Steps involved in starting up an

Enterprise

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 Timeline of the Presentation
• Steps for starting a Small Industry
• NOC from Pollution Board
• Project Report Preparation

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 Steps for Starting a Small
Industry :

 The Various Basic Steps for Starting a Small

Enterprise is as Given Below :

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 The Steps are discussed below :
1) Project Selection : Entrepreneur is the Most
Important person for the Success of a Project. In
order to set up a Small Enterprise, the Entrepreneur
has to decide or choose a suitable project.

The Entrepreneur has also to decide on a

suitable location for the project. Based on these
selections, a project feasibility study has to be
conducted & then a brief project profile has to be
prepared for the proposed project.

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 The Project Selection & the Preliminary
Activities involve the following :

a) Product or Service Selection.

b) Location Selection.
c) Project Feasibility Study.
d) Preparation of Project Profile.
e) Business Plan Preparation.

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 a) Product or Service Selection :
This is the first & most important step in
setting up a small enterprise. Because, the
further prospects, actions & efforts in setting
up the small enterprise & commencing its
commercial activities successfully depend on
this decision.
Therefore, the Entrepreneur has to be
very careful in the choice or selection of the
Project. The main factors to be considered in
deciding a suitable project are as follows :
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 1) Background & Experience of Entrepreneurs.
2) Availability of the Right Technology & Know –
How for the Project.
3) Marketability of the Product / Service.
4) Investment Capacity (i.e., Financial Resources.)
5) Availability of Plant & Machinery, Indigenous
or Imported.
6) Availability of Raw Materials.
7) Availability of Proper Infrastructural Facilities
Viz., Land / Shed, Power, Water, Communication,
Transport etc.
8) Availability of right kind of Labor Viz., Skilled,
Semi – Skilled & Unskilled.

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 Considering all above aspects & taking
the help of Governmental Support
Organizations like TECSOK, KIADB,
KSSIDC etc & even private consultants , the
Entrepreneur has to choose & decide the
project for implementation.
b) Location Selection : After deciding on
the Project, the next important decision an
Entrepreneur has to make is about the Location
of the Project. There are a Few factors
associated with the same :

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 1) Nearness or Proximity to Market.
2) Availability of Raw Materials.
3) Availability of Transformation &
Communication Facilities.
4) Availability of Govt Incentives / Concessions.
5) Govt Industrial Policy.
6) Availability of suitable Infrastructural facilities.
7) Availability of Labor.
8) Convenience for the Entrepreneur’s.

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 c) Project Feasibility Study : The important facets of Project
Feasibility Study are as follows :
1) Market Analysis is carried out to find out the aggregate
demand of the proposed Product / Service & what would be the
Market Share of the proposed project.

2) Technical Analysis seeks to determine whether the

prerequisites for the successful commissioning of the Project
have been considered & reasonably good choices have been
made with respect to Location, Size, Process & so on.

3) Financial Analysis seeks to ascertain whether the

proposed project will be Financially viable in the sense of
being able to meet the burden of Servicing Debt & Satisfy the
return on Investment Expectations of the Promoter’s.

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 4) Economic Analysis : (Social Cost – Benefit
Analysis) is concerned judging a Project from the larger,
social point of view. In such an evaluation, the focus is on
the Social Costs & Benefits of the Project.
5) Project Profile : This gives a Bird’s Eye View of the
Proposed Project. This may be used for obtaining
Provisional Registration Certificate (PRC) from the
District Industries Centre & for making an Application to
KIADB for allotment of Land or to KSSIDC for allotment
of Shed & other Infrastructures.
A Project Profile generally contains information
about the Project under the Following Heads :

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 1) Introduction.
2) Promoter(s) Background (Education, Experience).
3) Product(s) Service(s) Description (Specification, Uses etc.)
4) Market & Marketing.
5) Infrastructure needed.
6) Plant & Machinery (Description, Capacity, Cost etc.)
7) Process Details.
8) Raw Materials (Requirements, Specifications, Cost etc.)
9) Power, Water & other utilities required.
10) Manpower needed (type of Personnel reqd & salaries /
wages)
11) Cost of the Project & means of finance.
12) Cost of Production & Profitability.

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 e) Business Plan Preparation : This is a
Document where the Entrepreneur plans his
Business to have an Organized & effective
response to a situation which may arise in future.
A Business Plan is used to make Crucial Start Up
Decisions to reassure Lenders, Investors, to
measure Operational Progress ; to Test Planning
Assumptions ; to Adjust Forecasts; & to set the
standard for good Operational Management.

A Workable Business Plan has the following

features :
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 Determines where the Company needs to go.
 Forewarns of possible hurdles along the way.
 Formulates the responses to contingencies.
 Keeps the Business on Track to reach its Planned
Goals.

Start a Business Plan with describing your

Business & Product or Services. Indicate the Market
Segment you are Targeting & the Stage of
Development your Company is in.

