Professional Documents
Culture Documents
AND MANGEMNT
ASSIGNMENT
Ans.:- Project rating index is used to evaluate a large number of project ideas regularly, it
may be helpful to streamline the process of preliminary screening.
QUASAR PLASTICS
Quality at the BEST
Executive summary
Plastic is the basic need of our day to day life. During recent years the plastic industry has
grown with a substantial growth rate. This growth is driven by three sectors viz packaging,
infrastructure and agriculture. There are the various verities of plastics out of which PVC
(Polyvinyl chloride) and PET (Polyethylene terephthylene) plastics have their considerable
contribution. PET plastics are generally used in the manufacturing of beverage bottles for the
packaging and PVC plastic is used in the production of household plastic materials. The
growing utilization of plastics in industrial and consumer applications and surrounding solid
waste recycling, has led to an increased demand for recycled plastic resins and products.
We the Quasar plastics provide a wide range of plastic solutions for household and raw
material for packaging of various companies. As a part of our ongoing efforts to exploit this
opportunity we will recycle the plastics and then produce kitchen ware items and other
related plastic material. We will also sell the recycled plastics to the companies in the plastic
business. We will have a recycling plant along with the production unit. The raw material
will be procured from the waste collectors. The raw material will be post consumed beverage
bottles and other soft plastic materials
Our main focus is our industrial customer whom we will sell PET bottles and PET flakes. It
will contribute more than 60% of our sales. We will also focus on the household plastic
business which is the part of our portfolio. The initial set up cost will be Rs 34, 40,000.
Quasar plastics will be a solution proprietorship business run by the promoter Saurabh Kumar
who is a MBA graduate with Marketing and Finance as specialization.
Since plastic material does not carry any brand name so it will give us an addition benefit in
long term to establish our brand name. To exploit the market we will use penetration pricing
as our marketing strategy and utilize our stringent distribution network and strong industrial
relationship.
As a future plan in coming years we will increase the variety of plastics like LDPE (Low
density polyethylene) and HDPE (High density polyethylene). By doing this we will be able
to produce plastic carry bags and raw material for production for plastic chairs and tables and
other fiber based products.
COMPANY OVERVIEW
Quasar Plastics provide a wide range of plastic solutions for households and raw material for
packaging to the various companies. Allahabad is the place where the facility will be
established and other operation will commence.
We will collect the plastic garbage like consumer beverage bottles, plastic bags from various
garbage stores and then our recycle unit will process it which eventually be used for the
production of finished goods.
The plastic garbage we are getting as raw material has two components one is PVC
(Polyvinyl chloride) and other is PET (Polyethylene terephthylene ). Firstly the whole
garbage is melted and then PVC and PET are separated from each other by froth flotation
technique.
We will create a plant (actual facilities to be shared with the recycling unit) to manufacture
extruded plastic flakes (purified plastic). The extruded plastic is then molded in the various
products.
Mission Statement
Quasar Plastics
• Strive to provide the excellent plastic solution to the customers at competitive prices.
From Allahabad city 500 tons of solid waste is produced from that 15tons of plastic bags and
around 7 tons of plastic bottles is generated per day. So the supply of raw material will be
continuous.
Apart from this we will sell raw material for packaging to the various small companies in this
area. Around 30 small and medium scale companies are working in this region. So a large
amount of industrial customer is also available.
There are two folds of products that we are providing one is industrial and other is household.
Objectives
• Develop a business that survives on its own cash.
• Expand the service to whole UP in first five years and then to Delhi.
Key to success:
• Cleaned and recycled plastic flakes of PET and bottles, recovered from post-consumer
beverage bottles. (this PET will work as raw material for packaging to various firms,
not for the end user)
• Household finished plastic goods. We are manufacturing plastic tubes of various
diameter, plastic kitchen ware. ( for the end user)
PET flake will be sold to thermo formers (those who mold plastic sheets into usable products)
primarily to be used to produce high-visibility packaging. And also to the beverage
companies for packaging.
Recycled plastic is widely used in mainstream construction products such as damp proof
membrane, drainage pipes, ducting and flooring. Bins, street signs and planters are frequently
made from plastic. They are cost competitive and resistant to damage. Local authorities and
schools are able to demonstrate recycling in action by specifying recycled products
High strength PET is used in the clothing, furnishings, tyre cord and technical textiles
Apart from PET the household plastic will be directly sold to the end customers. In day to
day life plastic items like water bottles, shop case scrubber etc is frequently used. So there is
a big demand of these in local market.
Market comparison
While quality and delivery are important factors to our potential clients, price is most often
the determining factor in a buying decision. Good-quality packaging products manufactured
from recycled (less expensive) resins, as close as practical to the end customer's operations,
will be most competitive and achieve a significant market share. These factors have helped to
determine the business parameters of Replay Plastics.
Possible obstacle
The product is completed and ready for the market launch. The possible obstacles are
Industry analysis
Plastic recycling is an industry in itself in India. According to the Crisil research 7360
companies are working in this industry with a turnover of Rs 9200 Crore provides
employment to 3.5 million people. In India per capita plastic consumption in lowest in the
world. The per capita consumption is just one fifth of world average which is 5kg. the
domestic demand of plastic has grown by 9% and reached to 4.5MMT in year 2005.The GDP
has grown during this period at 6.3% and plastic industry 1.3 times of GDP. According to
the Crisil report the demand of plastic by 2012 will be around 12MMT. The plastic
consumption in India is booming. Demand for commodity plastics is growing at the rate of
15% per year. .India holds immense potential for the use of plastic in the infrastructure and
agriculture. In case of packaging industry we are using more plastic than the developed
countries. The growth is driven in three major sectors – infrastructure which is 13%% of the
total, packaging is 15% of the total and 10% for plastic consumer durables. It is projected that
the plastic waste generation will reach the will reach the level of 1.6 million tons annually.
Each region is specialized in one type of plastic viz south: PET; north: PVC;
The current plastic recycling rate is estimated as 60% by Plastic India Foundation. One
estimate is that about 20,000 microenterprises are engaged in reprocessing and recovery of
plastic waste in addition to 180,000 of various sorting and washing units, 60% of which are
unregistered .Delhi alone has estimated 53,400 units and Delhi and Bombay together process
over 50% of India's waste plastics.
