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Cost structure of MSMEs in rice milling

Business Standard 

Rice milling generates significant employment in agrarian India, and as a key sector of its agricultural and food processing industry, presents an attractive business opportunity for entrepreneurs across the country. CRISIL has analysed the performance and cost structure of 400 rated MSMEs involved in rice processing for 2011-12 (refers to financial year, April 1 to March 31).

The analysis indicates that the cost of raw material, i.e., paddy, constitutes the largest portion of the MSMEs' overall cost structure (excluding depreciation and finance charges), accounting for an average of 90.68 per cent of their overall costs. This forms a significant proportion as compared to the share of processing expenses (4.89 per cent) and selling expenses (2.30 per cent). Employee and power costs also account for low shares of 1.34 per cent and 0.79 per cent respectively of the total cost.

The analysis also indicates variations in the share of power costs from state to state - mills in the rice belts of Bihar, Chhattisgarh, Gujarat, and Karnataka appear favourably placed with electricity expenses below 0.55 per cent of overall cost, as compared to mills in West Bengal, Punjab, Uttar Pradesh, Haryana, Andhra Pradesh, Maharashtra, and Tamil Nadu, where power costs are more than 0.8 per cent of the overall cost structure.

Note: The analysis is based on the latest audited financial statements of CRISIL-rated MSMEs. Most enterprises finalise their audited financials by the end of the second quarter, after the closure of the financial year. CRISIL rates over 45,000 MSMEs in India. This fortnightly tracker presents to our readers insights on MSMEs, a key element of the Indian economy.

First Published: Mon, January 06 2014. 21:34 IST