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PROJECT FORMULATION A PROCESS TO MAKE AN OBJECTIVE INDEPENDENT ASSESSMENT OF THE VARIOUS ASPECTS OF AN INVESTMENT PROPOSOTION OF A PROJECT IDEA FOR DETERMINING ITS TOTAL IMPACT AND ALSO ITS LIABILITY •FORMING STRATEGY IN THE PRE-INVESTMENT STAGE - FROM THE CONCEPTION OF A PROJECT IDEA UNTIL THE FINAL ANALYSIS TO DECIDE ABOUT THE FUTURE OF THE PROJECT •TO ACHIEVE THE PROJECT OBJECTIVES WITH THE MINIMUM EXPENDITURE AND ADEQUATE RESOURCES i.e. TO DERIVE MAXIMUM BENEFITS FROM MINIMUM EXPENDITURE

STAGES * * * *

CONCEPTION OF AN IDEA ANALYSIS OF RELATED ASPECTS FORMULATION OF A PROJECT DESIGN OF A PROJECT

STAGES OF A PROJECT FORMULATION 1. 2. 3. 4. 5. 6. 7.

FEASIBILITY ANALYSIS TECHNO-ECONOMIC ANALYSIS PROJECT DESIGN AND NETWORK ANALYSIS INPUT ANALYSIS FINANCIAL ANALYSIS SOCIAL COST-BENEFIT ANALYSIS PRE-INVESTMENT ANALYSIS

FEASIBILITY ANALYSIS TO EXAMINE THE IDEA IN THE CONTEXT OF INTERNAL AND EXTERNAL CONSTRAINTS. CONSIDERATIONS - SEEMS TO BE FEASIBLE - NOT FEASIBLE - UNABLE TO ARRIVE AT CONCLUSION FOR WANT OF DATA IT IS A CONTINUOUS PROCESS TILL FINAL DECISION IS ARRIVED AT TECHNO-ECONOMIC ANALYSIS - RELATES TO (1) CHOICE OF PROPER AND APPROPRIATE TECHNOLOGY AND (2) ESTIMATION OF DEMAND POTENTIAL - THIS ANALYSIS GIVES THE PROJECT A UNIQUE INDIVIDUALITY AND SETS THE STAGE FOR DETAILED DESIGN DEVELOPMENT

PROJECT DESIGN AND NETWORK ANALYSIS - DEFINES INDIVIDUAL ACTIVITIES WHICH CONSTITUTES THE PROJECT AND INTER-RELATIONSHIP WITH EACH OTHER - PRESENTATION OF SEQUENCE OF EVENTS - PREPARATION OF TIME CHART WITH TIME ALLOCATION OF EACH ACTIVITY (PERT/CPM) - LEADS TO PROJECT DESIGN FOR DETAILED IDENTIFICATION OF INPUTS INPUT ANALYSIS - ASSESSMENT OF INPUT NEEDS DURING CONSTRUCTION AND OPERATION OF THE PROJECT - SUMMATION OF TOTAL INPUTS REQUIREMENTS ON QUALITATIVE AND QUANTITATIVE TERMS - INPUTS INCLUDES MATERIALS, MANPOWER, RECURRING AND NON-RECURRING RESOURCE AND EVALUATE THE FEASIBILITY - HELP IN ASSESSING PROJECT COST WHICH IS NECESSARY TO MAKE COSTBENEFIT ANALYSIS

FINANCIAL ANALYSIS ESTIMATION OF - PROJECT COST - OPERATING COST - FUND REQUIREMENTS COMPARISON OF VARIOUS PROPOSALS ON A COMMON SCALE TO HELP IN DECISION MAKING - ANALYTICAL TOOLS ARE * DISCOUNTED CASH FLOW * PAYBACK PERIOD * COST-VOLUME-PROFIT RELATIONSHIP * RATIO ANALYSIS - LEADS TO FINANCIAL FORECASTS WITH CARE AND FORESIGHT

COST-BENEFIT ANALYSIS - OVERALL WORTH OF PROJECT - CONSIDERATION OF NATIONAL VISIBILITY - BENEFITS TO PROMOTERS AND ALL OTHER ENTITIES CONNECTED WITH THE PROJECT - STRATEGY IS A RECOGNISED SYSTEM INTERNATIONALLY FOR PROJECT FORMULATION - SOCIAL BENEFITS * JOB OPPORTUNITIES * REVENUE TO GOVT * DEVELOMENT OF REGION * OVERALL INDUSTRIAL DEVELOPMENT

