Project Report

Project:
Project is the foundation of an enterprise. It is an idea or plan that is intended to be carried out. It is a scheme, design, a proposal, of something intended or devised to be achieved. Newman defined that A project typically has a distance mission that it is designed to achieve and a clear termination point, the achievement of the mission. Gillinger defines project As the whole complex of activities involved in using resources to gain benefits. According to Project Management Institute, USA, A project is a system involving coordination of a number of separate department entities through the organization, and which must be completed within prescribed schedules and time constraints.

Project Identification:
Project identification is concerned with collection, compilation and analysis of economic data for the eventual purpose of locating possible opportunities for investment and with the development of characteristics of such opportunities. Opportunities, according to Drucker are of three kinds: 1. Additive Opportunities: Which enable the decision-maker to better utilize the existing resources without in any way involving a change in the character of business. 2. Complementary Opportunities: Involve the introduction of new ideas and lead to certain amount of change in existing structure. 3. Break-through Opportunities: Involve fundamental changes in both the structure and character of business.

Project Life Cycle:

Project Life Cycle consists of three main stages: 1. The Pre-investment Phase: It is the first phase in the life of a project. It is primarily concerned with objective formulation, demand forecasting, selection of optimal strategy etc. The project idea is developed into an investment proposition during this phase. 2. The Construction Phase: This phase begins after the investment decision is taken. Resources are invested during this phase in building the basic assets of the project. The construction phase consists mainly of developing the infrastructure for the project. 3. The Normalization Phase: This phase starts after the trial run of the project framework developed during the construction phase. It involves routine procedures which are performed in cyclic order. The primary objective of this phase is to produce the goods and services for which the project was established. Thus the assets created in construction phase are utilized during the normalization phase.

Meaning of Project Report:

Project report is a written statement of what an entrepreneur proposes to take up. It is a kind of guide or course of action what an entrepreneur hopes to achieve in his business and how is he going to achieve it. In other words, project report serves like a kind of big road map to reach the destination determined by the entrepreneur. It can best be defined as a well evolved course of action devised to achieve the specified objective within a specified period of time.

Uses project report:

1. The Entrepreneur: The project report is a blueprint that helps to explain the idea of entrepreneur in factual terms. It facilitates him to plan his course of action and evolve business strategy. 2. Financial Institutions: For extending financial existence the bankers would like to know the feasibility and profitability of enterprise. They would also like to know whether the entrepreneur will be able to generate the necessary funds periodically , to repay the loan together with interest. 3. The Government: Some of the legal requirements like water and power connection, pollution control certificate, etc. must be fulfilled. The project report contains a complete and detailed information which helps the government in taking decisions. 1. It describes the direction the enterprise is going in, what its goals are, where it wants to be, and how it is going to get there. It also enables entrepreneur to know that he is proceeding in the right direction. 2. The second function of project report is to attract lenders and investors. Although, it is not mandatory for the small enterprises to prepare project reports, yet it is useful and beneficial for various reasons. a) On the basis of project report the financial institutions make appraisal if the enterprise required financial assistance or not. If yes, how much. b) The organizations which provide various assistance such as work shed, raw material etc are equally interested in knowing the economic soundness of the proposal.

Significance of Project Report: Project report serves two essential functions-

Contents of Project Report: A good project report should contain the following

contents: 1. General Information: Information on product profile and product details. 2. Promoter: His/her educational qualification, work experience, project related experience. 3. Location: Exact location of the project, lease or freehold, location advantages. 4. Land and Building: Land area, construction area, type of construction, cost of construction, detailed plan and estimate along with plant layout. 5. Plant and Machinery: Details of machines required, capacity, suppliers. Cost, various alternatives available, cost of miscellaneous alternatives.

