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Unit 3

Unit 3

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Published by Usha Nandhini

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Categories:Business/Law
Published by: Usha Nandhini on Jul 27, 2010
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PROJCECT IDENTIFICATION AND SELECTIONMEANING OF PROJECT:
A project is an idea or plan that is intended to be carried out. Thedictionary meaning of a project is that it is a scheme, design; a proposal of something intended or devised to be achieved.
Definitions on 'project':
Newman
define that "a project typically has a distinct mission that it isdesigned to achieve and a clear termination point, the achievement of themission".
Gillinger 
defines project “as the whole complex of activities involved inusing resources to gain benefits”.According to
Encyclopedia of Management,
"a project is an organizedunit dedicated to the attainment of a goal- the successful completion of adevelopment project on time, within budget, in conformance with pre-determined programme specifications".Now, a project can be defined as a scientifically evolved work plandevised to achieve a specific objective within a specified period of time.Here, it is also important to mention that while projects can differ in their size, nature, objectives, time duration and complexity, yet they partake of the following three basic attributes:
(i)
A Course of Action
(ii)
Specific Objectives, and
(iii)
Definite Time PerspectiveEvery project has a starting point, an end point with specificobjectives.
Project Classification
Project classification is a natural corollary to the study of project idea.Different authorities have classified projects differently. Following are themajor classifications of projects:
1. Quantifiable and Non-Quantifiable Projects:
Projects for which a plausible quantitative assessment of benefits canbe made are called 'quantifiable projects.' Projects concerned withindustrial development, power generation, mineral development fall in thiscategory. On the contrary, non-quantifiable projects are those in which aplausible quantitative assessment cannot’ be made. Projects involvinghealth education and defense are the examples of non-quantifiableprojects.
 
2. Sectoral Projects
According to this classification, a project may fall in anyone of thefollowing sectors:
(i)
Agriculture and Allied Sector 
(ii)
Irrigation and Power Sector 
(iii)
Industry and Mining Sector 
(iv)
Transport and Communication Sector 
(v)
Social Services Sector 
(vi)
Miscellaneous Sector The project classification based on economic sectors is found useful inresource allocation more especially at macro levels.
3. Techno-Economic Projects
Projects classification based on techno-economic characteristics fallin this category. This type of classification includes factors intensity-oriented classification, causation oriented classification and magnitude-oriented classification. These are discussed as follows:
(a)
Factor Intensity-Oriented Classification
:
Based on factor intensityclassification, projects may be classified as capital intensive or labor intensive. If large investment is made in plant and machinery, the projectswill be termed as 'capital intensive'. On the contrary, projects involvinglarge number of human resources will be termed as 'labor intensive'.
(b)
Causation-Oriented Classification
:
Where causation is used as abasis of classification, projects may be classified as demand based or rawmaterial based projects. The very existence of demand for certain goods or services makes the project demand-based and the availability of certainraw materials, skills or other inputs makes the project raw material-based.
(c)
Magnitude-Oriented Classification
:
In case of magnitude-orientedclassification, based on the size of investment involved in the projects, theprojects are classified into large scale, medium-scale or small-scaleprojectsDefinite procedure of selecting a project. Basically, project selectionconsists of two main steps:1. Project Identification2. Project Selection
PROJECT IDENTIFICATION
Project identification is concerned with the collection, compilation andanalysis of economic data for the eventual purpose of locating possibleopportunities for investment and with the development of thecharacteristics of such opportunities. Opportunities, according Drucker (1955), are of three kinds; additive, complementary and break-through.
 
Additive opportunities are those opportunities, which enable the decision-maker to better utilize the existing resources without in any way involving achange in the character of business.i)Complementary opportunities involve the introduction of new ideasand as such do lead to a certain amount of change in the existing structure.ii)Break-through opportunities, on the other hand, involve fundamentalchanges in both the structure and character of business.iii)Additive opportunities involve the least amount of disturbance to theexisting state of affairs and hence the least amount of risk.The element of risk is more in other two opportunities. When theelement of risk increases, it becomes more important to precisely definethe scope and nature of project idea, to develop alternative solutions for achieving the project objectives and to select the best possible approachso as to minimize both resource consumption and risks and to optimize thereturn or gains.Project identification cannot be complete without identifying thecharacteristics of a project. Every project has three basic dimensions-inputs, outputs and social costs and benefits.The input characteristics define what the project will consume in termsof raw materials, energy, manpower, finance and organizational setup. Thenature and magnitude of each of these inputs must be determined in order to make the input characteristic explicit.The output characteristics of a project define what the project willgenerate in the form of goods and services, employment, revenue etc., thequantity and quality of all these outputs should be clearly specified.In addition to inputs and outputs every project has an impact on thesociety. It inevitably affects the current equilibriums of the demand andsupply in the economy. It is necessary to evaluate carefully the sacrifice,which the society will be required to make, and the benefits that will accrueto the society from a given project.Project do not emerge them selves. The inputs to set up a project cancome from different sources such as Government agencies, credit and

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