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Rotterdam
25 May 2016
Prepared for:
PFD / WFP
Prepared by:
RHDHV, Rotterdam, The Netherlands
PPP Proposal
For the construction of 2 million MT
Near-Farm Wheat Storage Facilities
PPP Project Proposal i RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
Contents
1. INTRODUCTION ....................................................................................................................................... 1
2. NEEDS ANALYSES .................................................................................................................................... 2
2.1 Sector Diagnostics ................................................................................................................................... 2 2.2 Commitment of the Government and its Agency ................................................................................... 6 2.3 Available budget of the Government Agency ......................................................................................... 7 2.4 Capacity of the Government Agency ...................................................................................................... 8 2.5 Specification of Project Outputs ............................................................................................................. 9 2.6 Scope of the Project .............................................................................................................................. 10
3. OPTIONS ANALYSIS ............................................................................................................................... 11
3.1 PPP Options .......................................................................................................................................... 11 3.2 Market interest ..................................................................................................................................... 12 3.3 Choice of technology ............................................................................................................................ 12 3.4 Choice of location ................................................................................................................................. 13
4. PROJECT DESIGN AND COST ................................................................................................................. 15
4.1 Preliminary design ................................................................................................................................ 15 4.2 Cost estimates ...................................................................................................................................... 17
5. ENVIRONMENTAL AND SOCIAL ASSESSMENT ...................................................................................... 18
5.1 Environmental impact assessment ....................................................................................................... 18 5.2 Social impact assessment ..................................................................................................................... 18 5.3 Land acquisition and resettlement plans .............................................................................................. 18
6. FINANCIAL ANALYSIS ............................................................................................................................ 19
6.1 Near-Farm Wheat Silo concept ............................................................................................................. 19 6.2 Hardware investments.......................................................................................................................... 19 6.3 Business operations .............................................................................................................................. 20 6.4 Cash flow and return on investment .................................................................................................... 20 6.5 Projected financial performance .......................................................................................................... 22 6.6 Sensitivity analysis ................................................................................................................................ 23 6.7 Risk assessment .................................................................................................................................... 24 6.8 Need for government support .............................................................................................................. 28 6.9 Tariff design .......................................................................................................................................... 28
7. ECONOMIC ANALYSIS ........................................................................................................................... 29
7.1 Least-cost analysis ................................................................................................................................ 29 7.2 Economical rate of return ..................................................................................................................... 29 7.3 Value for money ................................................................................................................................... 31
8. PROJECT IMPLEMENTATION PLAN ....................................................................................................... 32
9. DRAFT TENDER AND CONCESSION AGREEMENT DOCUMENTS ........................................................... 35
9.1 Draft Tender Document ........................................................................................................................ 35 9.2 Draft Concession Agreement ................................................................................................................ 35
PPP Project Proposal ii RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
Annexes
1. Sector Background
2. Business Case and Financial Model
3. Market Evaluation
� Local Market
� International Market
4. Site Information
� Environmental Impact Analysis
� Social Impact Analysis
5. Technical Specification of 10.000 MT Wheat Silo Complex
6. Lay out drawing of 10.000 MT Wheat Silo Complex
7. Investment Cost Estimate
8. Draft Tender Document
9. Draft Concession Agreement
10. Profile of Transaction Advisor
PPP Project Proposal 1 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
1. Introduction
The Government of Punjab (GoPunjab) procures an average of 3.59 million MT of wheat every year from growers for
food security and price stabilization. The average supply of wheat from the Punjab Food Department (PFD) to the
market is 3.23 million MT.
The procured wheat is stored in public and privately owned go-downs and open storage facilities. Presently the PFD has
a total of 376 wheat procurement and storage centres all across Punjab. These wheat procurement centres can be
classified in two broad categories: Provincial Reserve Centres established on state land comprising mainly house-type
go-downs and Flag Centres established on open private rented land where wheat is stored in the open.
The average storage at each flag centre is around 10,000 MT. In years when there is a wheat surplus, the storage at the
flag centres needs to be maintained throughout the year which creates difficulties for the PFD in ensuring safe storage
of wheat. Wheat release is generally slow in the months May to September and picks up after that. However, wheat
stored in the southern divisions which is mostly stored in the open remains there till the very end of March.
Currently the PFD is operating two silo sites in Rawalpindi and Faisalabad with a total storage capacity of 82,000 MT. In
this scenario it is quite clear that the PFD urgently requires establishment of modern storage facilities to ensure quality
of wheat throughout the storage season. Statistics reveal that in average about 1.9 million MT is stored at these flag
centres in open.
To expand the construction of silo storage capacity, the Government of Punjab recently undertook an exercise to
establish a number of 50,000 MT storage silos at different locations up to a total capacity of 700,000 MT in Public-
Private Partnership (PPP) mode jointly with the International Finance Corporation (IFC) as facilitator for investors.
However this exercise could not yield the desired result of attracting bidders from the private sector.
In order however not to lose momentum with the transformation from a bag to a bulk handling system, through the
World Food Program (WFP), the Punjab Food Department (PFD) has appointed Royal HaskoningDHV (RHDHV) from the
Netherlands as its technical consultant to provide recommendations for the rapid improvement of the current wheat
storage and handling practices. Within the framework of this assignment and as the first stage of wheat silo capacity
realisation, RHDHV is currently engaged in the part preparation of a PPP proposal for the realisation of 2 million MT
wheat silo storage capacity in units of 10,000 to 20,000 MT each.
This PPP Proposal is prepared for submission to and consideration by the PPP Cell and through this document the
Punjab Food Department is requesting approval to proceed with the tender for the involvement of the Private Sector
for investments in 2 million MT Near-Farm Wheat Silo storage capacity, based on PFD guaranteed storage volumes and
annual lease payment for a period of ten years.
PPP Project Proposal 2 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
2. Needs analyses
2.1 Sector Diagnostics
2.1.1 General information
An elaborate evaluation of Punjab’s wheat sector is attached in annex 1 clearly describing all shortcomings of the
current wheat handling and storage systems. In addition the study provides clear recommendations on secor
restructuring and on the approach to move from a bag to a wheat bulk handling system. A summary of the study is
given below, for the details it is referred to annex 1.
The recommended approach has been approved by the Chief Minister of Punjab in a meeting on 27 January 2016.
Meanwhile the Steering Committee and a number of Technical Committees have been formed to (i) guide and steer the
application of the PPP Proposal and (ii) to provide financial, technical, market and legislative input for the sound
preparation of the PPP Proposal.
2.1.2 Executive summary of constraints and solutions for the wheat sector in Punjab
Wheat production
The current wheat production in Punjab Province amounts almost 20 million MT (Pakistan 26 million MT). With an
average production of 1.15 MT per acre the productivity is low and may improve in further years due to improved seed
varieties and optimization of cultivation processes. For the medium term, particularly if it is considered that the
majority of fields in Punjab can be irrigated, a production increase to a minimum of 1.5 to 1.6 MT / acre is anticipated
which will result in a wheat production of more than 25 million MT should Punjab maintain the same area under
cultivation. FAO studies indicate production potential even to be (much) higher up to 2 MT / acre, given the high quality
of land, irrigation options and the favourable agro-climatic conditions. Pakistan was a net wheat importer until 2000.
Since then, the country has either imported or exported wheat (Figure 2.1).
Figure 2.1: Net wheat trade (export minus imports) in Pakistan
Wheat price support in an international perspective
Table 2.1 indicates Government procurement prices and it is concluded that Pakistan is paying high prices to its
farmers. For the year 2014/15 wheat procurement prices have been raised to Rs 1,300 /40 kg which is corresponding
with USD 322 /MT at current exchange rates (USD = 100 Rs). Compared to international wheat prices in the range of
USD 184 /MT the Pakistani farmers are being generously rewarded for the cultivation of wheat. In particular in recent
years the country has to export its wheat at excessive cost to the government, as support prices are approx. US$ 100-
150 /MT higher compared to international prices.
PPP Project Proposal 3 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
Table 2.1: Government procurement prices
Government procurement price 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
Wheat Rs / 40 kg 950 950 1,050 1,200 1,200 1,300
Wheat Rs / MT 23,750 23,750 26,250 30,000 30,000 32,500
USD / MT Pakistan (exch 1 April) 284 281 291 305 308 322
Int. in USD / MT (CBOT 1 April) 147 228 221 228 184 184
Difference Pakistan - International 137 53 71 77 124 138
Maintaining such a generous price policy will result in following:
• Overproduction, as farmers will continue to increase area under wheat due to the absence of alternative (high)
profitable crops;
• Due to high price levels small farmers will remain in business as they can still earn a (meagre) living out of it. In
other words, it is hindering the highly necessary modernization and efficiency improvement of the sector;
• Necessary innovation in shifting to alternative crops will not progress. With its extensive irrigation scheme and
favourable climate, Punjab is capable of growing any crop ranging from potatoes, cotton, fruits and vegetables to
oilseeds, pulses and beans. In particular oilseed cultivation will offer ample opportunity, as a large share of edible
oils is imported;
The effects of the subsidy program are as follows:
• Annually the Government spends 80% of the costs on bank mark-ups, a substantial portion which is due to past
accumulation of debt in the system;
• Small farmers are by-passed in the subsidy system. The large administrative burden and cost to farmers is
overwhelming to those with small marketable surplus. In this respect they must employ intermediaries and
consequently lose most of the benefit the program seeks to provide. Back of the envelope calculations indicate that
only a meagre 5% of the farmers (the larger ones) benefit from the wheat subsidy program (26% of the farmers
produce wheat and only 18% of them produce a marketable surplus). Nevertheless other farmers, supplying
through middlemen, also benefit from the high support prices.
Weaknesses of the current wheat supply chain include:
• The Fair Average Quality (FAQ) stipulates up to 1.0% non-edible impurities, but studies have indicated that farmers
are delivering wheat with non-edible impurities up to 3.35% due to lack of a functioning inspection system upon
wheat intake;
• Due to the zero loss policy in place, and lack of grain cleaning systems, rubbish keeps on polluting all stages of the
supply chain (from farm to mill);
• The bag handling system is very inefficient and labour intensive;
• Storage under unfavourable conditions in go-downs and open-storage facilities (ganjis) is resulting in losses of
respectively 3.3% and 7.4%;
• Current PFD stock of 5.2 million MT (i.e. 3.2 million MT procurement and 2 million MT carry-over) is too high.
Proposed reform measures
Regarding the above the following reform measures are advised:
• Change from bag to bulk handling and storage system;
• Abolish the zero loss policy and pay farmers only for good quality wheat;
• Deregulate the sector with more private sector involvement and align the wheat support price in line with
international trade levels;
• Targeted subsidies to small (poor) wheat producers to compensate for lower wheat support price;
• Introduce a margin between PFD procurement and release price to cover (part of) PFD’s incidental charges;
• Improve inspection methods and install grain cleaning systems at wheat intake.
PPP Project Proposal 4 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
Proposed wheat handling and storage strategy
For the change from bag to bulk handling and storage we assume that government intervention in wheat procurement
will gradually decrease to 2 million MT / year and that carry forward stocks will not comprise more than 1 million MT.
This results in a 3 million MT bulk storage capacity to be constructed, which will be sufficient to cover the PFD
requirements. This 3 million MT of storage capacity should consist of:
• 1 million MT of large scale “strategic storage facilities” with the following features:
� Units with capacity of between 50,000 and 100,000 MT each at approximately 10 to 15 different sites in the
surplus areas;
� For each silo between 5 to 10 wheat collection and transfer centres in order to limit the transportation
distance for the smaller farmers to 10 km;
� Theses silos should replace the current PFD go-downs;
� Public funding.
• 2 million MT of “near-farm bulk storage facilities” with the following features:
� Units with capacity of 10 to 20,000 MT each at 100 to 200 different sites in the wheat surplus areas;
� These silos should replace the current open storage facilities (ganjis);
� Private investment funding based on a Public-Private Partnership (PPP) model.
• All above storage facilities to be equipped with a rapid sampling and laboratory analyses equipment;
• Install cleaning systems at the intake of all above storage facilities.
Proposed investment scheme
The proposed investment scheme for 3 million MT bulk storage is presented in Table 2.2 and assumes the change from
bag to bulk to be realised in two stages each covering a five-year period. Through the realisation of this scheme all bag
operations will be abolished and the entire value chain will benefit from improved efficiency and reduced handling cost.
