Feasibility test of a project:

To evaluate an investment, project feasibility test is being done. There are three types of feasibilities evaluated for a project viz. 1) market feasibility 2) technical feasibility 3) financial feasibility. Market feasibility (for demand and market price estimates): The process of market feasibility test includes following steps: 1) Study of end user profile 2) Study of influencing factors with critical infrastructure factors 3) Market potential analysis 4) Demand forecasting and supply estimation 5) Estimation of demand supply gap 6) Analysis of Companys own market share with potential to fill the demandsupply gap 7) Analysis of Competition in the market and substitute of the product Technical feasibily (to derive project cost with operational cost and critical factors for the project): The factors considered in technical feasibility are: 1) Availability of commercially viable technology, raw material and other resources 2) Technological innovation rate 3) Market rate of technology and raw material 4) Identification of the factors that are critical for the project Financial feasibility: Financial feasibility study requires detailed financial analysis based on certain assumptions, working and calculations such as:1) Projections for prices of products, cost of various resources for manufacturing goods and capacity utilization. 2) Basic workings in different schedules like interest and repayment schedule, working capital schedule, working capital loan etc. 3) Risk- return analysis is also an important part of feasibility test. The required rate of return should be higher than the risk free market rate of retun. 4) Financial statements prepared in the project feasibility report viz. projected profit and loss account, projected balance sheet and projected cash flow statements.

5) Financial indicators are calculated from data available in various financial statements. Basic financial parameters used for judging the viability of the project are interest coverage ratio (ICR), Debt service coverage ratio (DSCR), net present value (NPV) or internal rate of return (IRR). Sometimes pay back period is also calculated. Followings are the financial indicators: Interest coverage ratio indicates the safely and timely payment of interest to lenders. The ratio indicates how many times the operating cash flow before interest is earned against interest liability. Debt service coverage ratio indicates the safely and timely payment of interest and principal amount to lenders. An average DSCR of 1.5 is considered good. Net present value (NPV) is an approach in which total value addition from project is calculated taking into account the discounted cash flow. Positive NPV is mandatory to beat the inflation and the higher NPV is preferable. Internal rate of return (IRR) is a rate where NPV is zero. It is a minimum required rate of return from any project. Pay back period technique is used to calculate the period in which initial investment will be recovered.

6) After testing the project on above parameters, the project feasibility is checked under risk and uncertainties. For this purpose a new approach has been introduced that is called sensitivity analysis or what if analysis. Under this approach, the relationship between basic underlying factors (quantity sold, sale price, input cost) and N.P.V. is established. And the effect of changes in basic factors on N.P.V. is studied. (one factor is values at a time with a variation range like +- 10%)

The project is acceptable when it is positive on all the above parameters.

Solar Photovoltaics in India

Begun as far back as in the mid 70s solar photovoltaics programme of the Government of India is one of the largest in the World. While the rest of the world has progressed tremendously in production of basic silicon monocrystalline photoltaic cells, in India the major players are Central

Electronics Ltd, BHEL, REIL and the other manufacturers of SPV modules are in fact assemblers sourcing the cells and carrying out assembly. Where this segment of basic manufacturing has not shown much growth in India and is unlikely also in the near future due to high costs involved in manufacturing monocrystalline silicon cells from scratch, the market is growing for SPV applications based products with the active encouragement of the government. Electricity and social development go hand in hand. Rural areas of India are so far-flung that in some cases it is decided not to lay down conventional electricity lines due to the small populace to be served and high cost of laying lines. Conventional gensets are also not feasible due to recurring maintenance problems. The best solution under the circumstances is solar photovoltaic based systems to generate power, run irrigation pumping sets and home lighting and streetlights. In addition to offering subsidy on these products government is also offering training on PV technology, PV system designs and related fields. The programme of MNES comprises of promoting use of PV technology to provide lighting in villages in the form of : Community lighting systems Portable solar lanterns Capacity usually 1KW to 2.5 KW Small 10Wp SPV module connected to a 12V7AH battery lighting 7 W CFL lamp for 3 hours a day Built around a 75Wp SPV module charging a 100-130AH battery to run a 11W CFL lamp for dusk to dawn operation. Based on 35-50Wp SPV module, powering two CFLs each of 9 or 11W to work 4-5 hours per day. Some systems also incorporate facility to run a small TV set or a fan from the power supply. Typically 1KW DC motor based pumping for shallow pumping.

Street lights

Fixed home lighting systems

Water Pumping

Reliefs offered by government on SPV manufacturers and users of SPV based products :

100% depreciation in the first year of installation of the systems No excise duty for manufacturers Low import tariff for several raw materials and components Soft loans to users, intermediaries and manufacturers.

Entrepreneurs worldwide wishing to tap the Indian markets will find it a rewarding experience. A local partner helps.. So go on.spread the light..