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 2) Decide on the Constitution :
To start any Enterprise, the Promoter’s
have to decide on the Constitution of the Unit.
There are 3 Major Alternatives :
a) Proprietary b) Partnership c)
Company.
In fact, this has to be decided at the
initial stages of the Project & necessary
formalities should be completed by the time the
application for Provisional Registration
Certificate (PRC) is made to DIC (District
Industries Centre).
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 a) Proprietary Enterprise : A Single Individual is
the Owner of such an Enterprise. The Proprietor may
proceed to obtain PRC from the DIC.

b) Partnership Enterprise (Firm): This is an

Association of Two or more Persons, subject to a
Maximum of 20 Persons. They are governed by the
Indian Partnership Act , 1932 & rules framed there
under the State Govt. It is advisable to have a
Partnership Deed Agreement on Stamp Paper of
Appropriate Value.

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 Registration Formalities of a Partnership Firm :
For Registering a Partnership Firm, an
Application in the prescribed form has to be submitted
to the Registrar of Firms of the District , along with
the authenticated copy of the Partnership deed & the
prescribed fee & must obtain “Form A” & “Form C”
from the Registrar of Firms for having registered the
Partnership Firm.

Assistance of a Chartered Accountant may be

availed for completing the above formalities.

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 c) Company :
This may be a Private or Public Limited
Company. A Private Limited Company can be formed
with a minimum of 2 Persons & a Maximum of 50
Persons. A Public Limited Company can be formed
with a Minimum of 7 Persons & Maximum number of
Persons is unlimited. Company is governed by the
Companies Act, 1956.

For Registering the Company, one has to

approach Registrar of Companies of the State.

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 3) Obtaining SSI Registration :
Entrepreneurs desiring to start a Small Enterprise
have to initially obtain a PRC(Provisional Registration
Certificate). Once the Unit goes into Production, the PRC
has to be converted into a Permanent Registration
Certificate (PMT).

a) PRC : This is the Initial Registration reqd for starting

a Micro & Small Enterprise. The Entrepreneur has to
apply & obtain a PRC after selection of the Project &
deciding on the Location of the Unit. This Application is
necessary for Infrastructural Facilities such as Land, Shed,
Power etc & Finance from the Financial Institutions.

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 b) Permanent Registration Certificate (PMT) :
A Micro or a Small Enterprise can get a Permanent Registration
Certificate when it actually commences Commercial Production / Service.
PRC would be converted to PMT when the Unit commences its Commercial
Activities.

PMT Registration will help in several ways like the following :

 To apply for scarce raw materials & for imported raw materials.
 To get Working Capital Loan from Banks / Financial Institutions.
 To get Central Excise Duty Concessions.
 For Claiming Incentives, Concessions, including Sales Tax Exemption
wherever applicable.
 To apply for registration under Govt Stores purchase programs /
Ancillary Development Programme / Export Promotion Program & to get
Purchase & Price Preference.

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 4) Specific Clearances :
There are a number of Statutory Clearances reqd to start
Micro & Small Enterprises.

Some of them are given below :

a) Agricultural Land Conversion into Non – Agricultural
Land (NA Conversion).
b) Building Plan approved by the Local Authorities.
c) Factories Act & Labor Dept.
d) Trade License from the Local Authorities.
e) Pollution Control Board Clearances.
f) Food Adulteration Act License.
g) BIS Certification wherever applicable etc.

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 5) Land or Shed Selection :
For any Industrial Project, suitable Industrial Site or a
ready Industrial shed is reqd. The Promoters of the Unit could
consider taking an Industrial Site & constructing a shed as per
their requirement, alternatively, could consider taking a ready
Industrial Shed on Ownership Basis also.

Whom to approach :
a) KIADB for Land.
b) KSSIDC for Shed requirement.
c) Alternatively, the Entrepreneur can also approach directly
the Jt. Director , DIC in the particular District also for
requirement of Land / Shed for the proposed Enterprise.

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 6) Plant & Machinery :

This requirement for a Particular Project

could be purchased from recognized
manufacturer’s / dealers. This could also be
taken on Hire Basis operated by National Small
Industries Corporation Limited (NSIC).

This is a Govt of India promoted

Corporation.

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 7) Infrastructure Facilities :
For Micro or Small Enterprises the main infrastructure
facilities are Land or Shed for the Project , Power Connection ,
Water Supply & Telephone & Internet Facility.
As said earlier, for Land or Shed , the Entrepreneur can
approach either KIADB or KSSIDC as the case may be. For
the requirement of Power, an application may be made to the
local electricity company in the region. For Telephone
connection & Internet facilities, Entrepreneur has to approach
BSNL or other operators.
District level Single Window Agency (SWA) assists the
Entrepreneur in getting all the above facilities. Hence, the
Entrepreneur can forward an Application on a plain paper to
the Jt. Director , District Industries Centre of the District giving
his requirement of various infrastructural facilities for speedy
approval & sanction.

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 8) Project Report :
For any New Project or Enterprise to be set up,
Proper Planning is necessary.

A detailed Project Report provides such a plan for

the Project. The Report is useful to the Entrepreneur for
Planning & Implementing the Project. This is essential for
Obtaining Finance & other clearances for the Project.

In fact, the Project Report gives a detailed insight

of the Techno – Economic Viability of the Project. This is
generally prepared to cover the following :

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 1) Introduction.
2) Entrepreneurs (Promoters) Background
(Education, Experience, Special Achievements etc.)
3) Details of Product(s) to be manufactured & specs
/ details of Service(s) to be rendered with Technical
Details.
4) Market Potential for the Product(s) / Service(s)
& Marketing Plan.
5) Plant Capacity, Production Plan &
Manufacturing Process.
6) Infrastructure needed for the Project.
7) Raw Materials & Consumables needed for the
Project.

