Oil Mill Business: How to Start in 10 Steps with Business Plan

Cooking oil is the most important household item anywhere in the world. As the health awareness among people is increasing day by day the demand for edible oil is also increasing. Thus, making oil mill business a profitable one to start.

Moreover, market research shows cooking oil business is expected to grow at CAGR of 5.14% (2020-2025) making it a highly demanding one.

If you are a farmer and have your own land then starting a small scale oil mill business is a profitable one.

Because you can grow a variety of seeds in your land without worrying about buying the raw materials.

Normally, edible oils can be extracted from various seeds such as sunflower, mustard, canola, peanut, soybean, cottonseed, rapeseed, and sesame seeds.

While most of them were used for cooking purposes some of them were also used in soap making, pharmaceutical products, and the cosmetics industry.

Surprisingly, some vegetable oils once recycled can even be used to power diesel engines!

Taking into account the market demand and variety of uses you can start a small scale oil mill business.

Here are the 10 simple steps to start an Oil Mill Business

Step 1. Creating a Business Plan

If you are planning to start a small scale oil mill, then you need to have a well-documented business plan. Because edible oil industry is a highly competitive sector and it is increasing day by day.

With proper business planning, you will have better chances of making success in this business.

While creating a business plan you need to include details about oil mill location, machinery, number of workers, investment, raw materials, marketing, supply, and transportation.

Once you do in-depth research on above mentioned things, you will get an overall idea on how to start this business.

Step 2. Selecting Raw Material Source

Oilseeds can be obtained in two ways. One way, You can buy the seeds directly from a supplier such as Indiamart or you can directly get them from your own farm.

Growing oil seeds on your own land has several advantages, you can grow a variety of seeds like sunflower, mustard, sesame, soybean, peanuts, and rapeseed.

Plus, you can export to the market for the desired price. But the only problem is, it takes time and money to go this way.

if you are not worried about time and money then cultivating your own seeds is the best practice.

Whether you choose to obtain the raw materials from your own farm or else from a supplier always look for the best quality seeds.

Purchasing low-quality seeds would impact your edible oil production and even creates an unpleasant taste to customers.

Step 3. Deciding a suitable Location for setting up Oil Mill

Oil mil location plays a very important role in this business. There are two things to consider before setting up the plant.

Location

Your oil mill should be located nearby the farms that grow plants for oil extraction. Suppose, if you choose to produce sunflower oil then choose a location around sunflower plantation. So that you can easily arrange transportation at low cost.

Land size

The size of the land is not a big deal for setting up an oil mill. An area of 1000 sq yard is good enough for a small scale oil extraction unit with a production capacity of 5 to 10 metric tons every day.

In which, half of the place can be used for production purposes while the other half can be used for small office room, packing and storing raw materials.

Step 4. Obtaining Funds for your Business

Besides your own money, you need a good amount of cash to start a cooking oil business. Initially, we may not have all the money to start this business. In such cases you can approach banks or investors.

For obtaining a loan from banks, you need to submit a detailed project report about your oil mill business, in this report, you will explain things like the scope of your business, raw materials, machinery, number of workers, location details of the oil mill, and estimated operating costs of the business.

If your project report looks promising to the banks or investors you will have better chances of getting funds within no time.

Step 5. Purchasing Oil Machinery

There are different kinds of oil machinery equipment used for extracting oil from seeds. They were available in two types commercial scale and industrial scale.

An industrial scale oil mill machinery needs consists an oil press, heating machine, refining machine, filtration unit, and packing machine.

Basing upon your production capacity and business need you need to decide which equipment is suitable for your oil mill.

If you are starting a small scale groundnut oil mill with a 5-ton production capacity, then you need the following machinery

steam Boiler, seed decorticator, expeller, filter press, and a screw conveyor.

The price of a small scale oil mill setup ranges from INR 1.80 lakhs to 8 lakhs per unit.

While purchasing the machinery you need to consider things like built quality, price, usage, horsepower, production capacity, and mode of operation.

Step 6. Installation of Machinery and Resources for Running Oil Mill

Once you have purchased all the machinery from supplier you need to install the machinery at your manufacturing plant.

Normally the supplier itself would send a person to install the machinery at your plant.

But before the installation process is done you need to make sure your plant has proper electricity and water supply.

Because oil processing machines require a lot of water and power for extraction process.

In addition to that, make sure your unit has a proper sewage system for expelling waste material.

Once your machinery is installed a dry run would be carried out to make sure all the machines are working properly or not.

Usually, a dry run will be carried out 2-3 times before starting a full-scale oil extraction.

Step 7. Planning and Optimizing Oil Extraction Process

The are several stages involved in oil extraction. Depending upon the variety of seed you are using the extraction process varies.

Some seeds have complex extraction processes such as sunflower, cotton, and rapeseed. While seeds like peanuts and mustards are far easy to process.

The more complex and time taking the extraction process, the more amount of power and resources are required to run the plant.

However, remember that some seeds such as castor and cotton even though take a lot of time and resources for extraction. They provided a good return on investments.

Because, the byproduct of these oilseeds, which is called oil cake, have good demand in agriculture as manure and cattle feed.

In every batch, a certain portion of the oil gets wasted during the extraction process and this oil cannot be used for cooking. In such cases, implement oil recycling techniques to efficiently minimize wastage.

Step 8. Hiring Workers

The good thing about starting a oil mill business is, it requires very few workers to operate the plant.

A small scale unit requires just 3-4 workers to run the plant. Of which one person should be a technician who should be in charge of maintenance and proper running of the machinery.

While, one person should take care of marketing and distribution. keep in mind, in order to achieve success in oil mill business you need to extensively work on marketing. Hence you need to appoint a dedicated person for this.

Step 9. Getting Licenses and Registering your Oil mill Business

You need to have certain licenses and registrations to run your oil mill business. These licenses depend upon the product you manufacture and the location of your manufacturing plant.

For edible oil manufacturing In India, it is mandatory to have FSSAI license. This license is compulsory for those who do the food business.

So, before you start the manufacturing process go through the FSSAI Standards and check guidelines for your cooking oil business.

In addition to that, FSSAI recently announced regulations on packing and labelling of food products. So be sure to check these guidelines also.

Next, you need a business registration. Here you can decide to register as a private company or LLP or a Sole proprietorship.

Apart from all these, you need a GST number for your business. Once you submit appropriate documents you will get the GSTIN number within 2-3 working days.

Step 10. Creating a Marketing Plan for Your Business

One of the most important steps in the cooking oil business is to have a marketing plan. No matter how good the quality of your oil is, without a proper marketing strategy, it is really difficult to make profits in oil mill business

Marketing of edible oil mainly depends on things like cost of the product, buying capacity of a region, demand for the product.

In addition to that, branded labeling and packing also play a very important role in the marketing of edible oils.

The use of high-quality pictures or graphics for labeling oil packets and cans brings a commercial look to your product and attracts more customers. At the same time, proper packing prevents oil from leaking.

You also need to utilize all possible marketing channels to sell your products like giving Ads in Newspapers, TV Channels, using social media platforms, and tie-ups with local shops, supermarkets, and restaurants.

Profits for oil mill depends on number of sales done in a period of time and total increase in customers from starting of the business.

Edible oils are consumed throughout the year. However, during festive seasons and marriages, the demand will be much higher. If you can utilize this time you can earn a good profit from your oil mill.

FAQ’s on Cooking oil business