Compounders
These specialist companies, usually small, stock various polymers and provide the
manufacturers of plastic goods with technical advice and the most suitable materials or
mixtures for each individual need. The compounder is often the best market for the recycler
because he possesses superior technical knowledge and has a large volume throughput of
virgin material, in which small percentages of reclaim will reduce cost without seriously
affecting the quality required by the molder.
Stockists
These warehouses stock polymers and compounds but neither manufacture themselves, nor
provide a compounding service. They may be agents or subsidiaries of the producer
companies or departments of companies concerned with the supply of other materials such as
chemical, rubber or paper. They may be willing to stock reclaim alongside virgin materials,
especially if these are in short supply.
Other Manufacturers
Many companies are not plastics specialists but employ molding operations in the
manufacture of some other product. For example shoe and boot makers use plastics
extensively and may carry out the various plastics molding operations in the same production
sequence as the work in leather, canvas, rubber etc. Many manufacturers use plastic
packaging machinery at the end of a production operation.
Fabricators
These firms cut and join sheet, rod or extrusion to manufacture a variety of products. They
have no opportunity to use reclaim. Machinery and Tool Makers One other sector of the
plastics industry justifies mention although not customers for reclaim. The makers and
suppliers of plastics manufacturing machinery, tools, moulds and dies are well informed
about who does what, who makes what and who uses what within the local plastics industry.
They may advise who is likely to buy material.
Marketplace analysis
Various overseas players wish to explore the Indian market and invest in opportunities
thrown open by the country, projected to be world number 3 in plastics consumption by
2010.As shown above the north region of India is specialized in recycling of PVC. So
there is a great scope of PET recycling. Apart from this the other
Customer analysis
Since we are new player in the market so we need to make some stringent strategies to
penetrate market and grab customers. The customers of the plastic industry are scattered due
to lack well known brand names. So our first priority will be to accumulate the defused
customers.
The direct customers are the customers whom we are selling our product regularly. So for us
households whom we are selling plastic goods and companies who are getting raw materials
for packaging are direct customers (PET bottles). So only in Allahabad around 20,000
families are our direct prospective customers and in terms of business to business market
around 20 small and medium scale companies are our direct customers
Apart from them there are few small companies which are giving compounding services.
They use to collect various types of plastics flakes along with the virgin plastic and suggest
customer (companies) in choosing appropriate plastic. An Asha enterprise is one compounder
whom we will sell our plastics.
Competitor analysis
In plastic manufacturing market there is no specific brand name is existing so the market is
flooded by small companies which are in this business. So they are our biggest direct
competitors.
As we are also not alone as a supplier of PET to the companies as raw materials there are
many companies in this region which are supplying PET. Indira Plastics is one of them who
is currently selling all types of plastics items. So in case of business to business market they
are our direct competitors. Kanpur is plastic recycling city of UP. The direct threat we will
also have is with the companies operating in Kanpur. But as the distance between Kanpur and
Allahabad is 600km as well as the road is not in good condition, so it will not affect much.
Marketing strategy
The Company has chosen to focus on the production of plastic packaging materials from
recycled post-consumer beverage bottles. we have identified a significant available market in
the eastern part of UP. All of our initial marketing strategy will be to secure contracts in that
segment, and after reaching full planned capacity, look to grow in concert with that segment
and related markets. We see little need at present for further market research and
development, and will focus on continually updating our production technology in an effort
to remain in the forefront of our chosen marketplace.
The packaging companies require high quality and highly transparent PET bottles. The
companies which are producing mineral water will reject PET bottles with even a small
impurity/ opaqueness. So we the Quasar Plastics provide high end PET flakes for the perfect
packaging.
Quasar Plastics will apply recycling and extrusion technology managed by decades of
industry specific expertise to create a competitive advantage for its clients. These processes
will produce clean, cost-efficient, recycled raw material for manufacturers of thermoform,
laminate and other high value-added products, and high strength packaging strapping for
shippers of large products and pallets, thereby reducing costs and creating a clear pricing
edge among their competitors.
Plastic bags and plastic sheets are now in high demand. And this demand is driven by
continuously increasing promotional activities.
Pricing strategy
As plastic products do not carry any brand name so only pricing and distribution strategies
will works to achieve competitive edge. The pricing strategy we will use is penetration
pricing. The price of all household plastic goods we will sell will be lower than the market
price. Also for the PET flakes and bottles the price will be lower than the competitors. A
lower price enables me to get contracts of PET bottles and sheets from various companies.
In case of kitchenware and other household products we will provide combo offers and
discounts which a common customer expects.
Distribution strategy
As I described before that firstly we will target Allahabad city and villages close to it. We
will have a distribution center in the Allahabad city which continuously maintains the supply
of goods. So the household plastics will be sold through small local grocery shops from
which the customers can get them easily. Apart from this we will hire street hawkers who
will roam around the city and sell the goods door to door.
PET bottles will be stored in warehouse which is close to the facility itself. The sales people
will directly contact to the companies which require these bottles for packaging and look for
the contracts. In city as stated above that we will have a distribution center, from that center
we will distribute to whole sellers.
As I described we are in both B2C and B2B so for this we will use two different promotional
strategies. For B2C business we will use flyers which will have full detail of our product
range, price, combo offers and discounts. These flyers will circulate through the newspapers
across whole city. For B2B business we will promote through online social media and we
will also develop our website through which enable us to widely spread our contact among
various companies. the site will have full details of product which are available for
companies as well as end user.
Sales strategy
The strategy of sales effort will be to convert potential and first time customers into long term
customers. Our sales strategy is totally based upon the distribution channel and the pricing
strategies. We will have a distribution centre in the city that will take care of sales of
household and also supply products to the wholesalers. We will also give the industrial
customers a facility to order the products through our website which will help them in
reducing the delivery time.
To market the products, the Company will use a number of sales agents/brokers. They have a
customer base of their own, having developed successful relationships with their client over
the years. Their customer base is currently demanding product so they can expand upon their
current base. Of course, they will expand that to new customers when product is available.
If the Company grows faster than its prime customer base, additional capacity may be
developed. We will identify additional prospective customers who can be attracted for our
products.
