CHAPTER II

PROJECT IDENTIFIFCATION:

Identifying suitable opportunities for investment is an intricate and involved exercise in

developing countries. A variety of constraints, complexities, risks and uncertainties have to
be reckoned with, and their implications on the project implementation and its subsequent
success in the operational phase have to be carefully and thoroughly examined before the
resources are committed. Efforts in identifying these opportunities pursued at different levels.
The enterprise management is expected to take all initiative to convince itself about the
prospects of the project that it wishes to launch.

Where national economic planning is a fairly organized effort, the planning process spell out
national and state priorities for development and investment, and also provides the relevant
economic and other indicators. The promoters or concerned entrepreneurs can then make
their choices from among the priority sectors or probable production gaps in commercially
attractive areas. The opportunity studies help in spotting investment opportunities or project
ideas, which can be subjected to further detailed scrutiny, if initially found viable. For this
preliminary assessment, a quick analysis of the following aspects is necessary:

 Availability of requisite natural resources suitable for processing and manufacture;

 The pattern of agricultural activity and scope for agro-based industries;
 Categories of consumer products that have prospects of growing demand in response
to population growth or improvements in standard of living;
 Scope and areas for import substitution;
 Manufacturing lines that have been found to be successful by other entrepreneurs;
 Possible inter linkages with other industries in the country or abroad;
 Scope for forward or backward integration with existing activities of the enterprise;
 Scope for diversification into related lines;
 Scope for expansion of existing capacity for achieving economies of scale or for
maintaining or improving market share;
 The prevailing and expected investment climate in the country;
 The industrial policies in vogue;
 The availability and the cost aspects of factors of production;
 Opportunities for export.

Broad indications on these and other relevant aspects are obtained with the help of the
preliminary studies. These rely on aggregate estimates that are readily available. Rough cost
data are obtained from comparable projects, if any, or are estimated in broad terms.

The opportunity studies can be general or specific in nature.

a) General Opportunity Studies

The government and development institutions carry out these general studies for the benefit
of potential investors. These general studies could be:

Handout Prepared by: Dr. Anitha Lourdu James, Associate Professor, Werabe University
 Area Studies: Identifying locations that require development and investment initiatives,
such as backward areas, export zones, etc.

Sub-Sectoral Studies: The focus of attention being sub sectoral areas, such as consumer
durables, construction materials, etc.

Resource-Based Studies: These involve a survey of the availability of natural resources

that can be processed for making immediate or final products.

b) Specific Project Opportunity Studies

After identification of general investment opportunities, whereby products that have potential
for domestic manufacture get noted, the next step is to prepare an investment profile for the
chosen line. Industrial promotion and development agencies often provide this information
for prospective investors.

The specific opportunity study enables the project idea to graduate into an investment
proposition. Government policies, incentives and other supports are aspects on which
information would be needed as they have a bearing on the profitable functioning of the
project. A broad investment profile should be an output of the study, in order to elicit investor
response. Since the study confines itself to aggregates and summary data for a quick
understanding of the investment prospects, it should not be very expensive. At a moderate
cost it should be possible to get the salient facts.

Pre-Feasibility Studies

The project idea requires to be expanded with the help of a more detailed examination of all
relevant information, as also by gathering additional essential information. A thorough
techno-economic feasibility study is very expensive and there is need to be convinced about
the worth of launching such an elaborate and costly exercise. The pre-feasibility study is thus
an intermediate effort, following the identification of a project idea, to determine whether the
proposal deserves to be pursued further for project formulation and implementation. The
following aspects come for consideration at this stage.

 Whether, on the basis of the elaborate information obtained during the pre-feasibility
study, the investment prospect is promising enough to be processed into an
investment decision.
 Whether, in the light of the information obtained, it is found justifiable to go for a
very comprehensive scrutiny and analysis of the project prospects.
 There could be some critical aspects pertaining to the specific project idea which
require a very thorough examination and in depth analysis, through further support or
functional studies. Market surveys may be necessary, or laboratory tests may have to
be carried out to establish the attributes that the product is claimed to possess. The
production process may have to be tried out through pilot plant tests.
 The outcome of the pre-feasibility study might also be the realization that the project
idea is not with pursuing further.

