This action might not be possible to undo. Are you sure you want to continue?
Project approach finds favour, the world over in almost every type of economic activity. Project approach would be applied for small investments like purchasing of buffaloes as also huge dams involving several crore of rupees. It is a flexible approach of development. Each project is considered to be an independent unit having its own costs and benefits. In the liberalised economic environment and in the wake of Financial Sector Reforms, the importance of project approach has further increased. PROJECT APPROACH PROJECT Means a location specific activity with specific objectives, time and cost limitations and of non-repetitive nature. In banking, we refer to projects as an activity in which financial resources are expended to create capital assets that produce benefits over an extended period of time and which logically lends itself to planning, financing and implementing as a unit. PROJECT INCLUDES Capital investment Creation of capital assets Generation of benefits over an extended period of time. PROJECT COULD BE AN ACRONYM FOR P R O J E C T Product of Goods and Services Resources - Men, Material, Money, etc. Organization Justification - Social benefits, wealth, jobs Economic viability, profits, etc. Continuity - Planning, Research & Development Time bound implementation and operations
PROJECT CYCLE IDENTIFICATION First step in the project cycle Several sources for identification of projects - Progressive farmers, successful entrepreneurs, technical experts, bankers, media, national priorities and thrust areas of development. FORMULATION
C:\Documents and Settings\T S Mohan\Desktop\pnbah\PROJECT APPRAISAL
Several organizations like NABARD and its Training Establishments may conduct such evaluation studies and publish them for wider circulation. Commercial. i. Banks undertake appraisal of projects before financing. Appraisal may involve Financial.Preparation stage of the project At times. MONITORING Ongoing process of keeping track of the project Banks may undertake two types of monitoring. based on certain assumptions. Feasibility study is the first step in formulation. Economic and Environmental analysis. Appraisal is a joint exercise of promoters and institutions. Appraisal highlights the weak areas in the project with the ultimate objective of strengthening them adequately to ensure final success of the project. the banker may have to formulate the project himself if the potential entrepreneurs are too scattered. even a pre-feasibility study may have to be conducted. IMPLEMENTATION Involves three phases. APPRAISAL Includes analysis and scrutiny of each and every aspect. It is a second look at the project report by a person who is in no way involved in its preparation. ESSENCE OF PROJECT APPRAISAL Appraisal is a comprehensive and systematic review of all aspects of a project. Speed of appraisal. viz. and Operation phase. In case of complex projects.e. therefore. Project appraisal is an exercise in future. it is necessary to understand the environment in which the project has to sustain itself. details and assumptions. Hence. Pre-development phase. C:\Documents and Settings\T S Mohan\Desktop\pnbah\PROJECT APPRAISAL . No cut and dry formula to straightway decide a project to be acceptable or unacceptable. ü Desk Monitoring ü Field Monitoring EVALUATION Conducted ex-post for the purpose of learning lessons of success and failure from the project. depends very much on the speed with which the information is forthcoming from the entrepreneurs. Advance techniques of Project Planning like PERT (Programme Evaluation and Review Techniques) and CPM (Critical Path Method) are used in capital intensive and complex projects which involve long gestation periods. Managerial. Development phase. Specialised consultancy firms offer services for conducting feasibility studies.
Adequate data has been furnished against every item. Both in the scrutiny of preliminary information and processing of application. should do the appraisal of the project. etc. This will reduce avoidable correspondence and facilitate expeditious disposal of application. The promoter’s contribution is not unduly low. The product to be manufactured has market potential. A team comprising say. Cost of the project is unduly high. The technology to be adopted is well proven. THE FIRST STEP The first step in detailed appraisal is in regard to information submitted by the entrepreneur. In case of technocrat and new entrepreneur. Consistency of data and information furnished should be cross-checked. Second hand equipment to be acquired is too old and will not have trouble-free residual life. i. Prima facie. A project is likely to receive favourable consideration and detailed appraisal is taken if It has priority according to Government guidelines. information furnished is correct. far away from sources of raw materials. a tolerant and understanding attitude is necessary. i. Financial position of the promoter company is not satisfactory. C:\Documents and Settings\T S Mohan\Desktop\pnbah\PROJECT APPRAISAL . STEPS AND METHODOLOGY FOR APPRAISAL Entrepreneur seeking financial assistance should furnish detailed information about the project in prescribed form. Equipment supplied by the proposed machinery suppliers to some other units has not been performing satisfactorily. The project cost is not unreasonably high.any undue delay distorts profitability projections and success of the project becomes a difficult proposition. personal discussions between the officials of the financial institutions and the borrowing concerns are both necessary and desirable. market. Promoter’s contribution unusually low and promoters decline to increase it. an economist. Collaborators have inadequate experience.. Location of the proposed unit has apparent disadvantages. Debt-Equity Ratio is abnormally adverse.e. A proposal is rejected without detailed appraisal if it has some of the following features Banker’s report on the promoters is not satisfactory. The promoter inspires confidence. Clarification / additional information called for wherever necessary. an engineer and a financial analyst. Profitability estimates are conservative and indicate repayment of the loan within reasonable period.e.Project should be appraised within a time bound programme . Promoters reported to have indulged in illegal and anti-social activities.