Table 2.2: Proposed investment scheme for change from bag to bulk storage and handling system
Type of storage Phase 1
(2016-2020) Phase 1+2
(2021-2025) Silo type Ownership / funding Location Investment
Strategic stores: 10 x 100,000 MT (or 20 x 50,000 MT)
500,000 MT 1,000,000 MT
concrete silos with imported handling and cleaning equipment bin size 5,000 MT
Ownership asset: public Operation: public Ownership stock: public
In surplus areas at PFD owned premises (replacing PFD go-downs)
US$ 110 million
Wheat transfer centers
50 nos 100 nos
weighbridge, intake pit, sampling and truck loading bins: no storage
Ownership asset: public Operation: public
In surplus areas at PFD owned premises
Near-farm stores 200 x 10,000 MT or 100 x 20,000 MT (pending location and private sector interest)
1,000,000 MT 2,000,000 MT
steel silos with local handling and cleaning equipment bin size 2,500 - 5,000 MT
PPP Ownership asset: private Operation: private Ownership stock: public
In surplus areas at private premises to be selected
US$ 200 million
PPP Project Proposal 5 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
Integrated cost of the proposed wheat handling system
When the near-farm storage facilities (10,000 MT) and the strategic storage facilities (50-100,000 MT) have been
realised and the entire chain will be bulk based, the integrated chain cost as indicated in Table 2.3 are valid.
Table 2.3: Integrated costs of the proposed bulk handling system (Rs/MT)
Activity Current Bag Storage Strategic Bulk Storage Near-Farm Bulk Storage
farmer PFD miller losses farmer PFD miller losses farmer PFD miller losses
delivery to procurement centre 280 60 60
cost of bags 275
delivery charges paid to growers -75 75
bank commission / taxes 137 137 137
transportation charges 602 90 600 600
go-down expenses /rent 394 775 2,750
departmental charges 320 200 200
interest 6,775 6,775 6,775
delivery to millers 298
weight and quality losses 1,739 163 163
FM and by-product losses 1,089 325 325
by-product sale -325 -81 -81
total by stakeholder 205 8,303 573 2,503 60 7,977 600 407 60 9,862 600 407
stakeholders combined 9,081 2,503 8,637 407 10,522 407
total including losses 11,584 9,044 10,929
Through the implementation of a bulk handling system, the reduction of losses will be in order of Rs 2,100 /MT.
Combined the Strategic and Near-Farm bulk handling system will incur operational expenditures of Rs 10,000 /MT
which is 6% less when compared to the expenditures incurred for the current bag handling system (Rs 11,584 /MT).
Proposed PPP model
Based on extensive discussions with PFD and earlier experience the PFD opts for a PPP model with public ownership of
stocks, private ownership of the storage facilities and private operations of the grain stock including unloading,
weighing, testing, drying (if required), storing and maintaining the quality of the wheat.
The features of the proposed PPP model are as follows:
• The project is financed, designed, constructed, operated and maintained by the private sector;
• Stocks are owned by PFD;
• The service is provided as agreed to PFD over a concession period of 10 years from commissioning with fixed
annual service charge of Rs 2,500 /MT and an annual variable service charge of Rs 250 /MT;
• The private party is responsible for the storage of wheat received at the designated procurement centres;
• Quality of grain is defined in the contract. The private sector has to act as good landlord and based on PFD
instructions carry out all necessary grain preservation measures (temperature control, aeration, fumigation,
recirculation) for which a variable service charge will be paid. Quality risk and volume losses are to be borne by the
owner of the stock;
• Investment for a 10,000 MT silo facility is calculated at Rs 111 million (USD 1.1 million) with a Pay Back Period of 5.0
years and Internal Rate of Return of 15.2%.
PPP Project Proposal 6 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
The fixed and variable service charge of total Rs 2,750 /MT, which is to be paid by PFD to the private sector investors, is
to be recovered by introducing a margin between wheat procurement and wheat release price. Each margin of Rs 100 /
40 kg, results in Rs 2,500 /MT revenues for the Punjab Food Department.
Summary of recommendations
Summarizing, the main recommendations following the feasibility study are:
• To shift from a bag to a bulk handling and storage system;
• To construct a total of 1 million MT strategic bulk storage capacity in 50,000 to 100,000 MT units. This is considered
a sustainable public investment of USD 110 million with a technical lifetime of 50 years;
• To construct a total of 2 million MT near-farm bulk storage capacity in 10,000 – 20,000 MT units, which is
considered a sustainable PPP investment of USD 200 million with a technical lifetime of 25 years.
2.2 Commitment of the Government and its Agency
2.2.1 Adherence to its reform strategy and PPP Policy
The Punjab Food Department is fully committed toward the construction of 1 million MT strategic wheat storage and 2
million MT near-farm storage as detailed in table 2.2. The construction of the strategic storage has already commenced
with to-date 80,000 MT realised and the construction of another 100,000 MT in progress. The construction of these
large scale concrete silos will continue and it is planned that by the year 2025 a total of 1 million MT will have been
realised.
Through the initiation of the underlying PPP near-farm storage project Government is seriously committing itself to
support, facilitate and monitor long-term the involvement of private sector funding for the realisation of 2 million MT
wheat silo capacity through (i) ensuring 80 to 100% of the storage capacity to be filled with PFD’s wheat stock for a
period of 10 years, against Fixed and Variable Service Charges as will result as the outcome of this tender.
«PFD to complete»
2.2.2 Extent of stakeholder consultations and transparency in the process
During the studies stakeholders as listed in table 2.4 have been extensively consulted. With Government, in particular
with the Punjab Food Department and with the PPP Cell, the project has been extensively discussed and various
concepts and approaches towards the implementation of the project have been evaluated.
With potential investors, including flour and feed milling companies, wheat producers and livestock rearing companies
that project has been discussed in-depth. In addition numerous Wheat Procurement and Flag Centres have been
consulted to learn from their long experience in the wheat handling and trade.
Table 2.4: Stakeholder participation
Government Punjab Food Department
Planning and Development Department
PPP Cell
Department of Finance
Department of Agriculture
Environmental Department
Private investors and Wheat Storage Animal Feed Milling Companies
Wheat Flour Milling Companies
Wheat Producers
Livestock Rearing Companies
Agricultural Cooperatives
Wheat Procurement Centres
Wheat Flag Centres
PPP Project Proposal 7 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
2.2.3 Provision of adequate funding and support for the process
«PFD to complete»
2.2.4 Driver of the process
The Punjab Food Department has already established a kind of Project Management Unit within its department for the
preparation and implementation of the project. The Project Management Unit is supported by three Technical Working
Groups as follows:
1. Finance and Marketing: the Punjab Board of Investment and Trade is responsible for:
a. collecting sufficient market data on potential investors through the organisation of a number of
national and international seminars,
b. provide support to attract a sufficient number of private investors during the tender process, and
c. assist during contract negotiations with private sector
2. Technical Support: Specialists from the University for Engineering and Construction have been assigned to
review Tender Documentation on its technical aspects and where needed provides support mainly on the civil
engineering aspects for the foundation and its construction loads
3. Legislative: Specialist from Law Department
In addition to the Project Management Unit, the first necessary step is to appoint the Transaction Advisor who will
prepare all necessary documentation up to the conclusion of the Concession Agreement. The Transaction Advisor is to
closely collaborate with the Punjab Food Department.
Once under implementation and as this is a massive investment project it is recommended that the Project
Management Unit will be strengthened through outsourcing its implementation entirely to a professional project
management organisation with experience in grain post-harvest handling projects. The Punjab Food Department to
exercise only its monitoring, leadership and motivation tasks.
2.3 Available budget of the Government Agency
As can be derived from table 2.3 section 2.1.2 the current cost of the bag handling system comprise Rs 11,584/ MT
including the losses. When the shift to a bulk handling system have been realised the cost have been reduced to Rs
10,929/ MT. With an annual procurement of 3.59 million MT a savings will be realised of 3.59 mln MT x Rs 655/ MT = Rs
2.3 billion (= US$ 22 million) when reduction of losses will be taken into consideration.
Of course the picture is not as simple as described above. De-facto the current actual physical cost incurred by PFD,
excluding bank interest1, is Rs 1,528/ MT wheat handled (table 3) covering: delivery charges; bank commission and
taxes; transportation charges; godown expenses and rent; and departmental expenses.
With the introduction of 10,000 MT Near-Farm Wheat Silos these physical cost will increase to Rs 3,087/ MT wheat
handled (table 3) out of which Rs 2,750/ MT wheat handled have to be paid to the private sector investor as Fixed and
Variable Service Charge.
Due to the zero-loss policy in place the real chain cost are not reflected in PFD’s budget and hence a political decision
will be needed to introduce lease payments to private sector investors for their participation in wheat handling and
storage on behalf of Punjab Food Department. When the reduction of losses (approx. Rs 2,096/ MT) is taken into
consideration, in fact the total chain cost for the bulk system are cheaper when compared to conventional bag
handling.
1 Of course the interest charge of Rs 6,775/ MT is the main expenditure in the handling and storing of wheat (Table 3). These cost will require an
immediate solution in order for PFD to able to work with the appropriate cost levels.
PPP Project Proposal 8 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
«PFD to elaborate»
2.4 Capacity of the Government Agency
Even though Punjab Food Department employs over 3,000 staff, it only has a limited pool of project management staff
available.
Through the implementation of this project part of PFD tasks for the handling and storage of wheat will be taken over
by private sector, limiting the tasks of PFD to monitoring and control. This will allow PFD to restructure its organisation
improving efficiency and reducing its workforce.
As a consequence it is clear that PFD’s Project Management Unit (PMU) which has been established for the
implementation of the proposed PPP Project will have to be strengthened through (i) an extensive collaboration with
WFP providing assistance in all technical, administrative and procurement matters and (ii) hiring adequate expertise
upon need.
It should even be considered to outsource the entire implementation management of the PPP Near-Farm Wheat Silos
project to an independent professional project management organisation.
The preparation and implementation of the 1st
tranche of the project (20 pilot silos) is to follow the following critical
path:
No. Activity Date
1. RHDHV to complete draft documents by 31 May 2016 for submission to PFD
including draft framework of the PPP Proposal
31 May 2016
2. PFD to prepare Profile and Terms of Reference for Transaction Advisors to be
contracted with the assistance of PPP Cell
15 June 206
3. PFD to complete the draft PPP Proposal by including necessary Market
Information (PBIT), Site and Environmental Information, availability of budget
and institutional project implementation arrangements
30 June 2016
4. PFD to seek approval from Steering Committee for PPP Proposal and funding
to hire Transaction Advisors for the period of one year, through the
preparation of a PC-2 Document
15 July 2016
5. Contracting Transaction Advisors. The Transaction Advisors will be advised by
Technical, Financial, Legal and Contract Management Experts from the World
Food Program, who have induced their long-term commitment during the
implementation of this project
1 September 2016
6. Transaction Advisors to complete Pre-Qualification Document for PPP Near-
Farm Wheat Stores and publish Expression of Interest (EoI) for pre-
qualification of potential investors
1 October 2016
7. Submission of Pre-Qualification and evaluation. Issuing a full set of tender
documents to Pre-Qualified Investors
31 October 2016
8. Final data for submission of Technical and Financial Bid 31 December 2016
9. Bid evaluation and concession agreement award 1 March 2017
10. The 2nd
and 3rd
tranche (90 + 90 silos resp.) is to follow a similar time path
pending investors interest in Pilot Silo Construction
1 April – 31 December 2017
PPP Project Proposal 9 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
The Transaction Advisors are to be contracted soonest and should minimally include following expertise (Profile see
Annex 10):
� Team Leader;
� Operational Management and Technical Expert with experience in grain handling and storage;
� Environmental Specialist
� Contract Management and Legal Specialist
� Finance and Marketing Specialist with experience in mobilizing investors in agribusiness;
Once first concession agreements have been awarded a professional Project Management Unit (PMU) will be
established within the Punjab Food Department for the duration of the Concession Period of 10 years. The PMU will
extensively monitor the progress during the construction period and will closely monitor the adherence to the
Performance Standards as spelled out in the Concession Agreement.
