Introduction to profits in palm oil processing business (The cost to start)
Are you willing to start any business in the agro-allied or food processing segment? In that case, a sample palm oil processing business plan template would serve the purpose, and thus we can deliver in-depth stepwise conditions needed on how to start a palm oil processing company.
Ideas to start and make profits in palm oil processing business
Though very attractive, the palm oil business is usually overlooked. Palm oil is a majorly consumed edible oil across the world, as it is a famous food ingredient in Africa and even some parts of Asia (like in Malaysia and Indonesia).
The market potential for palm oil processing business for profits in India
Palm oil is in the highest demand because it is majorly consumed in every home for cooking and different purposes. Malaysia and Indonesia are considered to be the world’s largest exporters and producers of palm oil.
Currently, the global palm oil market is having a worth of hundreds of millions of dollars, and we can see the growth day by day in both the export and import market. You can gain a large amount of money by tapping into this attractive market. There are several opportunities in palm oil production for interested businessmen.
But before we go into further details, we would like to explain about this commodity and why it is highly chosen for cooking and other uses.
Palm oil is extracted from the kernel of the palm fruit, which is red viscous color. It has its origin in West Africa and has been extracted and consumed in the region for years. It didn’t become popular in Indonesia, Malaysia, and some other countries in the Far East till the last decade.
Why do several people prefer palm oil to other oils? Here are the possible reasons:
- Palm oil has a comparatively long shelf life if checked with other edible oils. With good storage provisions in place, palm oil could be stored for up around one year without damaging quality.
- Palm oil is a very proper source of Vitamin E, it promotes skin health and boosts its immunity to infections. It also improves vision and avoids eye-related diseases.
- Palm oil is completely free of cholesterol and low-density lipoproteins. These are the main factors behind so many cases of hypertension and different health problems, and they are existing in some other edible oils.
- Palm oil is moderately cheap if compared to other edible oils.
Additionally, palm oil is used for several industrial purposes for instance the production of ice cream, margarine, soaps, creams, and vitamin supplements, etc. We can even discuss the different business prospects in palm oil production.
There are different ways to make money from palm oil, based on how much funding or savings you have. If you have little capital, you may purchase and sell palm oil in bulk amount. But if you have good financial potential, you can start a palm oil processing unit or a palm kernel extraction plant, which is even more attractive business as compared to the palm oil business. If you are desired in setting up a palm oil processing company, you may go through the below steps you need to follow.
Starting a palm oil processing unit
Find a good location
Since you will not be selling to consumers directly, it is not mandatory to establish your palm oil processing plant near to any market. You must establish close to palm plantations or regions having palm trees in abundance.
However, if you can establish the unit that is closer to both the plantations and marketplace; it will be an added benefit for you. Secondly, your location should be free of excessive human to animal movements; but should be easily accessible for transport vehicles.
License required for establishing a palm oil processing plant
Below is the list of licenses for establishing a palm oil processing plant.
- You need to acquire GST for your business
- You need to take the PAN card for your business
- NOC is must for this business
- You need to acquire all the registrations that required your business.
- As it is related to food items you need to acquire FSSAI business.
- You also need to get the license required for export business.
- You also need to acquire the Udhyog Aadhaar card for your business.
Equipment for palm oil processing business
Previously, palm oil was processed in “oil pots” prepared in the ground. The processing at that time was done by rubbing and squeezing the palm kernel fruits until oil was extracted. However, this old method is very wasteful and labor-intensive at the same time much of oil is left on the kernel fruits.
But currently, machines are employed to process palm oil. This modern method is even hygienic, and it aids to extract all the palm oil on kernel fruits without any wastage of oil. You must be aware that most machines that are required for processing palm oil can be imported or fabricated in the neighborhood at a reasonable rate. Examples of equipment important for palm oil processing business are below:
- Palm Fruit Stripper
- Nut Fiber Separator
- Pounding Machine
- Mechanical Screw Press
- Barrels or surface tanks for storage purposes
Setup your processing plant
You must approach the services of professionals to support in constructing the needed infrastructure and also to install the appropriate processing machines.
Hire people to work with you
You must appoint someone who would operate the palm oil processing machine. If you are planning to install more than one machine, then you must get one person for each machine. You would also require other employees, for security purposes, administrative staff, and so on.
The cost or investment to start a palm oil processing business in India
In case if you miss this: Profitable Food Business Ideas in India.
The palm oil milling machine price starts from Rs. 6 lakh.
The cost of raw materials for the palm oil processing business is Rs. 2 lakhs.
The miscellaneous cost for establishing the palm oil processing plant is Rs. 2 lakhs.
The cost involved in taking the license for palm oil processing business is Rs. 2 lakhs.
So, the total cost involved in the palm oil processing plant is Rs. 10 lakhs.
Profits margin in palm oil processing business
You can expect 35% to 40% of profits in the palm oil processing business. You can get good profits when you start exporting palm oil. Your profits mainly depend upon the quality of your product. As the demand is growing day by day you can start the business and get good profits.
Create market awareness for palm oil
Approach potential marketers and inspire them to buy from your company. One smooth way to retain them for a long duration is to provide high-quality palm oil at comparatively low and with some offer prices. You must even encourage your customers to tell their friends about your business.
Moreover, you can also keep a retail store to sell your palm oil. If you plan to opt for this route, you can develop a competitive advantage by branding the gallons and fortifying your palm oil using vitamin A.
Challenges for getting profits in palm oil processing business
Six challenges for initiating a palm oil processing business
- It is investment intensive
- It is also management based
- Getting an ideal location with all the necessary amenities is very difficult.
- There is every possibility that your palm oil processing could be set up in a remote area, which is near to the source of supply (plantation farms). Thus you must expect some difficulties while transporting bunches of palm fruits from source to the processing unit. The same problem you will get while transporting the processed palm oil from the processing unit to the marketplace.
- Because of your remote location, it is the likelihood that you will have problems with the power supply. So you must avail of your power supply or get generators. This will, in turn, increase the operational costs.
- For you to be in stable operation, you must get a constant supply of raw materials (palm fruits), and this some time it is quite problematic when there is scarcity. The best way to overcome this problem is to have your plantation farm or even enhance your storage capacity. This will aid to provide a steady supply of palm oil for selling to your customer even when others have a scarcity of raw materials.
To reduce the input costs and increase profits in palm oil processing business, you can start commercial Oil Palm Cultivation.