agro and food processing - ગુજરાત ખેત નિગમ ... 5 market potential global...

Establishment ofCastor Derivatives BasePerfumery RawMaterials Unit

Agro and FoodProcessingGovernment of Gujarat

Contents

Project Concept 3Market Potential 5Growth Drivers 6Gujarat – Competitive Advantage 7Project Information 8- Location/ Size

- Infrastructure Availability/ Connectivity

- Raw Material/ Manpower

- Key Players/ Machinery Suppliers

- Key collaborations

- Key considerations

Project Financials 13Approvals & Incentives 14Key Department Contacts 18

Project Concept

Castor oil and its derivatives

Global castor oil and derivatives market

Castor oil is extracted from castor seeds and is used either in its crude form or in the refinedhydrogenated form. Generally, 65% of it is processed (about 28% is refined, 12% is hydrogenated,20% is dehydrated and the balance 5% is processed to manufacture other derivatives).

The major derivatives of castor oil used in the industry are hydrogenated castor oil (HCO),Dehydrated castor oil (DCO) and Sebacic acid etc.

Hydrogenated Castor Oil Castor Oil Pale Pressed Grade 2-Octanol(Capryl alcohol)

Castor meal First pressed degummed gradecastor oil Sebacic Acid

12-Hydroxy Stearic Acid (12-HSA) First Special Grade (FSG) Castor Oil Ricinoleic AcidBlown castor oil Castor Oil USP Castor Oil C-18 derivativesSulfated castor oil Dehydrated Castor Oil (DCO) Castor Oil C-11 DerivativesCommercial Grade Castor Oil Ethoxylated Castor Oil Castor Oil C-7 DerivativesBP grade Castor Oil Extra Pale Grade Castor Oil Castor Oil C-3 DerivativesCastor Oil European Pharmacopoeia

Key derivatives of castor oil

674898

2013 2020

Global castor oil and derivativesdemand (in kilogram tons)

Source: Global Castor Oil And Derivatives Market Size,Share And Trends Report To 2020 : Radiant Insights

CAGR4.2%

► The global castor oil and derivatives market isexpected to reach US$1.81 billion by 2020, withthe global demand growing at a CAGR of 4.2%between 2013 and 2020.

► Cosmetics & pharmaceuticals accounted for over25% of total market volume in 2013 and was thelargest application segment. Growing demandfor bio ingredient based cosmetics wouldcontinue to remain a key driver for this segment.

► Asia Pacific emerged as the largest regionalmarket and accounted for 57.2% of total marketvolume in 2013. Growth of personal careindustry coupled with increasing healthcareexpenditure particularly in China and India isexpected to drive the regional demand.

The conceptThe project envisages setting up of a Castor oil derivatives unit to manufacture perfumeryraw materials. Castor is abundantly produced in Gujarat thereby making it an attractive proposition.

Project Concept

Heptaldehyde and Undecylenic acid – the basic derivatives of castor oil,used to manufacture various perfumery compounds, which in turn are used tomanufacture perfumes and synthetic flavors.

Alpha-amyl CinnamicAldehydes

In soap perfumery

Nonylenic acid esters tomake 8-n-amylbutyrolactone

Coconut aldehyde for flavorof coconut milk

Heptanoic acid Verts de Violette

Methyl-n-heptyl ketone andester of 3-noninic acid

Oil of Rue used in violetPerfume

Heptaldehyde Jasmine Flavor

Perfumery Compoundsprepared

End – use of Perfumerycompound

Heptaldehyde

Gamma Undecalactone alsoknown as Aldehyde- C-14

Peach odor

Nonylic acid , Nonylic alcoholand nonylic aldehydes

Rose and Orange oilconstituents

Undecylenic alcohol Floral odor with fatty note

n-decylaldehyde Spicy Orange like odor

Allyl esters of UndecylenicAcid

Odor of quinches and asmodifier

Undecylenicacid

Specifications for proposed perfumery chemicals

Specification details Heptaldehyde Undecylenic Acid

Appearance description Pungent smelling oily liquid Oily liquidColor Colorless to pale yellow Water white to pale yellowAcid content 5 % maximum 90-95% minimumAldehyde content 90-95% minimum 3-5% maximumRefractive index at 25° C 1.415 1.488Freezing point (in ° C) NA 21-24Acid value NA 295-304Specific gravity 0.815 0.92Boiling point (in ° C) 152-154 NA

Market Potential

Global flavor and fragrance industry (F&F industry)

Source: Technavio Analysis

► The global F&F industry comprises the traditional market for F&F as well as the one foringredients such as essential oils and aroma chemicals. The market is estimated to be US$25.5billion in 2014 and is expected to grow at a CAGR of 5.8% to reach US$31.9 billion by 2018.