The first month prior to the opening will be used to get the new office in order, set up
appointment and begin marketing activities. In the first month we will focus on the
generating public visibility. The sales forecast is based on the assumption that we will sell all
of the highest volume PET bottles that we can produce. This flake will be sold to
other manufacturing companies. Recycling industry is growing with 15-20% each year. So
we can assume that we will grow with at least 20%. There is a continuing strong demand for
flake and extruded products made from recycled PET.
Sales forecast
year 1 year 2 year 3 year 4
Annual sales 1620000 2106000 2737800 3559140
Monthly sales 135000 175500 228150 296595
PET Sales 94500 122850 159705 207617
Household items 40500 52650 68445 88978.5
Development
The development of Quasar plastics required to accomplish a series of action and formalities.
Since we are new in the market we kept our production is low initially, as demand will
increase the production will be enhanced respectively. Now we are recycling and producing
only two types of plastics i.e. PVC and PET, as we grow we will produce a wide the range of
plastics and its finished product. . The development process involves following steps:
• Legal formalities
• Office/business setup
• Future offerings and expansion plan
Development strategy
In future we are looking for the production of a variety of plastic. These plastics will be
LDPE plastic is used in the production carry bags and other plastic sheets as well as cling
wrap, car covers, squeeze bottles, liners for tanks and ponds, moisture barriers in
construction. And HDPE plastics are used in production of freezer bags, water pipes, wire
and cable insulation, extrusion coating.
Our development strategy will base on timely completion of the establishment of the business
centre with low execution cost. Our strategy will focus not only the current uninterrupted
production of PVC and PET and acquisition of customer as fast as we can, but we will also
look for the future expansion plan and execution strategy.
Our future development strategy will focus on to chart out a careful plan for the future
expansion and growth of our business. The development strategy will address following
issue:
• How will we expand our services?
• Which are the new areas we will include to provide our services?
• What will be the format of the business
Our development strategy will address all those above mentioned point. As we will grow
and our earning will increase, we will produce more of PVC and PET as well as expand
in new area. We have a development strategy to expand our facility size in order to meet
the production size.
Management
The company will be managed by promoter and six supporting staff. Saurabh Kumar, a MBA
graduate with specialization in Marketing and Finance is the owner and promoter of Quasar
Plastics. He has intensive knowledge and vast understanding in financial areas like Risk and
Return management, Investment portfolio and Capital Budgeting, which undoubtedly will be
of intense help in the business. Apart from this he also has a good knowledge of chemicals
and their properties.
Marketing skills like convincing power, negotiating ability, creating promotional strategies
and sales skills will all be extremely helpful in taking the business a long way and will prove
intensely valuable to take Quasar Plastics to flaring heights.
Thus with such potential skills, and other qualities like efficient interpersonal skills,
leadership skills and decision making quality, aptly makes him the best promoter and eligible
founder and owner of Quasar Plastics
Along with promoter five more employees will work for the accomplishment of companies’
objective. One supervisor will work on the facility along with two supporting staff.
Supervisor who will work upon the facility does not need to be a chemical engineer a simple
technician has experience on working upon the facility can be able to do this.
Job description
Process No of employees Proficiency
Sorting 2 unskilled
Belt Conveyer 1 semiskilled
PET Separator 1 semiskilled
Packaging 4 unskilled
Operations
The operations is defined as the process used to deliver your products and service to the
customer market place and also include manufacturing transportation logistics travel and after
sales services.
The facility is located at outside the city. Facility is divided in two parts
• Recycling and Production unit
• Warehouse
The facility is located in an area of 3000sqft. Apart from these two units there will be an
office which will look for the perpetual supply of required raw material and also take care
about the outbound logistics. The production capacity is 80kg/hr.
The operations will be based upon JIT i.e. just in time. We will have contracted with the
suppliers who can supply the raw material as quickly as we want. The raw material contains
post consumer beverage bottles and other plastic materials. The bottles and other plastic
material that can be recycled have a specific sign from which it can be identified that it can be
recycled or not.
The plastic is then transferred to respective unit to be recycled because PET and PVC cannot
be recycled simultaneously due to their different properties. There will be two units running
parallel to each other. On unit will recycle and produce PVC plastic and other will perform
the same for the PET plastic.
The recycled PVC is then moved for the plastic injection moulding unit in the various shapes.
Since there are a variety of product is being produced so the preference will be given to that
product whose demand is high. All the products will not be produced each and every day.
There will be different products which will be produced on different day according to the
demand in market.
After the recycling process is completed one part of PET flake is moved to the warehouse
according to the demand of raw material which different companies need and other part will
move for the moulding in bottles.
The recycled PET flake is then heated and made the viscous solution of it. The PET resin is
then feeded to moulder and moulder will give it various shape bottles. And then it left for
drying. Those products which further need for processing like buckets, the handle will be
inserted after the bucket is dried.
Stages of Recycling and Production
The process of recycling of waste plastics into products of varying usefulness involves the
following essential steps:
• Sizing / Chipping
• Cleaning
• Segregation.
• Agglomerating / Colouring
• Extrusion / Palletisation
• Fabrication into end Product.
Chipping:
The plastics waste is then required to be properly sized so that those may be fed into the
extruders for processing and palletizing. The sizing operation depends on the type and shape
of the waste plastics. During this process, attention is required to separate any powdery
material from the sized / chipped plastics.
Segregation:
Certain polymeric materials are compatible with each other at all proportions. For example
LDPE and LDPE are generally compatible to each other at all proportions.
The advanced technology of separating / segregating different types of waste plastics
involves ‘Floatation Process’. In this process the property of the varying densities of different
plastics is made use of for segregating different types of plastics.
However in the Indian Context, this separation or segregation process, in many cases, are
done by manual process utilizing the availability of cheap and expert labor force. In case the
waste is contaminated with embedded metals, proper method of separating the metals / other
contaminants is required.
Cleaning:
The scale of cleaning depends on the type of waste. Whenever a cleaning operation is
involved, it is to be ensured that the water or any other cleaning material used, should be
discharged after ascertaining that the discharge does not contain any objectionable substance.
A proper Treatment Device may have to be deployed – like a water treatment plant / effluent
treatment plant. For drying, a suitably designed drier is used.