credibility and capacity. source of raw materials. Availability of raw material in adequate quantity and on steady basis is doubtful. Availability of social infrastructure. their financial strength.Process know-how / technology to be adopted has not been proved successful on a commercial scale. Inspection team to pay attention regarding suitability of the site. NEXT STEP Before providing financial assistance to a unit. will be available by the time the project will need them. etc. national highway. Are located in specified backward or less backward areas. Products to be manufactured do not have sufficient market potential. THE SECOND STEP Involves site inspection by appraisal team. Scanning the environment protection arrangements. Are export oriented or import substitutes. There is no certainty that utilities like power. Are employment oriented. market for end-products. Would help in setting up of ancillary small-scale units. BCR and IRR Management Appraisal Environmental Appraisal C:\Documents and Settings\T S Mohan\Desktop\pnbah\PROJECT APPRAISAL .. It should ensure that the project will generate enough funds. water. Some of the basic tests adopted to examine various aspects of appraisal are Technical Appraisal Commercial Appraisal Financial Appraisal Cost of the project and means of finance Profitability estimate and cash flow Ratio analysis BEP analysis ü ü ü ü ü DCF . Preference is given to proposals / projects Which utilise any industrial waste or agricultural surplus as raw materials. it becomes necessary for a financial institution to examine Viability of the project. timely availability of utilities. etc. Process know-how / technology has become obsolete. Ascertaining sources of skilled and unskilled manpower.Calculation of NPV. collect market reports on the promoters. distance from railway station. Sufficient notice of site inspection to be given to the promoters. Most importantly.
Effluent disposal Transportation Development of other industries COMMERCIAL APPRAISAL In the commercial appraisal the following aspects will be looked into Demand . etc.) Plant layout Location of the project Land Raw material Market Labour Utilities such as water.whom are we going to cater Export market Supply and depth of competition Pricing policy . Size of the plant (minimum economic size) Product mix (various items to be manufactured by the unit) Selection of the plant and machinery (whether any unit purchased. fuel.no trouble. etc. reputed . ü ü ü ü ü ü ü FINANCIAL APPRAISAL In the financial appraisal the following aspects will be kept in view ü Capital cost of the project C:\Documents and Settings\T S Mohan\Desktop\pnbah\PROJECT APPRAISAL .techniques of forecasting Import substitution Past trend End use .Stakeholder analysis TECHNICAL APPRAISAL Technical appraisal will focus on the following areas Manufacturing process / technology Technical arrangement like parting know-how. power.Social Appraisal . service back-up) Procurement of plant and machinery (seller’s name. cost.whether price will be lower when compared to the competitors Life cycle of the product Brand name Packing and advertisement Sales promotion Salesmen Advertising Servicing Sources of market information and publications useful to study various aspects of marketing. etc.
Some of the points to be considered while appraising the management are Qualities of entrepreneur Honesty and integrity Involvement in the project Financial resources in case of overrun. whether he can arrange resources Competence Risk taking Initiative Intelligence Drive and energy Self confidence Frankness Patience Types of organisation Sole proprietorship Partnership Corporate sector Board of Directors Committee of the Board ü ü ü ü ü ü ü ü ü ü ü ü ü ü 9 9 C:\Documents and Settings\T S Mohan\Desktop\pnbah\PROJECT APPRAISAL .ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü Land and site development Building Plant and machinery Technical know-how and engineering fee Miscellaneous fixed assets Preliminary and pre-operative expenses Provision for contingencies Margin money for working capital Sources of finance and Financial projections Profitability estimates Cash-flow statements Projected balance sheet Ratio analysis Debt equity ratio Current ratio DSCR Margin on security Other ratios Break-even analysis Discounted cash flow NPV BCR IRR MANAGEMENT APPRAISAL The most important aspect of project appraisal is the management appraisal.