2.5 Specification of Project Outputs
Following project outputs have been specified:
Tender Tranche No. Sites Silo Capacity Annual Volumes per Silo Total volume
1st
Tranche: Pilot
Project
10 to 20 sites pending
silo capacity
Per site: 10-20,000 MT
Total: 200, 000 MT
Storage for PFD: 10-20,000
MT
Transit: 5-10,000 MT for PFD
or Millers
Storage for own purpose:
tbd
Storage for PFD:
200,000 MT
Transit: 100,000 MT for
PFD or Millers
Storage for own
purpose: tbd
2nd
Tranche 45 to 90 sites pending
silo capacity
Per site: 10-20,000 MT
Total: 900, 000 MT
Storage for PFD: 10-20,000
MT
Transit: 5-10,000 MT for PFD
or Millers
Storage for own purpose:
tbd
Storage for PFD:
900,000 MT
Transit: 450,000 MT for
PFD or Millers
Storage for own
purpose: tbd
2nd
Tranche 45 to 90 sites pending
silo capacity
Per site: 10-20,000 MT
Total: 900, 000 MT
Storage for PFD: 10-20,000
MT
Transit: 5-10,000 MT for PFD
or Millers
Storage for own purpose:
tbd
Storage for PFD:
900,000 MT
Transit: 450,000 MT for
PFD or Millers
Storage for own
purpose: tbd
Pending wheat volumes handled at the different sites, silo capacity of 10,000 MT or 20,000 MT may be realised.
PPP Project Proposal 10 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
2.6 Scope of the Project
The PPP project will be structured on the basis of a 10-year Build-Own-Operate (BOO) concession agreement which
includes a construction period of up to 1 year. At the end of the concession agreement, ownership of all land and
wheat storage facilities will remain with the operator, who will have no further obligations towards the Authority,
unless the concession agreement is extended on mutually agreed terms.
For the duration of the concession agreement, the operator will be responsible for receiving grain procured by the
Authority from farmers in bulk, and for an initial period of five years also receive wheat in bags as wheat
producers will require time to transform operations from bag to bulk handling and transport.
Each consignment of grain received will be sampled and checked for quality in accordance with the Fair Average
Quality (FAQ) standards, and subsequently be pre-cleaned till storage and dispatch specifications and stored until
further instruction for release from the Authority. The FAQ standards and storage and dispatch specifications are
attached in annex 9 and the operator is responsible for maintaining the storage and dispatch specifications within
its tolerance limits throughout the storage period. Quality control will be subcontracted to an independent
inspection agency such as SGS or Veritas on which basis quality upon intake and outtake will be assessed.
The districts where near-farm wheat silos are to be realised have been identified based on existing storage
deficits, comparing the district’s current storage capacity with historic levels of grain procurement by the
Authority (annex 4). The exact locations within the identified districts will be selected by the bidders in
consultation with the Authority based on the requirements specified in annex 4, but will be primarily the sites
currently housing the so called PFD flag centres. Near-farm wheat silos may be constructed at this site or in a
radius of 500 meters from this site. The operator will acquire the corresponding land under his sole responsibility
and will bear all costs and expenses related to the acquisition of land needed for near-farm wheat silo construction
(approx. 6,800 m2 for a 10,000 MT unit and 10,000 m
2 for a 20,000 MT unit).
In return for the operators services, the Authority will pay the operator a concession fee per MT, which will
comprise a fixed element based on storage capacity (the "fixed service charge"), and a variable element based on
handled volume and quality preservation services such as fumigation, aeration and ventilation, render(the
"variable service charge"). The fixed service charge will be an availability based payment based on full capacity,
payable regardless of actual capacity utilized by the Authority during the year. The variable service charge will be
paid for the volume of grain handled and quality preservation services rendered (i.e. received and/or dispatched,
sampling, fumigation, aeration, ventilation) by the operator during the year.
The level of the fixed service charge payable by the Authority to the operator shall be fixed following the
outcome of the bidding process. The variable service charge will be paid at 10% of fixed service charge for every
MT handled during each financial year.
The realisation of the project will be along a three staged tender and implementation scheme±
1) 1st
tranche - pilot project of 20 near-farm wheat silos: start construction 01/04/2017
2) 2nd
tranche - realisation of 90 silos: start construction 01/07/2017
3) 3rd
tranche - realisation of 90 silos: start construction 01/10/2017
The detailed implementation scheme is presented in chapter 8.
PPP Project Proposal 11 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
3. Options analysis
3.1 PPP Options
Overall, similar to projects in any other sector, PPP’s in grain storage range from full public ownership projects, which
are the norm in most developing countries, to full privatization at the other end, with many variations in between (Box
1). Given this background, a spectrum of PPP models and examples which are used globally for grain and agricultural
storage for emergency reserves as well as for other purposes, are specified in detail in annex 1: the Sector Background
Report. In the case of countries like India, the stocks are associated with national and state food ration and targeted
feeding programs, resulting in longer term contracts. In these cases, the private party takes on a larger role in the
provision of services and provides land as well as financing for projects.
Based on extensive discussions with PFD and earlier experience the PFD opts for a PPP model with public ownership of
stocks, private ownership of the storage facilities and private operations of the grain stock including unloading,
weighing, testing, drying (if required), storing and maintaining the quality of the wheat. The features of the proposed
PPP model are as follows:
• The project is financed, designed, constructed, operated and maintained by the private sector;
• Stocks are owned by PFD;
• The service is provided as agreed to PFD over a concession period of 10 years from commissioning with fixed
annual service charge of Rs 2,500 /MT and an annual variable service charge of Rs 250 /MT;
• The private party is responsible for the storage of wheat received at the designated procurement centres;
• Quality of grain is defined in the contract. The private sector has to act as good landlord and based on PFD
instructions carry out all necessary grain preservation measures (temperature control, aeration, fumigation,
recirculation) for which a variable service charge will be paid. Quality risk and volume losses are to be borne by the
owner of the stock;
• Investment for a 10,000 MT silo facility is calculated at Rs 111 million (USD 1,1 million) with a Pay Back Period of 5.0
years and Internal Rate of Return of 15.2%.
The fixed and variable service charge of total Rs 2,750 /MT, which is to be paid by PFD to the private sector investors, is
to be recovered by introducing a margin between wheat procurement and wheat release price. Each margin of Rs 100 /
40 kg, results in Rs 2,500 /MT revenues for the Punjab Food Department.
For Pakistan the PPP model recommended is the Build-Own-Operate with main reason being that GoPunjab is looking
for a continued privatization of the grain sector including a less prominent role for the government. Hence it is nog
considered logic to implement a Build-Own-Operate-Transfer model as then again, at the end of the concession period,
the GoPunjab would increase its control of the grain market by owning storage assets.
PPP Project Proposal 12 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
3.2 Market interest
3.2.1 National investors interest
An investors conference organised by the Punjab Board of Investment and Trade (PBIT) has indicated ample interest
amongst investors from entire Pakistan, including amongst others (i) animal feed millers, (ii) wheat flour millers, (iii)
large wheat producer, (iv) farmers cooperatives, (v) livestock rearing companies involved in dairy farming, poultry
breeding and fattening and cattle raising, and (v) various other (institutional) investors. A list of potential investors is
indicated below:
� Aslkd
� dkdk
� Qwdlqwdpl
� Wadk
� Adp[pkfdk
«PBIT to complete»
3.2.2 International investors interest
In addition the Punjab Board of Investment (PBIT) has organized an investment conference in Dubai. Major
international grain trading companies have indicated interest including amongst others:
� Cargill
� Continental Grain
� Louis Dreyfus
� ADM
� Bunge
� Glencore International
«PBIT to complete»
3.3 Choice of technology
The technical specification for the technology to be installed are provided in detail in annex 5. The realisation of 2
million MT near-farm storage in 2 phases of 1 million MT each. The near-farm storage facilities will have following
features:
� Upon completion the near-farm storage facilities will consist of 100 to 200 silo complexes of 10,000 MT or
20,000 each (or any combination) with in total a storage capacity of 2 million MT;
� The silo layout will comprise of 4 bins of 2,500 MT, but 2 bins of 5,000 MT may also be a feasible proposition,
pending investors preference
� Steel silos: As private sector will invest, the erection of steel silos is considered most appropriate as it is (i)
cheaper compared to concrete silos, (ii) easy to erect and (iii) easy to maintain;
� Local handling equipment: due to low rotation schemes also for on-farm storage throughput will be low.
However should investors wish so, also imported handling and cleaning equipment may be proposed which
will enhance durability and which will reduce break-down during operations, as well as repair and maintenance
expenditure
� Fully integrated pre-cleaning systems;
� Fully integrated weighing system;
� Fumigation or ozonation technology;
� Aeration and re-circulation;
� Temperature monitoring and control systems;
PPP Project Proposal 13 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
� Level indicator system;
� Sampling and screening systems. Upon intake wheat will be analysed for FM (screening), damaged/shrivelled
grains and moisture content. Farmers will be paid on nett tonnage delivered free of FM and
damaged/shrivelled and the prescribed moisture content (10%).
Pakistan has no manufacturing base for steel silo structures and as a result all steel silos are currently being imported
with main supplier from the US, Turkey and Brazil while also from China first silos are being imported. The grain
conveying and cleaning systems are being manufactured in Pakistan in limited volumes. Even though most of the millers
and also PFD silos have installed local equipment, performance is poor and repair and maintenance cost is high. Unless
quality of manufacturing quality within Pakistan is drastically improved, probably in joint venture with a foreign
company, the decision to install local equipment should be carefully considered.
3.4 Choice of location
3.4.1 Pilot sites
PFD has dedicated its 200 sites as potential locations for the realisation of near-farm wheat storage. The districts
where near-farm wheat silos are to be realised have been identified based on existing storage deficits, comparing
the district’s current storage capacity with historic levels of grain procurement by the Authority (annex 4). The
exact locations within the identified districts will be selected by the bidders in consultation with the Authority
based on the requirements specified in annex 4, but will be primarily the sites currently housing the so called PFD
flag centres. Near-farm wheat silos may be constructed at this site or in a radius of 500 meters from this site. The
operator will acquire the corresponding land under his sole responsibility and will bear all costs and expenses
related to the acquisition of land needed for near-farm wheat silo construction (approx. 6,800 m2 for a 10,000 MT unit and
10,000 m2 for a 20,000 MT unit). The potential sites for the pilot project are given below in table 3.1.
Table 3.1: Potential pilot sites
No. Division District Center Storage Capacity (MT)
1. Bahawalpur Bahawalpur Dera Bakha 10,000
2. Bahawalpur Rahim Yar Khan Bangla Manthar 10,000
3. Bahawalpur Bahawalnagar 203 / Murad 10,000
4. Multan Lodhran Zakhira 10,000
5. Multan Vehari Kachi Pakkhi 10,000
6. Multan Multan Bahadarpur 10,000
7. Multan Khanewal Jodhpur 10,000
8. Dera Ghazi Khan DGK Shah Saddar Din 10,000
9. Dera Ghazi Khan Rajanpur Mithon Kot 10,000
10. Dera Ghazi Khan Layyah Jamal Chappri 10,000
11. Dera Ghazi Khan Muzaffargarh Wandhar 10,000
12. Sahiwal Sahiwal 90/12 L 10,000
13. Sahiwal Pakpatten Trikhni 10,000
14. Sahiwal Okara Mandi Ahmadabad 10,000
15. Faisalabad Jhang Bahadarpur 10,000
16. Sargodha Bhakkar Notak 10,000
17. Sargodha Bhakkar 51/TDA 10,000
18. Sargodha Sargodha Farooqa 10,000
19. Sargodha Mianwali Wan Bacharan 10,000
PPP Project Proposal 14 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
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BE3531-102-R004 PPP Proposal V1.0
25 May 2016
20. Lahore Kasur Teengmore 10,000
21. Lahore Nankana Bucheki 10,000
22. Gujranwala Gujranwala Ahmednagar 10,000
23. Gujranwala Gujranwala Qila Dedar Singh 10,000
Storage capacity to be reviewed: pilot sites with large wheat surplus 20,000 MT may be constructed (PFD please
indicate).
3.4.2 Criteria for pilot site selection
Following are the criteria for the selection of the pilot sites:
1. Availability of wheat: all of these sites have large surplus wheat procurement for transit to the northern parts
of the Punjab
2. These site all have been in-use by the Punjab Food Department since long time and wheat producers are very
familiar with these sites, which enhance wheat delivery
3. All of these sites should have good road access as well as utility connections
4. All of these sites are located at higher altitudes and away from river beddings and lowland areas which may be
subject to floods
5. Prior to bid submission the bidders should provide clarity on land ownership and/or buy or lease arrangements
with current land owners
PPP Project Proposal 15 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
4. Project design and cost
4.1 Preliminary design
A typical layout design is presented below while the details and layout alternatives are enclosed as annex 6:
Graph: 4.1: Typical layout drawing for a 10,000 MT steel
silo
Remarks by Technical Working Group on “cul-de-sac”!!
