Energy (Oil & Gas)

PROJECT TI 06 : DEVELOPMENT OF ESSENTIAL OILS INDUSTRY

Project summary :

1. Sector : Industry

2. Location : Thimpu / Mongar

3. Executing Agency : MTI

4. Implementing Agency : Division of Industry

5. Estimated cost:
Recurrent : Nu. 1.800 m
Capital: Nu. 6.500 m
Total: Nu 8.300 m

6. Funds Secured : Nil

7. Financing Gap: Nu. 6.500 m

8. External finance reqd.: Nu. 6.500 m

9. Status : Continuation

10. Documents available: Assistance in Essential Oils Development in Bhutan; Technical Report, First to Third Mission - Dr. Gulati, FAO; PPER 1 to 2 - Kesang Wangdi, Project Manager; Report on Advisory Mission Related to Integrated Development of Essential Oils Industry in Bhutan - Dr. G. Blaak, FAO.

Project Objectives

- Directly support and assist the poor in remote areas to earn cash income through the establishment of cottage units on an organized basis;
- Create job opportunities and provide financial assistance to rural people especially women;
- Place tsheri and unproductive land under permanent perennial plant species for essential oil production;
- Introduce essential oil inter-cropping for soil and water conservation and cash income;
- Develop local metal-working industries in the fabrication of stainless steel products;
- Develop efficient utilization of the distillation units round the year for non-timber forest products on a sustainable basis;
- Develop solid markets for essential oils;
- Establish local processing industries for lemon grass oil;
- Diversify the production of commercially viable essential oil on a sustainable basis,
- Boost hard currency earnings; and
- Process the essential oils within Bhutan for Flavour and Fragrance industry

Project Description

The on-going project has established appropriate distillation technology, improved yield and quality of oil and developed national capacity to run an essential oils industry. Initial niche market for Lemon Grass has been built and contact with more buyers for other essential oils are being developed. 12 modified FAO units have been distributed to the rural people of eastern Bhutan increasing the 1995 production of 4.5 MT, boosting hard currency earnings by US$ 48,800.00 as compared to the previous years. Rural income has also been enhanced by Nu. 365 per kg of Lemon Grass oil.

The project will promote the further development of essential oils industry in Bhutan. The on-going project has organized the distillation of lemon grass oil and identified the most appropriate technology to pursue future development. Trial runs on the potential for other essential oils such as artemisia, wintergreen, abies densa and pine needle from the indigenous and improved lemon grass variety pragati, palmarosa, java citronella and mentha piperate from introduced crops have also been initiated.

The project will focus on diversification, establishment of a processing industry using Lemon Grass oil in Vitamin A, floor polish, room refresher, soap and cheap perfumes, and to process other essential oils within Bhutan for flavours and fragrances. Possibilities of expanding project area to other dzongkhags will also be explored.

Project Impact 

- Provide the principle target beneficiaries, the rural harvesters, mostly women and distillers of essential oil crops, an expanded opportunity to earn cash incomes ;
- Support government efforts to expand the role of the private sector since the project beneficiaries will include the small-scale distillers and intermediary marketers ;
- Offer the possibility to develop local expertise in the fabrication of stainless steel products bringing about import-substitution of stainless steel products ;
- Provide possibilities of establishing local flavour and fragrance industries using processed essential oils resulting in the reduction of imports from India and elsewhere ; and
- Benefit project personnel with the experience gained through building a nascent essential oils industry with Bhutan.

Project Management

Because of the involvement of more than one organization and the concerns over environmental implications, the project will be governed by an Essential Oils Coordination Committee comprising senior representatives from the Ministry of Finance, Ministry of Planning, /Ministry of Trade and Industry, Ministry of Agriculture, National Environment Secretariat, Division of Health and the donor.

Field implementation will be directly supervised by the Project Manager who will be responsible for coordination at all levels of implementation.

Financial Detail

Manpower Requirement

The project will require the following manpower in addition to the existing staff:

Equipment

The equipment to be purchased under the project are equipment for the Distillery Construction Workshop; Office Equipment; Gas Chromatography / Mass Spectrometry; stainless Steel Raw Materials; Transport facilities; Camping and Survey Equipment; Facilities for establishment of Processing Facilities; Trail Distillation Plant; Epoxy coated drums of various capacity; Additional Laboratory Equipment; and Nursery Tools and 6 KVA Generator.

Technical Assistance

Technical Assistance in establishing processing industries will be required from UNIDO, FAO expertise will be required in the agronomic and taxonomy aspects of the project.