Many industries situated outside the metropolises, use open space for natural drying of the
cleaned waste.
Agglomerating / Colouring
In the next operation the sized plastics waste is mixed with colour master batch in high-speed
mixers / agglomerators and the output is ready for extrusion into pellets.
Extrusion / Palletisation
This is the most important part of the process wherein the sized / chipped plastics are
plasticized and granulated to make the plastics material ready for fabrication next.
The type and size of the Extruder depend on the type and volume of the plastics waste.
Scope of operations
Now presently our production capacity is 200kg/day from which in initial stages we are
utilizing around 50% of it. As the business expands we will reach to optimum capacity
utilization. We are expecting that we will start producing more advance plastics in the fourth
year of our operations and accordingly the sales will increase and the facility will have to be
expanded.
Supply chain
In the city there are various small post consumer plastic bottle collectors. To make a
continuous supply of raw material we will have four suppliers with us. There will be one
permanent supplier which will continuously supply the raw material. In case of excess
demand other suppliers will be taken into consideration. The transportation cost will be
covered by supplier only. The finished product will be stored in the warehouse and according
to the demand it will be send to city distribution centre. The distribution center will directly
sell the finished household plastics as well as to the small shops.
Our average daily demand of raw material is 300kg and the lead time we will keep lead time
of 6hrs. We keep a safety stock of 50 kg. So the reorder point is given by
Reorder point= average daily uses x lead time + safety stock
Reorder point = 300 X .25day + 50= 125 kg.
So at each and every day we will have minimum of 125kg (safety stock+ reorder point) of
raw material in our inventory.
This means that when the raw material level reaches to 125kg we will place the next order. The
difference time in which we will place the order and receive the order is the lead time which is 6hrs.
Process flow chart
Gantt chart
As it is an assembly line the output of one stage is feeded to the input of next stage. The
whole process will run in series format. That is the reason why no parallel process is
mentioned in the gantt chart.
Facility Layout
Financials:
Start-up Assets
Cash Required 1,00,000
Other Current Assets 0
Long-term Assets 33,30,000
Total Assets 34,30,000
Income statement
The projected income is as shown below it shows that first year we will end up with loss but
from second year we will start making profits.
Particulars YEAR 1 YEAR 2 YEAR 3 Year 4
net sales 1620000 2106000 2737800 3285360
cost of good sales 891000 1158300 1505790 1806948
gross margin 729000 947700 1232010 1478412
operating expenses:
admin exp. 3000 3150 3308 3473
Advertisement 6000 7200 8640 10368
Salaries 192000 211200 232320 255552
Transportation 96000 105600 116160 127776
Maintenance 15000 15750 16538 17364
Electricity 4800 5040 5292 5557
Telephone 10000 11000 12100 13310
Legal exp. 10000 1000 1000 1000
Insurance 20000 20000 20000 20000
Rent 24000 26400 29040 31944
other exp 6000 6600 7260 7986
386800 412940 451657 494330
EBITDA 342200 534760 780353 984082
less depreciation 303000 272700 245430 220887
EBIT 39200 262060 534923 763195
Less interest paid 175550 165061 153243 139926
EBT -136350 96999 381680 623269
tax @ 30% 0 29100 114504 186981
PAT -136350 67899 267176 436288
Balance sheet
The projected balance sheet of four years is as follows:
Sources of Funds Year-1 Year-2 Year-3 Year-4
Capital
Owner's capital 1930000 1930000 1930000 1930000
Surplus -136350 -68451 130274 765287
As the BEP is 15months it means that at 15th month we will be in a trade off total expenses
and revenue.
Appendix
Annuity table:
pmt[1-1/(1-
total loan amt.= i)^n]/i
n is number of years
i is interest rate
loan amount 1500000 ######
interest rate annually 0.12 ######
pmt = 21521 21520.64
PROPOSAL EVALUATION
Factors likely to impact the success of the project proposal (With reason why we are giving a
good weightage to the inputs):
1). Inputs availability: Availability of raw material and inputs is very important for starting
a business. They plays a vital role in the success of the project. Input availability has a major
part of weightage in the success of a project.
Replay our supplier of raw material is confident that it has secured good availability of low
cost post-consumer PET bottles (feed stock) derived from post-consumer beverage bottles. It
may be possible that we would not get desired raw material.
2). Finance availibity: Finance availability is also a key factor in success of a business
proposal because without finance no one can start an business. It also take a good weightage
in a project proposal.
We need 34,40,000 for setting up QUASSAR Plastic. we are approaching to Corporates and
Financial institutions, who can finance this project.
3). Adequacy of the market: Market condition prevailing in the market can create a huge
gap between your assumed and current position. Player in this at this time is very less but if
competition start increasing in the market or market demand get reduces for the product
because of a ban on use of plastic items. It is also a major problem and plays a average
weightage in the project.
4). Complimentary Relationship with other products: This plastic product is related to
kitchenware items, which is consumer durables, whose sales can not go down. So it carries a
low weightage in project success. If a product is a complimentary product of other product,
then sale of that product will depend on the sales of the main product and carry a high
weightage.
5). Reasonableness of cost adequacy: The cost structure of the proposed project must
enables it to realize an acceptable profit with a price. One has to use Economies of scale for
reasonableness of the cost. For reasonableness of the cost purpose main aim of the
businessman has to be reduce expenses by economies in operations. So it carries a good
weightage in projects success.
A project manager needs to be very careful that work in progress stays on course as the
project nears its end. Some employees have a tendency to drop the ball or let things slide as
the conclusion approaches. Costs may exceed budget. However, excellence must prevail all
the way to the finish line.
6). Government rules and regulations: The project must be feasible give the national goals
and governmental regulatory framework. All the factors like consistency with national goals,
environmental effect, difficulty in obtaining license for business. So while making a project
one should always keep one thing in mind, the project proposal should comply with all the
rules and regulations framework of the government. It carries a good weightage in the project
proposal.
7). Acceptability of Risk Levels: The desirability of a project is critically dependent on the
risk characterising a project. Assessment of the risk is such a difficult task, indeed. Here one
has to keep in mind factors like technological changes, competition from substitutes, shift in
customers preferences etc. Acceptability of risk level depends on risk of the project and the
liquidity of the firm. It carries a good weightage in the project proposal.