► The market is driven by increasing demand from emerging markets, rising preference ofpackaged foods and beverages, growing cosmetics industry and emerging middle classpopulation.

► The industry is characterized by its dynamic structure and intense competition. It is estimatedthat in 2014 top five players accounted for 61.7% of the market. Givaundan (famous fordeveloping perfumes for Ralph Lauren) leads the market with 19% share, followed by Firmenich,IFF, Symrise, and Takasago.

25.5 26.9 28.4 30.1 31.9

5.4%

5.7%5.9%

6.1%

5.0%5.2%5.4%5.6%5.8%6.0%6.2%

0.05.0

10.015.020.025.030.035.0

2014 2015 2016 2017 2018

US$ billion % growth

Global Flavors and Fragrances Market 2014-2018 (US$ billion)

20%

14%

12%11%5%

38%

Top players in Global F&F Industry:Market share 2014

GivaudanFirmenichIFFSymriseTakasagoOthers

Source:Leffingwell & Associates

Indian flavor and fragrance industry (F&F industry)

► The fragrance market is consolidated, with large players such as Unilever, Dabur, ReckittBenckiser and Henkel generating the bulk of sales. India differentiates itself in the global marketwith its sandal, jasmine and herbal-related fragrances, and spice-based flavors.

► India, being a world leader in Castor seeds/oil production and processing has edge over othercountries such as Japan, France and Germany which are importing castor oil and manufacturingthese perfumery chemicals for further processing into perfumes and synthetic flavors.

► Bulgari Parfums remains the leading player in fragrances in 2014, with a 6% value share as ithas massive presence in the market, reinforced by the company’s in-store promotionalcampaigns and strong brand image amongst urban consumers.

► The Indian fragrance industry is witnessing advances in water soluble and water-insolublefragrance encapsulation technology.

Growth Drivers

High availabilityof castor seeds

Wide industryapplication

Rising percapita income

Increaseddemand fromdevelopingmarkets

► Castor seed production in India is estimated to rise by 10%to reach 1.39 million tonnes for the year 2015-16.

► Production in Gujarat will increase by 8% to 1.15 milliontonnes as against 1.06 million tonnes in 2015. Area undercastor crop registered an increase of 6% to 781,000 hectaresduring the same period

► Castor oil and its derivatives are used in a number ofindustries for production of a wide variety of products.

► It is used as a raw material in the manufacture of a numberof chemicals, which are further used in the manufacture ofsurfactants, specialty soaps, surface coatings, cosmetics &personal care products, pharmaceuticals, perfumes,plasticisers, greases & lubricants and specialty rubber.

► India’s per capita income increased by 11.5% from US$ 969in 2010-11 to US$ 1499 in 2013-14, promising economicgrowth indicate corresponding trends for income growth

► Holistic development will encourage higher spending onluxury items such as perfumes, which would further drive thedemand for castor derivatives.

► With the market in developed nations almost stagnant,manufacturers are targeting developing countries where thegrowth rate in the flavor and fragrances market is higherthan the global average.

► Further, global players are sourcing essential oils from Indiaand to cut down cost of manufacturing quality aroma andflavor chemicals.

Gujarat - CompetitiveAdvantage

► Gujarat has a well developed chemical industry base, which can offer ready availability oftechnical and commercial manpower.

High availability of raw material

Availability of skilled manpower

1.1 1.13

0.17 0.26

2015 2016E

Gujarat Other states

Castor seed production in India (in milliontonnes)

1.271.39

~84% of castor seeds produced inIndia comes from Gujarat.

58% rainfall deficit in Gujarat in 2016till date. Low water requirement forcultivation of castor seeds makesGujarat a favorable destination.Source:Solvent Extractors' Association of India (SEA)

Ease of doing business► Only state which comply 100% with the environmental procedures. Gujarat fares

highly when it comes to setting up a business, allotment of land and obtaining aconstruction permit.

Flourishing economy► Gujarat contributes 7.2% of the Nation’s GDP and shows leadership in many areas

of manufacturing and infrastructure sectors. Gujarat’s SDP (State Domestic Product)at current price registered a growth of 11% during the year 2014-15.

