In Pakistan, Seed Act 1976 provided the regulatory mechanism for controlling and regulating the quality of seed. According to this act and Amended Seed Bill 2009, it is mandatory for every organization, dealers, growers and processors of seed business to get registered with Federal Seed Certification Agency (FSCA) and National Seed Registration. Thus for starting the seed processing business, the owner has to get registered with Federal Seed Certification & Registration Department (FSCRD), Islamabad to be eligible for selling the approved seed. It operates under the supervision of Ministry of National Food Security and Research (MNFSR) and has provincial offices.
The major functions of FSCRD are as follows:
- Certification of Seeds
- Registration of the growers
- Field inspection of the crops
- Sampling and testing of seeds
- Quality control of seeds
- Issuance of the quality certificate
Agriculture sector contributes 24% of the total GDP for Pakistan. However, the massive population influx in Pakistan, has greatly burdened the agriculture sector, as its productivity is not able to meet the current food requirements. The solution lies in increasing the crop yield by developing high yielding crop seeds having disease resistance and high germination percentage. This particular article provides the basic information for capturing the potential investment opportunity in the seed processing sector of Pakistan.
The estimated cost for setting up the proposed seed processing unit is Rs. 21.20 million out of which Rs. 15.73 million is the capital cost and Rs. 5.48 million is for working capital. The project is to be financed through 50% debt and 50% equity. The project NPV is around Rs. 20.85 million, with an IRR of 34% and Payback Period of 3.99 years. The project will provide employment opportunities to 10 people including owner manager. The legal business status of this project is proposed as ‘Sole Proprietorship’.
How to Start a Seed Processing Business (Wheat & Rice) in Pakistan
Wheat and rice are recognized as the main staple crops in Pakistan due to their substantial use as a basic food ingredient of majority of the population. This article provides basic information for establishing a seed-processing unit for producing seeds of wheat and rice through the multiplication process. Multiplication is the growth of certified seeds through supplying basic seed to the selected registered growers, from whom the output of their crops of wheat and rice will be purchased. For this proposed venture, basic seed will be acquired from Seed Research Institutes & Seed Corporations approved and certified by the Government of Pakistan.
Currently, there is a shortage of approved and certified seeds. The proposed project will help in fulfilling this gap and will provide quality wheat and rice seed suitable for sowing in local conditions. Similarly, this project can be considered as a lucrative investment opportunity because the potential for quality seed is quite high in the agriculture market.
The processing of the seed involves cleaning, grading, treating, packing and storing operations. Processing is a value addition activity, which improves the physical purity and health of seed stock by removing various contaminants including undersized and shriveled grains, inert matter and seeds of other crops.
Proposed project is designed to produce a maximum of 03 tons of seed per hour and will provide employment opportunities to ten (10) individuals directly, while seasonal pickers & packers would also be required. The project is proposed to be established on a purchased land having an area of around 4 Kanals and should be preferably located in the proximity of grains and agro market of rural and peri-urban areas for easy accessibility of growers.
Procedure of Seed Processing in Pakistan
The procedure of seed processing in Pakistan mainly includes the following steps:
- Approved / certified seed will be acquired from Seed Corporations or other bodies. (refer to How to Register Seed Company in Pakistan)
- Distribution of basic seed among selected growers/ farmers.
- Farmers will sow and grow this seed in a controlled environment.
- Output produce from these farms (i.e. wheat and rice crop) will be purchased by the entrepreneur for processing.
- Drying of Seed: At the time of harvest, seed normally contains very high moisture content i.e., above 16% on average. In order to avoid any negative effects of high moisture, the seed has to be dried and the moisture content has to be reduced to 8-12%. If the seed is stored at high moisture content, it loses germination quickly and is infested with pest and diseases.
- Cleaning of Seed: Impurities like weeds, immature seeds, infected seeds and other crop seeds have to be removed.
- Grading of Seed: Seed length and gravity separating.
- Treating of Seed: Suitable fungicide and color is used to protect the seed from fungus and various soil related diseases. The color also gives a suitable appearance to the seed proving that a check has been performed, confirming that all seeds have been uniformly treated.
- Processed seed is packed in bags.
- Seed is directly sold to farmers and growers as well as seed dealers, distributors and retailers.