8). Compatibility with the promoters: The idea must be compatible with the interest,
personality, and Resources of the entrepreneur. According to Murphy, a real opportujity has
tree characteristic (i) It fits the personality f the entrepreneur- it square with his abilities,
training, and proclivities. (ii) It is accessible to him. (iii) It offers him the prospect of rapid
growth and high return on invested capital.
Every project needs a leader- someone to take charge and keep things moving, even when the
going gets rough. Without a leader, confusion will rule and controversies ensue. A good
leader delegates, recognizes the strengths of each team member and places people in the most
effective positions.
5 4 3 2 1
Input Availability 0.25 0.75
The Total Rating of the index is 4.75 and benchmark index is calculated is 3.75. As the
project above has total of 4.55 Rating Index, The project can be successful according to the
project rating index model. All the factors preliminary showing that project will be successful
if started. The search for a promising project idea is the first step towards establishing a
successful venture.
The project must be organized. Put a schedule in place with a beginning and proposed ending
date, and provide a budget so the dollars assigned to the project stay within cost perimeters.
Staff should know how much time is allotted for the project, so they can plan accordingly.
Distribute duties so everyone knows exactly what is expected of them.
Basically a promising investment idea enables a firm to exploit opportunities in the
environment by drawing on its competitive abilities. Hence, the firm has systematically
monitor and assess its competitive abilities.
Q.2 Perform a social cost benefit analysis (SCBA) of the recently concluded commonwealth
games in India. The critique should clearly focus upon:
a) The various steps in the UNIDO approach to SCBA.
b) Discuss the impact on India in the short, medium to long term.
Ans.:
Preface
The world over, cities vie with each other to host “hallmark” events such as the Olympics,
World Cup’s etc. It is seen by many as a sure way of shooting the host city into the limelight,
resulting in an “economic windfall” (Baade and Matheson, 2003), and at the same time
giving these host cities the impetus to improve domestic facilities and infrastructure. The
impact of being the host city, range from the physical (construction projects) to the intangible
(local self-esteem or international impact). The impact that an event of this kind has on the
urban landscape can largely be gauged by the size of the “legacy” that it creates. It is
important to note here that it is not only legacy creation that is important, but creating a
legacy which is beneficial to the host community post games, and which justifies the costs
involved. The controversy surrounding these events however is centred on its economic
sense. Do these games make money for the host city or not? The data from past Olympic
games seems to suggest not. All recent Summer Games with the sole exception of the 1984
Los Angeles Games have lost money. The citizens of Munich continue to pay a special tax to
this day, to pay off debt incurred in the 1976 Games (Preuss, 1998). This is very often not
revealed to the public by using smart accounting techniques that do not include a lot of the
costs incurred under direct games expenditure. After the $200 million profit that L.A. made
on the games in ‘84, they have been increasingly looked upon as extremely profitable, though
LA’s performance is yet to be replicated (Baade and Matheson 2003). Interestingly only Los
Angeles bid for the 1984 Games, largely due to the financial disasters that the Montreal and
Moscow Olympic Games in 1976 and 1980 were. This fact explains the absence of
significant public sector financial support in Los Angeles, and, perhaps, the private financial
success the 1984 Games are thought to have enjoyed. Eventhough here employment effects
and increased economic activity seem to have been transitory.
When numerous bidders are present however, theoretically the winning bid would be
constant with a zero economic return on the investment if opportunity costs were included in
the bidding calculus. The political nature of the event has however ensured that the games
give a negative return. In other words government is willing to pay something for perceived
political gains (Baade and Matheson, 2002).
Today, the bid process has also become a very expensive and long drawn out affair. Some
estimates place the amount spent by potential hosts for the 2012 Olympics during the bidding
process at nearly 200 million Euros.
In more recent years, therefore, hosting sporting events has been viewed as a prestigious
achievement resulting in opportunities for economic profit, urban regeneration and global
media exposure. Increasingly such sporting events are being aimed at increasing the exposure
and visibility of the host city, and many academicians believe that success cannot be simply
decided by profit and loss, as there are many intangible and unaccounted for benefits (Brown
and Massey, 2001) Urban regeneration and the re-imaging of cities is now a central aspect of
game bids. Barcelona and Manchester can be viewed as partially successful in that they were
able to re align the popular image of the city, both of which were manufacturing centres to
that of tourist destinations as trendy European cities. In Delhi too, the emphasis is on
portraying Delhi as a “world class” city, one of “international standards.” This is of course a
little more problematic in third world conditions as it requires a further marginalisation of the
poor to portray this “image” to the world.
In Barcelona, for example, the largest component of investment went into the development of
roads and transport facilities, while the construction of offices, commercial property, hotels
and sports facilities also made up a large proportion.
The importance of the urban transformation of Barcelona due to the Games is seen in these
proportions: in relation to the dimension in 1989, the new road projects meant an increase in
expenditure of 15%, the new sewerage systems an increase of 17%, new green zones and
beaches an increase of 78%, and ponds and fountains, an increase of 268%.
Sporting events of these kinds are increasingly being seen as vehicles for urban renewal, a
catalyst to create jobs, increase investment and transform the landscape of the city. The 2002
Commonwealth Games in Manchester were aimed primarily to “regenerate” the area which,
had in recent years been undergoing a depression due to the re location of the many heavy
engineering and chemical industries which had been the mainstay of the region’s economy.
The focal point of the regeneration was East Manchester which had been the worst affected.
The Cambridge Policy Consultants estimate that the Games will help to regenerate
approximately 60ha of land and create 72,000m of employment floor space in East
Manchester (Cambridge Policy Consultants, 2002). The image of the region seems to have
been greatly improved by the games, with 18 million people visiting the region in 2002
putting £6 billion into the North West’s economy, and with over 300,000 expected each year.
The wish to host an event of this kind does not derive from a sense of philanthropy or love of
sport, but is now largely seen as a business opportunity. The games act like a magnet,
attracting attention, which in turn transforms into the more tangible investment and increased
tourism.
Qatar, host of the 2006 Asian Games, has spent an estimated $17billion on the development
of new sports, tourism and cultural facilities.
The games were seen as an opportunity to launch Qatar as a major tourist and financial hub.