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 8) Plant & Machinery for the Project
(Description , Capacity , Cost etc.)
9) Manpower requirements.
10) Total Project Cost.
11) Means of Finance.
12) Income , Costs & Profitability
Projections.
13) Financial Analysis.
14) Schedule of Implementation.
15) Conclusions & Recommendations.

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 9) Finance :
Finance for such Projects are under 2 main categories :
a) Term Loan.
b) Working Capital Loan.
a) Term Loan : For starting a Small Enterprise, Term Loan Finance
for the Fixed Assets like Land, Building, Plant & Machinery etc .,
can be availed. This Loan can be availed from Karnataka State
Financial Corporation (KSFC) & or from the Commercial Banks.
Financial Institutions sanction up to 75 % of the Total
investment on Fixed Assets & the Balance of 25 % has to be pooled
in by the Promoters as Margin Money. At present the Lending
Interest Rates are between 13 to 14 % & also subject to change.
Promoters can also approach National Small Industries Corporation
(NSIC) for Financial Assistance.

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 b) Working Capital Loan :
It is always preferable to approach
Commercial banks for Working Capital Loan.
All Commercial Banks finance up to 75 % of
the Working Capital Loan & the remaining 25
% has to be pooled in by the Promoters.
It is important to note that Banks will
release Working Capital Loan only after the
Promoters have contributed their share of 25 %
, at present the Lending Rates are varying
between 13 to 14 %.
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 c) Single Window Scheme (SWS) of KSFC for both
Term Loan & Working Capital Loan :
This Loan Scheme is for providing assistance
to new Micro & Small Enterprises whose project cost
(Excluding Working Capital Margin of the Promoters)
does not exceed Rs. 50 Lakh & the Total Working
Capital Requirements at the Normal Level of
Operation is up to Rs. 20 Lakh. Term Loan for Fixed
Assets & Term Loan for Working Capital is fixed
based on the Debt Equity Ratio of 2:1 for Loans
above Rs. 10 Lakh & 3:1 for Loans up to Rs. 10 Lakh.

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 10) Implementation of the Project :
The Entrepreneurs will have to take necessary steps to
physically implement the Project after obtaining the various
Licenses, Clearances, Infrastructural Facilities etc. Following are the
Major Activities that the Entrepreneurs have to undertake for
implementing the Project.

a) Construct Shed : If the Entrepreneurs have taken a ready shed

from the KSSIDC or have made arrangements for Rental Sheds /
Premises then they need to go thro this Step. If they have obtained
Industrial Land from KIADB or they have made arrangements for
Vacant Land privately, then they have to take steps to construct the
shed for their industry. The Plan for the Industrial Shed should be
approved by the concerned authorities like KIADB & or Local
Authorities like Municipal Corporations or Municipalities or Village
Panchayats etc., as the case may be.

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 b) Order for Machinery :
The Entrepreneurs have to take necessary steps to order the
necessary Machinery, Equipments etc. thro NSIC or any other
suitable Organizations. The Terms & Conditions for ordering
Machinery, Equipments etc. will vary from dealer to dealer, hence
the Entrepreneurs have to make necessary arrangements as per the
terms & conditions of the dealers.

The delivery dates may vary upon the type of Machinery,

Equipments etc. & the dealer thro whom the Machinery is ordered.

Keeping these Factors in mind, the Entrepreneurs should plan

to order the necessary Machinery, Equipments etc. at the appropriate
time so that they are able to obtain them in Time, to implement the
Project.

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 c) Recruit Personnel :
Depending upon the Size of the Industry & type of the Products,
the Entrepreneurs will have to hire different types of personnel for
the Industry.

Certain Managerial & Technical Personnel may be reqd in the

initial stages for the Project Planning. These Personnel may be
needed for the preliminary works, for supervision & other related
works during Planning & Implementation of the Project.

Accordingly, the Entrepreneurs should take steps to hire the Key

Managerial & Technical Personnel well in advance. Most of the
other Personnel & Office Staff will be needed as soon as the unit is
ready for Commissioning.

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 d) Arrange for Raw Materials :
Entrepreneurs should plan for reqd Raw
Materials as soon as they proceed to implement the
Project. They should try to get the necessary samples
for the Basic Raw Materials & Components that they
need to buy from outside for the Project.
During the implementation of the Project, they
should finalize the Sources of Raw Materials, the
Quality & Quantity Requirements for the Project.
Accordingly, they should Plan & Order the necessary
Raw Materials & Components so that they start
receiving the supplies from the date of expected
Commissioning of the Project.

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 e) Marketing :
The Entrepreneurs would have already
considered about the Market for their Project & the
Marketing Plan that they desire to take up for the
Products.

They should build up necessary Contacts for

marketing during the implementation stage. They
have to undertake necessary ground work of
contacting the prospective customers & preparing
necessary plans for Marketing. The Planning should
cover the product(s) design, Pricing, Promotional
Activities & the Distribution Systems.