The site required for the realisation of a 10,000 MT silo is approx. 6,800 m2. In order to limit the distance for farmers to
deliver the wheat to a maximum of 10 km, it is assumed that the storage capacity will be realised through the
construction of 10,000 MT. However as investment cost for a 20,000 MT unit is 20% less per MT, in the locations where
sufficient surplus wheat volumes are available the construction of 20,000 MT units may also be considered.
The near-farm storages will have sufficient space for limited truck parking, office, laboratory facilities and weighbridge
and sampling facilities. Above a block positioning of the silo bins is indicated but, pending site characteristics and
dimensions, the silo bins may also be positioned in-line (ref. annex 6 for layout options).
It is proposed that laboratory analyses for quality inspection (wheat intake and outtake) will be outsourced to an
independent food inspection agency, such as SGS, Veritas or Unicontrol, in order to create transparency and
independency in wheat quality assessment which will form the basis of payment to wheat producers.
Other remarks by Technical Working Group (official response awaited):
• Fumigation
• Weighing under cells (to note theft)
• With 40 MT/hr Intake capacity too low
PPP Project Proposal 16 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
• No details on foundation works
• Pre-qualification of silo suppliers (to avoid low quality suppliers)
PPP Project Proposal 17 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
4.2 Cost estimates
As it concerns near-farm storage the private sector will be the main driver for the realisation of storage capacity.
Designs to be based on suggestions by PFD, but private sector should be allowed some form of flexibility also to
accommodate own requirements. For a 10,000 MT unit investment cost is in the range of USD 110/ MT, which is
summarized in table 4.1 and included in annex 7 in detail.
Table 4.1: Investment in near-farm storage of 10,000 MT and 20,000 MT units
Item Description 10,000 MT 20,000 MT
1 Land acquisition and preparation 16,620,000 23,637,804
2 Civil works 19,000,000 17,800,000
3 Grain cleaning equipment (40 resp. 75 MT/hr) 4,463,700 5,451,600
4 Silo foundations 13,000,000 25,000,000
5 Steel silos 25,280,000 48,060,000
6 Mechanical grain handling systems (40 resp. 75 MT/hr) 13,062,700 20,162,600
7 Electrical works 7,000,000 8,000,000
8 Customs clearance charges 12,578,800 23,025,600
Grand total 111,005,700 171,137,604
Costs per MT 11,100 8,556
In order to limit the distance for farmers to deliver the wheat to a maximum of 10 km, it is assumed that the storage
capacity will be realised through the construction of 10,000 MT. However, as investment cost for a 20,000 MT unit is
20% less, in the order of USD 85/ MT, the construction of 20,000 MT units may also be considered in the locations
where sufficient surplus wheat volumes are available.
In order to limit investments as much as possible and, as such, provide an interesting business proposition for potential
private investors, the feasibility of the proposed investment is assessed based on (i) the importation of the steel silo
structures, as for these components no national suppliers are available and (ii) the installation of local conveying and
cleaning equipment.
The installation of imported conveying and cleaning equipment will increase the investment for a 10,000 MT unit from
USD 110/ MT to USD 150/ MT and for a 20,000 MT unit from USD 80/ MT to USD 110/ MT. However, as the imported
equipment is more durable, the annual expenditures for repair and maintenance will be substantially less.
PPP Project Proposal 18 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
5. Environmental and social assessment
5.1 Environmental impact assessment
PPP cell remark: PFD to arrange environmental blanket approval. Easier for investor
5.2 Social impact assessment
(PPP Cell remark: EIA most important. This section to be limited to 1 page
5.3 Land acquisition and resettlement plans
(PPP Cell remark: EIA most important. This section to be limited to 1 page
PPP Project Proposal 19 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
6. Financial Analysis
6.1 Near-Farm Wheat Silo concept
The first stage of changing from a bag to a bulk handling system concerns the establishment of a network of Near-Farm
Wheat Silos (NFWS) in the central and southern wheat surplus regions of the Punjab province of a total capacity of 2
million MT. The capacity of each NFWS storage depends on the (i) volumes handled at the flag centres, (ii) importance
of transit function to the deficit areas located in the northern wheat deficit regions of the Punjab province, and (iii)
interest and (financial) capacity of potential private sector operators to invest in such NFWS storages. For the purpose
of this business plan, it is assumed that a typical NFWS unit will have a capacity of resp. 10,000 MT or in selected cases
20,000 MT.
6.2 Hardware investments
The NFWS storage network will have the following features:
� Upon completion, there will be 100-200 NFWS storages of 10-20,000 MT each with a total storage capacity of 2
million MT;
� The silo layout will comprise 4 bins of 2,500 MT, but 2 bins of 5,000 MT may also be a feasible proposition;
� Steel silos: As private sector will invest, the erection of steel silos is considered most appropriate as it is (i)
cheaper compared to concrete silos, (ii) easy to erect and (iii) easy to maintain;
� Local handling equipment: due to low rotation schemes also for on-farm storage throughput will be low;
� Fully integrated pre-cleaning systems;
� Fully integrated weighing system;
� Fumigation or ozonation technology;
� Aeration and re-circulation;
� Temperature monitoring and control systems;
� Level indicator system;
� Sampling and screening systems. Upon intake wheat will be analysed for FM (screening), damaged/ shrivelled
grains and moisture content. Farmers will be paid on net tonnage delivered, i.e. free of foreign material and
damaged/shrivelled grains, and based on the prescribed moisture content (10%).
It is proposed that 2 million MT near-farm storage will be constructed in the surplus areas. In the deficit areas, wheat
market and construction of storage capacity in private sector appears to proceed well. The private sector is expected to
be the main driver for the realisation of storage capacity. Designs are to be based on suggestions by PFD, but private
sector should be allowed some form of flexibility also to accommodate own requirements. For a 10,000 MT unit,
investment cost is Rs 110,000/ MT or about USD 110/ MT, which is summarized in table 4.1 and included in the annexes
in detail.
For the investment cost it is referred to table 4.1.
PPP Project Proposal 20 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
6.3 Business operations
6.3.1 Revenues
Revenues to be potentially generated by the NFWS complex comprise four components:
1) Revenues from storage operations on behalf of the Punjab Food Department. PFD will guarantee a Fixed
Service Charge for storage services rendered of Rs 2,500/ MT for a period of 10 years of the full capacity. These
revenues will be charged to PFD on a fixed basis regardless of actual storage capacity utilized.
2) Revenues from cleaning, fumigation, aeration and recirculation services. These services will be rendered at Rs
250/MT and will be charged to PFD on a variable basis pending actual services rendered.
3) Revenues for transit services rendered. During the harvest season (i) millers located in the north will directly
collect wheat for storage in own silos, and (ii) PFD will direct wheat immediately to its storage facilities in the
north. Services rendered for transit operations will include unloading at the silo, cleaning, temporary storage
(few days only) and truck loading for dispatch to the north2. It is assumed that each NFWS will handle an
additional 50% of the capacity used as transit wheat.
4) Revenues from services rendered for other crops. Once silos are emptied, or PFD will not use the full capacity,
the private operators will be allowed to utilize silo facilities for storage of own crops or to render storage
services to third parties. It is therefore assumed that any spear capacity will be used for other clients.
The above-mentioned revenues combined will result in annual sales of Rs 30 million with potentially higher income
from transit operations and rental fees for storage services rendered to third parties.
6.3.2 Expenditures
Expenditures have been kept at a minimum. Throughout the year the NFWS will be operated with a staff of 8 people,
while during the harvest period another 5 temporary labour will be hired. Other cost items include fumigation pellets,
utilities, repair and maintenance, insurance, and other overhead cost. The total costs are estimated at approx. Rs 7.7
million per year.
6.4 Cash flow and return on investment
Based on these assumptions, the NFWS will generate a cash flow (before interest and taxes) of Rs 22.3 million per year
starting with Year 1. The pay-back period and return on investment (the Internal Rate of Return, or IRR) are 5.0 years
and 15.2%, which is expected to be attractive for private investors.
Based on a survey, the potential private investors are looking for a pay-back period in the order of five years. Should
flour and animal feed millers be considered as potential investors, the acceptable pay-back period may be substantially
stretched, considering the strategic importance of the bulk storage concept for the entire value chain. Therefore,
potential investors should primarily be identified along the value chain, including large wheat producers, farmers
cooperatives and wheat processors, such as animal feed and flour mills, as well as major livestock rearing operators.
The detailed cash flow analysis is given in the business plan in annex 2. The cash flow for the base case (10,000 MT
with local handling equipment) is presented in table 6.1
2 Cost for sampling and laboratory analysis are assumed to be covered by the owner of the commodity.
PPP Project Proposal 21 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0 25 May 2016
Table 6.1: Cash flow for the base case (10,000 MT and local handling equipment) REVENUES Initial value Growth rate Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Total capacity (MT) 10.000
Rental income: fixed charges
Capacity used 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Quantity (MT) 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000
Rental price storage (Rs / MT) 2.500 0,0% 2.500 2.500 2.500 2.500 2.500 2.500 2.500 2.500 2.500 2.500
Sales (Rs) 25.000.000 25.000.000 25.000.000 25.000.000 25.000.000 25.000.000 25.000.000 25.000.000 25.000.000 25.000.000
Rental income: variable charges
Quantity (MT) 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000
Cleaning, fumigation, aeration, recirculation 250 0,0% 250 250 250 250 250 250 250 250 250 250
Sales (Rs) 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000
Income from transit/cleaning operations
Capacity used 50% 50% 50% 50% 50% 50% 50% 50% 50% 50%
Quantity (MT) 5.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000
Transit unload, load, temporary storage 500 0,0% 500 500 500 500 500 500 500 500 500 500
Sales (Rs) 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000
Income storage other crops (maize, oilseeds)
Capacity used 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Quantity (MT) - - - - - - - - - -
Rental price storage (Rs / MT) 2.500 0,0% 2.500 2.500 2.500 2.500 2.500 2.500 2.500 2.500 2.500 2.500
Cleaning, fumigation, aeration, recirculation 250 0,0% 250 250 250 250 250 250 250 250 250 250
Sales (Rs) - - - - - - - - - -
Total Sales (Rs) 30.000.000 30.000.000 30.000.000 30.000.000 30.000.000 30.000.000 30.000.000 30.000.000 30.000.000 30.000.000
COSTS Initial value Growth rate Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Fumigation
Cost (Rs per MT wheat) 20 0,0% 20 20 20 20 20 20 20 20 20 20
Quantity (MT) 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000
Fumigation cost (Rs) 200.000 200.000 200.000 200.000 200.000 200.000 200.000 200.000 200.000 200.000
Labour
Fixed labour (Rs per employee) 240.000 0,0% 240.000 240.000 240.000 240.000 240.000 240.000 240.000 240.000 240.000 240.000
Fixed labour (# of employees) 7 7 7 7 7 7 7 7 7 7 7
Variable labour (Rs per empl., 2 months) 50.000 0,0% 50.000 50.000 50.000 50.000 50.000 50.000 50.000 50.000 50.000 50.000
Variable labour (# of employees) 5 5 5 5 5 5 5 5 5 5 5
Labour cost (Rs) 1.930.000 1.930.000 1.930.000 1.930.000 1.930.000 1.930.000 1.930.000 1.930.000 1.930.000 1.930.000
Utilities
Cost (Rs / MT) storage 35 0,0% 35 35 35 35 35 35 35 35 35 35
Cost (Rs / MT) cleaning 20 0,0% 20 20 20 20 20 20 20 20 20 20
Electricity cost (Rs) 550.000 550.000 550.000 550.000 550.000 550.000 550.000 550.000 550.000 550.000
Water cost (Rs) 5.000 0,0% 5.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000
Overhead costs
Administrative 240.000 0,0% 240.000 240.000 240.000 240.000 240.000 240.000 240.000 240.000 240.000 240.000
Marketing - 0,0% - - - - - - - - - -
Maintenance 3,0% 0,0% 2.831.556 2.831.556 2.831.556 2.831.556 2.831.556 2.831.556 2.831.556 2.831.556 2.831.556 2.831.556
Insurance 1,0% 0,0% 943.852 943.852 943.852 943.852 943.852 943.852 943.852 943.852 943.852 943.852
Other overhead costs 1.000.000 0,0% 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000
Total overhead (Rs) 5.015.408 5.015.408 5.015.408 5.015.408 5.015.408 5.015.408 5.015.408 5.015.408 5.015.408 5.015.408
Total Costs (Rs) 0,0% 7.700.408 7.700.408 7.700.408 7.700.408 7.700.408 7.700.408 7.700.408 7.700.408 7.700.408 7.700.408
EBITDA (Rs) 22.299.592 22.299.592 22.299.592 22.299.592 22.299.592 22.299.592 22.299.592 22.299.592 22.299.592 22.299.592
INVESTMENTS (Rs) -111.005.200
CASH FLOW (YEARLY) -111.005.200 22.299.592 22.299.592 22.299.592 22.299.592 22.299.592 22.299.592 22.299.592 22.299.592 22.299.592 22.299.592
CASH FLOW (CUMMULATIVE) -111.005.200 -88.705.608 -66.406.016 -44.106.424 -21.806.832 492.760 22.792.352 45.091.944 67.391.536 89.691.128 111.990.720
INTERNAL RATE OF RETURN 15,2%
PAYBACK PERIOD (YEARS) 5,0
PPP Project Proposal 22 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
6.5 Projected financial performance
6.5.1 Assumptions
For the purpose of this business plan, it is assumed that:
� the investment is financed with 25% equity and 75% debt,
� interest rate on debt is 6%,
� debt has a 10 year maturity after a grace period (on principal only) of one year,
� to be able to pay interest for the first year, the initial debt amount is increased respectively,
� depreciation is done over 20 years at equal amounts,
� maintenance cost is estimated at 3% of the total depreciated investment amount,
� insurance cost is estimated at 1% of the total depreciated investment amount,
� tax rate is 35%,
� payments are made without delay, resulting in no accounts receivable or payable.
