PC-1A PILOT PROJECT FOR CIGAR

SUBMITTED TO GOVERNMENT OF KHYBER PAKHTUNKHWADIRECTORATE GENERAL, AGRICULTURE RESEARCH SYSTEM,

KHYBER PAKHTUNKHWA, JULY, 2015

Total Allocation: 5.000 millionProject Cost: 4.260 millionDuration: 1 year (July-June 2015-16)ADP #. 19, Code 150732

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GOVERNMENT OF PAKISTAN PLANNING COMMISSIONPC-I FORM

(PRODUCTION SECTORS)

1. Name of the Project: A PILOT PROJECT FOR CIGAR

2. Location: This Project will be located in the following 6 locations of Khyber Pakhtunkhwa (

Peshawar, Swabi, Bunair, Serai Nourang, Abbottabad and Mansehra)

3. Authorities responsible for:

Indicate name of agency responsible for sponsoring, execution, operation and maintenance

i. Sponsoring Government of Khyber Pakhtunkhwa (ADP 2015-16) through

Agriculture, Livestock and Cooperative Deptt, Khyber Pakhtunkhwa

ii. Execution

Director General Agriculture Research through concerned P.I and Focal Persons

The Project activities will be based at 6 locations of Khyber Pakhtunkhwa

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iii. Operation and maintenance

Principal Investigator (P.I) along with Focal Person/s among the Research Officers of the

concerned Institute/Stations nominated by the Director General to run the project activities at their

respective location.

In case of more than one agency, give their component wise responsibility. For provincial

projects, name of the concerned federal ministry be provided.

NA

4. a. Plan provision

If the project is included in the plan, specify actual allocation.

The Project has been included in the plan and reflected in ADP 2015-16 with an amount

of Rs. 5.000 million. The PC-1 is submitted with an amount of Rs. 4.260 million after

concurrence issued by the Finance Department.

If not included in the current plan, what warrants its inclusion and how it is

now proposed to be accommodated

Include in the current plan.

If the project is proposed to be financed out of the block provision, indicate.

NA

b. Provision in the current year PSPD/ADP

Following is the provision in the ADP 2015-16 of the province

Head Allocation in ADP 2015-16

Project Cost after Concurrence

TF beyond 2015-16

Revenue 5.000 million 4.260 million 0.000

Total 5.000 million 4.260 million 0.000

5. Project objectives and its relationship with sector objectives:

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The objectives of the sector/sub sector as indicated in the medium term/five year plan

be reproduced. Indicate objectives of the project and develop a linkage between the

proposed project and sectoral objectives.

Project objectives:

This project is initiated to stream line the research activities with respect to climate change

and conservation for sustainable use of resources. Overall objective of the project is to introduce

the cigar tobacco crop and associated crop husbandry issues, area identification, growth and yield

assessment and thereafter learning associated procedures like fermentation and air curing etc.

Main objectives during the pilot phase include:

Collection and import of seed material for cigar tobacco.

Cultivation of cigar tobacco under controlled and open environment at different locations

like Peshawar, Swabi, Bunair, Serai Nourang, Abbottabad and Mansehra.

Comparative assessments and area suitability for cigar cultivation on selected sites.

Successful plantation testing, fermentation, curing for cigar suitability

Recommendations for farmers to select best varieties for quality Cigar formation

Relationship with sectoral objectives

The project falls under priority areas of both federal Government as well as Government of

Khyber Pakhtunkhwa. The main objectives of the project are in line with the growth and

promotion of Agricultural sector and mitigating climate change aspect during the pilot phase

In case of revised projects, indicate objectives of the project if different from original PC-I.

N.A

6. Description and Justification of Project

Describe the project and indicate existing facilities in the area and justify the

establishment of the project.