Strategic location and excellent infrastructure► Located on the west coast of India, Gujarat is well connected to the major cities of

the world by air and sea routes. The state has 45 ports, 12 domestic airports and 1international airport in addition to an extensive rail and road network.

Other advantages

~1978kg/ha Highestproductivity in the world

4.91 lakh ha. & ~9.71 lakhMT Production

Project Information

Project location

► Castor seed is cultivated mostly in aridand semi-arid regions across the worldwith a crop duration of 7 to 8 months.

► India is the world’s largest producer ofcastor contributing to around 85% ofworld’s total production.

► Gujarat, Rajasthan and Andhra Pradeshcontribute 96% of the total castor seedproduction in India.

► The production in India has beenwitnessing an increasing trend in the2001-2014 decade due to rising usage ofcastor oil in different industries.

Major castor producing areas in Gujarat

Source: Religare castor seed crop survery report

District-wise castor production in Gujarat (2014-15)

District Estimated area('000 ha)

Estimated yield(Kg/ha)

Estimatedproduction ('000tons)

Banaskantha 135 1813 245Patan 117 1614 189Mehsana 78 1381 108Ahmedabad 48 1789 86Sabarkantha 38 1849 70Surendra Nagar 68 788 54Gandhinagar 26 1760 46Kutch 93 474 44Vadodara 27 1568 42Kheda 13 1710 22Morbi 28 800 22Rajkot 10 855 9Jamnagar 8 760 6Panchmahal 2 1890 4Others 42 1050 44Total 733 1351 990

Project Information

► Mehsana is one of the 33 districts of Gujarat and is located in the northern part of the state witha geographical spread of 4500 km2.

► The district shares border with Banaskantha district in the north; Ahmedabad and Gandhinagardistricts in the south; Patan and Surendranagar in west; and Sabarkantha district in east.

► The district is strategically located and is at a distance of around 75 km from Ahmedabad. Overthe last few years, the district has seen significant industrial development.

► Mehsana is divided into nine sub-districts. Among these, industrial development is mainlyconcentrated in Kadi and Mehsana Taluka, while other regions like Kheralu, Vadnagar andSatlasana still remain backward.

Project site – Mehsana (Gujarat)

9 sub-districts

10 towns

606 villages

9 CD blocks

Project at a Glance

Location Mehsana, Gujarat

Area 4500 sq. km.

Mehsana

► Water for industrial purposes can beobtained from four sources viz. GujaratWater Supply and Sewerage Board(GWSSB), an irrigation canal, dams, andsurface reservoirs.

► The main source for the power supply isGujarat Energy TransmissionCorporation Limited.

WaterPower

► Mehsana is connected with otherdistricts of the state like Patan,Porbandar and Ahmedabad by rail.

► It is further connected to Kandla port viarail network through Ahmedabad andGandhidham.

► Mehsana has a 51 km four-lane toll roadconnecting it with Ahmedabad, Gujarat.

► The district is well-connected withGandhinagar (68km), Vapi (458 km),Palanpur (72km), Rajkot (299km) andSurendranagar (143km).

► The nearest airport to the district is thedomestic and international airport atAhmedabad located at a distance of77km.

Air

RoadRail

Port

► The nearest port is at Dholera, 110 kmsfrom Ahmedabad. The port has potential tocater to ship building and ship repairingindustries; offers opportunity for developingberths for salt export.

► Dholera is being promoted as the SpecialInvestment Region for Gujarat.

Mehsana is well-connected with different parts of Gujarat as well as withother states in India

Project Information

Logistics & connectivity

Infrastructure availability

Utilities

Project Information

► Gujarat is the largest castor seed producing state in India. Raw material can be easily sourcedfrom the main castor producing districts - Banaskantha, Patan, Mehsana, Ahmedabad andSabarkantha.

► Farmers in Gujarat sowed a higher number of castor seeds in 2014, primarily driven by highprices in the market. The state also received decent rainfall which further helped in enhancing theyield.

Sourcing of raw material

Key castor oil manufacturers in India

Jayant Agro Adani Wilmar Gokul Refoils &Solvent Ltd.

Shivam Agro Sebacic India Limited

Key collaborations

Collaboration Year Description

Jayant Agro – Arkema 2013Arkema acquired 25% stake in Jayant Agro’ssubsidiary Ihsedu Agrochem which specializes inthe production of castor oil.