6.5.2 Financial Statements
An investment in a 10,000 MT storage facility will result in a Balance Sheet with total assets of Rs 111.0 million in Year 0,
which will steadily grow to Rs 117.7 million in Year 10 (table 6.2). To simplify the forecast, the NFWS facility's assets will
only comprise land, silos, and equipment in Year 0. Over time, net profits will accumulate in the cash account. The debt-
to-equity ratio, due to the assumptions above, is initially close to 3 but decreases over time to 0 given that the debt is
fully repaid by Year 10.
Table 6.2: Projected Balance Sheet.
ASSETS Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Current assets
Cash 0 3.835.527 8.016.469 12.542.826 17.414.598 22.631.785 28.194.387 34.102.405 40.355.837 46.954.685 53.898.948
Total current assets 0 3.835.527 8.016.469 12.542.826 17.414.598 22.631.785 28.194.387 34.102.405 40.355.837 46.954.685 53.898.948
Fixed assets
Land 16.620.000 16.620.000 16.620.000 16.620.000 16.620.000 16.620.000 16.620.000 16.620.000 16.620.000 16.620.000 16.620.000
Silos and equipment 94.385.200 94.385.200 94.385.200 94.385.200 94.385.200 94.385.200 94.385.200 94.385.200 94.385.200 94.385.200 94.385.200
...less depreciation 0 (4.719.260) (9.438.520) (14.157.780) (18.877.040) (23.596.300) (28.315.560) (33.034.820) (37.754.080) (42.473.340) (47.192.600)
94.385.200 89.665.940 84.946.680 80.227.420 75.508.160 70.788.900 66.069.640 61.350.380 56.631.120 51.911.860 47.192.600
Total fixed assets 111.005.200 106.285.940 101.566.680 96.847.420 92.128.160 87.408.900 82.689.640 77.970.380 73.251.120 68.531.860 63.812.600
TOTAL ASSETS 111.005.200 110.121.467 109.583.149 109.390.246 109.542.758 110.040.685 110.884.027 112.072.785 113.606.957 115.486.545 117.711.548
LIABILITIES Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Debt
Outstanding amount 88.567.979 79.711.181 70.854.383 61.997.585 53.140.787 44.283.989 35.427.191 26.570.394 17.713.596 8.856.798 0
88.567.979 79.711.181 70.854.383 61.997.585 53.140.787 44.283.989 35.427.191 26.570.394 17.713.596 8.856.798 0
Equity
Capital 27.751.300 27.751.300 27.751.300 27.751.300 27.751.300 27.751.300 27.751.300 27.751.300 27.751.300 27.751.300 27.751.300
Retained earnings (5.314.079) 2.658.986 10.977.466 19.641.361 28.650.670 38.005.396 47.705.536 57.751.091 68.142.062 78.878.447 89.960.248
Total equity 22.437.221 30.410.286 38.728.766 47.392.661 56.401.970 65.756.696 75.456.836 85.502.391 95.893.362 106.629.747 117.711.548
TOTAL LIABILITIES 111.005.200 110.121.467 109.583.149 109.390.246 109.542.758 110.040.685 110.884.027 112.072.785 113.606.957 115.486.545 117.711.548
PPP Project Proposal 23 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
Table 6.3: Projected Income Statement
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Revenues
Rental (fixed) 0 25.000.000 25.000.000 25.000.000 25.000.000 25.000.000 25.000.000 25.000.000 25.000.000 25.000.000 25.000.000
Rental (variable) 0 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000
Transit operations 0 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000
Other 0 0 0 0 0 0 0 0 0 0 0
0 30.000.000 30.000.000 30.000.000 30.000.000 30.000.000 30.000.000 30.000.000 30.000.000 30.000.000 30.000.000
Expenses
Fumigation 0 200.000 200.000 200.000 200.000 200.000 200.000 200.000 200.000 200.000 200.000
Labour 0 1.930.000 1.930.000 1.930.000 1.930.000 1.930.000 1.930.000 1.930.000 1.930.000 1.930.000 1.930.000
Utilities 0 555.000 555.000 555.000 555.000 555.000 555.000 555.000 555.000 555.000 555.000
Administrative 0 240.000 240.000 240.000 240.000 240.000 240.000 240.000 240.000 240.000 240.000
Marketing 0 0 0 0 0 0 0 0 0 0 0
Maintenance 0 2.831.556 2.831.556 2.831.556 2.831.556 2.831.556 2.831.556 2.831.556 2.831.556 2.831.556 2.831.556
Insurance 0 943.852 943.852 943.852 943.852 943.852 943.852 943.852 943.852 943.852 943.852
Other 0 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000
0 7.700.408 7.700.408 7.700.408 7.700.408 7.700.408 7.700.408 7.700.408 7.700.408 7.700.408 7.700.408
EBITDA 0 22.299.592 22.299.592 22.299.592 22.299.592 22.299.592 22.299.592 22.299.592 22.299.592 22.299.592 22.299.592
Depreciation 0 4.719.260 4.719.260 4.719.260 4.719.260 4.719.260 4.719.260 4.719.260 4.719.260 4.719.260 4.719.260
EBIT 0 17.580.332 17.580.332 17.580.332 17.580.332 17.580.332 17.580.332 17.580.332 17.580.332 17.580.332 17.580.332
Debt amount, beg. 88.567.979 88.567.979 79.711.181 70.854.383 61.997.585 53.140.787 44.283.989 35.427.191 26.570.394 17.713.596 8.856.798
Interest 5.314.079 5.314.079 4.782.671 4.251.263 3.719.855 3.188.447 2.657.039 2.125.631 1.594.224 1.062.816 531.408
Earnings before tax (5.314.079) 12.266.253 12.797.661 13.329.069 13.860.477 14.391.885 14.923.293 15.454.701 15.986.108 16.517.516 17.048.924
Tax 0 4.293.189 4.479.181 4.665.174 4.851.167 5.037.160 5.223.152 5.409.145 5.595.138 5.781.131 5.967.123
NET PROFIT (5.314.079) 7.973.065 8.318.480 8.663.895 9.009.310 9.354.725 9.700.140 10.045.555 10.390.970 10.736.386 11.081.801
6.6 Sensitivity analysis
6.6.1 Rental income
As private sector wishes to see pay-back periods in the range of five years, the Fixed Service Charge is calculated at Rs
2,500 MT / year with a 10% Variable Service Charge. Should private sector be accommodated to accept longer pay-back
periods of up to ten years, the annual Service Charges can be reduced significantly, as shown in table 6.4
Table 6.4: Effect of the Service Charges on the pay-back period and return on investment.
Fixed Service Charge
(Rs/MT) Variable Service Charge
(Rs/MT) Pay-back period
(Years)
Return on investment
(over a 10-year period)
2,500 250 5.0 15.2%
2,000 200 6.8 7.7%
1,500 150 > 10 -1.3%
6.6.2 Transit operations
Transit operations have a certain effect on the business. If the NFWS facility can double its turnover from transit
operations (say, by doubling the quantity transited), the investment is paid back in 4.5 years, while the IRR increases to
18.1%. Sensitivity to the Transit Service Charge is less pronounced. Even a drop of 40% would result in insignificant
changes, as shown in 6.5. Obviously, the Transit Service Charge becomes more important with higher transit quantities.
Table 6.5: Effect of the transit operations on the pay-back period and return on investment.
Transit quantity
(MT) Transit Service Charge
(Rs/MT) Pay-back period
(Years)
Return on investment
(over a 10-year period)
10,000 500 4.5 18.1%
7,500 500 4.6 17.6%
5,000 500 5.0 15.2%
5,000 400 5.1 14.6%
5,000 300 5.2 14.0%
PPP Project Proposal 24 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
6.6.3 Operating costs
As operating costs represent only some 25% of the sales revenue, sensitivity to them is low. An overall increase or
decrease by 10% will result in a pay-back period of 5.2 and 4.8 years, respectively, and an IRR of 14.3% and 16.1%,
respectively.
Table 6.6: Effect of the operating costs on the pay-back period and return on investment.
Level of the operating costs Pay-back period
(Years)
Return on investment
(over a 10-year period)
Increase by 10% 5.2 14.3%
Base scenario 5.0 15.2%
Decrease by 10% 4.8 16.1%
6.6.4 Investment cost
Should the investment cost escalate, which is possible when imported handling equipment will be used, the pay-back
period will increase from 5.0 years to 7.0 years, and the return on investment over a 10-year period will drop from
15.2% to 7.1% (Table 1.7). The investment is a NFWS storage of 20,000 MT with imported equipment has the same
return as the 10,000 MT with local equipment. The most attractive is the investment in a 20,000 MT unit with local
equipment. Such an investment is estimated to have a pay-back period of just 3.6 years and an IRR of 24.7%.
Table 1.7: Effect of the NFWS capacity and equipment origin on the pay-back period and return on investment.
Capacity
(MT) Origin of the conveying
and cleaning equipment Total investment
(Rs)
Pay-back period
(Years)
Return on investment
(over a 10-year period)
10,000 Imported 157,854,800 7.0 7.1%
10,000 Local 111,005,700 5.0 15.2%
20,000 Imported 228,346,049 4.7 16.6%
20,000 Local 171,137,604 3.6 24.7%
6.7 Risk assessment
The overall risk assessment of the project is presented below. As can be noted the construction and operational risks
are with the private sector being the investor an operator. These risks include potential construction delays which are
to be prevented through professional construction supervision, and operational risks which also have to be controlled
by the appointment of qualified staff and management. The commercial risks are (very) limited as the silos will be built
by GoPunjab guaranteeing storage volumes and lease payment during the concession period.
Government should cover the political risks involved in changes in legislation and lack of budget ensuring annual lease
payments through the establishment of a dedicated (escrow) account. When natural disasters strike and wheat
dispatch operations will be under stress, government is to ensure appropriate compensation. The financial institutions
and commercial lenders involved run the regular commercial risks connected with project finance operations, and
should ensure these risks to be appropriately covered and minimized.
PPP Project Proposal 25 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0 25 May 2016
Table 6.8: Overall risk assessment
Risk Category Sub-Category Government
Agency
Private
Party
Commercial
Lenders
Frequency Impact Potential Risk Mitigation Measures
Construction Delay ■ Frequent High Sound project preparation by engineering company or construction company
including obtaining permits and licences.
Civil works relatively simple, supply of technology preferably by one supplier,
maximum two.
Close Supervision during construction period to be arranged by investor.
In case of mal-performance of civil contractor follow protocols and contract
conditions. When needed replace contractors quickly
Cost overrun ■ Frequent High Limited number of suppliers and contractors.
Close supervision during construction period to be arranged by investor.
Adherence to predetermined Time Schedule.
In case of mal-performance of civil contractor follow protocols and contract
conditions. When needed replace contractors quickly
Poor quality
and poor
performance
■ Regular High Independent supervisor
Project
Management
Poor staff,
organization,
communication
■ Regular High Setup Project Execution Plan
Operations Damage and
theft
■ Regular High Insurance.
