The cost <strong>of</strong> vegetable <strong>oil</strong> fortification is based on data obta<strong>in</strong>ed from <strong>oil</strong> fortify<strong>in</strong>g <strong>in</strong>dustries <strong>in</strong> Ug<strong>and</strong>a. To protect proprietary <strong>in</strong>formation, the cost estimates presented <strong>and</strong> discussed here are based on a hybrid <strong>of</strong> the two companies rather than actual separate costs <strong>of</strong> each company. The two companies’ output levels <strong>and</strong> the technology they use <strong>in</strong> fortify<strong>in</strong>g their products are similar. The only difference is whether the company uses a vitam<strong>in</strong> A premix/dilution or adds the vitam<strong>in</strong> A directly to the <strong>oil</strong>. The calculations assume the company: • consists <strong>of</strong> one plant • produces six batches • annually produces 50,250 metric tons <strong>of</strong> vegetable <strong>oil</strong> • uses one <strong>of</strong> two ret<strong>in</strong>ol palmitate <strong>Vitam<strong>in</strong></strong> A compounds: o 1 million IU/g, for which it pays 67,849 UGX (US$40.75) per kilogram (Table 4.2) or o 1.7 million IU/g, for which it pays 111,139 UGX (US$66.75) per kilogram (Table 4.3) • uses semi-quantitative chromogenic method for quality control • the exchange rate is 1,665 UGX per US$1.00 (the rate on May 1, 2008). 28
Table 4.2: The Private Sector Plant Costs <strong>of</strong> Fortify<strong>in</strong>g <strong>Vegetable</strong> Oil <strong>with</strong> <strong>Vitam<strong>in</strong></strong> A <strong>in</strong> Ug<strong>and</strong>a Fortificant: Ret<strong>in</strong>ol Palmitate 1 million IU / gram (Based on a weighted average <strong>of</strong> the costs <strong>of</strong> the two largest vegetable <strong>oil</strong> producers <strong>in</strong> Ug<strong>and</strong>a, <strong>and</strong> an annual output level <strong>of</strong> 50,250 tons per plant <strong>and</strong> 6 products/br<strong>and</strong>s) ONE-TIME CAPITAL COSTS To mix, <strong>in</strong>troduce <strong>and</strong> improve dispersion <strong>of</strong> vitam<strong>in</strong> A: UGX US$ sta<strong>in</strong>less steel tank for mak<strong>in</strong>g premix: 24,975,000 15,000 pump to pump premix solution <strong>in</strong>to process tank: 832,500 500 accessories 1,415,250 850 pip<strong>in</strong>g 333,000 200 27,555,750 16,550 Tra<strong>in</strong><strong>in</strong>g <strong>in</strong> <strong>in</strong>-plant QA-sensitization for QA heads <strong>of</strong> all food vehicles (25 staff, does not <strong>in</strong>clude value <strong>of</strong> staff time) 333,000 200 Tra<strong>in</strong><strong>in</strong>g <strong>in</strong> <strong>in</strong>-plant QA <strong>of</strong> supervisors, lab etc. personnel (25 staff, does not <strong>in</strong>clude value <strong>of</strong> staff time) 333,000 200 Re-design<strong>in</strong>g <strong>of</strong> label <strong>and</strong> pr<strong>in</strong>t<strong>in</strong>g plates ( 8 br<strong>and</strong>s) 3,496,500 2,100 Total Capital Costs: 31,718,250 19,050 ANNUAL RECURRENT COSTS 1. Premix Costs UGX US$ Us<strong>in</strong>g Ret<strong>in</strong>ol Palmitate 1 million IU/g to add 83.3 g <strong>of</strong> vitam<strong>in</strong> A / ton <strong>of</strong> vegetable <strong>oil</strong> 1,466 kg/quarter 99,469,236 59,741 Freight 5,055,939 3,037 Clearance 250,000 150 Import license/NDA Certification <strong>of</strong> Premix Supplier (prorated to quarterly payment) 25,000 15 2% NDA charge 1,989,385 1,195 Total Premix Cost/Quarter 106,789,560 64,138 Total Premix Cost/Year 427,158,238 256,551 2. QA /QC Test<strong>in</strong>g Costs-In Plant Method #1: (As described <strong>in</strong> ECSA <strong>Vegetable</strong> Oil <strong>Fortification</strong> Manual, 2007) Semi-quantitative test us<strong>in</strong>g a chromogenic reagent (US$4/test x 6 test/day x 250 days) = 9,990,000 6,000 Total Additional In-Plant Lab Costs: 9,990,000 6,000 3. External Lab Costs UIRI Lab Quantitative Test Fee = 80,000 per test 1,920,000 monthly for two tests per month External Lab Costs: 23,040,000 13,838 4. Incremental production costs Additional staff to h<strong>and</strong>le production/premix-related activities: 1/shift 300,000 Monthly salary 105,000 Benefits @ 35% <strong>of</strong> salary, <strong>in</strong>cludes: a) NSSF (National Social Security Fund, 10%) b) Transport <strong>and</strong> food allowances c) Health Insurance 405,000 Total remuneration <strong>of</strong> one production worker/month 1,215,000 Total cost 3 additional workers/month 14,580,000 8,757 Power for pump <strong>and</strong> two mix<strong>in</strong>g tanks: 4 kw/hr*9 hrs/day*355 days/yr*190 UGX/hr 2,428,200 1,458 Incremental Annual Production Costs: 17,008,200 10,215 Total Annual Incremental Costs <strong>of</strong> <strong>Fortification</strong> UGX US$ 1. Premix 427,158,238 256,551 2. Quality assurance / In-Plant lab test<strong>in</strong>g: 9,990,000 6,000 3. Quality control / External lab test<strong>in</strong>g: 23,040,000 13,838 4. Additional production costs 17,008,200 10,215 TOTAL: 477,196,438 286,604 29