Jayant Agro – MitsuiChemicals – Itoh OilChemicals

2013

Jayant Agro, Mitsui Chemicals and Itoh OilChemicals entered into a joint venture forinvesting in Vithal Castor Polyols Pvt. Limited formanufacturing Castor Oil based Polyols

Following are a collaborations in the castor derivatives market in recent years:

Equipment and machinery requirement

Project Information

List of plant and machineryParticulars Units required

Cracking unit – with column (MS), condenser (MS), receiver (MS) withelectrical heating

2

Castor oil (raw material) tanks 4

Acidification tank (SS) 2

Saponification tank (SS) 2

Caustic tank (MS) 1

H2SO4 tank (SS) 1

Dryer (PVC) 1

Storage tanks of crude fatty acid (PVC) 1

List of suppliers for plant and machineryCompany Location

Troika Process Pvt Ltd. Mumbai

Muez-Hest India Pvt. Ltd. Mumbai

Chempro Ahmedabad

Sterling Equipments Pvt. Ltd. Pune

Sundex Process Engineers Pvt. Ltd. Mumbai

Servotech India Limited Mumbai

Kumar Metal Industries Pvt. Ltd. Mumbai

Key considerations

► The Flavour and Fragrance industry is characterized by unprecedented volatility in the price ofcastor seeds.

► The essential oil segment faces fierce competition from manufacturers and sellers of syntheticflavouring, which is comparatively less expensive than their products.

► Stringent safety-related norms issued by the Flavor and Extracts Manufacturers Association(FEMA) and the International Fragrance Association (IFRA) restrict the use of several chemicalsin production and creation of F&Fs.

Project Financials

Project cost and means of finance

Project components & specifications Cost (INR million)

Land and Land development (Area: 5,000 square meters)(Average land cost ~INR850 per square meters)

4.25

Buildings and civil works 6.47

Plant and machinery (30 tons/day) 10.78

Miscellaneous and other fixed assets 2.16

Preliminary and pre-operative 1.62

Provision for contingencies 1.62

Total Fixed Assets 26.90

Margin for working capital 11.32

Estimated block capital cost of project 38.22

Means of finance Cost (INR million)

Promoter’s contribution (Equity) 12.62

Term loan (Debt) 25.61

Total 38.22

Key operational indicators

Particulars Units

Project capacity (in tons per annum) 6,000

Working days in a year (8 hours single shift) 200

Manpower requirement 50

Cost of setting-up a castor oil derivatives unit

Approvals & Incentives

The proposed unit being an Export Oriented Unit (EOU) and catering the major market ofadvance countries like Japan, Egypt, USA, South Korea & Netherlands, are required to gettheir products approved with Food and Drugs Administration (FDA) in these countries,apart from registration with Indian and state food administration departments.

The most critical aspect of this product will be its quality for export consumers and Codexstandards of respective countries will be followed by the unit. It is obligatory to meetprovisions under the PFA act for all ingredients and quality aspects for marketing productin Indian market.

Export Oriented Unit (EOU) registration from RBI, Directorate General of Foreign Trade(DGFT) and with CHEMEXCIL (Basic Chemicals, Cosmetics & Dyes Export PromotionCouncil) as registered manufacturer exporter to avail export incentives.

The proposed unit will have to register itself with Secretariat of Industrial Approvals (SIA),Ministry of Industries and Government of India, by filing Industrial Entrepreneur’sMemorandum (IEM), if it has plant and machinery investment of more than INR10 million.

Approvals

1234

The Gujarat Government defines Agro industries in its Agro industrial policy as unitswhich add value to agriculture products/residues, both food and non-food, byprocessing into products which are marketable or usable or edible or by improvingstorability or by providing the link from farm to the market or part thereof. Agroindustry also includes Hi-Tech and Bio-technology based agriculture.


Approvals Required to set up an agro industry*

* All the permissions are not required from the day one but as the unit becomes operational, most of theabove mentioned major permissions have to be obtained.

