Published on: 2024-05-13
Author - Prakalp M Jain (Click here to connect on linkedin)
How to Start Rice Milling Business in India
From Dal Rice to Fried Rice, From Pulao to Biryani, there is a bit of rice involved in every India’s life. Rice is consumed by over 50.00% Indian population as staple food. Rice is India’s one of the most major food crop with per capital consumption of rice above 110 Kg / year. India is the second-largest producer of rice in the world, after China. On account of various agriculture improvement initiatives under Green Revolution program, India has emerged as leading exporter country of rice from being net importer till 1970s. India exported rice amounting to about 896 billion INR in financial year 2023. This was a significant increase from the previous year which had exports valued at over 721 billion Indian rupees.
From the food security aspect, Rice is one of the strong resources that the government provides to needy households in India at very concessional rates or for free under certain government policies including Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) through fair price shops.
With rising demand of rice and its derivative products, India has huge potential to grow its rice production and processing capabilities. The state of West Bengal enjoys first rank is rice production in India with about 15.00% share of the total rice production in the country. In this ranking, Uttar Pradesh, Punjab, Orissa, Bihar, and Chhattisgarh follow West Bengal.
Central as well as state governments are putting thrust on increasing the rice cultivation as well as rice milling and rice processing capacities by offering various incentives and subsidies. States like Madhya Pradesh are putting focused efforts to increase rice cultivation in order to improve farmer incomes and rice production to leverage the agri-economy.
A rice milling business shall involve procurement of paddy, pre-cleaning, husking, paddy separation, polishing, sorting and mixing in order to package and ship it to customers. Based on our experience at Effologic in setting up food processing businesses, we are hereby summarizing key points that require careful planning to Start & run Rice Milling Business effectively.
The rice milling process uses mechanical devices to process paddy. Stones and dust are removed under processing part from paddy and then it is fed into de-husker which gives brown rice as outcome. The brown colored rice is further fed into huller. Huller polishes the brown rice to remove bran and polished rice from huller is ready for cooking. This entire process is referred as Rice Milling Process. Additional steps are adopted for basmati rice milling and also for enrichment of rice with minerals etc (fortification).
To start with, careful selection of the segment that you want to operate into, needs to be undertaken. Two main rice segments are Basmati and Non-Basmati rice in India. Basmati rice is a special variety of rice which is long and slender -grained rice and has a particular aroma. It has the longest grains of any rice making it more in demand in various food businesses.
Other than Basmati rice, India cultivates over 800 different varieties of rice like Sugandha, SHarbati, Sona Masoori, IPR etc. As non-basmati rice is about 30%-60% cheaper than the Basmati rice, Indians consume non-Basmati rice as well as export it in even larger quantities. In most of the food security program of central and state governments, non-basmati rice is distributed at concessional prices to poor & needy families.
As rice milling process for basmati & non-basmati rice is separate, land requirements, investment, project cost, plant & machineries will differ accordingly. Factors like availability of type of rice in your area, consumption of rice, warehousing facilities, export opportunities and export-infrastructure etc. need to be carefully analyzed to finalize the segment. One major thing to note is that for Basmati Rice Milling requires certain additional processing like Parboiling etc, which will require additional investments & procedures.
First of all, proper market analysis about availability of Paddy as raw material needs to be undertaken. Factors like distance from Mandi, warehouse etc and no. of farmers / mandis , stocking capacity etc. need to be considered.
Model 01 -Custom Rice Milling
Many Rice Mills undertake custom milling i.e. milling on Job work basis for Government, government entities, public sector units or large millers. Under this business model, paddy is supplied by the respective entity and the rice miller undertakes milling on job work basis and gets paid milling charges on per Ton, Per Quintal or Per KG basis. Most of the rice procured by Central / State Governments are milled under custom milling model where the government entities pay milling charges, transportation, loading and unloading charges to registered milers. Presently average milling rates of about Rs 35 to Rs. 50 per Quintal are bring paid by Government entities in states like Madhya Pradesh for rice milling. Additionally, revenues can be generated from other by-products like Broken Rice, Husk, Rice Bran etc which can also be sold in open market.
If you are new entrepreneur in the segment and want to start, you can start from custom milling as it gives clarity about revenues without pressure of procurement, sales and marketing work.