Thus what one sees is that these hallmark events tend to serve as a “spotlight”, focusing the
world’s attention on the host city. This often results in improved infrastructure for the cities’
citizens, as well as increased interest in the city as an investment destination.
Sporting events have an impact on many facets of city’s urban infrastructure. The various
sectors on which events like the Olympics, or the Commonwealth Games can have. The event
does not only improve sports infrastructure, but over all infrastructure in the city. This is one
of the themes than one sees recurring in a number of bids for the games. Cape Town in its
failed 2004 Olympics bid highlighted the urban regeneration, and socio-economic impact that
the event would have. The Cape Town 2004 Olympic bid was designed to be developmental,
with every aspect of the plan attempting to contribute to the “upliftment” of those previously
disadvantaged under apartheid.
The Commonwealth Games 2010, Delhi– The XIX Commonwealth Games, were held in
Delhi, India, from 3 to 14 October 2010. A total of 6,081 athletes from 71 Commonwealth
nations and dependencies competed in 21 sports and 272 events. The opening and the closing
ceremony of CWG took place at the Jawaharlal Nehru Stadium in Delhi. The official Mascot
of the game was “Shera”, the motto of the Delhi game was "Come out and Play". The theme
song was Jiyo Utho Badho Jeeto composed by A.R Rehman
In Delhi’s bid for the games, it states that through the games, the city wishes to, among other
things:
1. Stimulate economic growth and development.
2. Improve city infrastructure.
Thus two of the professed aims of the games are to improve the welfare of the citizens of the
city through improving facilities and promoting investment in the city. The focus area of the
games this time is going to be East Delhi, across the Yamuna, where the games village and
some of the venues are to be located. Residents of the area are hoping for a similar
transformation as the one South Delhi experienced in the run up to the 1982 games.
Infrastructure investments have already increased dramatically in the region with a new
bridge being built at Wazirabad, the metro phase 2 being constructed, and numerous flyovers
and roads in the pipeline. There are indeed ambitious plans afloat ranging from improving
street furniture to setting up more power stations before the 2010 deadline.
The work ahead of the games can be broadly grouped into the following:
1. New Stadiums and renovation of existing stadiums
2. Games Village.
3. Transport sector.
4. Urban infrastructure like water and electricity.
5. Efforts to make Delhi “world-class”.
Originally the plan was to build a completely new athletics stadium, one that would outrival
J.N. Stadium. However lack of funds and available land has meant that the organising team
has had to rein in its ambitions. Now the plan is to build one large new stadium, an aquatics
centre in the Delhi University with five swimming pools, as well as a new TT hall in the
Yamuna Sports Complex and new stadiums for Badminton and Squash in the Siri Fort Sports
Complex. The project in DU, which is going to give a major boost to sports there, is to have
an Olympic-size (50 metres) pool, a diving pool, pool for synchronised swimming, one for
water polo and a warm-up pool as well as a gym. The university is also set to be the venue for
the Rugby 7’s event. The existing stadiums are however going to need extensive renovation
before they can match up to the standards of the CWG. As reported in the Indian Express, the
work remaining on the existing stadium is extensive. The estimated expenditure, only for
renovation work, is over Rs.1250 Crores. Though construction of new stadiums and up
gradation of the existing ones is central to the run up to the Games, the CWG is after all a
sporting event; it is by no means the only focus area. Delhi is attempting to give itself a major
facelift due to the games, and develop a whole portion of the city, East Delhi and the Yamuna
riverfront, which until now has been largely neglected. As Delhi expands rapidly and space
runs out, until now undeveloped Yamuna riverfront, largely inhabited by slum dwellers and
vegetable growers, is looking like prime real estate. The banks of the Yamuna are the largest
open space left in the city, as well as the largest groundwater recharge zone. The 25 km
stretch along the river has 97 sq km of prime land, 7 per cent of Delhi’s total area. DDA and
other government authorities seem to have big plans for the area, developing the banks as
green spaces and commercial areas. The proposals are centered on a “Thames-type Plan”,
channelling the river and reclaiming the land for other uses. A first step in the development of
the region is the Games Village, a mammoth Rs. 955 crore project being built on a 63.5-
hectare site by the DDA, for the 8000 plus athletes and officials expected for the event. The
land has already been acquired from UP at a cost of Rs. 19 Crore and the project is in the
planning stage. The village will of course not be a one off structure, but will need extensive
transport links, amenity providers and so on. There are also eight to nine hotels planned for
the area, which will in turn give rise to other auxiliary services coming up. The village will be
a well-planned site, with facilities for recreation, commercial activities, hospitals, training,
shopping and living, all at hand. Interestingly, one proposal for post event usage is to hand
over the village to the Delhi University as hostels, as DU is facing a tremendous shortage of
hostel space. This however seems to have run into rough weather with high costs involved
and the DDA now seeming to prefer selling the units as mid income housing post games10.
Housing too is to get a shooting the arm with over 40,000 low-income housing units to be
built before the 2010 games.
Organizing Committee:
The Organizing Committee of Commonwealth Games 2010 Delhi (OC CWG Delhi 2010)
came into being on 10 February 2005, as a registered society under the Societies Registration
Act 1860. Indian Olympic Association president Suresh Kalmadi was appointed as head of
the committee.
Benefits and development as a result of games:
Benefits and development as a result of games Construction of 24 flyovers, 75 aerobridges,
Construction of 1285kms of international standard roads, Construction of 11 world-class
sports venues. 5000 new low-floor buses in Delhi, 80 new metro destinations and Restoration
of 46 national monuments.
Delhi Metro:
Delhi Metro Delhi Metro expanded to accommodate more people and boost the use of public
transport during the 2010 games. The metro extended to Gurgaon and the Noida regions.
Green Games:
Green Games The organizers signed a Memorandum of Understanding (MOU) with the
United Nations Environment Programme to show the intention to host a "sustainable games"
and to take the environment into consideration when constructing and renovating venues.
Thyagaraj Stadium is a key example of environmentally considered construction. A “green
helipad” constructed at the Commonwealth Games Village.
Games Village:
Games Village The Games Village, was built by Emaars MGF, at a cost of US $230.7 million
(Rs. 1,038 crore). The Delhi Development Authority (DDA) offered a Rs. 700 crore bailout
in May 2009 to the company to meet the costs of construction. This is probably the first ever
government bailout for a private realty company in India.