PRE-INVESTMENT ANALYSIS * CONSOLIDATION OF ALL PREVIOUS STEPS * FORMAL AND FINAL SHAPE TO THE PROJECT PROPOSAL * PRESENTATION TO PROJECT SPONSORING AGENCIES, PROJECT IMPLEMENTING BODY AND EXTERNAL CONSULTANCY AGENCIES FOR ACCEPTANCE * ENABLE FINANCIAL CORPORATION AND BANK TO TAKE CREDIT DECISION

PROJECT IMPLEMENTATION - RELATES TO NETWORK DESIGN - IMPLEMENTATION TECHNIQUES INCLUDE- PROGRAMME EVALUATION AND REVIEW (PERT) AND CRITICAL PATH METHOD (CPM) - INDENTIFICATION OF PROJECT ACTIVITIES AND DETERMINING GEOGRAPHICAL REPRESENTATION OF THE ACTIVITIES IN LOGICAL SEQUENCE - DECIDING WORK PLAN INDICATING TIME AND RESOURCE REQUIREMENT - DEVELOPING MONITORING AND CONTROL INSTRUMENT - ENSURES COMPLETION OF PROJECT IN TIME

SOCIAL COST- BENEFIT EVALUATION - PRIMARY : BENEFITS TO PROJECT IMPLEMENTING BODIES -SECONDARY : CONTRIBUTES TO NATIONAL EXCHEQUER BY WAY OF DIRECT/INDIRECT TAXES -TERITARY : NON QUANTIFIABLE SPILL OVER AND MULTIFIER EFFECTS ORGANISATIONAL ASPECTS -IMPLEMENTATION OF PROJECT NEEDS SUFFICIENT TECHNICAL, SKILLED AND UNSKILLED MANPOWER - PERSONNEL SHOULD BE AVAILABLE AT THE TIME OF NEED -RETAINING THE PERSONNEL FOR DAILY OPERATION AND MAINTENANCE ACTIVITY

COMMERCIAL ASPECTS -EXAMINATION OF ARRANGEMENTS FOR BUYING OR ACQUIRING INPUTS FOR PROJECT SUCH AS RAW MATERIALS, LABOUR, POWER, WATER ETC. AT REASONABLE COST - ADEQUACY AND TIMELINESS OF THE AVAILABILITY INFLUENCE TIME AND COST OVER RUN -ENSURING EXISTENCE OF SUITABLE FACILITIES FOR THE MARKETING OF THE PRODUCT, MARKET OUTLETS AND ADEQUATE DEMAND LEGAL ASPECTS - SECURITY FOR DIFFERENT TYPES OF LOANS - LEGAL PROBLEMS RELATE TO TITLE DEEDS, LAND LEGISLATION, MORTGAGE OR HYPOTHECATION OF ASSETS TO BE LOOKED INTO BEFORE THE SCHEME IS FINANCED - POSSIBLE ALTERNATIVES OF MEETING LACUNAE OR GAPS

RISK AND UNCERTAINITY -FEASIBILITY DEPENDS ON 1. SIZE OF INVESTMENT 2. OPERATING COSTS 3. SALES REVENUE - ANY CHANGE IN QUANTITY AND PRICE MAY DIVERT THE ACTUAL FROM THE ESTIMATED RESULT - UNCERTAINTIES ARISE AS A RESULT OF PROJECT ITSELF AND THE ENVIRONMENT IN WHICH IT OPERATES - IMPORTANT VARIABLES OF RISK AND UNCERTAINITY I) CHANGES IN THE PRICE OF INPUTS AND/OR OUTPUTS II) CHANGES IN TECHNOLOGY III) UNREALIASTIC ESTIMATION OF ITS RATED CAPACITY IV) LENGTH OF CONSTRUCTION AND RUNNING-IN PERIODS V) CHANGES IN TASTES AND PREFERENCES OR INTRODUCTION OF NEW SUBSTITUTES

DIFFERENCE BETWEEN PROJECT FORMULATION AND PROJECT REPORT A * PREPARATION OF THE PREINVESTMENT PLAN * STRATEGY IS AN INVESTIGATION PROCESS * PROJECT IDEA IS EXAMINED FROM THE OVERALL VIEW OF SPONSORING BODY BASED ON TECHNOECONOMIC-FINANCIAL AND SOCIAL COST BENEFIT

B * POST INVESTMENT DECISION EXERCISE * PREPARATION OF DETAILED DESIGN AND SPECIFICATION, ENGINEERING DRAWINGS * SITE INVESTIGATION AND FOUNDATION DESIGN * PROCESS DESIGN * COST AND PROFIT ASPECTS * SCREENING OF ALL RELATED ASPECTS

