Lapsi Enterprise Feasibility

 Table of Contents

 

Lapsi Enterprise pre-feasibility study

Introduction of Palika

Objectives of enterprise pre-feasibility study

Introduction to Lapsi Candy Enterprise

SWOT analysis

Conclusions and Way forward

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Likhutamakoshi is a Rural municipality located in the Ramechhap District of the Bagmati Province of Nepal. The municipality spans 124.51 square kilometres (48.07 sq mi) of area, with a total population of 23,109 according to a 2011 Nepal census. There are total of 59 Community Forest covering an area of 327.23 ha.

Likhutamakoshi is divided into 7 wards, with Bijulikot declared the administrative center of the rural municipality. The Rural municipality lies 565.008 m to 2780 m above sea level. It has the confluence of arable land, dry land, meadows, forests, shrubs and bushes. And the rainfall measures up to 125cm at monsoon.

The highest number of people comprises from the Kshetri community   followed by indigenous Tamang people.

 

 

 

Regarding the occupation and livelihood practices adopted by the people in Likhu  Tamakoshi Rural municipality , 78 % of the people are engaged  in Agriculture and Animal Husbandry which gives a clear idea that the dependency on forest resources from the community forestry in the area is high.

 

 

Objectives of enterprise pre-feasibility study

1. To identify the possibility of enterprise establishment in the area

2. Selection of possible CFUGs for enterprise establishment

3.  Identification of possible enterprise and CFUG based on resource availability and market potential, interest and motivation of community members, transportation facilities, existing skill and knowledge on the enterprises and scale-up

 

 

 

 

 

Introduction to Lapsi Candy Enterprise

This Forest based enterprise will be established in Ramechhap district, Likhu Tamakoshi Rural Municipality ward no.4. It will be operated by the User Group of Bhringeshwor Community Forest (38.85ha). There is abundance of Lapsi in this community forest area as well as nearby CF. In spite of its commercial potential, some of it has been used locally only but the rest of the resources are being wasted in the forest.

 

1. Description of product and services

Lapsi candy will be produced in the Lapsi industry of this Bhringeshwor CF.

 

2. Location of enterprise

This industry will remain within the area of Bhringeshwor CF. Appropriate location will be selected based on the availability of electricity, roads and water.

 

3. Targeted Market

The goods produced from this industry will be within the Likhu Tamakoshi Rural Municipality and Manthali market area of ​​Ramechhap district as the first market and the second market will be Dhulikhel market of Banepa.

 

4. Production Target (Monthly)

The following items will be produced monthly from this Lapsi industry:

Lapsi candy; 5000 packets; 1 kg per packet

 

 

 

 

 

 

 

5. Production process

The production process of this Lapsi industry will be as follows.

Collection of lapsi from forest and storage of lapsi

 

 Boiling in hot water and throwing bark and seed stone

     

 

Processing in the machine

 

 

Storage of packaging and finished goods

 

6. Details of Fixed Capital

This Lapsi industry requires the following fixed assets.

S.N.	Description	Unit	Total	Depreciation (10%)
1	Land	Ropani	50,000
2	Building	2	3,00,000	30,000
3	Machine, Tools, Utensils, Furniture, Etc		2,00,000	20,000
	Total		5,50,000	50,000

 

7. Required raw materials and costing

 

 

S.N.	Details of raw materials	Quantity	Rate	Total
1	Oil	250 l	250	62500
2	Salt	50 kg	20	10000
3	Sugar	50 kg	80	40000
4	Chilies, Spices	20 Kg	50	10000
5	Firewood	500 kg	5	2500
6	Plastic	2500	6	150000
7	Plastic Can	2500	10	50000
8	Lapsi	5000 kg	40	200000
9
	Total monthly cost			390000

 

8. Manpower and wage

 

S.N.	Description	Employee count	Monthly wage	Total wage 3 months
1	Manager	1	15000	180000
2	Skilled Manpower	3	45000	405000
	Total		60000	585000

 

 

 

9. Overhead costs

 

Description	Monthly cost	Annual cost
Electricity	1500	18000
Maintenance cost	2000	24000
Transport cost	1000	12000
Tea and snacks	500	6000
Total	5000	60000

 

10. Per Unit production costs

 

S.N.	Description	Amount
1	1-month raw material cost	390000
2	1-month labor wage	60000
3	1-month overhead cost	5000
4	1-month Total cost	455000
5	1-month Production amount	5000 packets
6	Per kg production cost	91

 

 

 

11. Fixed capital (Land, Building, Machine and Tools) = 550000 Cost before production = 10000     12. Working capital Total raw materials stock (1 month) = 390000 Stock of produced goods (½ month) = 212500 Unpaid goods total valuation (½ month) = 212500 Labor wage and overhead cost (1 month) = 65000 Total Working Capital = 880000   Total capital required = 11 + 12 = 1440000     13.  Annual Depreciation = 50000 Total annual production amount = 15000 packets Final cost = 91 + 3.33 = 94.333 (95) Profit = 110 % Selling cost per kg = 200                   14. Profit and Loss i. Income from Total annual sales Monthly (5000 kg) * 3 months * Rs.200 selling price = 3000000 ii. Annual cost Raw materials Monthly (390500) * 3 months = 1170000 Labor wage monthly = 60000 * 3 months = 180000 Overhead cost monthly (5000) * 12 = 60000 Annual Depreciation = 50000   Annual profit = Annual Income – Annual cost = 1540000

15.