The 4 most Tangible benefits for the city of Delhi from hosting the CWG:
The four most talked about tangible benefits for the city of Delhi from hosting the CWG are:
Development of infrastructure, Employment generation, Boost to tourism, The
creation of a clean, beautiful, vibrant and “world class” Delhi. The event did not only
improve sports infrastructure, but over all infrastructure in Delhi.
Financial Cost:
The 2010 Commonwealth Games are the most expensive Commonwealth Games ever.
Business Today magazine estimated that the Games cost Rs. 300 billion (i.e US$ 6.8 billion).
The first budget for the Games approved by the Cabinet in April 2007 estimated the total
expenditure of the Games at Rs. 3,566 crore ± Rs. 300 crore.
Sports facility structure: Olympics have the strongest influence on the sports facilities
structure in the city. There must be adequate and sufficient sports and training facilities for all
sports at an international level. After the games, these facilities are often available for leisure
sports. Originally the plan was to build a completely new athletics stadium, one that would
outrival J.N. Stadium. However lack of funds and available land has meant that the
organising team has had to rein in its ambitions. Now the plan is to build one large new
stadium, an aquatics centre in the Delhi University with five swimming pools, as well as a
new TT hall in the Yamuna Sports Complex and new stadiums for Badminton and Squash in
the Siri Fort Sports Complex. The project in DU, which is going to give a major boost to
sports there, is to have an Olympic-size (50 metres) pool, a diving pool, pool for
synchronised swimming, one for water polo and a warm-up pool as well as a gym. The
university is also set to be the venue for the Rugby 7’s event. The existing stadiums are
however going to need extensive renovation before they can match up to the standards of the
CWG.
Housing: In most cities, Olympic villages are newly constructed. The question of the social
distribution of the newly created housing units is reviewed. In Munich ‘72, the Olympic
Village was constructed for the socially deprived groups of society. In other cities, the
Olympic Villages were sold to the middle and lower-upper classes. In Los Angeles ‘84 and
Atlanta ‘96, the villages continued to be students’ homes.
CWG brings us to another interesting development, the arrival of developing nations on the
sports-hosting scene. Developing nations have only hosted two summer Olympics, one
Winter Olympics, one Commonwealth Games and six football World Cups. This of course,
due to the changing world order and rising prominence, is set to change. Beijing has host the
2008 Summer Olympics, India, the 2010 Commonwealth Games, South Africa the 2010
Football World Cup and South Asia the 2011 Cricket World Cup. However research seems to
point out that though the benefits of hosting these events are dubious at best, the factors seem
to work expressly against developing nations. The experience that a developing nation faces
is vastly different from that of a developed nation. This is especially pertinent in the Indian
context as we prepare to host the 2010 Commonwealth Games, and make a push to host the
2014 Asian Games, and the 2016 Olympic Games.
As Matheson and Baade (2003) point out, there are very good reasons for why developing
nations are more adversely impacted by such events. They can be listed as:
1. High infrastructure development costs.
2. Underutilization of facilities post event
3. High opportunity cost of capital
4. Unable to attract large numbers of spectators
(ii). Obtaining the net benefit of the project measured in terms of economic price:
Sporting events have an impact on many facets of city’s urban infrastructure. The various
sectors on which events like the Olympics, or the Commonwealth Games can have. The event
does not only improve sports infrastructure, but over all infrastructure in the city. This is one
of the themes than one sees recurring in a number of bids for the games.
The four most talked about tangible benefits for the city of Delhi from hosting the CWG are:
Development of infrastructure, Employment generation, Boost to tourism, The creation of a
clean, beautiful, vibrant and “world class” Delhi. The event did not only improve sports
infrastructure, but over all infrastructure in Delhi.
CWG brings us to another interesting development, the arrival of developing nations on the
sports-hosting scene. The urban landscape Delhi too, is set to change dramatically with many
infrastructure projects being pushed through in time for 2010.
In Delhi’s bid for the games, it states that through the games, the city wishes to, among other
things:
1. Stimulate economic growth and development.
2. Improve city infrastructure.
Thus two of the professed aims of the games are to improve the welfare of the citizens of the
city through improving facilities and promoting investment in the city. Improved
infrastructure and facilities will attract more foreigners to visit India, because India is being
seen as a hottest destination worldwide to visit. It will boost foreign currency into India.
Meanwhile the economic growth and development will also boost, because economic
conditions of is good now as compared to other countries. It is growing rapidly that will
attract MNC’s to come and set their business in India.
Since 2003, when India won the bid to host the games, various agencies and government
bodies have been hard at work making plans for the upcoming event. The over arching theme
seems to be to make Delhi a “world class” city by 2010. This of course is a task easier said
than done in a city of nearly 15 million people, growing at a phenomenal pace, and largely in
a haphazard manner. Urban renewal or regeneration has been a theme in many such events in
the past and appears an important one in the 2010 games as well. This is because it gives an
opportunity to improve the infrastructure and appearance of the host city, and also gives
global media exposure meaning that the image of a city can be transformed in the eyes of
viewers.
(iii). Adjustment for the impact of the project on savings and investment:
The Commonwealth Games are obviously pure consumption. They can add nothing to
investment As already pointed out, by using public money the Games divert funds from
investment to consumption. If bread and circuses were all that was needed to promote
economic welfare the Roman Empire would never have suffered an economic decline.
Consumption is the force that drives the economy one would expect consumer spending to
exceed business spending. It does not. As a proportion of total spending, business spending
greatly exceeds consumer spending. This truth is concealed by the fact that GDP, a value-
added approach, grossly understates total spending by omitting intermediate spending. It can
never be sufficiently stressed that only savings and investment can raise a country’s
productive capacity and thus total demand, not consumption.
The social and environmental impact of the Games will be highly laudable as they are bound
to encourage improved standards of education to children, boost sports activities, create a
better quality of life and experience for citizens, increase international recognition and create
environmental consciousness among the community. It is estimated that the Commonwealth
Games 2010 would result in an overall economic impact of approximately $4,940 million on
over the period of 2008-12.