Handout Prepared by: Dr. Anitha Lourdu James, Associate Professor, Werabe University
 The conversion of the project idea into a commercial reality could possibly be achieved
through a variety of choices in terms of plant size, location, technology, product mix,
marketing approaches, etc. Before the ultimate feasibility study is taken up, there should
be clarity about the choices from among these possibilities or alternatives. Alternatives
will have to be considered in respect of the following:

Market size and plant capacity: The market scope and size have to be assessed, taking
note of the prevailing and prospective demand. The sales organization, the marketing
network and distribution channels that will be appropriate, the plant capacity to be
installed and the production processes to be adopted are all aspects on which a reasonable
degree of clarity is needed before the feasibility study can be taken up.

Material inputs: the raw materials and other critical stores items that are needed and the
alternatives or substitutes in respect thereof, the different sources for their procurement
and the related economics of purchase should be examined and suitable options chosen.

Location and site: Alternative locations available with adequate infrastructure facilities,
or with proximity to supplies of materials or to the markets for outputs have to be
considered and a proper choice made.

Project engineering: Technology and equipment sources have to be identified and

compared before a decision is taken. Their suitability to the local or domestic conditions
have to be examined carefully and the availability of requisite skills for their proper
maintenance to be ensured.

Overheads: The organization structure will determine the nature and amount of
overheads to be incurred in respect of manufacturing, selling and administrative
functions. Building and equipment layout, the choice of having a sales network or
distributing through wholesale outlets, etc. are aspects on which, at least. Tentative
decisions should be taken to guide the feasibility study.

Manpower: Ready availability of semi-skilled and skilled labour as also casual or

unskilled labour, competent and qualified supervisory and general staff, the training
facilities that are needed and related matters need to be considered and appropriate
choices made.

Project implementation: Whether the implementation will be departmentally carried out

or whether it will be entrusted entirely to specialist contractors are questions that have to
be resolved at the prefeasibility stage.

Financial analysis: Fairly reliable, though aggregate, estimates have to be made on the
capital costs of equipment, buildings, etc, and on the choices from among alternative
sources or modes of financing the project. Reliable assessment of costs and revenues
during operating phase will have to be made at this stage and the profitability examined.
Where the investment possibilities and prospects are widely known to be good, because
of the nature of the product or very favourable market factors, there may be no need for a
pre-feasibility study. Even in such instances, in order to decide on the location, size, etc.,

Handout Prepared by: Dr. Anitha Lourdu James, Associate Professor, Werabe University
 there may be a need for pre-feasibility studies on related aspects, by way of functional or
support studies, before the eventual decision on investment is taken.

Functional Studies or Support Studies

These are confined to selected aspects of the project being contemplated, and may be
found necessary by way of support for prefeasibility or feasibility studies, particularly in
the case of large projects with multi-division, multi-product characteristics. The following
types of studies are found to be common:

Market studies: The thrust is on examining the market prospects of the products
proposed to be manufactured. Demand estimates have to be prepared and, in addition,
scope for market penetration or creation of a new demand through suitable market
strategies have to be assessed.

Materials input studies: The ready availability of raw materials and other essential
inputs has to be examined, and reliable sources for these supplies have to be identified.
Need for developing proximate sources of supply for critical items or components
through vendor development initiatives have to be assessed, as this would involve
additional project outlays. The prevailing and anticipated price trends for these items have
also to be studied.

Location studies: Where transportation costs are high in relation to the high volume, low
cost raw material requirements (or finished products), or where transport bottlenecks pose
major constraints; location becomes a critical decision factor, and special studies may be
required to arrive at optimal decision in this regard.

Capacity studies: Technology choice is often motivated by the expectation of reaping

economies of scale. But these will have to be established with reference to the market
conditions, infrastructure facilities available, government policies on duties and levies,
and the inflation effects on equipment and other major input costs. Researchers on costs
and prices of manufactured products have questioned the belief that higher volume or
capacity means lower cost per unit. The impact of inflation on capital costs and costs of
operational inputs have had the effect of cancelling out the benefits that are expected to
result from larger size. Switching to high-capacity plants in cement and fertilizers has not
yielded us the benefit of lower unit costs. It is also likely that different technologies have
different optimal capacities, and comparative studies of capacities and costs specific to
these technology alternatives are essential before specific is taken.