Tobacco technically called nicotiana tabacum has been used as pain killer before 2000

B.C. The plant contains nicotine a water soluble alkali that work as pain killer. In most of the

societies different law have been imposed but the tobacco usage just changes its shapes and style

such as snuffing, chewing, piping and so many others but it alter from one shape to another. The

word cigar originated from the Spanish cigarro, which in turn probably derives from the

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Mayan sicar ("to smoke rolled tobacco leaves “from si'c, "tobacco ;"). There is also a possible

derivation, or at least an influence, from the Spanish cigarra ("cicada"), due to their similar shape.

The English word came into general use in 1730.

A cigar is tightly-rolled bundle of dried and fermented tobacco leaf, rolled in a series of

types and sizes that is ignited so that its smoke may be drawn into the mouth. Cigar tobacco is

grown in significant quantities in the countries like Brazil, Cameroon, Cuba, Dominican Republic,

Honduras, Indonesia, Mexico, Nicaragua, Philippines, Puerto Rico, Spain, Italy and eastern

United States. However, the origins of cigar smoking are still unknown. A cigar is defined as “any

roll of tobacco wrapped in leaf tobacco or in any substance containing tobacco,” while a cigarette

is “any roll of tobacco wrapped in paper or any substance not containing tobacco.” Traditional

cigars don’t usually have filters.

Most cigars are made of a single type of air-cured or dried tobacco. Cigar tobacco leaves are first

aged for about a year and then fermented in a multi-step process that can take from 3 to 5 months.

Fermentation causes chemical and bacterial reactions that change the tobacco. This is what gives

cigars a different taste and smell from cigarettes. Cigars that are sold like cigarettes and smoked

like cigarettes are another way the tobacco industry has managed to get around federal laws and

taxes. For example, cigars that are small in size but meet the legal definition of large cigars (based

on weight) are taxed at lower rates than cigarettes and small cigars by state and federal

governments. The tobacco industry uses this to their advantage.

Cigar is combustible tobacco products available in packs like cigarettes and be used like

cigarettes, but not legally be considered cigarettes. This means they’re not subject to Drug

Administration (DA) regulations in country like US. Moreover, cigar can be flavoured, and

labelled with misleading descriptors like “light” or “low tar.” They can be marketed and sold with

fewer restrictions and much lower taxes than cigarettes.

So, these low-priced and less-regulated products seem to have led some cigarette smokers to

switch to other combustible tobacco products, and cigarette-like cigar in many part of the world.

In Pakistan the available cigarette (FCV) and hukka tobacco (Rustica) are very common and

under cultivation while there the cigar tobacco has no idea. Tobacco being a major cash crop of

the province can be further promoted through introducing cigar tobacco, which can further

flourish the tobacco industry through such innovative research.

Scope of Work:

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To introduce this new tobacco spp, for the cash revenue and to boost the already available

established cigarette market, cigar cultivation can be promoted with the idea to expand this cash

crop canvas. Like the cigarettes, cigars deliver nicotine of an average of about 8 milligrams, but

only deliver about 1 to 2 mg of nicotine to the smoker. The less harmful product for the smokers

with various tastes may be introduced in the proposed project. Therefore, with the introduction of

cigar tobacco crop and the identification of suitable places for the successful crop husbandry

practices will be carried out in the study along with their other fermentation processes involved.

This proposed pilot phase study is to envisage the cigar tobacco scope. Though, this project does

not deal directly with the concern of food security. However, keeping the great impact of the

existing tobacco business and its cash value the revenue generation will open up new export

market which will be a good alternative for the poor farmers. The high cash revenue and the

adjustment of new crop spp may help in the issues concerning to climate change in the region.

Successful plantation and identification of suitable location may help the livelihood change.

Additionally, the cigarette smoker’s habit can be altered from cigarette to cigar with

comparatively less harmful items. Perhaps cigar contain high level of nicotine as compared to

cigarette but the inhalation and puffing provides a little of the available nicotine with several other

flavours as well. The industry and smokers are also subject to lesser drugs control option as

already imposed on cigarettes.

