnership is that income is
taxed only once. By contrast, most corporations are taxed twice --
they pay taxes on their income, and if there are shareholders, they
in turn pay taxes on the share of the corporation's income that
they receive as dividends. Partnerships need only file an
information return (a form indicating the partnership's income,
expenses, and profits or losses) with the Internal Revenue Service,
but the partnership itself does not pay taxes. Each partner pays
federal, state, and local taxes on their income from the
partnership as if it were personal income. The chief disadvantage
of being a general partner is that you can be held personally
responsible for another partner's negligence or carelessness. This
means that if your partnership is unable to meet its financial
obligations, you may have to use your personal assets to pay off
debtors, even though you personally may not be at fault. If the
partnership defaults on a loan, for example, the bank has the right
to sue any general partner to collect this debt. If you own a car
or a home, the court may order you to sell that property and turn
the proceeds over to the bank. (If you and your spouse own the
property jointly, the bank is entitled to only one-half the
proceeds.)
Equity Position
Equity funds come from personal moneys of the partners (such as
savings, inheritance or personal borrowings from financial
institutions, friends, relatives and business associates). These
funds are normally unsecured and have no registered claim on any of
the assets of the business, freeing those up to be used as
collateral for the loans (debt financing).
Key personnelTo accomplish missions, our company employs a
matrixed organizational structure. Indian group is organized into
the following major organizational units: MD/CEO, CFO, HR Manager
and Marketing Manager.
HR strategyFaced with rapid change organizations need to develop
a more focused and coherent approach to managing people. In just
the same way, we require a marketing or information technology
strategy it also requires a human resource or people strategy. The
ultimate purpose of developing a human resource strategy is to
ensure that the objectives set are mutually supportive so that the
reward and payment systems are integrated with employee training
and career development plans. Culture: the beliefs, values, norms
and management style of the organization
We believe that a norm is an implied agreement among the group's
membership regarding how members in the group should behave. From
the perspective of the formal group, norms generally fall into
three categories-positive, negative, and neutral. In other words,
norms support, obstruct, or have no effect on the aims of the
larger organization. Organization: the structure, job roles and
reporting lines of the organization People: the skill levels, staff
potential and management capability Human resources systems:
People work better when the environment, working methods, and
the equipment have been designed to help them. If we add to this
the natural motivation to do a good job-of-work for an appropriate
reward, we can confidently anticipate improved productivity.
Constantly improving productivity is something we all have a vested
interest in, as it is the key factor that drives up living
standards. High living standards are good for us, as those who
enjoy a
relative high standard of living tend to be healthier and tend
to live longer. We should also remember, the inverse holds true.
Effective communications are vital in our management; in fact, they
are the essence of our management.
RISK AND CONTIGENCIESEconomic, environmental and energy security
concerns arising from reliance on petroleum are forcing countries
the world over to shift to alternatives ethanol and biodiesel.
Since biofuels can be produced from a diverse set of crops each
country is adopting a strategy that exploits the comparative
advantages it holds in certain crops.India has launched a National
Mission on Biofuels, the main strategy of which has been to promote
Jatropha Curcas; a perennial shrub that bears nonedible oil seeds
that can be used to produce biodiesel. The cultivation of Jatropha
Curcas is to be undertaken mostly on wastelands. Indias biofuel
policy has certain drawbacks. These include the dependence of the
rural poor on such wastelands for diverse purposes and which are
unlikely to be met by Jatropha plantations, the potential for
conflicts from the appropriation of common pool resources like
wastelands without involvement of local communities in decision
making, the lack of prior experience with cultivation of Jatropha
especially on marginal lands, government subsidies to growers who
would mostly be large landholders, the absence of minimum support
prices for biofuel crops etc. An alternative approach would be one
which focuses on multipurpose, shortduration annual crops that can
either simultaneously yield fuel along with food and/or fodder or
can be cultivated in rotation with food crops, so that even small
private farmers can benefit from the opportunities that the market
for biofuels present. Some crops that are already commercially well
known and can be scaled up to produce for bioenergy are also
discussed. The importance of policies like renewable fuel standards
and minimum support prices for biofuels is also emphasized.