Equipment selection studies: Very large projects with multiple divisions and products
have to procure equipment from diverse sources. Certain common services like central
tool room or common annealing, heat treatment, plating, metallurgical testing and other
services can be planned, if found feasible, with substantial savings on capital costs. These
possibilities have to be examined through special studies.

Laboratory and pilot plant tests: To prove the suitability of raw materials or
components or processes, laboratory tests or pilot plant tests may have to be resorted to.

Handout Prepared by: Dr. Anitha Lourdu James, Associate Professor, Werabe University
 The functional or support are investigative in nature, with reference to the specific areas
of scrutiny and the conclusions there from provide clear guidance for proceeding with the
subsequent stages of project preparation. The support studies can precede or follow a pre-
feasibility study or a feasibility study. It is the outcome of the felt need to examine, in
depth, certain aspects that are found to be critical, calling for closer investigation. Such
requirements may arise even after feasibility studies have been completed.

Components of Project Feasibility Studies

Introduction

The United Nations Industrial Development Organization (UNIDO) has published in the
Manual for the Preparation of Industrial Feasibility Studies to help the
standardization of industrial feasibility studies, which have often found to be incomplete
and inadequately prepared. It will be useful to trace the components, or contents, of the
feasibility studies through the framework provided by UNIDO.

Components of Techno-Economic Feasibility Studies

Following are the contents of techno-economic feasibility studies:

a) Executive Summary

The feasibility study, being the final scrutiny, analysis, and projections prior to the
decision to commit resources, has to provide definite conclusions on all basic issues of
the project. In the course of the project opportunity study and the prefeasibility study,
various alternatives would have been considered and precise decisions would have been
arrived at on critical aspects such as location, capacity, technology, etc. The summary of
the conclusions and recommendations should be provided in the form of an executive
summary to facilitate a quick grasp of the essentials of the project. The table of contents
in feasibility study given above provides the sequence of presentation of information. On
each aspect, a brief write-up on the essential information should be given. At the end of
the technical, operational and financial data, the major advantages of the project, the
major drawbacks of the project and the prospects of implementing the project should be
highlighted.

b) Project Background and History

The success of any project is dependent, among other things, on its consonance with the
country’s economic setting and its state of industrial development. The economic,
industrial, financial and other relevant policies should be briefly described. There should
also be information on the project promoters or sponsors and the reasons for their specific
interest in the project. The nature of preliminary and subsequent studies that have
proceeded from the feasibility study should be mentioned, giving the highlights and the
costs incurred.

Handout Prepared by: Dr. Anitha Lourdu James, Associate Professor, Werabe University
 c) Demand and Market Study

After identifying the data requirements of the demand and market study, an appropriate
method of data collection and evaluation will have to be chosen from among the
alternative approaches available. Then the demand and market size for the products, and
by-products, if any, will have to be determined and projected for the life time of the
project. Estimations about the extent of market penetration by products should also be
given. The proposed sales programme has to be spelt out, indicating the progress
expected during the project life. The marketing strategy that has been chosen should be
elaborated, presenting its rationale. Information on product pricing, promotional efforts
planned, the proposed pattern of organization structure for distribution and sales, and
decisions on the discounts and commissions on sales, and the extent and nature of after
sales services intended to be provided should be given.

Estimated revenue from sales and the estimated costs of marketing and distribution need
to be shown. Taking note of the policy on stocks of finished goods to be maintained, the
production programme will have to be drawn up. Details that go into these computations
include the inventory requirements, plant capacity factors, quality specifications, annual
production targets, wastes and effluents, and the costs related thereto.

In developing countries, where the projects are geared to import substitution, the
secondary or published data on imports and consumptions provides near-total information
on the market demand for the concerned products. But in the case of the other categories
of products, the secondary data may not be adequate, and it may be necessary to generate
a fair amount of primary data. This could mean additional costs on preliminary and
support studies.