Existing Facilities:

At present all the mentioned Research Institutes/Stations have the facilities like land,

scientists, building etc but there was no work on cigar tobacco. The research department mainly

focused on the edible items. However, to some extent work has been done on FCV tobacco

(Virginia tobacco). To initiate this new task research department will need to import the seed

material, testing their viability and survival under open and controlled environment and to assess

their growth and yield factors for further propagation of material to adapt this crop in the region.

Existing and Required facilities:

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Locations Existing Resources Required resources Remarks

ARI, Tarnab Peshawar,

ARS, Swabi,

ARS, Bunair,

ARS, Serai Nourang,

HARS, Abbottabad

ARS, Baffa Mansehra)

Almost all the major

facilities are

available e.g land

and human resource

etc.

No major facility

required. Seed and

related inputs will be

required

The research

needs basic

inputs like seed

and other related

inputs like

fertilizer,

pesticides etc

Provide technical parameters i.e. input and output of the project in quantitative

terms. Also discuss the technology aspect of the project.

S. No Input Output

2 Seed import and collection Best crop seed identification for further

propagation

3 Agronomic practices in controlled

and open condition

Best adaptive practices for successful

crop husbandry

4 Multiple location trials Identification of Best location to get

better crop

Provide details of civil work, equipments, machinery and other physical activities

required for the project

No, civil work is involved in any activity of the project.

List of equipments and Machinery:

01, Core i.3 Computer (Cost Rs. 0.070 million)

No heavy machinery involved in the pilot phase.

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Indicate governance issues of the sector relevant to the project and strategy to resolve

them.

NA

7. Capital Cost Estimates

Indicate date of estimation of project cost estimates:

July, 2015

Basis for determining the capital cost be provided. It includes market survey,

schedule rates, estimation on the basis of previous work done etc.

N.A

Provide Year wise estimation of physical activities as per following:

Summarized Physical Activities to be carried out in this Project:

S. No Physical Activities Units 2015-16 Total

1 Seed Collection & import of different Cigar varieties

No. 18 18

2 Open field experiments at 6 locations

No. 18 18

3 Controlled experiments at 3 locations

No. 06 06

4 Fermentation and curing of crop The produce will be fermented and cured to get a final product.

Note: About 100gm seed of each variety is needed to raise nursery for 1 acre..

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Year Wise/Component Wise Capital Cost Estimates Rs. (Million)Financial Code 2015-16 Total

Operational    Seed Collection and procurement (Pg# 16) 2.000 2.000DPL (justification given on pg#16) 1.000 1.000POL 0.050 0.050Cost of Other Store (inputs & fermentation, curing and processing etc) (Pg#16) 1.000 1.000

TA/DA 0.100 0.100Stationary 0.020 0.020Printing and Publication 0.020 0.020Total Operational 4.190 4.190Physical Assets    Computer (01 No. Core i,3) 0.070 0.070Total Physical Assets 0.070 0.070Grand Total 4.260 4.260

Summary:

Financial Code 2015-16 Total

Total Operational 4.190 4.190

Total Purchases 0.070 0.070

G. Total 4.260 4.260

8. Annual operating and maintenance cost after completion of the Project

Item wise annual operating cost based on proposed capacity utilization for 1year

Rs. 0.05 million

9. DEMAND AND SUPPLY ANALYSIS

Description of product/services

Demand/supply along with unit price for the last five years

NA

Import/exports for the last five years along with unit price (if applicable)

NA

9

Project demand /supply for 10 years.

NA

Proposed year wise production and unit price of the product.

NA

Existing and proposed arrangements for marketing

NA

10. FINANCIAL PLAN

Source of Financing :

(a) Equity:

Indicate the amount of equity to be financed from each source

Sponsored own resources N.A

Federal Government N.A

Provincial Government 4.260 million

DFI’s/Banks NA

General Public NA

Foreign equity NA

NGO’s/ Beneficiaries NA

Others NA

(b) Debt:

Indicate the local and foreign debt, interest rate, and grace period and repayment period for

each loan separately. The loan repayment schedule be also annexed. N.A

(c) Grants along with source: N.A

(d) Weighted cost of capital: N.A

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11. PROJECT BENEFITS AND ANALYSIS

Financial:

Income to the project along with assumptions:

It is expected that the pilot phase of the project not soley based on an income generation activity.