Future investment opportunities lie not in big cities such as Mumbai and Delhi, but in smaller
centres. Investors will be able to get the growth prospects of a frontier market, but with the
stability of a more developed country. The consumer story is big in these regions. Not only
are the growing middle classes buying more goods and eating more meat, but their rise in
social status is encouraging more infrastructure to be built and bringing big business to the
financials.
"I come from a rural part of India," said Mr Patel. "I know how much people keep under the
mattress. But more people are getting bank accounts, mortgages and credit cards – which is
why we chose to play the consumer trend more indirectly through the financials." Four of the
top five holdings in the J P Morgan investment trust are banks. The newly launched In
synergy absolute India fund favours financials too. It is run by India's largest business,
Reliance Group, which invests in HDFC Bank. The high savings and investment rate,
37percent of GDP, coupled with the large as yet untapped market make it a good long-term
growth holding.
(iv). Adjustment for the impact of the project on income distribution: CWG will enables
people of India with new jobs, globalization of the market, more foreigners to the market.
The social and environmental impact of the Games will be highly laudable as they are bound
to encourage improved standards of education to children, boost sports activities, create a
better quality of life and experience for citizens, increase international recognition and create
environmental consciousness among the community.
Two of the professed aims of the games are to improve the welfare of the citizens of the city
through improving facilities and promoting investment in the city. Improved infrastructure
and facilities will attract more foreigners to visit India, because India is being seen as a
hottest destination worldwide to visit. It will boost foreign currency into India. Meanwhile
the economic growth and development will also boost, because economic conditions of is
good now as compared to other countries. It is growing rapidly that will attract MNC’s to
come and set their business in India. That will improve income distribution amongst the
people of India.
Sporting events of these kinds are increasingly being seen as vehicles for urban renewal, a
catalyst to create jobs, increase investment and transform the landscape of the city. The
Cambridge Policy Consultants estimate that the Games will help to regenerate approximately
60ha of land and create 72,000m of employment floor space in East Manchester. The image
of the region seems to have been greatly improved by the games, with 18 million people
visiting the region in 2002 putting £6billion into the North West’s economy, and with over
300,000 expected each year. The wish to host an event of this kind does not derive from a
sense of philanthropy or love of sport, but is now largely seen as a business opportunity. The
games act like a magnet, attracting attention, which in turn transforms into the more tangible
investment and increased tourism.
(v). The impact of the project on merit goods and demerit goods whose social values
differ from their economic value: A merit good is a good that is deemed intrinsically
desirable by society due to its positive externalities. A merit good is one for which the social
value exceeds the economic value. An example of a merit good is education. Education
confers private benefit to the individual as there is personal satisfaction in gaining skills or
knowledge. Furthermore, education allows an individual to get employment, have an income
and therefore have a higher standard of living. Other example, a country may place a higher
social value on production of oil as it reduces dependence on foreign supplies. Usually these
goods have positive externalities.
In the case of demerit good, whose consumption is considered unhealthy, degrading, or
otherwise socially undesirable due to the perceived negative effects on the consumers
themselves. It is over-consumed if left to market forces. Examples of demerit goods include
tobacco, alcoholic beverages, recreational drugs, gambling, junk food and prostitution.
Because of the nature of these goods, governments often levy taxes on these goods
(specifically, sin taxes), in some cases regulating or banning consumption or advertisement of
these goods.the social value of the good is less than its economic value. For example, a
country may regard alcoholic products as having a social value less than the economic value.
People don’t realise, or ignore the costs, of doing something e.g. smoking, alcohol. Usually
these goods have negative externalities.
Because of CWG 2010, Delhi government has invested a huge amount in games to develop
its infrastructure and facilities. They have spent excessive expenditure than budget on games,
as stated earlier. Consequence of the excessive expenditure in Delhi CWG, The Delhi
government has hiked bus fares and water tariff, withdrawn subsidy on LPG cylinders,
Increased VAT on a number of items.
Because of Excessive expenses on Commonwealth games 2010, there has been increase in
the rate of both merit and demerit goods in India.
CONCLUSION:
In conclusion we can say that there is some positive and negative impact both because of
Commonwealth games in Delhi. Somehow Delhi and India has shown its potential to world
as well as developed its infrastructure, but its human and economic aspect shows its negative
impact on peoples of the country.
The 2010 Commonwealth Games are the most expensive Commonwealth Games ever.
Business Today magazine estimated that the Games cost Rs. 300 billion (i.e. US$ 6.8 billion).
The first budget for the Games approved by the Cabinet in April 2007 estimated the total
expenditure of the Games at Rs. 3,566 crore ± Rs. 300 crore.
As the result The Delhi government has hiked bus fares and water tariff, withdrawn subsidy
on LPG cylinders, Increased VAT on a number of items. The obvious question that results
from this, is the cost justified, is yet to be answered conclusively either way.
Excessive budget overruns Delays in completion of projects Allegedly widespread corruption
by officials of the Games Organizing Committee On September 23, The Daily Telegraph UK
showed photographs taken of child labour working on the Games sites. There were also
multiple cases of items being rented for the 45 days for more money than it would cost to
actually buy the item.
The effect of an event of this magnitude on the environment is quite detrimental, increasing
pollution and causing imbalances by rampant, unchecked development. Unfortunately little
research seems to have been undertaken at the time. One can point out however that certain
areas, which were originally planned to be green open areas for the city, were developed at
the time. Also further portions of the Ridge area, a no build zone, were encroached upon. The
duration of the games also saw a rise in the lead concentration in the air, probably due to the
rise in automobiles on the roads at the time.
There are positive as well as besides the negatives, The four most talked about tangible
benefits for the city of Delhi from hosting the CWG are: Development of infrastructure,
Employment generation, Boost to tourism, The creation of a clean, beautiful, vibrant and
“world class” Delhi. The event did not only improve sports infrastructure, but over all
infrastructure and urban culture in Delhi. Also by successfully completing Commonwealth
Games India has shown its strong potential to organize such kind of events in future.
Benefits and development to Delhi as a result of CWG 2010 Construction of 24 flyovers, 75
aerobridges, Construction of 1285kms of international standard roads, Construction of 11
world-class sports venues. 5000 new low-floor buses in Delhi, 80 new metro destinations.