The projected sales and income are critical factors affecting the viability of the project.
Optimistic estimates may help launching a project sooner, but it is an act of self-
deception, as the ambitious assumptions fail to materialize and the project slides down to
disaster. We have innumerable examples of such projects that had looked splendid paper,
but could either produce the quantities promised, or failed to find the market anticipated.

 The demand analysis should aim at providing the following essential information:
 The geographical boundaries of the market for the product and the size and
composition of the present demand.
 The market segments in terms of a) The end use (e.g. consumers); b) Consumer
groups (e.g. high income, middle income); and c) Geographical division (e.g.
regional, national, foreign);
 Demand projections of the overall market and of its segments, covering, say, a ten
year period of project life;
 The market share that the project is likely to achieve, taking note of the
anticipated trends in domestic and international competition and shifts in
consumer needs or preferences.
 The pricing structure that is being adopted which is the basis for the expectations
of market penetrations.
Handout Prepared by: Dr. Anitha Lourdu James, Associate Professor, Werabe University
d) Demand Projections

Demand projections should take note of domestic potential as also export possibilities.
These projections should cover the following aspects:

 The estimate of the potential demand for the product or products;

 The estimates of the potential supplies;
 The degree of market penetration that the project is expected to achieve.

While projecting domestic demand, the following logical steps are involved:

 Gather and analyze available information on current consumption and the rate of
changes in the past;
 Classify such consumption data by market segments;
 Identify the major factors that have influenced past demand, and assess the extent
of their influence;
 Project the expected impact of these factors on future demand; and
 Forecast the demand through extrapolation of the influencing factors.

Growth in demand for consumer products may be linked to expected increase in income
levels. But if the chances are that inflation or hikes in taxes will overtake the income rises,
the demand growth may not occur, or even if it does, it may be marginal. Population growth
is another factor that is equally relevant. A careful assessment of the counteracting influences
of these factors is a precondition for purposeful demand projections.

e) Forecasting Techniques

There are different forecasting techniques that can be adopted and an appropriate choice has
to be made depending on the nature of the products and markets. The demand forecasting
techniques that are normally used are:

 The trend method, also referred to as extrapolation method;

 The consumption level method (taking note of the income and price elasticities of
demand);
 The end-use method, also known as the consumption coefficient method;
 The leading indicator method;
 Regression models;
 Market survey

f) Exports Projections

The information requirements for assessing export market potential are:

 The present volume of export of the product or products;

 The unit export prices for these products;
 Countries to which these products have been, or are being, exported;
 Special aspects concerning these products, such as quality stipulations, special selling
arrangements, etc.

Handout Prepared by: Dr. Anitha Lourdu James, Associate Professor, Werabe University
  Other countries with export assistance or export incentive provided by the home
country, and the prospects of their being continued or improved.
 Risk of violent shifts in demand due to rapid technological changes, or changes in
political situations.

g) Market Penetration

The market penetration that the proposed product can achieve is assessed with reference to
the following factors:

 The degree of domestic and/or foreign competition;

 The consumer preferences or responses; and
 The scope for substitution that exists, or might develop.

There are also strategic levers that can be employed for achieving market penetration. These
include:

 Product quality;
 Packaging;
 Marketing and distribution methods, and;
 The after-sales services provided.

h) Sensitivity Analysis

There are bound to be a large number of assumptions on a variety of aspects relating to the
project. These assumptions can get vitiated by unpredictable events or there could be
inadequacies or inherent errors in the project data inputs. The common deviations that occur
are:

 Errors in the base data;

 An analysis based on inadequate data;
 Unforeseen economic and socio-political developments;
 Certain essential parameters being overlooked or some relevant factors and
relationships being unknown or being suppressed;
 Unrealistic assumptions being made with no proper justifications;
 Rapid technical and technological changes.

The projections also have to reckon with a number of uncertainties. Among them are:

 Unpredictable shifts in the rates of increase of national and per capita incomes;
 Emergence or disappearance of a dominant competitor;
 Changes in transportation costs;
 Trade agreements within trade blocks;
 Introduction of new sources of raw materials or substitutes;
 Changes in tariff policies;
 New application possibilities for the product.