6. Production Process: Description of production process, process chart, technical know-how, technology alternatives available, production programme. 7. Utilities: Water, power, steam, compressed air requirements, cost estimates, sources of utilities. 8. Transport and communication: Mode, possibility of getting there, etc. 9. Raw Material: List of raw material required by quality and quantity, sources of procurement, cost of raw material, tie-up arrangements for procurement of raw materials, alternative raw material. 10.Manpower: Manpower required by skilled and semi-skilled, sources of manpower supply, cost of procurement, requirement for training and its cost. 11.Products: Product mix, estimated sales, distribution channels, competitors and their capacities, product standard, input-output ratio, product substitute. 12.Market: End-users of product, distribution of market as local, national, international, trade practices, sales promotion devices, proposed market research. 13.Requirement of working capital: Working capital required, sources of working capital, need for collateral security, nature and extent of credit facilities offered and available. 14.Requirement of Funds: Break-up of project cost in terms of costs of land, building, machinery, assets, working capital. 15.Cost of production and profitability of first ten years. 16.Break-even Analysis of the project. 17.Schedule of Implementation of project.

Planning Commissions guidelines for formulating of a Project Report:

In order to process investment proposals and arrive at investment decisions, the Planning Commission of India has also issued some guidelines for preparing/formulating realistic industrial projects. Summarized form of these guidelines is as under: 1. General Information: It should include following: An analysis of the industry to which the project belongs. Past performance of the industry. Description of the type of industry. Priority of the industry. Role of public sector. Allocation of invested funds. Choice of technology. 1. 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 underimplementation at the time the report is prepared 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 and a list of proposed projects.

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The rate of return on investment should be calculated and presented in the report. Location of the project as well as its implications. Foreign exchange requirement. Project Description: The report should provide a brief description of technology/process chosen for the project. An assessment of environmental effects of a project, every feasibility report must present the information on specific points, i.e., population, water, air, land, flora and fauna, effects arising out of projects pollution, other environmental discretions etc. It should also contain a list of operational requirements of plant, requirements of water and power, requirements of personnel, transport costs, etc. Marketing Plan: It should contain 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 market areas should be present. Estimates of the degree of price sensitivity should be present. An analysis of past trends in prices. Capital Requirements and Costs: The estimates should be reasonable complete and properly estimated. Information on all items of costs should be carefully collected and presented. Operating Requirements and Costs: Operating costs are those costs which are incurred after the commencement of commercial production. Operating costs relate to cost of raw materials, fuel, utilities, labour, repair and maintenance, selling expenses and other expenses. Financial Analysis: The purpose of financial analysis is to present some measures to assess the financial viability of the project. A proforma Balance Sheet for the projected data should be presented. Depreciation should be allowed on the basis specified. Foreign exchange requirements should be cleared by the department of economic affairs. The feasibility should take into account income-tax rebates for priority industries, incentives for backward areas, etc. Economic Analysis: Social profitability analysis needs some adjustment in the data relating to the costs and returns to enterprise. One important type of investment involves a correction in input and costs, to reflect the true value of foreign exchange, labour and capital. The enterprise should try to assess the impact of its operations on foreign trade.

Common errors in Project Formulation

1. Product Selection: Sometimes entrepreneurs commit mistake in selecting a wrong product for their enterprise. They select product without giving due attention to product related other aspects such as size of the product market, its future demand, competition, life cycle, availability of required labour, raw material and technology. 2. Capacity utilization and estimates: The entrepreneurs usually make overoptimistic estimates of capacity utilization based on completely false market conditions, competitive atmosphere, etc.

3. Market Study: Some entrepreneurs make wrong market study based on scanty and scattered information of demand and supply of their product. They conclude that market is just there waiting to be tapped. 4. Technology Selection: The requirement of technology differs from product to product. Sometimes entrepreneurs plan for a technology not possible to set up within limited financial resources. 5. Location Selection: Government offers financial incentives and concessions to establish industries in particular location. To avail the aforesaid benefits the entrepreneurs overlook other factors such as market proximity, availability of manpower, availability of raw material, etc. 6. Ownership Form: Many enterprise fail because they lack suitable form of ownership which is chosen without taking a comprehensive view of all the related factors.