Although Jatropha Curcas may have the potential to grow in diverse
agroclimatic conditions, withstand drought and pest attacks, there
is bound be accompanying variation in important parameters like
seed yield, oil content, nutrient requirements etc. which are
critical to economic viability of plantations. The survey carried
out by the National OilSeeds and Vegetable Oil Development Board is
said to have reported variation in oil content ranging from 21% to
48%. There is also no scientific evidence on the absence of pests
and diseases in Jatropha plantations.
In fact cultivation practices reported by Tamil Nadu
Agricultural University, Coimbatore (TNAU) mention of pests like
defoliators, bark eaters, stem borers etc., which call for pest
management techniques 2 . Further high plantation densities like
2500 plants per hectare are possible only under good soil and water
conditions while on rainfed plantations on marginal soils optimum
density is said to be about 1600 plants per hectare. The resulting
effect is that production per hectare is likely to be lower on such
lands. Such wide variation in key economic parameters and the lack
of standardized seed material, cultivation practices call for
intensive research and development prior to a largescale planting
based on incomplete information. While the national mission on
biofuels was launched as far back as 2003, there does not as on
date exist a formal policy that has been passed into law relating
to biofuels. First, blending of biodiesel is yet to be mandated by
law and the various missions are merely indicative of government
preference. Such mandates, which are commonly called Renewable
Portfolio Standards (RPS) in the electricity industry and Renewable
Fuel Standard (RFS) in the transportation industry , have become
the preferred mechanism through which national and state
governments in several OECD countries guarantee a market for
investments in alternative energy technologies. However since there
exist no such mandates in India oil companies have little incentive
to undertake the necessary investments to achieve blending of
biofuels with conventional fuels. On the other hand if the
existence of a guaranteed export market is adequate incentive then
the premise of subsidizing the biodiesel industry for national
energy security becomes untenable. Second, complementing the
absence of guaranteed national market for biodiesel, is the absence
of MSP for biodiesel crops. MSP for agricultural commodities
perform the vital role of motivating farmers to undertake
cultivation in risky environments such as those encountered by poor
farmers in arid, rain fed regions. The absence of MSP is bound to
deter investments especially in long duration crops with little
history of cultivation . Billion of rupees aree been poured into
the biodiesel production , the uncertainity arises will it deliver?
Amid all the uncertainicities ,in commodities industries the winner
are the latest entrants At the bottom of the cost curve wielding
the newest, most efficient technologies .But waiting may be costly
strategies in biodiesel industry because land and other requirement
are at the premium. Biodiesel player should loot at the different
way to mitigate the risk, but every strategy will require a
trade-off. Betting on number of geographical and technologies will
make more difficult , but help balance risk. Vertical integration
both complex and costly may be essential be helping in surviving
this industry. Little increase in the raw material, increases the
cost of production hefty, so this is one of the major threat since
major raw material needed is agricultural based, therefore
unexpected rain ,natural calamities which can effect the supply of
raw material can drastically affect the biodiesel prices. Whether
through subsidies ,import tariff, research grant, government
regulation have helped derive both demand and profitability in the
industry. Because energy policies of most nation Is still evolving
regulation perhaps is the greatest uncertainty of all. Lower
subsidies could diminish profit , therefore political stability and
strong market regulator for energy could prove a win win situation
for the companies as well as for overall industry. Companies that
enters now can mitigate the riskby hedging their bets and forming
relationship this may help them to reduce volatility and influence
regulation. Many countries are currently looking at growing
high-yielding crops for the production
of biofuels as alternatives to traditional fuels (petrol and
diesel) to address imminent energy shortages and reduce impacts of
climate change. This usually involves the importation of foreign
(i.e., alien) species of plants that are known for their fast and
productive growth. If these initiatives are not carefully assessed,