Handout Prepared by: Dr. Anitha Lourdu James, Associate Professor, Werabe University
To reduce the uncertainties from these diverse possibilities to a minimum, statistical
sensitivity analysis provides a systematic approach. This technique can be used to assess the
impact on costs and revenue, when the factors influencing demand turn out to be less or more
favorable to demand than was assumed. Where the sensitivity analysis has to take note of a
combination of changes of different factors, computer facilities can be employed with
advantage to provide a range of forecasts in the categories, pessimistic and realistic.

i) Sales Forecast and Marketing

The demand analysis gets transformed into sales forecasts. Simultaneously, decisions are
taken on the modes of distribution, market promotion strategy, pricing strategy etc. Analysis
of sales and sales income is thus a follow-up of market study and demand analysis. The
specific sales volumes, product by product, for the periods of the operating phase has to be
projected and the corresponding sales income estimated.

Volume of production and sales have a critical bearing on the production and selling costs
and, therefore, these estimates have to be carefully prepared, after considering possible
interruptions, delays, etc. that affects production volume. Choice of promotional methods and
distribution systems, have significant implications for product costs and these have to be
clearly defined and properly estimated. It is not uncommon to come across project estimates
where the sales quantities and prices are overstated thereby boosting up the revenues,
intentionally or otherwise.

j) Production Programme

Having arrived at the sales projections for the different stages of production in the operating
phase of the project, the feasibility study should spell out the detailed production programme.
The levels of output and capacity utilization during the specified periods should be clearly
indicated. Within the available plant capacity, the levels of output can vary substantially,
from time to time, for a variety of reasons, and prepare the materials flow diagram to show
the materials and utilities balances at various stages of production. The costs on inputs have
to be worked out in detail for the different categories. The production programme provides
the basis on which the cash flow projections for the production periods can be drawn up.

k) Plant Capacity

For determination of costs and revenues, the assumptions on plant capacity are very critical.
The UNIDO manual defines two capacity terms, as below:

Feasible Normal Capacity

This represents the capacity that is achievable under normal working conditions taking into
account not only the installed equipment and technical conditions of the plant, such as normal
stoppages, downtime, holidays, maintenance, tool changes, desired shift patterns and
indivisibilities of major machines to be combines, but also the management system applied.
Thus, the feasible normal capacity is the number of units produced during one year under the

Handout Prepared by: Dr. Anitha Lourdu James, Associate Professor, Werabe University
above conditions. This capacity figure should correspond to the demand figure derived from
the market study.

Nominal Maximum Capacity

This is technically feasible capacity and frequently corresponds to the installed capacity as
guaranteed by the supplier of the plant. To reach maximum output figure, overtime as well as
excessive consumption of factory supplies, utilities, spare parts, and wear and tear, will
inflate the normal level of production costs. With reference to the nature of operations,
technology and also the resource and input constraints, the feasible normal plant capacity has
to be determined and the production costs computed on that basis.

Matching Projected Sales and Plant Capacity

In the case of products that have rapid growth potential, the initial production capacity should
be higher than the initial demand and sales so as to be able to cover subsequent demand
growth. Care should, however, be taken to see that the planned underutilization of capacity
does not fall below the break-even level. Where expansion can be taken up fast to meet the
demand growth, the initial production should match the demand and creation of idle capacity
should be avoided. In keeping with the feasible normal capacity selected, the input
requirements of materials, manpower, services, etc. should be worked out in detail.

l) Materials and Inputs

As for the requirements of material and other inputs, detailed information has to be provided
about their nature, quantities, sources of procurement, and their costs. Materials and inputs
can be classified into:

 Raw materials;
 Processed industrial materials (intermediates or components);
 Manufactured (subassemblies):
 Auxiliary materials;
 Factory supplies;
 Utilities.