Therefore. Essence of EIA is prediction of the consequences to the natural environment from the project. transport and export upto the point of marketing in the global markets has to be appraised with special reference to maintaining a continuous cold chain for several products exported to the world markets. the latest share price also will have to be incorporated in the paragraph. Importance is now attached to Environmental Impact Assessment (EIA). a comprehensive appraisal of their strengths and weaknesses has to be done. While discussing the availability of the requisite infrastructure such as power. APPRAISAL OF INFRASTRUCTURE AND RELATED ASPECTS Adequacy or otherwise of infrastructure right from procurement of inputs.9 Chief Executive 9 Other Executives Organizational set-up Management problems ENVIRONMENTAL APPRAISAL One of the concerns of the policy makers is to have sustainable development. production. innovative. For example. processing. In respect of the companies which are quoted in the stock exchange. the success or failure depends not only on the projects and products proposed to be produced but also the entrepreneurial capabilities and managerial skills of the promoters. daily quantity of water required and its availability will have to be commented upon as also C:\Documents and Settings\T S Mohan\Desktop\pnbah\PROJECT APPRAISAL . which is not considered in EIA. the actual quantity required for running the unit and the arrangements that are being made vis-avis requirements will have to be clearly indicated. water. While discussing the credentials of the promoters. a paragraph should be incorporated giving details in regard to the various companies / undertakings in which the promoters are interested and the turnover and the working results of these companies. productivity and adaptability. equipments and other structures proposed to be imported / procured from local sources. in case of water requirement. APPRAISAL OF ENTREPRENEURSHIP AND MANAGERIAL SKILLS When the projects are promoted by first generation entrepreneurs. MAJOR ASPECTS TO BE COVERED IN NABARD’S APPRAISAL OF HIGH VALUE / EXPORT ORIENTED / INNOVATIVE PROJECTS APPRAISAL OF PROJECT COSTING Costing of the project investments has to be done with special reference to the structural designs. etc. imported technology has to be done with reference to its soundness. APPRAISAL OF TECHNOLOGY Appraisal of new. Elaborate analysis called Environmental Risk Assessment (ERA) is used to assess the probabilistic element of the impact.
MAN POWER REQUIREMENTS Man power requirements will have to be classified into three categories. While discussing aspects relating to marketing. At times. for development in future with a special reference to exports. a part of the production is marketed in the domestic market also. the techno-financial study should indicate the dates on which the studies were conducted and the names of the officers who were associated with the study.quality of water. the products are usually marketed in foreign countries. APPRAISAL OF ENVIRONMENTAL ASPECTS The impact of the project on the ecology of the area and environmental problems. APPRAISAL OF MARKETS AND MARKETING In respect of sophisticated high-value projects. this also should find a mention in the paragraph. APPRAISAL OF THE PERFORMANCE OF THE SECTOR The performance of the sector in the country in general and in the respective state in particular to which the concerned project pertains has to be analysed keeping the potential and the problems of the sector in view and suggesting remedial measures needed. the demand and supply of the products in the global market as also in the domestic market has to be assessed. etc. As far as possible. the standing of the foreign collaborators will have to be collected and incorporated. The percentage of growth of the particular product over a period in the international market should find a mention. water is to be treated. Local demand and supply position will have to be highlighted. Therefore. C:\Documents and Settings\T S Mohan\Desktop\pnbah\PROJECT APPRAISAL . Indian companies for which they have rendered technical assistance. likely to generate due to it have to be analyzed and presented in detail. full details in regard to foreign collaborator. the details in this regard along with the selling commission to be paid should find a mention. Analysis has to be made about the global demand for exportable products and supply by different countries in this regard. COLLABORATORS While discussing the aspects relating to import of technology. will have to be recommended. if any. skilled and unskilled labour and specific number of personnel in each of these categories will have to be indicated vis-a-vis availability. professional management at senior level. In case. The report should invariably mention whether the joint appraisal was done along with bank’s representatives. if any. Air lifting capacity in the concerned airport for that particular product will have to be mentioned in the appraisal report. In case where selling arrangements have been made with the foreign parties. mere mention about buy-back arrangements with foreign collaborator would be inadequate. viz. TECHNO-FINANCIAL STUDY Apart from other details.