Government permissions Concerned Department

Permission for starting the agro industrial project Industries Commisionerate, (offices in eachdistrict)

Approval of Factory Lay out Town Planning Department \ VillagePanchayat

NOC on Pollution Control State Pollution Control Board

ISI Certification Bureau of Indian Standards

Sales tax number from the State Department of Sales Tax, (Government ofGujarat)

CST no from the Central Government Department of Sales Tax, (Government ofGujarat)

Professional tax no Department of Sales Tax, (Government ofGujarat)

License under Shop and Establishment Act Municipal Corporation

Registration under PFA Act Food and Drug Controllers Office

Boiler Inspection and verification of smoke Nuisance Steam Boiler and Smoke NuisanceDepartment

Income tax no Income Tax Department

Electricity Connection & sanction load GEB

Inspection & approval of electrical installations Chief Electrical Inspector, Commissioner ofElectricity Duty

Inspection and passing of heavy vehicles \ reefervans, mobile pre-cooling units RTO Office

Inspection of Weights, measures and packaging Controller of Legal Metrology Department

Number, inspection and collection of excise duty Department of Central ExciseInspection of labs using sprits and alcohol in anindustrial unit Prohibition and Excise Department

Registration under Provident fund Employees Provident fund Organization


Incentives from Government of Gujarat to Agro Industries -Comprehensive Agro Business Policy – 2016 - 2021

Assistance of Capital Investment Subsidy:Capital Investment Subsidy of 25% of eligible project cost subject to maximum of INR 0.5 millionfor setting up/ expansion and diversification/modernization of agro and food processing units.

Assistance for back ended interest subsidy on term loan:• Back ended interest subsidy at 7.5% on the term loan with maximum amount of INR 1.5

million for a period of 5 years for setting up/ expansion and diversification/modernization ofagro and food processing units.

Additional back ended interest subsidy on term loan:• 1% additional interest subsidy to SC/ST, physically challenged or women entrepreneurs.• 1% additional interest subsidy to entrepreneurs below 35 years age.

Quality certification mark:MSME agro units are required to obtain quality certification mark for export purposes. For this50% (maximum of INR 0.5 million) assistance of expenditure incurred will be granted for obtainingcertification mark from institute approved by Quality Council of India.

Skill enhancement:Provides assistance at the rate of 50% of fee paid, subject to maximum of INR 10 thousand peremployee on obtaining industry recognized skill certifications from recognized institutions.

Incentive on power tariff and electric duty:Provides power tariff subsidy at the rate of INR one per unit in the billed amount of the utility aspromotional incentive on reimbursement basis for a period of five years with effect from thecommencement of commercial production/ rendering services.


Gujarat Industrial Policy 2015Government of Gujarat has announced an ambitious Industrial Policy, in January 2015, with theobjective of creating a healthy and conducive climate for conducting business and augmenting theindustrial development of the state, including agro and food processing.

Category ofProject Location

(Taluka)

% of eligible fixedcapital investment

entitled forIncentive

% of Net VATreimbursement to

the unit

% of Net VAT to bepaid to

Government

Incentive period(no. of years)

1 100 90 10 102 80 80 20 103 70 70 30 10

Net VAT incentive will be reimbursed to the industrial undertaking in one financial year will notexceed one-tenth of the total amount of eligible incentive.

Quantum of incentives

Net VAT incentives

Classification of the Project Amount (in INR crore)Ultra Mega Industrial Unit 500

Mega lndustrial Unit 400Large Industrial Unit 150

Micro, Small or Medium Industrial Unit 50

Approvals• Registration of the industrial undertaking• Industrial Entrepreneur Memorandum or Udyog Aadhar• Non-agriculture land permission and purchase deed registration• Consent to Establish from Gujarat Pollution Control Board

Gujarat Agro Industries Corporation LimitedGujarat State Civil Supplies Corporation Ltd Building2nd Floor , "B” Wing , Sector 10A,Gandhinagar – 382010, Gujarat, IndiaPhone / Fax : 079-23240208Email: [email protected]://gaic.gujarat.gov.in/

This project profile is based on preliminary study to facilitate prospective entrepreneurs to assess a prima facie scope.It is, however, advisable to get a detailed feasibility study prepared before taking a final investment decision.

Agriculture and Co-operation Departmentwww.agri.gujarat.gov.in/index.htm

Gujarat Industrial Development Corporationwww.gidc.gov.in/

www.nabard.org/National Bank for Agriculture and Rural Development (NABARD)

www.ic.gujarat.gov.inIndustries Commissionerate

http://apeda.gov.in/apedawebsite/Agricultural & Processed Food Products Export Development Authority

http://www.fssai.gov.in/Food Safety and Standards Authority of India

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