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 f) Erection & Commissioning :
Once the Building is ready & the
necessary Plant & Machinery have arrived, the
Entrepreneurs have to take steps to erect the
Machineries. The various items of Plant &
Machinery should be erected as per the Plan
prepared. Some of the sophisticated
Machineries are supplied along with the service
of erection. In such cases, the erection &
commissioning will be undertaken by the
Vendors of the equipment.

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 After the Plant Machinery is erected, the
Entrepreneurs should proceed to commission
the Plant. Initially, during the trial run period,
the Entrepreneurs will have to make necessary
adjustments & changes in Production &
Process so as to obtain the desired quality
products. Once, the Production / Process of the
Unit is standardized, they can proceed with
Commercial Production.

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 g) Obtain Final Clearances :

The Entrepreneurs are reqd to take

several Final Clearances when is ready for
Commissioning or as it goes into Production.
Accordingly, the Entrepreneurs are advised to
refer to the various preliminary clearances they
have obtained from different Depts /
Organizations & take necessary steps to obtain
Final Clearances or approvals as reqd.

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 Government Policy towards SSI :
Small Scale Enterprises have been given an important
place in the frame work of Indian Planning for both ideological
& Economic Reasons. Development of Small Scale Enterprises
have been taken up with various important objectives to be
realized. These are :
(1) The generation of Immediate Employment
Opportunities with relatively Low Investment.
(2) The promotion of more equitable distribution of
National Income.
(3) Effective mobilization of untapped Capital & Human
Skills.
(4) Dispersal of Manufacturing activities all over the
Country, leading to growth of Villages , Small Towns &
economically Backward Regions.

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 Therefore, the Govt of India as well as various State
Govts in the Country have started various programs & evolved
policies for the Development of Micro & Small Enterprises in
the Country.

Various measures taken by the Central & State Govts for

the development of Micro & Small Enterprises have included
Product Reservations, subsidies on fixed capital investment,
Sales Tax & Income Tax Concessions, Preferential allocation of
credit & interest subsidy, extension of business & Govt
purchases, Marketing Assistance including Export Promotion
by institutions such as National Small Industries Corporation,
Small Industries Development Organization & several other
agencies.

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 For the purpose of administration of
India’s Micro & Small Enterprises have been
divided into Seven Groups as under into
Traditional Sector & Modern Sector.
Traditional Sector :
1) Handicrafts.
2) Handlooms.
3) Khadi, Village & Cottage Industries.
4) Coir.
5) Sericulture.

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 Modern Sector :
6) Power Looms.
7) Residual Micro & Small Enterprises.

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 NOC from Pollution Board

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 Requirement of NOC
• Industrialization is on the increase and so is the
environmental pollution due to emissions and waste
generated from these industries. The industrial
pollution due to its nature has potential to cause
irreversible reactions in the environment and hence is
posing a major threat to sustainable development.
Since the carrying capacity of the environment is not
unlimited and some areas or ecosystems are more
susceptible to adverse environmental impacts than
others, the unplanned and haphazard location of
industries might substantially increase the risk to the
environment.
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 Requirement of NOC (Contd.)
• Presently, regional plans that in-build environmental
components and provide for industrial zones
compatible to the surrounding land uses do not exist in
India.
• Hence, the industrial entrepreneur is forced to
purchase a site convenient to him and then apply for
clearances.
• Normally, an industrial site even if is presently not in
an earmarked/notified industrial land use, the land use
conversion is made based on clearances from
environmental aspects and other considerations, such
as availability of electricity,
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water supply, etc.
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 Requirement of NOC (Contd.)
 A proposed site for starting an industry is cleared
from environmental angle, after reviewing its
pollution potential and probable impact on the
environment, by the State Pollution Control Boards
and the State Environmental Committees or Site
Clearance Committees.
 An industry cleared from environmental angle will,
however, cause pollution to some extent since the
discharge/emission of pollutants are permitted up to a
certain amount of tolerable levels. Such tolerable
levels are set based on technological and economic
feasibility considerations.
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 Requirement of NOC (Contd.)
• Furthermore, appropriate pollution control equipment
provided in an industry to meet the standards, may not be
performing or operating at its desired efficiency all the time which
implies that there is an additional risk of pollution. The site may
turnout to be either suitable or unsuitable.
• The present site clearance procedures also insist on carrying
out Environmental Impact Assessment (EIA) for certain projects.
The EIA process turns out to be a myopic assessment as the
reports are several times engineered to meet the desired results.
Even if an impact is found as a result of the EIA, the impacts are
nullified by changing the manufacturing process or the treatment
technology.