BUILDING UP OF DATA BANK For realistic appraisal of the projects on hi-tech. import duties. there is a need to collect. freight rates. The projects could be implemented in phases by the entrepreneur in view of the inherent risk involved in implementation of large outlay projects. market fees. etc. etc. update and maintain adequate data on the size of the domestic / foreign markets. if the projects are to be implemented by first generation entrepreneurs even if they have the required background in the proposed line of activity. demand and supply of products in domestic as well as foreign markets. C:\Documents and Settings\T S Mohan\Desktop\pnbah\PROJECT APPRAISAL . The percentage of individual items to the total outlay has to be worked out. to start with. product prices and fluctuations. bigger outlays should not be considered for such entrepreneurs. raw materials. the promoter’s experience in the particular line should be kept in view. MEANS OF FINANCE Whenever the project outlay is reduced. cost of various components of the investments. export oriented. Ministry of External Affairs. the sources and credibility of technology suppliers. Embassies and other related agencies to build up a reliable data base for day-to-day use of project appraisal. FIRST GENERATION ENTREPRENEURS While preparing appraisal reports in respect of bigger projects for commercial banks. The reduction in the outlay effected should be reflected in the bank loan retaining the margin as originally proposed. We have to collect reliable data on product prices for the part 2 to 3 years in the international market by writing to various agencies like APEDA. Besides. the reasons for the reduction in the various components of the outlay should be given item-wise.PROJECT OUTLAY The project outlay and the source from which this is being met will have to be incorporated. agro-processing. availability of alternative technologies and relative costs. Ministry of Commerce. MPEDA.
f.) space requirement. feed plant. Average unit cost of milch cattle quality / breed-wise. if required. Details of facilities available at the veterinary and centre and staff position at the veterinary aid centre / hospital and issue of health certificates for animals to be purchased. Status of beneficiaries (individuals / partnership firm / company / corporation / cooperative society) and the coverage of borrowers of weaker sections like landless labourers / small (as per norms given by National Bank) or marginal farmers / SC / ST. Civil structures like feed store. Specifications of the scheme area. etc. e. Names(s) of the financing bank(s) / branch(es) d.ANIMAL HUSBANDRY . etc. category-wise (adults. District Schedule of Rate (PWD). lactation period. g. Number of beneficiaries likely to be covered c. f. h. etc. dry period. Capability / experience of the persons / institutions implementing the scheme.g. average milk yield/day. i. Give feeding schedule per day (requirement of feed and fodder). Nature of objective of proposed development. chilling plant. housing. FINANCIAL ASPECTS C:\Documents and Settings\T S Mohan\Desktop\pnbah\PROJECT APPRAISAL . Housing needs. Feeding conditions : Availability of green and dry fodder and concentrate feed and arrangements for their production supply and procurement. c. 2. trace maps and blue prints of construction approved by Architect / Civil Engineer. F-1 or F-2 crossbred to all semen with 50% or 75% exotic blood level respectively. e. unit cost approved by Unit Cost Committee. etc. Distance of the milk collection centre from the scheme area. chaff cutter. location of unit(s) b. etc. Approval of the scheme by the competent authority. equipments needed and arrangements for supply of electricity and water. 3. etc. Marketing facilities : Arrangements for collection of milk. Breed and production criteria. with site maps and detailed estimates. calves. Animal breeding facilities : Distance of AI centre from the scheme area and type of semen available or chilled of frozen semen. fodder godown.. including State Government in the case of SLDB. b. TECHNICAL ASPECTS a. j. Plant and machinery. e.DAIRY DEVELOPMENT / FINANCING OF MILCH CATTLE AND BUFFALOES 1. capacity of processing plant and potential for handling additional milk. Comments on technical feasibility of the project. type of breed and quality of milch cattle and buffalo. tractor. d. and recent quotations in support of costs. mini truck / van. Veterinary aid facilities : Location of veterinary hospitals / centres in scheme area and distance from the scheme area. milk processing room.. GENERAL a. coverage of the loans under the Guarantee Schemes of Deposit Insurance and Credit Guarantee Corporation e.g. inter-calving period.
Comments on the financial positions of the borrowers / implementing agency. debt-equity ratio and profitability along with copies of audited financial statements. net present worth. b. places and markets. tripartite agreements. e. marketing of milk. for the last three years. availability of Government guarantee for bank loan / refinance (if necessary). f. Mode of providing insurance cover for mortality including Permanent Total Disability. e. In the case of partnership firm / company / corporation or society.g. Lending terms : Rate of interest. d. Tie-up arrangements for recovery of loans through the marketing agency. for the purpose. general or master policy. c. B/C Ratio. Availability of technical staff for implementation of the scheme with the bank / implementing authority. down payment. INFRASTRUCTURAL FACILITIES a. d. Details of technical guidance. Source of availability of animals. etc. Comments on the financial viability of the project along with milk flow chart and cash flow with assumptions / techno-economic norms. grace period. Year-wise physical and financial programme. source and extent of availability of subsidy. financial rate of return (IRR). nature of security. premium. the approximate distance and arrangements for procurement of animals and disbursement of loans.. bank loan and refinance requirement.a. b. training facilities. type of policy. etc. c. etc. 4. C:\Documents and Settings\T S Mohan\Desktop\pnbah\PROJECT APPRAISAL . veterinary health cover. if any. repayment period. etc. Training of the beneficiaries. government support / extension service available and whether budgetary provision has been made for the same. an analysis of their financial position.
