JAY SINGH DAIRY

1. Project Formulation for Bank loan

Project can be prepared by a beneficiary after consulting local technical persons of State Animal
Husbandry Department, DRDA, Dairy Co-operative Society / Union / Federation /
commercial dairy farmers. If possible, the beneficiaries should also visit progressive dairy
farms and government / military / agricultural university dairy farms in the vicinity and
discuss the profitability of dairy farming. A good practical training and experience in dairy
farming will be highly desirable. The dairy co-operative societies, if existing in the villages
would provide all supporting facilities particularly for marketing of fluid milk. Nearness of
dairy farm to such a society, veterinary aid centre, artificial insemination centre should be
ensured.
The project should include the following information on technical, financial and managerial
aspects in detail based on type of unit and capacity.

Technical:
a. Land and land development (Location, area, suitability, proximity to road, site map etc.)
b. Proposed capacity / No. of milch animals
c. Civil structures (Sheds, store room, milk room, office quarters, staff room etc.)
d. Equipment and Plant and Machinery (Chaff cutter, Silo pit, Milking machine, Feed grinder
and mixer, Milking pails/milk cans, Biogas plant, Bulk coolers, Equipment for manufacture
of products, Truck/van)
e. Housing Type of housing (Area requirement – Adults, Heifers (1-3 years), Calves (less than
1 year)
f. Animals (Proposed species, Proposed breed, Source of purchase, Place of purchase, Distance,
Cost of animal)
g. Production parameters (Order of lactation, Milk yield (ltrs. per day), Lactation days, Dry
days, Conception rate, Mortality(%) – Adults, Young stock)
h. Feeding (Source of fodder and feed - Green fodder, Dry fodder, Concentrates. Fodder crop-
rotations- Kharif, Rabi, Summer. Fodder cultivation expenses, Requirement and costs)
i. Breeding Facilities (Source, Location-Distance (km.), Availability of semen, Availability of
staff, Expenditure per animal/year )
j. Veterinary Aid Source (Location-Distance (km.), Availability of labour and other staff, Types
of facilities available, If own arrangements are made-Employed a veterinary
doctor/stockman/consultant, Periodicity of visit, Amount paid/visit (Rs.), Expenditure per
animal per year)
 k. Electricity (Source, Approval from SEB, Connected load, Problems of power failure,
Arrangements for generator)
l. Water (Source, Quality of water, Availability of sufficient quantity for drinking, cleaning and
fodder production, If investment has to be made, type of structure, design and cost)
m. Marketing of milk (Source of sales, Place of disposal, Distance (km.), Price realised - (Rs.
per liter of milk), Basis of payment, Periodicity of payment
n. Marketing of other products (Animal – age, place of sale, price expected, Manure
Qty./animal, Price/unit (Rs.), Empty gunny bags- Number, Cost/bag (Rs.)

Financial:

a. Financial viability (Internal Rate of Return, Benefit Cost Ratio, Net Present Worth)
b. Financial position of the borrowers (Profitability Ratios, Debt Equity Ratio, Whether Income
Tax & other tax obligations are paid upto date, Whether audit is up to date)
c. Lending Terms (Rate of Interest, Grace Period, Repayment Period, Nature of Security)

Managerial:

Borrower’s profile

a. Individual/Partnership /Company / Corporation/ Co-operative Society /Others

b. Capability in managing the proposed business
c. Experience in proposed activity or others
d. Financial soundness
e. Technical and other special qualifications
f. Technical/ Managerial staff and adequacy there of

Others:

a. Name of the financing bank

b. Training facilities
c. Assistance available from State/ Central Government
d. Regulatory clearances, if any etc.

2. Appraisal of the Project

The scheme so formulated should be submitted to the nearest branch of the bank. The bank's officer
can assist in preparation of the scheme or filling in the prescribed application form. The bank will
then examine the scheme for its technical feasibility and economic viability.
3. Sanction of Bank Loan and its Disbursement

After ensuring technical feasibility and economic viability, the scheme is sanctioned by the bank. The
loan is disbursed in kind in 2 to 3 stages against creation of specific assets such as construction of
sheds, purchase of equipment and machinery, purchase of animals and recurring cost on purchase of
feeds/fodders for the initial period of one/two months. The end use of the funds is verified and
constant follow-up is done by the bank.