PROJECT PROFITABILITY PROJECTIONS OBJECTIVES OF COST OF PRODUCTION AND PROFITABILITY ARE: TO ASSESS * CAPACITY OF THE UNIT TO AMORTISE AND SERVICE THE BORROWED FUNDS * EARNING CAPACITY OF PROJECT * CAPABILITY TO SERVICE THE SHARE CAPITAL AND * SURPLUS AVAILABLE FOR FUTURE GROWTH - INSTALLED CAPACITY IS DECIDED FROM DETAILED PROCESS FLOW CHART AND RATED CAPACITY OF EACH PROCESS/MACHINE - IT IS NOT STATIC, CHANGES AS PER PRODUCT-MIX AND CHANGES IN DIRECT INPUTS - CAPACITY UTILISATION FACTORS RESTRICTING UTLISATION * TEETHING PROBLEMS - P/M * TIME TAKEN FOR DEVELOPING PRODUCT * UPGRADING SKILLS * TECHNOLOGICAL CONSTRAINTS * BUILDING THE MARKET

FACTORS FOR LOW UTILISATION * TECHNICAL CONSTRAINTS * MARKET PROBLEMS * CHANGES IN PRODUCT-MIX * INHERENT CHARACTERISTICS OF THE INDUSTRY PRODUCT-MIX - DEPENDS ON DEMAND PROJECTIONS - PROFITABILITY IS KEY - CONTRIBUTION OF EACH PRODUCT - ADEQUACY OF THE PLANT SELLING PRICE - COST IS CONTROLLED IN-HOUSE; PRICE IS CONTROLLED BY MARKET FORCES - DEPENDS ON PRICE TRENDS IN PAST - TEST PRODUCT WHEN VARIATION IN CURRENT SELLING PRICE

EFFLUENT DISPOSAL - TREATMENT OF EFFLUENT DEPENDS ON ANALYSIS OF EFFLUENTS GENERATED DURING MANUFACTURING PROCESS AND REGULATIONS LAID DOWN BY GOVT. - EVERY INDUSTRIAL UNDERTAKING IS REQUIRED TO TAKE ADEQUATE STEPS TO PREVENT AIR, WATER AND SOIL POLUTION - NO OBJECTION CERTIFICATE IS TO BE OBTAINED FROM STATE POLUTION CONTROL BOARD BEFORE STARTING EVALUATION OF PROJECT ENERGY CONSERVATION/AUDIT - ENERGY CONSERVATION THROUGH BETTER ENERGY MANAGEMENT - STEPS PROPOSED FOR METERING IN MAIN AND SUB-CIRCUITS, BOTH ELECTRICAL AND STEAM GENERATION - STEPS FOR IMPROVING POWER FACTOR - PARTICULARS FOR MONITORING EQUIPMENT ENVISAGED FOR DETECTION AND MEASURING ENERGY LOSSES; PROVISION FOR ENERGY AUDIT - PROJECTED ENERGY INPUT COST PER UNIT OF OUTPUT AND ITS COMPARISON WITH SIMILAR UNITS - SCOPE FOR SOLAR/OTHER RENEWABLE SOURCES OF ENERGY

UTILISATION OF BYPRODUCTS -CERTAIN INDUSTRIES, PROPER AND EFFICIENT UTILISATION/RECOVERY OF BY-PRODUCTS IS A MAJOR FACTOR FOR THEIR ECONOMIC VIABILITY AND SELECTION OF PROCESS KNOW-HOW -ENSURING PROCESS ADOPTION FOR THE OPTIMAL UTILISATION/ RECOVERY OF BY-PRODUCTS

CHOICE OF TECHNICAL PROCESS - TECHNOLOGY SHOULD BE ALREADY ESTABLISHED ONE - IF NOT ESTABLISHED, THE DEGREE OF SUCCESS TO BE ASSESSED AND RISKS CALCULATED - TECHNOLOGY SHOULD BE BASED ON INDIGENOUS RAW MATERIALS AND RESOURCE - WORKABLE IN LOCAL CONDITIONS, E.G. TEMPERATURE, HUMIDITY, QUALITY AND AVAILABILITY OF RAW MATERIALS, SKILLED LABOUR, TRANSPORTATION, POWER, ETC. - SHOULD BE BASED ON NATIONAL GOALS - EMPLOYMENT GENERATION, ANCILLARISATION, IMPORT SUBSTITUTION, EXPORT PROMOTION, MAINTENANCE OF ECOLOGY BALANCE ETC. - SIZE OF PROJECT IS A KEY FOR ADOPTING A PARTICULAR PROCESS/ TECHNOLOGY

-FOR NEW TECHNOLOGY, FOLLOWING POINTS TO BE KEPT IN MIND * WHETHER TECHNOLOGY/PROCESS IS PATENTED OR NOT * DEGREE OF RELIABILITY *SCALE OF DEVELOPMENT i.e. LABORATORY, PILOT, COMMERCIAL *FLEXIBILITY - PROCESS CAN BE USED FOR ALTERNATIVE PRODUCTS