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 Requirement of NOC (Contd.)
• However, subsequently the industry may find it not feasible to
operate those modified systems. Also, an EIA is carried out
considering the existing surrounding land use. The industry has
no control on land use changes. If a sensitive land use comes up in
the vicinity of the industry, impacts might be noticed even if the
industry is meeting the required standards.
• Also, EIA is lengthy procedure besides being expensive and, in
addition, is proving to be a set back in fast and realistic decision-
making process. Due to lack of land use controls around the
industrial sites, areas/uses sensitive to pollution come up in the
vicinity of the industrial areas. The impacts, which are mainly
depending on the distances to the receiving environment, are
noticed due to such uncontrolled land use changes. Adoption of
strategic EIA region-wise is being considered appropriate rather
than site-specific or project- specific
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EIA.
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 CPCB
• The Central Pollution Control Board (CPCB) has decided
to build up the tool of environmental planning, in phases for
the protection of the environment. The most immediate
need is to properly site industries so as to reduce the risks of
pollution and to protect the environment. There is also a
need to simplify and support decision-making process on
site clearance for locating an industry.
• The Central Pollution Control Board (CPCB), statutory
organisation, was constituted in September, 1974 under the
Water (Prevention and Control of Pollution) Act, 1974.
Further, CPCB was entrusted with the powers and functions
under the Air (Prevention and Control of Pollution) Act, 1981
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 CPCB (Contd.)
• It serves as a field formation and also provides technical services
to the Ministry of Environment and Forests of the provisions of
the Environment (Protection) Act, 1986. Principal Functions of
the CPCB, as spelt out in the Water (Prevention and Control of
Pollution) Act, 1974, and the Air (Prevention and Control of
Pollution) Act, 1981, (i) to promote cleanliness of streams and
wells in different areas of the States by prevention, control and
abatement of water pollution, and (ii) to improve the quality of
air and to prevent, control or abate air pollution in the country.

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 CPCB (Contd.)
 Air Quality Monitoring is an important part of the air quality
management. The National Air Monitoring Programme (NAMP)
has been established with objectives to determine the present air
quality status and trends and to control and regulate pollution
from industries and other source to meet the air quality
standards. It also provides background air quality data needed
for industrial siting and towns planning.
 Besides this, CPCB has an automatic monitoring station at ITO
Intersection in New Delhi. At this station Resirable Suspended
Particulate Matter (RSPM), Carbon Monoxide (CO), Ozone
(O3), Sulphur Dioxide (SO2), Nitrogen Dioxide (NO2) and
Suspended Particulate Matter (SPM) are being monitored
regularly. This information on Air Quality at ITO is updated
every week.
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 CPCB (Contd.)
 Fresh water is a finite resource essential for use in agriculture,
industry, propagation of wildlife & fisheries and for human
existence. India is a riverine country. It has 14 major rivers, 44
medium rivers and 55 minor rivers besides numerous lakes,
ponds and wells which are used as primary source of drinking
water even without treatment. Most of the rivers being fed by
monsoon rains, which is limited to only three months of the
year, run dry throughout the rest of the year often carrying
wastewater discharges from industries or cities/towns
endangering the quality of our scarce water resources. The
parliament of India in its wisdom enacted the Water
(Prevention and Control of Pollution) Act, 1974 with a view to
maintaining and restoring wholesomeness of our water bodies.
One of the mandates of CPCB is to collect, collate and
disseminate technical and statistical data relating to water
pollution. Hence, Water Quality Monitoring (WQM) and
Surveillance are of utmost importance.
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 The Zoning Atlas
• The Zoning Atlas for siting of industries zones and
classifies the environment in a District and presents the
pollution receiving potential of various sites/zones in the
District and the possible alternate sites for industries through
easy-to-read maps.
• The objectives of preparing a Zoning Atlas for siting of
industries are:
 to zone and classify the environment in a District;
 to identify locations for siting of industries; and
 to identify industries suitable to the identified sites

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 Legal Aspect
• The Ministry of Environment & Forest (MoEF) has launched the
Charter on "Corporate Responsibility for Environmental Protection
(CREP)" in march 2003 with the purpose to go beyond the
compliance of regulatory norms for prevention & control of
pollution through various measures including waste minimization,
in- plant process control & adoption of clean technologies. The
Charter has set targets concerning conservation of water, energy,
recovery of chemicals, reduction in pollution, elimination of toxic
pollutants, process & management of residues that are required to
be disposed off in an environmentally sound manner. The Charter
enlists the action points for pollution control for various categories
of highly polluting industries. The Task Force was constituted for
monitoring the progress of implementation of CREP
recommendations/ action points.
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 Project Report Preparation

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 Project Report
• A project report is a report which provided all the
necessary information of the unit proposed to be set up
for the manufacture of a product or rendering a service.
• A well prepared project report will help the bankers in
appraising the project report and offer financial
assistance.
• A project report enables the entrepreneur to know how
much money, man power and material would be
required to setup the project, type of machine and
technology required, and the economic gains from the
project.

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 Significance of Project Report
• It helps in approaching District Industries Centre for
obtaining provisional / permanent registration.
• It helps in procuring developed land or shed from
Directorate of Industries or from the Development
Corporation meant for providing developed land / shed’s to
entrepreneurs.
• It helps in securing supply of scarce raw materials.
• It helps in approaching bank for getting working capital
loan.
• It helps in obtaining term loan from State Financial
Corporation / Bank.
• It helps the entrepreneur in establishing techno-economic
viability of the project.
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 Contents of a Project Report
• General Information: Information on product profile and product details.
• Promoter: His/her educational qualification, work experience, project
related experience.
• Location: Exact location of the project, lease or freehold, vocational
advantages.
• Land and Building: Land area, construction area, type of construction, cost
of construction, detailed plan and estimate along with plant layout.
• Plant and Machinery: Details of machine required, capacity, suppliers,
cost, various alternatives available, cost of miscellaneous assets.
• Production Process: Description of production process, process chart,
technical know how, technology alternatives available, production
programme.
• Utilities: Water, power, steam, compressed air requirements, cost
estimates, sources of utilities.
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 Contents of a Project Report
(Contd.)
• Transport and Communication: Mode, possibility of getting, costs.
• Raw Material: List of raw material required by quality and quantity,
sources of procurement, cost of raw material, tie-up arrangements, if any,
for procurement of raw material, alternative raw material, if any.
• Manpower: Manpower requirement by skilled and semi-skilled sources of
manpower supply, cost of procurement, requirement for training and its
cost.
• Products: Product mix, estimated sales distribution channels, competitors
and their capacities, product standard, input-output ratio, product
substitute.
• Market: End-users of product, distribution of market as local, national,
international, trade practices, sales promotion devices, proposed market
research.