Strict supply an dispatch acceptance protocols to be followed.
Continuous Site security to be arranged
Close staff monitoring program in place
Sound staff reward programme with focus on a payment based on good results
Safety and
hygiene
■ Regular High Strict safety and hygiene procedures to be followed in particular as wheat silos
may be subject to dust explosions due to accumulated dust in combination with a
fire spark (eg. from smoking)
Smoking to be prohibited on-site
Appropriate fire prevention and detection equipment to be installed as well as
the installation of a sufficient number of fire extinguishers
Staff to be trained in incident prevention and first aid measurements
PPP Project Proposal 26 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0 25 May 2016
Risk Category Sub-Category Government
Agency
Private
Party
Commercial
Lenders
Frequency Impact Potential Risk Mitigation Measures
Technical
performance
■ Regular High Installation of high quality (imported) silos and equipment will ensure good
performance
Repair and Maintenance Contract with equipment supplier will ensure
uninterrupted operations during a long period
Clear daily cleaning an hygiene protocols should keep site clean and end ensure
safe working conditions
Operational manuals to be strictly followed and staff to be well trained through
the development of obligatory annual training programs with tests.
Management ■ Regular High Only companies with a proven track record in the grain storage, handling and
feed and flour milling are allowed to participate in the bid.
Management to be subject to extensive (international) training programs
covering: operations & maintenance, safety
Stock and
quality control
■ Regular High PFD to setup proper organisation, standard procedures and develop computer
software
Commercial Operating cost ■ Seldom Moderate 5 year maintenance contract with equipment supplier will ensure fixed
operational cost during initial 5 years.
Well trained staff.
Sound finance and administrative system operated by well-educated and reliable
staff.
Prohibition of kick-backs and manipulative finance and operations
Price ■ Seldom Moderate Government guarantee on throughput for 100% of storage capacity realised
based on long term (10 years) lease concession.
Tariff for services rendered will be annually indexed in accordance with formal
indexation rate.
Demand ■ ■ Seldom Moderate Government guarantee on throughput for 100% of storage capacity realised
based on long term (10 years) lease concession.
Transit of wheat from surplus to deficit area will allow additional revenues for the
Near-Farm Wheat Centres
During periods when idle, the company is allowed to render services to third
companies, which create additional revenues
Payment ■ ■ Seldom High Government guarantee
Escrow account
PPP Project Proposal 27 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0 25 May 2016
Risk Category Sub-Category Government
Agency
Private
Party
Commercial
Lenders
Frequency Impact Potential Risk Mitigation Measures
Financial Total debt
amount
■ ■ Regular Moderate Financial (personal) guarantees and collateral by the investors resp.
shareholders of debt payments in case of non-compliance to be
demanded by the Bank.
Banks to demand a minimum of 25-35% equity investments on which
size of commercial loans will based.
Interest rate ■ ■ Regular Moderate Reasonable long-term interest rates from Bank
Guarantees by investors and 25-35% equity should ensure reasonable
interest rates in the range of 5%
Interest Swap
Exchange rate ■ ■ Regular Moderate In case of imported equipment fix the exchange rate with Bank or with
Supplier
Maturity ■ ■ Regular Moderate Loan repayment period preferably long term conform with Technical
Lifetime of equipment (25 years).
Political Expropriation,
etc.
■ Seldom High Government guarantee.
Partial credit guarantee from international financing institutions.
Force
Majeure
Natural
disasters, etc.
■ ■ Seldom High Appropriate insurance of assets.
Construction site to be located at higher (dry) altitude away from river
beds and areas which will be easily flooded.
Construction design standards to be engineered such that it will allow
assets to withstand regularly occurring Natural Disasters.
PPP Project Proposal 28 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
6.8 Need for government support
As the government is heavily regulating the wheat sector by setting procurement prices and by procuring annually
approx. 20% of the market volume (4 million MT out of a total production of 20 million MT) and is setting wheat
procurement and sales prices, this leaves little margin for private sector to develop private sector oriented grain trade
and storage operations as little margins are to be made.
As long as government maintains its wheat sector procurement policy the private sector will not invest in storage
capacity to store stocks owned by the Punjab Food Department, unless the Punjab Food Department will provide
guarantees on storage volume and annual lease payments.
Above are the main conclusions of the Wheat Sector Study which has been executed by RHDHV end 2015 on behalf of
Punjab Food Department and which is integrally attached as annex 1.
6.9 Tariff design
Following tariff design is proposed:
1. PFD Fixed Service Charge per MT stored in the range of Rs 2,500/ MT (but pending tender result)
2. PFD Variable Service Charge per MT stored of 10% of the Fixed Service Charge
3. Transit wheat cleaning and bulk truck loading services rendered of PFD wheat or Millers wheat at Rs 500/ MT
4. Storage of wheat, or other products, for third parties or own stock once PFD stocks have bene dispatched and
silos are empty: to be determined
PPP Project Proposal 29 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
7. Economic analysis
7.1 Least-cost analysis
7.1.1 Steel vs concrete silo
For the smaller capacities wheat silos, the installation of steel silos is optimal, because:
� Investment cost per MT is less: only once capacities over 50,000 MT are to be realised, the construction of
concrete silos is more effective (see also annex 1 - sector background - for a detailed cost comparison);
� Design works are rather limited, except for the engineering and design of the foundation, the design of the
superstructure can be outsourced to the equipment supplier, who will have standardized designs available;
� The installation of a steel silo can be realised quickly. After the order confirmation and reception of down
payment the manufacturing commonly can be done within 3 months, while also the installation on-site will
take a similar period
7.1.2 Capacities to be installed (10-20.000 MT)
As has been explained in section 4.2 the investment in a 20,000 MT silo with the installation of local handling
equipment, at US$ 85/ MT, is most economical. An important argument of the Punjab Food Department to erect
10,000/MT silos, at an investment cost of US$ 110/ MT, is that storage facilities should be easily reachable for small
farmers, which is considered to be an important argument.
Hence it is proposed to find a balanced combination for the construction of wheat silos including units of 10,000 MT at
the smaller wheat procurement centres, and units of 20,000 MT for the wheat procurement centres anticipating a
larger operation.
7.1.3 Installation of local or imported handling equipment
The installation of local or imported wheat conveying and cleaning equipment has been elaborated in detail in previous
sections. The installation of imported equipment will increase the overall investment cost with approx. 35-40% having
an effect on IRR and PBP. Reduced maintenance and a lower break-down frequency may however balance these
initially higher investment cost. This investment decision will have to be taken by the private sector operators as part of
their overall long-term business projections.
7.2 Economic rate of return
The Economic Rate of Return is an indicator for the benefits of the project to the entire economy, and as such:
� The reduction of losses, through the implementation of improved storage technology, of Rs 2,096/MT is
included as an economic benefit
� The import duties have been excluded from the investment cost
� Where applicable the Value Added Tax has been excluded from the operating cost
Applying above corrections for the Economic Analysis, the ERR is projected at 43.2% with a Pay Back Period of 2.2 years
(table 7.1). Main contributor of course to these highly positive ratios is the sharp reduction of wheat losses due to the
construction of advanced bulk storage systems.
PPP Project Proposal 30 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0 25 May 2016
Table 7.1: Economic Rate of Return (ERR) and Pay Back Period
REVENUES Initial value Growth rate Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Total capacity (MT) 10.000
Rental income: fixed charges
Capacity used 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Quantity (MT) 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000
Rental price storage (Rs / MT) 2.500 0,0% 2.500 2.500 2.500 2.500 2.500 2.500 2.500 2.500 2.500 2.500
Sales (Rs) 25.000.000 25.000.000 25.000.000 25.000.000 25.000.000 25.000.000 25.000.000 25.000.000 25.000.000 25.000.000
Rental income: variable charges
Quantity (MT) 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000
Cleaning, fumigation, aeration, recirculation 250 0,0% 250 250 250 250 250 250 250 250 250 250
Sales (Rs) 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000
Income from transit/cleaning operations
Capacity used 50% 50% 50% 50% 50% 50% 50% 50% 50% 50%
Quantity (MT) 5.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000
Transit unload, load, temporary storage 500 0,0% 500 500 500 500 500 500 500 500 500 500
Sales (Rs) 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000 2.500.000
Income storage other crops (maize, oilseeds)
Capacity used 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Quantity (MT) - - - - - - - - - -
Rental price storage (Rs / MT) 2.500 0,0% 2.500 2.500 2.500 2.500 2.500 2.500 2.500 2.500 2.500 2.500
Cleaning, fumigation, aeration, recirculation 250 0,0% 250 250 250 250 250 250 250 250 250 250
Sales (Rs) - - - - - - - - - -
Economic benefits
Reduction of losses during storage (table 2.3) 10.000 2.096 20.960.000 20.960.000 20.960.000 20.960.000 20.960.000 20.960.000 20.960.000 20.960.000 20.960.000 20.960.000
Total Sales (Rs) 50.960.000 50.960.000 50.960.000 50.960.000 50.960.000 50.960.000 50.960.000 50.960.000 50.960.000 50.960.000
COSTS Initial value Growth rate Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Fumigation
Cost (Rs per MT wheat) 20 0,0% 20 20 20 20 20 20 20 20 20 20
Quantity (MT) 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000
Fumigation cost (Rs) 200.000 200.000 200.000 200.000 200.000 200.000 200.000 200.000 200.000 200.000
Labour
Fixed labour (Rs per employee) 240.000 0,0% 240.000 240.000 240.000 240.000 240.000 240.000 240.000 240.000 240.000 240.000
Fixed labour (# of employees) 7 7 7 7 7 7 7 7 7 7 7
Variable labour (Rs per empl., 2 months) 50.000 0,0% 50.000 50.000 50.000 50.000 50.000 50.000 50.000 50.000 50.000 50.000
Variable labour (# of employees) 5 5 5 5 5 5 5 5 5 5 5
Labour cost (Rs) 1.930.000 1.930.000 1.930.000 1.930.000 1.930.000 1.930.000 1.930.000 1.930.000 1.930.000 1.930.000
Utilities
Cost (Rs / MT) storage 35 0,0% 35 35 35 35 35 35 35 35 35 35
Cost (Rs / MT) cleaning 20 0,0% 20 20 20 20 20 20 20 20 20 20
Electricity cost (Rs) 550.000 550.000 550.000 550.000 550.000 550.000 550.000 550.000 550.000 550.000
Water cost (Rs) 5.000 0,0% 5.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000
Overhead costs
Administrative 240.000 0,0% 240.000 240.000 240.000 240.000 240.000 240.000 240.000 240.000 240.000 240.000
Marketing - 0,0% - - - - - - - - - -
Maintenance 3,0% 0,0% 2.454.192 2.454.192 2.454.192 2.454.192 2.454.192 2.454.192 2.454.192 2.454.192 2.454.192 2.454.192
Insurance 1,0% 0,0% 818.064 818.064 818.064 818.064 818.064 818.064 818.064 818.064 818.064 818.064
Other overhead costs 1.000.000 0,0% 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000
Total overhead (Rs) 4.512.256 4.512.256 4.512.256 4.512.256 4.512.256 4.512.256 4.512.256 4.512.256 4.512.256 4.512.256
Total Costs (Rs) 0,0% 7.197.256 7.197.256 7.197.256 7.197.256 7.197.256 7.197.256 7.197.256 7.197.256 7.197.256 7.197.256
EBITDA (Rs) 43.762.744 43.762.744 43.762.744 43.762.744 43.762.744 43.762.744 43.762.744 43.762.744 43.762.744 43.762.744
INVESTMENTS (Rs) -98.426.400
CASH FLOW (YEARLY) -98.426.400 43.762.744 43.762.744 43.762.744 43.762.744 43.762.744 43.762.744 43.762.744 43.762.744 43.762.744 43.762.744
CASH FLOW (CUMMULATIVE) -98.426.400 -54.663.656 -10.900.912 32.861.832 76.624.576 120.387.320 164.150.064 207.912.808 251.675.552 295.438.296 339.201.040
ECONOMICAL RATE OF RETURN 43,2%
PAYBACK PERIOD (YEARS) 2,2
PPP Project Proposal 31 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
7.3 Value for money
Should government build the storage facilities from own funding and under management and control of the Punjab
Food Department, then of course the immediate financial benefits may flow to the Government budget. The reason
however to involve private sector investment is that government will not be able to make budget available at short
term.