Fixed cost: Indirect labor wage, Interest, Depreciation and Overhead cost

Movable expenses: Raw materials and Indirect labor

Break even point = Annual Fixed cost    * 100

Annual sales- Annual movable expenses

 

 

= 290000 * 100

 

3000000- 1170000

= 15.84 %

 

16.ROI

Net profit     * 100

 

Total Investment

 

= 1540000 * 100

1440000

= 106.94 %

 

 

SWOT analysis 

Strengths

 

a) Adequate raw materials availability

 

b) Human resource easily available

 

c) No cost of raw materials and land

 

d) Market demand good

 

e) Employment opportunities to local and unskilled manpower

 

f)  Utilization of otherwise wasted resources

 

g) Good Income

 

h) Good livelihood opportunity for local people

 

i) Unskilled and semi-skilled manpower can operate

 

j) Participation and inclusivity of local people

 

 

Weakness

 

a) Poor road condition to market

 

b) Unreliable power supply

 

c) Limitation in marketing of products

 

d) Management may not go well in long run

 

e) Seasonal nature of raw materials

 

 

Opportunities

 

a) Growing demand of local products by consumers

 

b) Local people actively looking for opportunities in their own community

 

c) High potential of income and employment

 

 

 

 

Threats

 

a)  Coordination with local government may not go as expected

 

b) Sustainability of enterprise

 

c) Management of enterprise in long run

 

 

Conclusions and Way forward

Analyzing the economic and technical aspects of the proposed Lapsi candy industry, we have come to the conclusion that it is profitable to operate this industry. Rs. 14,40,000 is required to start this industry, which is received in grants. This amount can be easily obtained from the profit of the first year. The return on investment of this industry is 107%.

The selected enterprise type and CFUG for forest-based enterprise establishment in this study seems to be profitable as the preliminary assessment shows sufficiently high economic value. The implementation and establishment of this enterprise will contribute to local community for the local economic development. Therefore, we conclude to implement it as quickly as possible.

Community Forest User Group Members and Leaders show strong community leadership in resolving dispute with hydropower project on their own!

This case study highlights an example of community leadership shown by Community Forest User Group (CFUG) members and leaders of the two Community Forest (CFs) that lies on Saipu, Ward-2 of Likhu TamaKoshi Rural Municipality in resolving the dispute for compensation and receiving of project benefits from Lower Likhu Hydropower Project (28.1MW), which is being developed on the banks of Likhu River lying between Ramechhap and Okhaldungha district in Bagmati Province, Nepal.

The sipupakha CF (2.13ha) and Rolfu CF (107.25 ha) consisting mostly of Sal and Chilaune forests were the sites for tunnel construction of about 300m and 500m respectively. The under-construction hydropower project which commenced its site work in 2016, had received consent from the local communities managing CFs based on a 13-point agreement which assured compensation with technical and financial support and a fair share of project benefits for locals for the loss of forests and trees and other environmental impacts made during the construction of the tunnel in the community forest area.

The demands of the local community included conducting public hearings, providing employment opportunities, up-gradation of roads and support for education, health, and drinking water in the area, and plantation of trees in exchange for trees that were to be felled for the construction works.

The present Constitution of Nepal has provisions in Article 27, which is regarding rights relating to access to information, and Article 30 regarding the right to be compensated from environmental damage which can be directly justified to the demands of the locals. There are other provisions as per the existing laws in Nepal like the project developers have to carry out environmental and social impact studies prior, to mitigate and reduce negative socio-economic, cultural, and environmental impacts like planting 25 trees in areas with inadequate forest cover for a single tree that has been felled while building their project or hand-over the required money for the same purpose. Both international and national laws also have the provision of social and economic regulations for the interests of local communities affected by the hydropower projects by setting standards of benefit sharing, access to information through public hearings and compensating affected people for all harms and damages. Likewise, the project developer itself has a corporate social responsibility as a part of business operations norms.

Photo: Under-constructed Lower Likhu Hydropower Project (28.1MW) and Sipu Pakha CF in frame

But, in the case of the study area, the agreement asserted, consisting of very basic justified demands and perspective of the affected communities with claims and payment of compensation and project benefits was never fulfilled by the hydro project, long after the project started its construction work also. So, the local CF leaders and community people of Rolfu CF and Sipu pakha CF warned the project officials about their agreement. When the hearing and fulfillment of the demands were not made aftermath also, they decided to protest and halt the project construction works and took a stand to only let construction works in reciprocation of fulfilling their prior agreement.

The protest disrupted all of the construction works of the hydro project. During the protest period, those CF leaders and locals who stood against the construction of the project were threatened with the use of police. The CF chairperson of Sipu pakha CF Karna Bahadur Poudel recalls " Police were after us, they could have taken us, we were on strike from outside our area ".

The locals also pointed out that "No other local government officials andother organizations' officials helped us in claiming our demands, it was only us who fought for our rights; the company had obtained support from local political leaders too and were not listening to our demands".

Tika Karki, Chairperson of Rolfu CF added "The project authorities had not provided much information to affected communities about the hydropower project, norms for construction projects, its benefits, and impacts and we too were not fully aware of our rights. So, we had expected further help on this matter from concerned authorities so that we could put our demands more firmly for the welfare of the local communities but we did put our demands with strong assertion".

Due to the constant protest of the local CF leaders and CFUG members, finally, after 13 days, with local government as a mediator, a new agreement paper was made between the Community people and the officials from the hydropower project. The compensation of 5 lakhs each was provided readily for two CFs. Likewise, for the possible drying up of spring water on the ground above the construction site, a new drinking water project was also started for the community people. Few were provided with employment opportunities based on qualification.

But, during the case study, it was also found that there were other CFs in the area that has not been able to receive such compensation from the hydropower project for the use of their land for tunnel construction and consequent environmental impacts. Even so, we can ascertain that by firm community leadership and strongly putting demands by the local CF leaders and CFUG members, the demands were fulfilled to some extent and the dispute was minimized.