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 Contents of a Project Report
(Contd.)
• Requirement of Working Capital: Estimation of working capital required,
sources of working capital, need for collateral security, nature and extent
of credit facilities offered and available.
• Requirement of Funds: Break-up of project cost in terms of costs of land,
building, machinery, miscellaneous assets, preliminary expenses,
contingencies and margin money for working capital, arrangements for
meeting the cost of setting up of the project.
• Cost of production and profitability of first ten years.
• Break-even analysis.
• Schedule of Implementation.

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 Formulation of a Project
Report
• General Information.
• Project Description.
• Market Potential.
• Capital Costs and Sources of Finance.
• Assessment of Working Capital
Requirements.
• Other Financial Aspects.
• Economic and Social Variables.
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 General Information
• Bio-Data of Promoters
 Name and address of the entrepreneur.
 The qualifications, experience and other capabilities of the entrepreneur. If
there are partners, state the characteristics of all the partners individually.
• Industry Profile: A little reference of analysis of industry to, which the project
belongs, e.g., past performance, present status, the way it is organized, the
problems it faces, etc.
• Constitution and Organization: The constitution and the organizational
structure of the enterprise. In case of a partnership firm, whether it is
registered with the Registrar of Firms. Whether a Registration Certificate from
the Directorate of Industries/District Industries Centre has been obtained or
will be applied later on.
• Product Details: The utility of the product and the range of products to be
manufactured. One could even provide the product designs/drawings along
with and made a mention of the advantages the proposed product offers over
its substitutes.
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 Project Description
 Site: Location (town, street, number etc.) whether owned or leasehold
land; whether the site is in approved industrial area? Is it suitable to the
type of enterprise being planned? The open/covered area availability
needed should be mentioned. If the location is in a residential area then
the copy of No Objection Certificate from the Municipal authorities should
be attached.
 Physical Infrastructure: Availability of physical infrastructure consisting of
the following items :
 Raw Material: Whether imported raw material is also required? If so
whether the license has been obtained. Which are the sources of raw
material and what is the probability of getting it on a continuous basis
at fair prices?
 Skilled Labor: Whether skilled labor is available in that area? If not,
what arrangements have been made to train the labor in various skills?

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 Project Description (Contd.)
• Utilities
Power: Inadequate supply of electricity or its high unit cost in an
area may become a major constraint in running a project. The
project report should contain the information regarding the
power requirements, the load sanctioned, stability of supply of
power and the price at different consumption levels.
Fuel: Whether other fuel items like coal, coke, oil or gas, are
required and if yes, then state their avail ability position.
Water: Water is an important factor for projects like brewery,
tannery, ice plant, soft drinks and chemicals. The source and the
quality of water in such cases should be clearly stated.

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 Project Description (Contd.)
• Pollution Control: Most industrial plants produce waste material or
emissions that may create significant problems. The emission may
be of various types like gaseous (smoke, fumes, etc.), physical
(noise, heat, vibration, etc.) or liquid or solid discharge through
pumps and sewers. State clearly the aspects like scope of dumps,
sewage system and sewage treatment plant.
• Communication System: Availability of communication facilities,
e.g., telephone, telex etc. should be stated in. the report.
• Transport Facilities: The distances over which the basic material
inputs will have to be transported and the available as well as
potential means of transportation should be stated together with
expected bottlenecks, if any.

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 Project Description (Contd.)
• Other Common Facilities: Availability of facilities like machine shops,
welding shops and electrical repair shops, etc.
• Manufacturing Process: The details of production and the process involved
should be clearly stated. Also state the period of conversion from raw
material into finished goods. A process flow chart should be presented.
• List of machinery and Equipment: A complete list of items of machinery
and other equipment indicating their type, size and cost should be
furnished. Sources of supply of capital equipment and the construction
services should also be given. Check machinery/equipment for each of the
above stated processes is ensured. If not, explain how such processes will
be get done.
• Capacity of the Plant: The installed licensed capacity should be stated. Also
state whether the unit will run on single, double or triple shift basis.