Specification of the scheme area. Equipment needed (with quotations) e. TECHNICAL ASPECTS a. Names(s) of the financing bank(s) / branch(es) d. m. office buildings. Training needs of farmers.. f.Dist. etc. de-beaker. Capability / experience of the persons / institutions implementing the scheme and availability of technical staff with them. Mortality estimates during growing and laying stages. medicines and eggs stores. feed mill. with site maps and plan estimates. etc. PWD . Distance between sheds and hatchery. etc. hatchery unit or pureline poultry project. Calendar for replacement and production of chicks (batch-wise and shed-wise). quarters. Arrangements of supply of electricity. sex ratio. d. livability of chicks. age of birds. Plant and machinery. Size / type of the units. with source of supply and cost assessment of connected load. Housing needs (deep litter / cage system) for growing and laying stages and distances between the sheds. standby electric generator. whether layer unit. distance of hatcheries and their capacities for supplying the chicks. Civil structure like feed. as per Bureau of Indian Standards (ISI) specifications. vehicles.g. essential load. Number of beneficiaries likely to be covered c. with recent quotations in support of costs. waterers. mating ratio in breeding farm / hatchery. Training of beneficiaries in poultry farming. source of availability. etc. l. feed plant. j. etc. e. foundation stock. Comments on technical feasibility of the project. including State Government in the case of SLDB. if required (agency and facilities available). Clearance from State Electricity Board for availability of electricity and Central Ground Water Board for feasibility of wells.g. coverage of the loans under the Guarantee Schemes of Deposit Insurance and Credit Guarantee Corporation e. deep freezer. g. supply of free chicks. Availability of one-day old quality chicks. C:\Documents and Settings\T S Mohan\Desktop\pnbah\PROJECT APPRAISAL . suitability of eggs and hatchability. and arrangements for procurement. their unit cost breakup and whether the same has been approved by the Unit Cost Committee. e. Nature of objective of proposed development. etc.POULTRY DEVELOPMENT 1. broiler unit. roads. b. Approval of the scheme by the competent authority. marketable age. Status of beneficiaries (individuals / partnership firm / company / corporation / cooperative society) and the coverage of borrowers of weaker sections like landless labourers / small (as per norms given by National Bank) or marginal farmers / SC / ST. physical components. trace map and blue print of construction approved by Architect / Civil Engineer. c. vaccinator. Breed of proposed birds. etc. average body weight of broilers. nests. GENERAL a. k. water. f. etc. etc. feeders. equipment. 2. incubators. etc. Production criteria of birds : Average hen-housed egg production. h. water requirement. i. average body weight at culling time. vaccination of the birds. Schedule of Rate. location of unit(s) b..
FINANCIAL ASPECTS C:\Documents and Settings\T S Mohan\Desktop\pnbah\PROJECT APPRAISAL .3.
a. e. Arrangements for availability of working capital till the income generation stage. an analysis of their financial position. bank loan and refinance requirement. Distance of veterinary aid centre from the scheme area. etc. Supervision and monitoring arrangements available with the financing institutions. C:\Documents and Settings\T S Mohan\Desktop\pnbah\PROJECT APPRAISAL . d. Source of availability of feed. veterinary health facility and marketing support available from Government and whether budgetary provision has been made for the same. the approximate distance and arrangements for procurement / supply. b. c. training facility. availability of Government guarantee for bank loan / refinance (if necessary). c. down payment. Lending terms : Rate of interest. Income with reference to the representative size (s) of the unit and the estimate of net income. Mode of providing insurance cover. financial rate of return (IRR). 4. debt-equity ratio and profitability along with copies of audited financial statements. Comments on the financial viability of the project along with cash flow with assumptions / techno-economic norms. grace period. e. net present worth. for the last three years. INFRASTRUCTURAL FACILITIES a. d. Comments on the financial positions of the borrowers / implementing agency. B/C Ratio. Year-wise physical and financial programme. repayment period. Arrangement for marketing of eggs and culled birds (broilers and spent hens). source and extent of availability of subsidy. nature of security. Details of technical guidance. g. f. etc. b. In the case of partnership firm / company / corporation or society.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.