Model 02 - Private Rice Milling -
Under Private Rice Milling business, entrepreneur usually purchases Paddy in large quantities from farmers / Mandis and undertakes milling in own premises. Milled rice can be eventually sold in own retail brand name or can be supplied to large / bulk purchasers. If you want to establish your own brand in this segment, you can setup dealer, distributor and retailer model and supply goods in this value chain. By establishing own brand, returns as per segment from 05 Rs. / Kg & above can be generated.
Depending on the segment that you choose i.e. Basmati vs Non-Basmati Rice Milling, land requirement would change. However, a 04 TPH non-basmati custom milling unit can be setup on land area starting from 20,000 sq ft excluding warehousing / stocking area. Land requirement would increase for bigger projects.
Depending on the segment, requirements of plant and machines would change. Majorly below machine are required :
Though it will vary from location to location and state to state, majorly below licenses and approvals shall be required for a Rice Mill Project :
To start with, funds available to setup rice mill need to be analyzed. At initial level a 04 to 05 ton per house (TPH) unit can be considered depending on funds available. Excluding land cost, 04 -05 TPH Rice Milling Factory can be setup with initial investment of approx. Rs. One Crore (Rs. 100.00 Lacs). However, recently, there have been introduction of mini-rice milling setups also that can be started in as low as about Rs. 25.00 lacs in India but with alower capacity. Further, Working capital requirements need to be assessed separately as per project parameters. Subject to eligibility, upto 75% Project Finance Loan can be obtained from Banks / Financial Institutions and balance 25.00% need to be arranged by Promoter as own Margin Money. Land need to be arranged under ownership or lease hold basis. The initial investment varies based on factors such as scale, location, and infrastructure adopted. A detailed business plan and financial analysis are essential to determine the specific investment requirements.
In order to apply for Project Loan for Rice Milling Unit, you would be required to meet below norms and provide documents / information to your Bank :
Remember that sanctioning of loan is discretion of the Bank so make sure that you meet required norms as stipulated by Bank. Once Project Cost is finalized, entrepreneur needs to ensure availability of margin money and also apply to Bank / Financing Institution for obtaining Project Loan and Working Capital facility like Cash Credit / Overdraft facility. Special focus need to be given to assessment of working capital requirement so that smooth day to day business can be run. In today’s time, schemes like Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) for collateral free loans, Agriculture Infrastructure Fund (AIF) etc. can be explored to avail smooth financing.
In order to promote agro-processing sector, Central government and various State Governments provide various capital subsidies and interest subsidies are being provided to Rice Milling businesses. Under Agriculture Infrastructure Fund (AIF), the central government is currently offering upto 3.00% interest subvention scheme and also reimbursement of Credit Guarantee Fees. Further, States like Madhya Pradesh are offering upto 48.00% capital subsidies also to promote rice milling businesses. Entrepreneurs can carefully understand, analyze and apply to take benefits of these schemes which can improve project viability by subsidies on rice milling project.
On-time implantation can be the key to success. So, it is required to ensure that the project works are executed smoothly. For this purpose, as and when required, suitable technical and financial experts can be engaged and suitable strategy can be made for timely implementation with maintaining all compliances and approvals. Also, industrial and food safety standards need to be adhered to while construction and operations of the project.
Maintaining consistent and effective quality services shall be helpful in making a positive brand image in market. Thus, Quality Management practices need to be adopted to suit best industry standards.
India is the world's largest rice exporter (since 2012), with its exports increasing by 49 percent in 2020 and 46 percent in 2021, reaching 22.1 million tonnes in 2022. So, entrepreneurs can also explore rice export from India for better business opportunities.
As Rice Industry is surely the backbone of our agri-economy, it has huge potential to be tapped by entrepreneurs. With focus of Indian government to move from ‘agri-based’ to ‘agro-processing based’ economy, there are excellent opportunities waiting for entrepreneurs in domestic as well as export front in Rice Milling Business.
{Note – Details given hereinabove are for creating general awareness and these details, information and data can differ from state to state, Project to Project, client to client and from time to time. Please read, understand and analyze each Projects requirement carefully and seek professional help prior to making investment decisions}
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