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Tomato paste plant to be set up at Killa Saifullah

KARACHI (August 31 2007): The Export Development Fund (EDF) has approved Rs 123 million for the setting up of a Tomato Paste Plant, having medium size processing facility (3-5 tons/hour), at Muslim Bagh, Killa Saifullah, Balochistan.

According to details available here on Thursday, the project was approved at the 51st meeting of the Board of Administrators of Export Development Fund (EDF) held in Islamabad on Wednesday.

Balochistan produces a range of fruits and vegetables almost round the year. It is the largest producer of temperate fruits. Among vegetables, tomato is the second major vegetable produced in the country and area under its cultivation was 46,2000 hectares with production of 468.146 MT during 2005-6. Its three varieties - Roma, Nagina and Pokit- are cultivated in Pakistan.

Tomato has a limited storage life and cannot be stored over extended periods. The problem is further compounded by lack of cold chain system. Therefore its prices highly fluctuate. Prices fall to the lowest ebb during periods of market gluts and losses are also significantly high.

Contrary to this, tomato paste has extended shelf life/storage periods even under ordinary conditions. Conversion of tomato into paste provides a way out with a positive outcome both commercially and financially.

Pakistan Horticulture Development and Export Board (PHDEB) has estimated that Balochistan over the last two years has emerged as major producer of tomato with 42 percent share in national production, followed by NWFP 34.5 percent, Punjab 14.5 percent and Sindh nine percent share. Killa Saifullah is the leading producer of tomato in Balochistan as well as in the country.

Food processors are major consumers of tomato paste in the local market, followed by hotels and restaurants and household. The current estimated consumption of tomato paste/pulp in the country is around 4,000-4,500 MT.

Some of the food processors partially meet their paste/pulp requirement through in-house production while others depend on imported paste/local pulp produced by cottage industry. Establishment of a tomato paste plant in the country could significantly reduce dependence of local ketchup industry/hotels on imported paste and thus save valuable foreign exchange. The paste is currently being imported mainly from China, Iran and Turkey. Around 2400 MT of tomato paste was imported during the year 2005-6.

Landed cost of paste from Iran and China ranged between Rs 45/kilogram to Rs 55/kg, while that from Turkey landed cost was around Rs 62-65/kg. Per capita consumption of tomato paste is still very low as compared to developed countries. For example, US consumption of tomato paste per capita is 30 kg per year, EU countries consume 15 kg per capita, and Turkey consumes one kilogram per capita.

As compared to these figures, per capita consumption in Pakistan is negligible. It shows that there is still big potential for demand from the local market, which is expected to rise with the passage of time. Based on the past data and discussions held with food processors and hotels/restaurants, it is expected that demand for tomato paste in the country will grow at 15 percent per annum in future.

Tomato`s harvesting season in Balochistan is spread over five months, Rabi - two months and Kharif - three months. Therefore, plant`s working is based on 150 days per annum. Based on this, it will have annual crushing capacity of 10,800 tons of tomato and resultant paste production of 2,160 tons (approx). Later on other fruits/vegetables could also be crushed to convert them into pulp subject to their being feasible. The capacity of the plant could be extended up to five MT per hour to meet the extended requirements in future.

The financial analysis of the project reveals pay back period of 5-15 years. The Internal Financial Rate of Return is calculated at 16.32 percent and Internal Economic Rate of Return at 28.03 percent. The beak-even capacity is 77 percent. These indicators show that project is financially and economically viable proposition.

The project will preferably be set up under public private partnership modality. However, given the circumstance in Balochistan, total investment has been proposed from EDF. Board of Directors comprising representatives from public and private sectors will manage the project.

A private limited company will be formed and registered with Securities and Exchange Commission of Pakistan (SECP). The day to day management will be entrusted to a team of professionals hired from the market.

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