It is assumed that under government it may take up to 10 years to realise the necessary wheat storage capacity of 2
million MT, while it is projected that under PPP-terms it may be possible to realise these investments in a three years
period.
Considering the fact that each year the difference in losses amounts to 6% x 2 million MT = 120,000 MT loss reduction
at a value of Rs 3.9 billion equal to US$ 39 million. Over a 7 years period the loss reduction in itself (US$ 273 million) will
pay for the initial investments required.
In addition it is assumed that mal-practices, as existing within the chain, may will reduce. For example farmers will be
paid on a nett Fair Average Quality volume, resulting in zero payments for dust and rubbish as these will be removed.
As a result dust and rubbish will not have to be transported to the deficit areas and millers will not have to go through
the troublesome process to remove it.
PPP Project Proposal 32 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
BE3531-102-R004 PPP Proposal V1.0
25 May 2016
8. Project implementation plan
The project implementation plan for the entire project for the realisation of 2 million MT near-farm wheat silos is given
in Graph 8.1, and given sufficient interest from private sector and excluding unforeseen delays, a project
implementation period of approx. three years should be considered feasible.
The construction period for one near-farm wheat silo is given in Graph 8.2. The time period required for project
preparation, land acquisition and construction is estimated at one year. As it is a relatively simple construction, an
ambitious contractor would be able to erect the entire facility in three to four months, once preparatory works have
been completed.
Project Proposal 33 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
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Graph 8.1: Time Schedule for PPP project implementation for 200 near-farm silos
Project Proposal 34 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
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Graph 8.2: Time schedule for the construction of 1 near-farm silo
PPP Project Proposal 35 RHDHV
For the construction of 2 million MT Near-Farm Wheat Storage Facilities Punjab Food Department
World Food Programme
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9. Draft tender and concession agreement documents
9.1 Draft Tender Document
The Draft Tender Document has been prepared and is attached as annex 8. The Draft Tender Document follows main
characteristics as outlined below:
� A description of the bid-package including main project features: The bid-package has been designed in such a
way that it will allow to offer for one near-farm wheat silo up to a maximum of 5. By following this approach
also medium sized companies may be interested in forwarding a bid as investments will be limited;
� A double stage tender procedure is proposed: Due to the fact that the investments are limited in size the Bid
Requirements have been designed compact and simple. Hence bid preparation will not require a massive
effort. However to attract investors with experience in wheat handling, storage and processing it is considered
important to first qualify them, prior to formal bid invitation;
� For the pilot project (20 silos) it is proposed that only national investors are allowed to bid. Based on this
experience the scaling-up by launching the 2nd
and the 3rd
tender at a later stage, international bidders will also
be requested to forward their bids;
� In order not to demotivate potential investors the Bid Security amount, with Rs. one million, is reasonable.
Considering the size of the investment it should be reviewed whether the Bid Security may be omitted fully,
which would further simplify procedures.
9.2 Draft Concession Agreement
The draft Concession Agreement, including all its performance parameters, is attached as annex 9. This document will
have to be extensively reviewed by the Legal Department.
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Annex 1: Sector Background
(RHDHV study on which basis CM has approved wheat silo construction scheme)
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Annex 2: Business Case and Financial Model
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Annex 3: Market Evaluation
- Local Market
- International Market
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Annex 4: Site information
- Site Description
- Environmental Impact Analysis
- Social Impact Analysis
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Annex 5: Technical Specifications for 10.000 MT Steel Silo Complex
1. General This section lays down the layout of the silo facilities, components and minimum specifications for the bulk storage.
The new storage facility will be used for the purchase and storage of wheat from farmers and aim to replace the
existing open storage (Ganjis) of the Punjab Food Department (PFD). The location of the wheat storage facility will be in
the vicinity of the farmers.
The silo facilities should be designed and built with the following main objectives:
• Ensure safe long term storage with minimum loss in quality of grain;
• Efficient handling of grains with minimum losses;
• Removal of impurities;
• Integration with present collection and distribution systems of PFD;
• Optimize capital investment;
• Enable efficient operations and maintenance;
• Ensure safety and security.
The storage capacity of the near farm-storage facility to be constructed shall be 10,000 MT.
Important Note:
Following specification is also applicable for a 20,000 MT steel silo complex provided that minimum intake and
outtake capacity shall be read as 75 MT/hr instead of 50 MT /hr.
2. Basis of Design
The location of the facility shall be outside potential flooding areas and load bearing capacity of land shall be suitable
for storage silos without the use of piling for foundation.
Intake will only take place during the wheat harvest season. Outtake may take place at any time, based on instructions
by the PFD. However, intake and outtake will not take place simultaneously. The intake capacities of handling
equipment shall be calculated by the supplier on the basis of the following minimum operational requirements during
the harvest period:
• Procurement period : 40 calendar days
• Working days : 7 days per week
• Working time : 12 hours per day
• Effective working time : 10 hours per day
• Overall efficiency : 90%
• Mode of delivery : 50% by tractor,
50% by truck
• Average tractor load : 5 MT
• Average truck load : 20 MT
• Vehicle weighing time : 2 minutes in-weighing
: 2 minutes out-weighing
Operational requirements for outtake shall be based on 8 hours working time during 5 days per week.
Wheat storage capacity of each individual silo shall be 2,500 or 5,000 MT.
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3. Grain Specifications
Wheat:
• Average bulk density: 0.75 t/m3 (0.833 t/m
3 for structural calculation purposes)
• Angle of repose : 28 degrees in a stockpile
• Particle size : under 10 mm
• Moisture content : 12% or less
• Other properties : Free flowing, abrasive, containing potentially explosive dust
By-products:
• Average bulk density : 0.3 t/m3
• Angle of repose : 45 degrees in a stock pile
• Particle size : 1 mm to 10 mm
• Moisture content : 12% or less
• Other properties : Less than average flowing
Grain Dust and Chaff:
• Average bulk density : 0.2 t/m3
• Angle of repose : 50 degrees in a stock pile
• Particle size : 1 mm to 5 mm
• Moisture content : 4% to 8%
• Other properties : Not free flowing
4. Process description and facilities
For a typical design of a 10,000 MT near-farm storage facility, reference is made to the drawings in Annex 8.
The layout of the grain silo facility may vary depending on the shape of the selected site.
Annexed drawings are for reference only. Final design and capacities shall be determined by the equipment supplier.
The new storage facility shall comprise the following main material handling and storage elements:
• Wheat intake facilities (50 MT/hr), including:
o 2 concrete intake pits with heavy duty grating suitable for the unloading of bulk trucks as well as the
unloading of bags-to-bulk (during the transition period);
o Canopy consisting of steel structure with roof cladding;
o 1 intake chain conveyor;
o 1 magnetic separator to remove steel parts;
o 1 intake bucket elevator feeding the cleaning section.
• Pre-cleaning system (50 MT/hr), including:
o Screening equipment and aspiration system to separate into the following fractions:
o 1st
grade (cleaned wheat);
o 2nd
grade (small and broken grains);
o Coarse particles (waste);
o Dust and lightweight particles.
• Easy access for screen replacement and maintenance;
• 1 bulk weighing scale (accuracy of weighing system ± 0.05%) with upper and lower hopper, discharging in to the silo
intake bucket elevator;
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• 1 truck loading hopper with retractable loading bellow (capacity approx. 100 m3) for small grains and dust.
Minimum slope of the truck loading hopper: 60 degrees;
• 1 truck loading hopper with retractable loading bellow (capacity approx. 100 m3) for coarse particles. Minimum
slope of the truck loading hopper: 60 degrees;
• Steel pre-cleaning tower with elevator pit and foundation, stairs and maintenance platforms.
Silo intake equipment (50 MT/hr), including;
• 1 silo intake bucket elevator with steel elevator tower;
• Distribution chain conveyors on top of the silos;
• Supporting steel structure with foundation.
• Storage system, including:
o Steel silos, complete with foundation, manholes, ladders, cages, platforms, etc.;
o Silo side discharge system;
o Silo aeration system with centrifugal fans and automated control;
o Roof exhaust fans;
o Fumigation (phosphine) or ozonation system;
o Sweeping augers;
o Silo unloading (chain or screw) conveyor;
o Low level indicator;
o High level indicator;
o Temperature control cables;
o Inspection opening;
o Centrally based temperature monitoring system;
o Centrally based inventory control system.
• Outtake and truck loading system (50 MT/hr), including:
o 1 outtake chain conveyor feeding the truck loading bin via the silo intake bucket elevator;
o Possibility for silo re-circulation;
o 1 truck loading bin (minimum capacity 100 m3) equipped with a dosing unit which can be set at the
required load and has an accuracy of +/- 2%. Minimum slope of the truck loading hopper: 45 degrees;
o Underneath the dosing unit a retractable truck loading bellow;
o Steel truck loading tower.
• Automation control system, including:
o PLC system;
o Safety system (e.g. emergency stop relays and push buttons)
o SCADA system with 2 redundant servers
o 1 operating station in the control room and 1 spare;
o UPS dedicated to the control equipment;
o 1 colour laser printer;
o Network gear;
o Management information system with OPC connection to other systems (e.g. weighing and temperature
monitoring).
• Utilities and services, including;
o Block wall around the storage facility;
o Power supply from the main distribution network with substation at the storage facility;
o Water supply and distribution system;
o Rainwater discharge system;
o Sewage system
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o Fire-fighting according to local regulations;
o Telephone and IT-system;
o Lighting systems.
5. Site layout, infrastructure and truck logistics
In order to adequately handle the trucks, the new storage facility requires:
• Sufficient waiting area for trucks before the wheat sampling station;
• A wheat sampling station before the storage facility entrance, including:
o Truck sampling area;
o Truck sampling platform for automated or manual bulk truck sampling;
o Sampling and laboratory equipment for testing of moisture level, percentage of damaged grains and
impurities.
• A combined truck entrance/exit gate;
• Weighbridge facilities, including:
o Pit mounted weighbridge of size and capacity suitable to meet maximum allowable truck dimensions and
weight by Pakistani regulations, but with a minimum weighing capacity of 100 MT;
o An efficient administrative system to register trucks before entering the weighbridge;
o Weighing processor;
o Minimum static weighing accuracy of +/- 0.05%.
• Adequate truck waiting area between weighbridge and wheat intake facilities;
• Adequate road infrastructure to guarantee an uni-directional flow on the facility;
The proposed truck logistics for wheat delivery at the storage facility is as follows:
1) Trucks and tractors for delivering wheat for the storage facility have to queue before the sampling station. The
trucks can drive up to the sampling station once this facility is free. Here a procurement officer will check if the
truck is at the right address and allowed to enter the storage facility. Once this is checked, the wheat will be
sampled manually from the truck sampling platform. Subsequently the sample will be analysed in the
laboratory. As soon as the test results are available and the procurement officer and supplier have reached an
agreement on the payment conditions (depending on wheat quality), the truck is registered and directed to
the weighbridge;
2) Registered trucks drive to the weighbridge where the gross weight is recorded;
3) After weighing the trucks drive to the truck dump pit, where the wheat is unloaded following the instructions
of the operator;
4) Subsequently, the trucks drive up to the truck weighbridge again where the tare weight is registered. Here the
truck driver receives a copy of the weighing ticket and final payments will be settled.
The proposed truck logistics for dispatch at the storage facility is as follows:
1) Bulk trucks for wheat dispatch will be registered before arrival;
2) Upon arrival the bulk trucks directly drive on the weighbridge where the tare weight is recorded;
3) After weighing the trucks drive to the truck loading station, where the product is loaded following the
instructions of the operator. The trucks shall receive a pre-described load of (pre-paid) wheat which shall be
controlled by the load cells under the truck loading bin in combination with the weighing processor. The trucks
loading bins for waste or 2nd
grade of wheat are not equipped with load cells and will be loaded on sight;
4) Subsequently, the truck drives up to the truck weighbridge again where the gross weight is registered. Here the
truck driver receives a copy of the weighing ticket.
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In order to reduce delays in truck registration, payments and other formalities near the truck entrance/exit, a suitable
registration and weighing system shall be provided and agreed upon with the PFD.
6. Auxiliary buildings
Location, layout and dimensions of the utility rooms required for the proper functioning of the storage facility, such as
substation, electrical switch room, etc. shall be determined by the supplier.
Apart from these general utility rooms, the following auxiliary buildings are considered to be part of the storage facility
in order to provide efficient operations and maintenance:
• Administration building, including:
o Truck registration and payment office;
o Operator room;
o Laboratory for sample testing;
o Wash room;
o Pantry;
o Truck weighbridge office.