4. Lending terms - General

Outlay
Outlay of the project depends on the local conditions, unit size and the components included in the
project. Prevailing market prices may be considered to arrive at the outlay.
Margin Money
Margin depends on the category of the borrowers and range from 10 to 25%.
Interest Rate for ultimate borrower
Banks are free to decide the rates of interest within the overall guidelines. However, for working out
the financial viability and bankability of the model projects we have assumed the rate of interest as 12
% p.a.
Security
Security will be as per NABARD/RBI guidelines issued from time to time.
Repayment period of loan
Repayment period depends upon the gross surplus in the scheme. The loan will be repaid in suitable
monthly/quarterly instalments usually within a period of five to seven years.
Insurance
The animals and capital assets may be insured annually or on long term master policy, where ever it is
applicable.

5. Economics of Dairy Farming

A model project with 10 buffaloes is given below. This is indicative and the applicable input and
output costs as also the parameters observed at the field level may be incorporated.

A. Capital Cost

Cost of animals 1000000

Transportation cost 20000

Construction of animal shed 100000

Construction of calf shed 35000
Cost of Chaff cutter and
equipment 100000
Total 1255000

B. Techno economic parameters

Type of Animal Graded Murrah Buffalo

No. of Animals 20
No. of animals/batch 10
Cost of Animal (Rs./animal) 50000
Cost of culled animal 5000
Transportation Cost/Animal 1000
Average Milk Yield (litre/day) 10
Floor space (sqft) per adult animal 50
Floor space (sqft) per calf 20
Cost of construction per sqft (Rs.) 120
Cost of chaff cutter (power operated) (Rs.) 50000
Cost of equipment per animal (Rs.) 1000
Insurance premium (% per annum) 5
Veterinary aid/animal/ year (Rs.) 1000
Quantity of Concentrate feed in one bag(kgs.) 50
Cost of concentrate feed (Rs./kg) 12
Cost of dry fodder (Rs./kg) 4
Cost of green fodder (Rs./kg) 2
No. of labours 2
Salary of labourer per month (Rs.) 15000
Cost of electricity and water/animal/year (Rs.) 200
Margin (%) 25
Rate of interest (%) 9
Repayment period (years) 5
Selling price of milk/litre (Rs./litre) 25
Sale price of gunny bags (Rs.per bag) 10
Lactation days 270
Dry days 150

C. i) Feeding Schedule

Type of
Lactation Dry
feed

Price (Rs.) Qty. (kg) Cost Per Day (Rs.) Qty. (kg) Cost Per Day (Rs.)

Concentrate
12 5 60 2 24
Feed
Green Fodder 2 25 50 20 20
Dry Fodder 4 4 16 5 20
 Total 126 64

ii) Total Concentrate Feed Consumed (Kgs.)

Year Lactaion Dry Total No. of Gunny Bags

Year 1 16500 600 17100 342

Year 2 22500 5400 27900 558

Year 3 22500 5400 27900 558
Year 4 24000 4800 28800 576
Year 5 24000 4800 28800 576

iii) Lactation Chart Per animal

I Batch II Batch
Year Lactation
Lactation days Dry days Dry days
days
I 240 30 90 0
II 240 120 210 150
III 210 150 240 120
IV 210 150 270 90
V 210 150 270 90

D. Economics

Ye
Particulars ars
1 2 3 4 5
Sale of Milk 1620000 1701000 1820000 1930000 2070000
Sale of Gunny bags 3420 5580 5580 5760 5760
Total 1623420 1706580 1825580 1935760 2075760
Cost of feeding during
680400 682000 695000 710000 713500
Lactation
Cost of feeding during dry
121600 124000 125500 126340 129400
Period
Veterinary aid and breeding
20000 20000 20000 20000 20000
Charges
Labour charges 180000 180000 180000 180000 180000
Electricity and misc. charges 2500 2500 2500 2500 2500
Insurance charges 50000 50000 50000 50000 50000
Total 1054500 1058500 1073000 1088840 1095400
Surplus 568920 648080 752580 846920 980360
E. BCR & IRR

1 2 3 4 5
Capital
1255000
Costs
Recurring
1054500 1058500 1073000 1088840 1095400
Cost
Total
2309500 1058500 1073000 1088840 1095400
Costs
Benefit 1623420 1706580 1825580 1935760 2075760
Net
-686080 648080 752580 846920 980360
Benefit

F. Loan Repayment Schedule

Loan Gross Total

Year Interest Principal Net
Outstanding Surplus Repayment
Surplus
1 932706 568920 36498 67294 103792 465128
2 760564 648080 76958 172143 249100 398980
3 572273 752580 60809 188291 249100 503480
4 366319 846920 43146 205954 249100 597820
5 141046 980360 4263 141046 145308 835052