However, it would be helpful to replicate the benefit to the end users. The successful crop

husbandry, productivity boost, and the expected income of the cash tobacco may help to boost the

income level of the poor farmers if successful practices are accomplished during introductory phase.

Economic Benefits:

Benefit to the economy along with assumptions

The project is an attempt to economic viability as it has both short term as well as long term

benefits. If the introduction of the cigar tobacco becomes successful it will open up option of cigar

cultivation in the region and through the export of this valuable cigar livelihood can be supported.

The Cigar tobacco could be a new commodity in the cropping pattern of Khyber Pakhtunkhwa if

introduced in the region successfully. Once the successful crop stands accomplished, it will later on

Create many job opportunities directly in the project activities and indirectly in the above sectors

due to increase in production area.

Social benefits

The farmers will understand physically new changes and their consequences in agriculture

production, which is highly exposed to natural process. Addition of one new cash crop may help

them in supporting their livelihood and accommodating another crop in the cropping pattern. Since

the crop is narcotic drug which are under human usage since 2000 B.C as pain killer. However, the

cigar is somewhat less hazardous for the health over the existing cigarette products if utilised

wisely.

Environmental impact assessment:

The project is environment friendly; perhaps the efforts are being carried out to monitor all the

positive and negative effects of the environment in relation to crop production.

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Financial/Economic Analysis (with assumptions) of the Project.

i) Financial

- This will be a new introduction in crop production potential & ultimately

increase farmers income and reduce their poverty

- If the successful plant growth achieved will boost the local production

- It will be a long term initiative for the scientists with plenty of commercial

aspects

- It will create job opportunities both directly and indirectly.

ii) Economic

NPV, IRR AND COST BENEFIT RATIO:

Year Project Cost O&M Cost Total Cost Benefits Net Benefits2015-16 4.260 0.000 4.260 0.000 -4.2602016-17 0.000 0.050 0.050 0.500 0.4502017-18 0.000 0.150 0.150 1.000 0.8502018-19 0.000 0.150 0.150 1.500 1.3502019-20 0.000 0.170 0.170 2.000 1.8302020-21 0.000 0.170 0.170 4.000 3.8302021-22 0.000 0.190 0.190 6.000 5.8102022-23 0.000 0.190 0.190 8.000 7.8102023-24 0.000 2.000 2.000 10.000 8.0002024-25 0.000 2.000 2.000 12.000 10.000

Total 4.260 5.070 9.330 45.000 35.670

NPV 12.884

IRR 44.17%

Benefit Cost Ratio 4.8

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SWOT Analysis of KHYBER PAKHTUNKHWA Agricultural Research System

Strengths

Highly qualified, well trained and experienced research staff in some fields but needs capacity

building

A network of well distributed research centers in Khyber Pakhtunkhwa.

Made significant contributions through successful strategic interventions at selected locations

around Khyber Pakhtunkhwa.

Weaknesses

Poor contacts and access to international research organizations.

Most scientists are short of writing skills and technical knowledge in new crops other than the

established crops.

No idea for cigar tobacco and need for self-discipline: most cannot work without supervision.

Opportunities

Great chances for improved collaboration and efficiency through merger of similar organization

i.e., research and Pakistan Tobacco board and tobacco companies.

Better services and more tangible benefits for researchers would uplift their lost moral.

Great opportunities for collaboration with all stakeholders.

Greater opportunity for well thought out research interventions as has been successful in the

past.