however, promoting the cultivation of some popular species for
biofuel production will increase two of the major causes of
biodiversity loss on the planet: clearing and conversion of yet
more natural areas for monocultures, and invasion by nonnative
species. Habitat conversion is already the leading cause of
biodiversity loss worldwide, and limiting the enthusiastic
cultivation of new crops to areas already converted is not an easy
task. The issue addressed here, though, is that some of the most
commonly recommended species for biofuel production, particularly
for Biodiesel, are also major invasive alien species in many parts
of the world. Thus, their likelihood of becoming invasive needs to
be assessed before being cultivated on a large-scale for biofuel
production in new areas. Some of these species are spread by birds,
small mammals and other animals, making their control difficult or
impossible, with impacts increasing over time and long-term
production prone to greater financial losses than gains. This note
provides basic information and recommendations for proposals on
biofuel developments using species that may have a history of
invasion and so require careful management if they are to be used
on a large scale and not contribute to natural habitat and
biodiversity loss. The Global Invasive Species Programme has
identified actions to avoid impacts on biodiversity from the use of
inappropriate species for biofuels and is ready to provide further
support to countries on this issue. Specifically, the development
of biodiesel production projects should consider: Information
gathering: Risk assessment: Benefit/cost analysis:); Selection of
native or low risk species: create incentives for the development
and use of native and/or non-native species that pose the
lowestrisks to biodiversity; Transportation & storage of
biodiesel require special management. Some properties of biodiesel
make it undesirable for use at high concentrations. For example,
pure biodiesel doesn't flow well at low temperatures, which can
cause problems for customers with outdoor storage tanks in colder
climates. A related disadvantage is that biodiesel, because of its
nature, cant be transported in pipelines. It has to be transported
by truck or rail, which increases the cost. Biodiesel is less
suitable for use in low temperatures, than petrodiesel. The cloud
point is the temperature at which a sample of the fuel starts to
appear cloudy, indicating that wax crystals have begun to form. At
even lower temperatures, the fuel becomes a gel that cannot be
pumped. The pour point is the temperature below which the fuel will
not flow. As the cloud and pour points for biodiesel are higher
than those for petroleum diesel, the performance of biodiesel in
cold conditions is markedly worse than that of petroleum diesel. At
low temperatures, diesel fuel forms wax crystals, which can clog
fuel lines and filters in a vehicles fuel system. Vehicles running
on biodiesel blends may therefore exhibit more drivability problems
at less severe winter temperatures than do vehicles running on
petroleum diesel. Therefore a proper blend must to be standardized
to meet the problem at a macro level then only it will be
compatible and compliance.
SummaryBioDiesel in India is virtually a non-starter.. So by
taking the advantage of the this we can successfully can lauch our
dream project which can take our industry as well as india to sour
a new height in the field of renwable source energy sector. The
various attributes will lend a competitive edge over the other
source of energy. Bio diesel is a substitute or extender for
traditional problem diesel and you do not need special pump or high
pressure equipment for fueling. The addition , it can be used in
conventional diesel engines, you need not need to buy special
vehicle and engines to run bio diesel. Biodiesel also produce fewer
particulate, carbon-di-oxide and sulfur di oxide emission all
targeted as public health risk by the environmental protection
engency. Since Biodiesel can be used in convertible diesel engines,
the renewable fuel can directly replaced petroleum product,
reducing the countries on imported oil. Biodiesel can help reduce
our dependence on foreign oil and help us leverage our fossil fuel
supply. It can also help reduce green house gas emission , as well
as public health risk associated with air pollution. It is non
toxic and biodegradable. Bio diesel contain only trace amount of
sulfur, typically less than the new epa standard that will go into
effect diesel fuel. It is safe to handle, transport, and store and
has a higher flash point than petroleum dielsel. It can also be
stored in diesel tank and pumped with regular equipment except in
colder weather.