The major items of materials have to be described, mentioning possible alternatives,

and justifying the selection. Information should also be provided on their qualitative aspects
and quantities available, sources of supplies, and the prevailing and projected costs.

m) Supply Programme

The procurement plan should be linked to the anticipated production and inventory levels and
the annual costs of consumption determined for the classified groups of materials and inputs.
The utilities required have to be assessed in detail, taking note of the location, technology,
and plant capacity. Their availability and proximity of sources of supply are critical for the
success of the project. Supply programmes for these should also be drawn up. The general
tendency is to take utilities or off-site facilities for granted, and underestimate their

Handout Prepared by: Dr. Anitha Lourdu James, Associate Professor, Werabe University
significance, time frame for installation and costs. Electricity, water, steam, compressed air,
fuel and effluent disposal are project components that require planned and detailed attention o
avert project cost and time overruns and to avoid capacity constraints during the operating
phase for want of support services.

n) Location

Specific requirements that the locations have to fulfill for smooth plant operations have to be
spelt out. Alternatives locations that are likely to be suitable should be identified. The reasons
for the choice of the optimal location from among considered alternatives should be
substantiated.

o) Plant Site

Choice of site, in a given location, for erecting the plant involves selection from available
alternatives, with due consideration for the terrain, transport facilities, water supply, power
supply, manpower availability, etc. Site preparation and development, in some instances, can
be a very expensive proposition and this aspect has to be assessed carefully. The cost
estimates should take note of the magnitude of work involved in preparing the site for plant
erection.

p) Local Conditions

A good understanding if the local conditions in terms of infrastructure and socio-economic

environment is very essential and the relevant information has to be gathered for the
feasibility study. Infrastructural investment is a very essential precondition for the operation
of any project.

q) Layout and Physical Coverage of the Project

Just as it is important to determine the composition and cost of equipment, materials,

services, land, etc., in great detail, it is also necessary to consider the requirements or
structures and civil works for the considerable construction and erection work that has to be
undertaken during project implantation. Such constructions/erections have to be defined and
their costs estimates prepared.

 Project layouts have to be determined with reference to:

 The production programme;
 The procurement programme for materials, supplies and services;
 The technology chosen;
 The equipment selected;
 The civil work involved; and
 Significant factors, if any, with reference to the local conditions.

Alternative project layouts should be considered, and the optimal layout chosen. To highlight
the scope of the project and project components, the physical layout drawings have to be
drawn up.

Handout Prepared by: Dr. Anitha Lourdu James, Associate Professor, Werabe University
r) Technology and Equipment

The feasibility study should also describe the technologies considered and the rationale for
the ultimate choice of technology. The costs of technology in terms of investments, or lump
sum payment of technology fees, or royalty or annualized payments have to be determined
and detailed. Equipment have to be categorized as belonging to the production, infrastructure
or other categories, the basis of their choice elaborated and their costs estimated, with
appropriate details of quantities and rates.

s) Civil Engineering

Civil engineering includes the creation of manufacturing facilities required for the project.
Proper blue print of the infrastructure required for the project should be created.

t) Plant Organization

Organizational planning is as important as project engineering. Effective implantation is

difficult if the organizational structure is vague; there is likely to be overlap of functions and
duplication of responsibilities, causing delays and interruptions in project construction. The
consequences are cost and time overruns. There should be a proper grasp of the types of
operations involved and the nature of services required for achieving the production
objective. Production cost centers and service cost centers should be identified and defined in
the organizational framework. Similarly, administration and finance cost centers should also
be incorporated in the structure.

u) Overhead Costs

If the plant is organized into production, service and administrative cost centres,it should be
possible to obtain realistic assessment of overhead costs. The tendency is generally, is to
calculate overhead as percentage surcharge on material cost, or on direct labor cost, or on the
sum of the two. This is too broad an approximation and is inadequate for a proper assessment
of project feasibility.The cost items accruing in the different production, service and other
cost centers should be identified, listed and the expenditure under the individual items
estimated. Depreciation charges and financing cost should also be duly reckoned.

v) Labour

After deciding on the projected production capacity and the layout, process, etc. The requisite
personnel at various levels of operations have to be assessed. The cost of recruitment,
training, employment, and promotions have to be estimated and reckoned for working out the
economics of the project.

w) Staff

Lack of qualified and competent supervisory and managerial staff has very often been a
major handicap for many a project. Advance planning and action is necessary to determine
the manpower needs for supervisory and managerial positions, for the proposed organization
structure and plant layout, and for requiting, inducting and training the key personnel in order