Threats

No idea, knowledge and facilities regarding fermentation of tobacco and curing

Empowerment of the scientists to work on the crop of their choice and expertise

12. (a) Implementation Schedule

Starting date

July, 2015-16

Completion date

June, 2015-16 (12 months)

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(b) Result Based Monitoring (RBM) Indicators

S.No Input Output Outcome Target impact Baseline indicator

Targets after completion of project

1 Collection and import of seed (cigar)

18 different kinds of cigar varieties

No variety is available in Pakistan.

Identification of viable varieties through experimentations

25-30 mnd per acre production(cured/processed)

2 Testing/experiments at 6 different locations

Crop production assessment

No work has been done

18 experiments under open field in 6 districts and 6 controlled experimentation at 3 locations

Identification of best adapted cigar varieties to be cultivated to increase farmers income

3 Growth assessment

Successful crop testing for fermentation and curing

No such activities were executed in Research system.

Fermented and cured crop from successful plantation

Selection of best suitable varieties. Recommendations for farmers to cultivate best adapted varieties for quality cigar formation

13. Management structure and manpower requirements including specialized skills during

construction and operational phases

Manpower requirements will be met by involving skilled professionals during execution and

operation of the project including germination testes, cleaning, culture practices, irrigation

fertilizer and pesticides application. All the Activities of this project will be executed through

Director General Agricultural Research. However the concern Principal Investigator (PI) and

focal person will be responsible for the overall execution and implementation.

14. Additional Projects/Decisions Required

N.A

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15. Certified that the project has been prepared on the basis of instructions provided by the

planning commission for the preparation of PC-1 for production sector projects

Prepared by

--------------------------------------------Dr. Bashir AhmadDirector Planning (Research)Directorate General Agric. Res. System

-------------------------------------------- Dr. Muhammad Asim

Dy. Director Planning Directorate General Agric. Res. System

------------------------------------------ Nasiruddin

Deputy Director Planning Directorate General Agric. Res. System

Checked by

--------------------------------------------Dr. Nazeer Hussain ShahDirector General Research,Agril. Research Khyber Pakhtunkhwa Peshawar

Approved by----------------------------------------------------SecretaryGovernment of Khyber Pakhtunkhwa,Agriculture, Livestock & Cooperative Deptt

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Justification of Seed Price:

Under prevailing conditions, 6gm of tobacco FCV costs Rs. 2000-2500. As the import of CIGAR is not in practice, hence its exact cost may not be possible to estimate. However, the allocated amount will cover cost of seed, cost of import including fee of different Government Departments.

Since, it is under Narcotics Drugs, the import would be made through Government involving Pakistan Tobacco Board and Quarantine Department. Pakistan Tobacco Board has imported CIGAR Tobacco only from single source, which remained unsuccessful.

Keeping the above facts in view and adding more chances for the project to be successful and viable, import of different varieties from different countries will be carried out.

Detail of Cost of Other: Rs. (million)

Items Unit Price No. of Experiments

Qty. Total Cost

Pesticides/Insecticides 500/litre 18 Exper. 1 lit/Exper. 0.009DAP 3800/bag -do- 1 bag/Exper. 0.068Urea 2000/bag -do- 1 bag/Exper. 0.036MOP/SOP 3400/bag -do- 1 bag/Exper. 0.061Accessories for Nursery Establishment e.g Germination trays, stands, plastic bags etc

- - - 0.300

Small tools for field operation - - - 0.146Curing and Fermentation - - - 0.380Total - - - 1.000

Justification for DPL:

No. of DPL/loc

Rate/month Duration No. of Experiments/

No. of locations

Dpl*Duration*loc*Rate

Open Field Experiments 02 15000 6 months 03 06 2*6*6*15000= 1.080 m

Controlled Experiments

01 15000 6 months 02 03 1*6*3*15000= 0.270 m

Total 1.350 million

Note: The no. of DPL per location has been kept up to minimum level and for minimum period. Even then the amount for DPL has been kept of Rs. 1.000 million.

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