Layout drawings, location and minimum layout requirements of these buildings shall be determined in close
consultation with the PFD.
7. Quality of materials
All plant and materials shall be new and shall comply with the relevant codes.
The supplier shall only supply and deliver plant and materials that are suitable for the uses in the applicable (weather)
conditions as where such will be installed.
All plant and materials shall be of a robust design and of proven technology, i.e. the same type of equipment shall be in
use successfully for more than two years at 3 different locations, without major breakdowns on similar duties and
conditions. Unproven or prototype equipment or components are not acceptable.
The steel silos shall be made in galvanised and corrugated sheets with outside galvanised stiffeners. Corrugated sheets
and stiffeners shall be made of steel with minimum quality S 350 GD for the silo wall (according to UNE-EN-10326
(2004) and S 280 GD for the silo roof and platforms. Minimum sheet thickness shall be 1.0 mm. Stiffeners shall be
provided with a minimum thickness of 1.5 mm.
The galvanization for all silo sheeting, supports and supporting structures shall be continuous hot dip zinc coating with a
minimum weight of 450 gr/m2
surface, according to UNE-EN 10326. Coating weight of platforms shall be more than 300
gr/m2 surface.
All bolts shall be galvanized with minimum quality 8.8 or 10.9 and the washers are metal sheet with a neoprene gasket
ensuring the seal.
All silo equipment shall be ATEX certified.
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8. Preferred equipment suppliers
The steel storage silos and silo equipment shall origin from reputable international suppliers. The silo supplier shall
have a track record of at least 3 similar silo projects in Pakistan.
Other grain handling equipment may be imported from International suppliers or purchased locally.
9. Spare parts
The Contractor shall have sufficient spare parts available as required for 2 (two) years of normal operation.
The Contractor shall have one full set of electrical tools and special tools available on site as required for normal
maintenance.
10. Applicable standards and norms
The silo storage facilities shall be designed and constructed in accordance with the applicable codes of Pakistan where
available, and with international codes in the absence of codes in Pakistan, and good industry practices, as indicated
below:
Primary Building Codes:
• Governing building Code: National Building Code of Pakistan;
• Supplemental building code: Uniform Building Code (UBC) 1997;
• The more stringent requirements of the two codes shall govern.
Other applicable Codes and Regulations:
• NFPA 69: Standard on Explosion Prevention Systems;
• International ATEX regulations;
• IMC International Mechanical Code;
• International Electrical Code (IEC) Standards, e.g. IEC 61 508;
• International Standards for Automaton, e.g. ISA 88, ISA 95 and ISA 99;
• The I.E.E. Wiring Regulations for Electrical Installations;
• AS 2628 – Australian Standards for fumigation.
The above Standards and regulations are offered for guidance only. It is the responsibility of the Bidder to check and
comply with all regulations which apply to any part of the Agreement.
11. Environmental Compliance
The Bidder must identify restrictions, International and Pakistani legislation regarding the environment and
demonstrate the full adherence to the Environmental Impact Assessment (EIA).
The environmental standards that must be complied with include (but are not limited to) those listed below:
1. Legislative and Institutional:
• Pakistan Environmental Protection Act, 1997
• Pakistan Environmental Protection Agency (Review of IEE and EIA Regulations, 2000)
• National Environmental Quality Standards (NEQS), 2000
• Building Energy Code of Pakistan, 2008
• The Forest Act, 1927 (and Provincial Acts and Rules)
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• Land Acquisition Act, 1894 • Antiquity Act, 1925
• Factories Act, 1934
2. Environmental Guidelines:
• Environmental Protection Agency’s Environmental Guidelines
12. Performance Standards for a 10,000 MT silo:
The Concessionaire should provide efficient services in the form of handling and storage of wheat. The PFD, therefore,
identifies the key performance indicators relating to the operations and maintenance of the storage facility and
stipulates penalties for failure to achieve the requisite levels of performance. particular, the Concessionaire is required
to ensure the availability of storage capacity at the pre-determined normative levels.
Parameter Performance Requirement
Turn-around time for
delivery vehicles
The nominal design turn-around time of single vehicle, shall not exceed 30
minutes.
The maximum delivery turn-around time of vehicles, under normal
operating conditions, from entrance security gate to exit security gate, shall
not exceed 3 (three) hours.
Test to include sampling, sample testing, weighing full, tipping, weighing
empty, issue of documentation, payment and clearing exit security gate.
Turn-around times for
dispatch vehicles
The maximum dispatch turn-around time of vehicles, under normal
operating conditions, from entrance security gate to exit security gate, shall
not exceed 1 (one) hour.
Testing and calibration
of weighbridges and
bulk weighers
The weighbridge shall be equipped with a device that is capable of
indicating and printing weight in increments of not greater than 5 kg.
The tolerance that shall be applied to the accuracy of the entire system
shall be 0.1% of the known applied load.
Equipment shall be tested in accordance with manufactures operating
manual and calibration certificate.
Capacity requirements
receiving and cleaning
system
Receiving volume during the harvest period amounts 10,000MT in 40 days.
Minimum intake equipment capacity 50 MT/hr.
Capacity requirements
storage system
Nett storage capacity 10,000 MT of wheat distributed over 4 silos of 2,500
MT each or 2 silos of 5,000 MT
Capacity requirements
dispatch system
Dispatch during post-harvest period 10,000MT.
Minimum outtake equipment capacity 50 MT/hr.
Sampling and Sample
Testing System
(i) Sampling of Grain delivered in Vehicles:
To determine acceptance specifications for grain delivered in vehicles, the
operator will be required to take the following minimum number of samples
with an authorized sampler:
• for tractor-trolley: 2 (three) samples
• for trucks up to 10 tonnes payload: 3 (three) samples
• for trucks exceeding 10 tonnes payload: 4 (four) samples
These samples shall be reduced to 750 gr g representative wheat sample
using an authorized grain divider.
(ii) Sampling Grain for dispatch:
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To determine dispatch specifications, the operator will be required to take
the following minimum number of samples with an authorized sampler:
• for vehicles up to 10 tonnes payload: 2 (two) samples
• for vehicles up to 20 tonnes payload: 3 (three) samples
• for vehicles in excess of 20 tonnes payload 4 (four) samples.
These samples shall be reduced to 750 g representative wheat sample using
an authorized Grain divider.
(iii) Testing:
Testing of Grain samples shall be performed in accordance with applicable
international standards relevant to the sampling and testing.
Minimum grain acceptance
specifications
Grain delivered at the storage silo facility shall be tested and shall conform
with the following Fair Average Quality (FAQ) standards for wheat in Punjab
prior to unloading:
• Moisture content: Maximum 10.0% by weight
• Dust, dirt & other non-edible matter: Maximum 1.0% by weight
• Other food grains: Maximum 5.0% by weight
• Shrivelled and damaged grains: Maximum 5.0% by weight
• Protein content: May vary
• Infested and weevilled grain: Rejected
Storage and dispatch
specifications (after pre-
cleaning)
<<to be reviewed by PFD>>
100% of samples of wheat grains dispatched from the facilities be tested and
shall conform with the following specifications:
• Moisture content: Maximum 12.0% by weight
• Dust, dirt & other non-edible matter; Maximum 0.75% by weight
• By-products: Maximum 2.0% by weight
• Shrivelled and damaged grains: Maximum 2.0% by weight
• Protein content: May vary
• Infested and weevilled grain: 0%
Steel silo quality Minimum steel quality (according to UNE-EN 10326):
• S 350 GD for the silo wall;
• S 280 GD for the silo roof and platforms
Minimum steel thickness:
• 1.0 mm for the walls
• 1.5 mm for the stiffeners
Minimum coating weight of galvanization (according to UNE-EN 10326):
• 450 gr/m2 surface for the walls
• 300 gr/m2 surface for platforms
Water tightness steel silos Demonstrate the ability to prevent rain water from entering the storage
silos.
Airtightness steel silos Demonstrate that all steel silos are sufficiently sealed to allow effective
fumigation.
Response time for
reparations and repair
The Concessionaire shall repair and rectify any defects and deficiencies
within a period of 24 hours.
Acceptable storage and
transit losses
Maximum 0.25% (zero point twenty five percent) of actual annual accepted
tonnage at each wheat silo storage facility.
This amount will be credited to the operator in the annual inventory
reconciliation at audit time.
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Annex 6 Layout drawings of 10.000 MT Steel Silo Complex
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Annex 7: Investment Cost Estimate
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Annex 8: Draft Tender Document
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Annex 9: Draft Concession Agreement
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Annex 10: Profile of the Transaction Advisor
Preferably the Transaction Advisor should have following experience and capacities:
� Experience in Pakistan
� Background in structuring PPP Transactions
� Experience in grain handling, storage and processing or related agribusiness fields
For the structuring of current PPP Transaction following expert profiles should be included in the proposed team:
No. Position Qualification and expertise required Job Description
1 Team Leader
(national)
Education
Graduate Chartered/Professional Engineer
with a Master degree in relevant field.
Expertise
Minimum of 15 years of overall professional
experience in project preparation and
construction supervision.
Experience in wheat storing, handling,
conveying, and weighing, packaging
equipment and quality control.
Experience in environmental impact
assessment, risk management and
mitigation measures.
• Full responsibility for all aspects of PPP project management,
administration, design review, quality control, construction
supervision, contract administration, monitoring, maintaining liaison
and reporting.
• Management of the activities of the team to ensure timely delivery of
project output.
• Provide advice and direction to the team
• Prepare project plan, schedules and time frame for publications of
different reports.
• Oversee all procurement of services, equipment and materials
required for the work and coordinate required logistics for efficient
performance of the team.
• Providing assistance in preparation of reimbursement application
• Liaison with PFD and other concerned agencies.
• Periodic and regular updating of the project implementation
schedule.
• Assist with day-to-day project planning and management.
• Facilitate information flow between all parties involved.
• Review and update design calculations and drawing during
implementation as proposed by the contractor.
• Preparation of reports.
2 Operational
Management
and Technical
Expert
(national)
Education
MSc. Economics and/or Engineering.
Expertise
Minimum 15 years of overall professional
experience in business planning and
engineering for grain handling and storage
facilities.
Extensive international experience in grain
storing, handling, conveying, and weighing,
packaging equipment and quality control.
• Development of clear Operational and Technical Review for the
proposed wheat silo complexes.
3 Environmental
Specialist with
experience in
Land Issues
(national)
Education
MSc. in Environmental Science or equivalent
degree. Civil Engineering background will be
an added advantage.
Expertise
15 years of experience in EIA development
and implementation, especially with Silo
construction and operation. Should have
experience in road, railway and waterways
as well as land issues and potential
resettlement. Experience with industrial
occupational health and safety is a must.
• Review the detailed engineering design of silos for each site
• Lead for the update and preparation of site specific EIA
• Lead the preparation of site specific environmental management
parameters based on the EIA along with budget (cost estimate) in
coordination with other consultants which will be included in the
bidding documents. Prepared EIA will also be attached with the
bidding document
• Lead the preparation of quality monitoring report and training
material for the PFD staff
• Supervise the implementation of the EIA including social and
environmental safeguard compliance and land related issues
• Supervise environmental and social safeguard compliance specially
the occupational health and safety aspect during project operation
4 Contract
Management
Specialist
(national)
Education
MSc. Civil/Structural engineering.
Licensed Professional/Chartered Engineer
Minimum 15 years’ experience in Contract
management or procurement in wheat
storage construction projects.
• Participating, as necessary, in developing the solicitation and writing
the draft documents. Contract administration must be considered
during this process.
• Documenting significant events.
• Maintaining appropriate records.
• Developing a timetable and start and end date for each performance
component. Include milestones with accompanying timeframes, and
monitoring and reporting requirements.
• Defining terms or conditions of default.
• Establishing a procedure, identifying a responsible person and
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No. Position Qualification and expertise required Job Description
establishing a timeframe for handling noncompliance.
• Establishing a procedure, identifying a responsible person and
establishing a timeline for making necessary contract decisions or
modifications.
5 Finance and
Marketing
Expert
(national)
Education
MSc. Finance and Marketing
Minimum 10 years’ experience in
structuring PPP finance deals, and
procurement in international construction
projects including steel silos
• Review marketing evaluation undertaken assessing interest of
potential investors
• Upon need the organization of national and international investors
conferences
• Review finance capacities of potential investors
• Preparation of a wheat construction finance scheme in cooperation
with financial institutions in order to facilitate and standardize
financing of the wheat silos by private sector