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 Project Description (Contd.)
• Technology Selected: Is it up-to-date and appropriate? Which other units
are using the same technology and with what results? How is required
know how proposed to be arranged?
• Balancing of Plant: While stating the stages of production, also state
whether the capacity of various plants at different stages of production is
sufficient. Balancing equipment required at a later stage and the
consequent increase in capacity should be assessed.
• Quality Control/Testing and Inspection: Whether some system has been
designed to check the quality of products on a continuous basis? Obtaining
quality marks like ISI, Agmark help in creating confidence among
consumers if there is a probability of getting them for the products, the fact
should be included in the project report.
• Research and Development: Besides the quality control, whether any cell
to study improvement of quality is proposed to be formed in the
enterprise?
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 Market Potential
• Demand and Supply Position: State the data regarding total
expected demand of the product and present supply position. How-
much of this gap will be filled up by the proposed unit?
• Price Expected to be Realized: An estimate of the price expected
should be furnished to assess the margin of profit. A comparative
statement of competitor’s selling price would be helpful.
• Marketing Strategy: What strategy for selling the products is
proposed to be followed? Whether any arrangements have been
made with reputed suppliers and distributors for lifting the
production? Sometimes, particularly in electrical goods, owners of
reputed brands may enter into contract to lift the entire production
and sell it later after putting their trade mark on it.

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 Market Potential (Contd.)
• After-Sales Service: In some items it is very vital. Even due to a
loose screw or snapping of a wire, the customer may find the
instrument either not working or working improperly and without
after-sales service. Due to this, the product gets a bad name.
Normally it has been found that money spent on after -sales service
by a manufacturer is repaid many times over the long run.
• Seasonality Factor: Whether the product has seasonal fluctuations
in sales? If so, the arrangements made for warehousing or stocking
of the goods in off-season should be stated.
• Transportation: Whether the unit will depend for the
transportation of goods on public carrier or will it like to own its
own transport? If own transport is needed, state the probable cost
and the amount of assistance required.
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 Capital Costs and Sources of
Finance
• Land and building
• Plant and machinery
• Installation costs
• Other miscellaneous assets like furniture/fixtures,
vehicles, tools, dies, jigs, fixtures, patterns, types etc.
• Preliminary and preoperative expenses.
• Contingency cushion against price rise/unforeseen
expenses.
• Margin for working capital.

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 Capital Costs and Sources of
Finance (Contd.)
• Besides the cost factors, the report should includes probable
sources of finance. These sources of funds should equal the cost of
a project as otherwise the project cannot be set-up in full. The
resources would include the owner’s funds together with loans and
deposits raised as well as the limits expected from financial
institutions/banks.

• The estimation of funds for the cost factors involved should be

realistic and correct. Many units run into serious financial problems
because of inadequate estimate of funds requirement.

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 Assessment of Working Capital,
Requirements
• Planning for working capital requirements is
equally crucial for an entrepreneur. While
estimating the capital costs, margin for
working capital has taken into account.

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 Other Financial Aspects
• One of the objectives of setting-up a project is
to earn a livelihood. Besides the project set-up
must be able to retrieve the investments
made within its life cycle. This would be
possible only if the products taken up for
production are adequately profitable. This
would require preparation of a projected
Profit & Loss Account which would indicate
likely sales revenue, cost of production, allied
cost and profit.
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 Economic and Social Variables
• Employment Generating : The number of persons
proposed to be employed vis-a-vis employment
situation of that area may be mentioned.
• Import Substitution : The manner in which it is
planned to be achieved and the amount of benefit
expected may be mentioned.
• Ancillarisation : Whether the unit will need sub-
contracting functions of such type that ancillary
industrial units may be promoted to meet them?

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 Economic and Social Variables
(Contd.)
• Exports : Quite likely the products proposed for
manufacture may be exported in full or in part.
• Local Resource Utilization: Certain local resources
which are presently a waste may be usefully utilized
upon the project going on stream.
• Development of the Area : How the establishment of
the unit will bring on overall development in the area
of its operation ?

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 Economic and Social Variables
(Contd.)
• Project Implementation Schedule : Preferably a PERT/CPM chart can be
appended to the project report. If this is not feasible then in a tabular
form, likely dates of completion of the following activities can be
mentioned.
- Acquisition of land Installation of plant/machinery
- Registration of the unit Recruitment of workers
- Bank loans Training of workers
- Construction of building Ordering raw materials
- Power connection Procurement of raw materials
- Ordering plant/machinery Trial run
- Supply of plant/machinery Commercial production
• Plant Layout : If possible, a copy of the plant layout can also be furnished
in the project report. This will assist determining sufficiency of area for
present and future expansion programmers.
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 Specimen of A Project Report
A. PRODUCT DESCRIPTION
B. PRODUCTION AND GENERAL EVALUATION OF
PROSPECTS;
C. MARKET ASPECTS
• Users
• Sales Channels & Methods
• Geographical Extent to Market.
• Competitive Situation:
• Domestic Market
• Export Market
• Market needed for plant described

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 Specimen of a Project Report
(Contd.)
D. PRODUCTION REQUIREMENT:
• Annual Capacity (One/Two/Three-Shift Operation)
• Capital Requirements
– Land & Buildings on rent (Mention value, if owned)
– Equipment, furniture and fittings
– Working capital
• Total capital which the entrepreneur would needed for the whole
project provided he uses agencies planned by the Government for
financial accommodation.
– Own
– Own Borrowings
• Expected net profit per annum

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 Specimen of a Project Report
(Contd.)
E. CAPITAL REQUIREMENTS
I. Fixed assets & working capital
• Land (.........sq. meters) and
• Building (...........sq. meters), on rent at Rs. ......................... per annum
• Equipments:
– Production Equipment (List down in an appendix, giving values, etc., of each machine separately)
– Other Tools & Equipment
– Furniture and Fittings
• Working Capital
II. Raw Material & Allied Supplies (Annual)
• Power, Fuel & water
• Maintenance & Allied Supplies
• Other Supplies
III. Manpower (Annual)
• Manager
• Foreman
• Supervisors
• Skilled Workers
• Semi-Skilled Workers
• Unskilled Workers
• Office Staff
• Others
IV. Other Costs (Annual)
• Depreciation on equipment, furniture & fittings......annum
• Interest on capital (fixed and working.....per annum on average)
• Administrative Costs
• Sales cost (including sales commission, advertisement, etc.)
• Provision for discount, bad debts and miscellaneous contingencies
• Training costs.