Handout Prepared by: Dr. Anitha Lourdu James, Associate Professor, Werabe University
to ensure smooth and efficient operations from the commencement of commercial
production.

x) Implementation Scheduling

The implementation phase commences from the time the decision to invest is taken, and
extends up to commencement of commercial production. From the process plant initial
concept, it proceeds through the stages of design, quotations, bid analysis orders and site
contracts, scope variations work completion and startup. If these stages are not properly
planned and managed, delays omissions and commissions will proliferate and cause
avoidable and substantial cost and time overruns. Planning and executing project construction
is no less important than planning and procuring equipment, facilities and services.

Though due attention is paid to the determination of the periods required for the various
implementation activities, continued methodical and systematic review is essential to ensure
that the project schedule is well knit and co-ordinate. Bar Charts, CPM, PERT techniques can
be of immense help in effective implementation planning and management. Yet it is
necessary to review the implementation schedule from time to time to initiate midcourse
corrections or revisions promptly.

y) Financial evaluation

The feasibility study elaborates, as we have seen, element by element, from the project
conception to the terminal stage of the project life, the status, the prospects the choices, the
selection, the process, the specifications, the quantum, the price, the time schedule, the costs
and the benefits. The building blocks should thus be well- defined and established.
Unfortunately, this is where we seem to grossly underestimate the role of the techno-
economic feasibility study and its comprehensiveness and credibility for the successful
implementation and subsequent functioning of the project.

z) Economic Evaluation

In the case of the projects, it is particularly necessary to evaluate the contribution of the
projects to the national economy. Rising of aggregate consumption could be one of the basic
objectives in the project evaluation. Redistribution of income could be another. These
different objectives will have to be weighted and combined to establish the net contribution
of the project to the national economy.

Detailed Project Report (DPR)

Detailed Project Report is one which contains the complete details of the project and it is
required to be submitted to banks and financial institutions for obtaining the financial
assistance. Usually, all the contents of techno-economic feasibility studies will be covered in
the DPR. Detailed project report is a complete document for investment decision making,
approval. Detailed project report is base document for planning the project and implementing
the project. Preparation of detailed project report is a step in firming up the proposal. When
an investment proposal has been approved on the basis of functional report and the proposal

Handout Prepared by: Dr. Anitha Lourdu James, Associate Professor, Werabe University
is a major proposal, it would be necessary for detailed project report to firm up the proposal
for the capital cost as well as the various facilities. It includes:

 Examination of technological parameters.

 Description of the technology to be used.
 Broad technical specification.
 Evaluation of the existing resources.
 Schedule plan.
 General layout.
 Volume of work

Feasibility-cum Detailed Project Report (FDPR)

The interested promoter should submit a Feasibility-cum-Detailed Project Report (FDPR)

covering following aspects for getting financial assistance from banks and financial
institutions:

1. Availability of raw materials and tie up (MOU document)/ willingness

certification
2. Availability of land and tie up (Lease document)/ willingness certification
3. Organization type and structure like (Entrepreneur/ Proprietary, Private
limited, Entrepreneur/ Public limited, Co-operative, NGO etc.
4. Brief project description
5. Tie up with technology, equipment suppliers
6. Financial analysis and profitability study.
7. Incentives, concessions expected from other Government and public bodies
for demonstration and future multiplications.
8. Initial contribution in terms of finance, technology development, technical and
equipment tie up by the promoter and user agency (mention separately).
9. Organizations to operate and maintain the demonstration project.
10. Organization to replicate the project in a specific region or throughout India.
11. Fulfilment of statutory requirements (like PCB clearance, environmental
clearance/ safety, etc.

Conclusion

The Detailed Project Report (DPR) is an essential building block for the projects and
enabling sustainable quality service delivery. The DPR is to be prepared carefully and with
sufficient details to ensure appraisal, approval, and subsequent project implementation in a
timely and efficient manner. This document provides a reference format for preparing DPRs/
Project Reports across sectors.

Handout Prepared by: Dr. Anitha Lourdu James, Associate Professor, Werabe University