Operational Capacity of Seed Processing Unit in Pakistan
The proposed Seed Processing Unit has a maximum capacity of processing 03 tons of seed per hour. As both rice and wheat are seasonal crops, therefore the proposed unit will operate on seasonal basis. It is estimated that at 100% capacity utilization, the unit would be able produce 2,880 tons of wheat and 2,160 tons of rice per season annually. However, capacity utilization during first year of operation is assumed at 60%, which means 1,728 tons of wheat and 1,296 tons of rice seed will be processed and available for sale. Capacity utilization growth rate of 5% is considered for subsequent years, while maximum capacity utilization (i.e. 95%) will be achieved during the 8th year of operation. This production capacity is estimated to be economically viable and justifies the capital as well as operational costs of the project. It is pertinent to mention that, the processing of above mentioned quantities of seeds would entail wastage of 5%.
Basic seed of wheat and rice are the main raw material required for the proposed business, which will be procured from seed corporations or other certified institutions. After that, basic seed will be cultivated under the controlled environment at various seed farms, which will result in multiplying it and producing approved seed through processing. The approved seed is the final product of the unit, which will then be distributed and sold through marketing for growing crops with higher yields.
Factors for Success of Seed Processing Business in Pakistan
Following are the factors critical for the success of this business venture in Pakistan:
- Complete adherence to best agronomic practices is critical to the success of this project; therefore, technical knowledge & experience of the entrepreneur is absolutely necessary.
- The harvested seed must be dried to the level of safe moisture content to reduce physiological activity and damage from storage fungi and insects.
- Sourcing of good quality of basic seed duly approved / certified on reasonable prices.
- All seed plants should have an internal seed-quality control system. Laboratories to assess quality before and after processing and to monitor the efficiency of the different processing machines are essential.
- Appropriate arrangements for cleaning, grading, treating, packing, storing and transportation of seed to the market.
- Properly trained seed staff should be engaged and comprehensive staff training programs to be adopted for capacity building.
Cities & Districts for Seed Processing Business in Pakistan
As per the current agricultural practices and climatic conditions, this business can be easily started in majority of rural and peri-urban areas of Punjab and Sindh and in some parts of KPK and Baluchistan. Following are few of the potential areas for wheat and rice cultivation in Pakistan: Sahiwal, Okara, Gujrawala, Gujrat, Narowal, Sialkot, Rahim Yar Khan, Faisalabad, Toba Tek Sing, Swat, Tarnab, Mardan, Khairabad, MirpurKhas, Chiniot, Sanghar, Noshera and etc.
Potential target customers for the processed seed will be the growers of wheat and rice. Hence, the proposed unit should be established in any of the above-mentioned locations across Pakistan. However, it is be ensured that unit should be located in the vicinity of local grain and agro product markets of the rural and peri-urban areas of said districts for easy accessibility of growers.
Machinery Requirement for Seed Processing Unit
Following is a list of machinery and equipment required for an average sized seed processing factory in Pakistan:
- Pre Cleaning System
- Gravity Separating System
- Length Grader
- Rotary Dryer Plant
- Traitor Plant Iron
- Generator 10 Kva
- Laboratory Equipment’s
- Safety Equipment’s
Space Requirements for Seed Processing Unit
An investment of Rs. 20.2 million (appx) is required to start a seed processing business in Pakistan. Approximately 4 Kanals of land would be required for establishment of the proposed unit, it is recommended that required land should be procured in the vicinity of grain and agro products market of any rural or peri-urban areas of identified potential cities. Cost of land is estimated at a rate of Rs.0.5 million per kanal; hence total cost of required land is Rs. 2.00 million. The infrastructural requirements of the project mainly comprises of the construction of production hall, office, store and other facilities.
Financial Requirements for Seed Processing Business in Pakistan
All the assumptions in this financial model are based upon total installed capacity of processing of 03 tons of seed (either wheat or rice) per hour on seasonal basis. Whereas, during first year of operation capacity utilization is assumed as 60% with 1,728 tons of wheat and 1,296 tons of rice to be processed, out of total processed seeds 5% will be wastage and remaining 95% will be sold.
A detailed financial model has been developed to analyze the commercial viability of the seed processing unit. Various costs and revenue related assumptions along with results of the analysis are outlined in this section. The projected income statement, cash flow statement and balance sheet can be studied in the pre-feasibility study of seed processing business in Pakistan by SMEDA.