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 Specimen of a Project Report
(Contd.)
F. TOTAL ANNUAL COSTS, SALES REVENUE AND NET PROFITS
• Annual Costs
– Rent for Land & Buildings
– Raw Materials & Allied Supplies
– Manpower
– Other Costs
• Annual Sales Revenue
• Expected Annual Net Profit (b-a)
• % Profit on Own Capital
• % Profit on Total Annual Sales Turnover
• % on Total Investment

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 Planning Commission’s Guidelines
For Formulating A Project Report
• General Information: The feasibility report should
include an analysis of the industry to which the
project belongs. It should deal with the past
performance of the industry. The description of the
type of industry should be given, i.e., the priority of
the industry, increase in production, role of the
public sector, allocation of investment of funds,
choice of technique, etc. This should also contain
information about the enterprise submitting the
feasibility report.

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 Planning Commission’s Guidelines
For Formulating A Project Report
(Contd.)
• Preliminary Analysis of Alternatives: This should contain present
data on the gap between demand and supply for the outputs which
are to be produced, data on the capacity that would be available
from the projects that are in production or under implementation
at the time the report is prepared, a complete list of all existing
plants in the industry, giving their capacity and level of production
actually attained, a list of all projects for which letters of
intents/licenses have been issued dry a list of proposed projects. All
options that are technically feasible should be considered at this
preliminary stage. The location of the project as well as its
implications should also be looked into. An account of the foreign
exchange requirement should also be taken. The profitability of
different options should also be given. The rate of return on
investment should be calculated and presented in the report.
Alternative cost calculations vis-a-vis return should be presented.
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 Planning Commission’s Guidelines
For Formulating A Project Report
(Contd.)
• Project Description: The feasibility should provide a brief
description of the technology/process chosen for the project.
Information relevant to determining optimality of the
locations chosen should also be included. To assist in the
assessment of the locations chosen should be included. To
assist in the assessment of the environmental effects of
project, every feasibility report must present the information
on specific points, i.e., population, water, air, land, flora and
fauna, effects arising out of project’s pollution, other
environmental discretions etc. The report should contain a list
of the operational requirements of the plant, requirements of
water and power, requirements of personnel, organizational
structure envisaged, transportation costs, activity-wise
phasing of construction and factors affecting it.
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 Planning Commission’s Guidelines
For Formulating A Project Report
(Contd.)
• Marketing Plan: Market Plan it should contain the following items
– Data on the marketing plan.
– Demand and prospective supply in each of the areas to be
served.
The method and data used for main estimates of domestic supply and
selection of the market areas should be resented. Estimates of the
degree of price sensitivity should be presented. It should contain an
analysis of past trends in prices.
• Capital Requirements and Costs: The estimates should be
reasonably complete and properly estimated. Information on all
items of costs should be carefully collected and presented.

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 Planning Commission’s
Guidelines For Formulating A
•
Project Report (Contd.)
Operating Requirements and Costs: Operating costs are essentially those
costs which are incurred after the commencement of commercial
production. Information about all items of operating cost should be
collected; operating costs relate to the cost of raw materials and
intermediates, fuel, utilities, labor, repair and maintenance, selling
expenses and other expenses.
• Financial Analysis: The purpose of this analysis is to present some
measures to assess the financial viability of the project. A Performa
Balance Sheet for the project data should be presented. Depreciation
should be allowed for on the basis of specified by the Bureau of Public
Enterprises. Foreign exchange requirements should be cleared by the
Department of Economic Affairs. The feasibility report should take into
account income tax rebates for priority industries, incentives for backward
areas, accelerated depreciation, etc. The sensitivity analysis should also be
presented. The report must analysis the sensitivity of the rate of return of
change in the level and pattern MS
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product
ESBM prices. 87
 Planning Commission’s
Guidelines For Formulating A
Project Report (Contd.)
• Economic Analysis: Social profitability analysis needs some adjustment in
the data relating to the costs and returns to the enterprise. One important
type of investment involves a correction in input and costs, to reflect the
true value of foreign exchange, labor and capital. The enterprise should try
to assess the impact of its operations on foreign trade. Indirect costs and
benefits should also be included in the report. If they cannot be
quantified, they should be analyzed and their importance emphasized.
• Miscellaneous Aspects: The preceding three areas are deemed
appropriate to almost every new small enterprise. Notwithstanding,
depending upon the size of the operation and peculiarities of a particular
project, other items may be consider important to be applied out in the
project report. To mention, probable use of minicomputers or other
electronic data processing services, cash flow statements, method of
accounting etc., may be of great use in some small enterprises.
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