Professional Documents
Culture Documents
UNIT II
Project Identification and
Formulation
Project Environment
Surroundings in which a project is undertaken. It
includes,
Air
Water
Land
Natural Resources
Pollution
Humans and their interaction- social, political
and economic both within and outside the
project boundaries
Project Identification
Search for project ideas
----Requires
Imagination
Sensitivity to environmental changes
Realistic assessment of what the firm can
do
Idea Generation
New ideas-Technological breakthrough
Product variantsexisting fields of technology
Clear articulation of objectives---Cost reduction
Productivity improvement
Increase in capacity utilisation
Improvement in contribution margin
Expansion into promising fields
Conducive climate to encourage creativity of employees
SWOT Analysis
Investment Opportunities
Corporate Appraisal
Project Screening
Preliminary Screening
Compatibility with the promoter
Consistency with governmental
priorities
Availability of Inputs
Adequacy of market
Reasonableness of cost
Acceptability risk level
Project Screening
Project Rating Index
Factor
Factor
Weight
Rating
VG
5
G
4
A
3
Factor
Score
P
2
VP
1
Input Availability
0.25
Technical Know-how
0.10
0.40
Reasonableness of Cost
0.05
0.20
Adequacy of Market
0.15
0.05
0.20
Stability
0.10
0.40
0.20
Govt Priorities
0.10
0.75
1.00
Rating Index
0.75
0.30
4.00
Brain
Storming
Options
SWOT
Alternatives
Initial
Vision Plan
Cash Flow
Return on Investment
Growth
Strategic
Considerations
Available
Options Conversion Options
External Factors
Market Demands &
Prices
Available Crudes
& Prices
Develop
Options
Evaluate
Future
Configuration
Stages of a Project-Development
Objective:
Facilitate an investment decision
Issues to be addressed
Infrastructure-raw material receipt and product
evacuation, location and site development
requirements, water intake and treatment, enabling
facilities for construction.
Technology selection and integration of various
processes into one composite scheme to meet the
project objectives
Investment and economic analysis
Project financing
Output-Project Feasibility Report and recommendation of
project implementation approach
Stages of a ProjectDefinition
Crucial Stage for the project as it is the final gate for approval or
otherwise.
Project owner should have the approval for expenditure towards
Basic design and engineering.
Detailed cost estimates and project schedules to be prepared,
with appropriate value engineering carried out for cost
rationalization, overall process integration, optimization of utility
and offsite systems design and project implementation approach
Output- Front end loading report with detailed cost estimates and
packages that are good for inviting bids from EPC/EPCM contractors
Implementation Sequence
SUPPORT
PROCESS DESIGN
DESIGN
BASIS
CONCEPTUAL
PROCESS DESIGN
ENGINEERING
DETAIL PROCESS
DESIGN
CONSTRUCTION
BASIC FRONT
END DESIGN
CONTRACTS
COMMERCIAL
TERMS &
CONDITIONS
OWNER
MANAGEMENT
COMMISSIONING
& HANDING OVER
CONFIGURATION
& DESIGN BASIS
CONSTRUCTION
PROCESS
DESIGN
FRONT END
ENGG
PROJECT
MANAGEMENT
EQUIPMENT
DELIVERIES
DETAIL ENGG.
BID PACKAGE
&
CONTRACTOR
SELECTION
VENDORS
CONTRACTORS EPC
CONTRACTORS
PROJECT FORMAT
1. INTRODUCTION
2. PRODUCT
2.1 Applications
2.2 Availability of technology and compliances
3.MARKET POTENTIAL
3.1. Demand and Supply
3.2. Marketing Strategy
4.MANUFACTURING PROCESS
PROJECT FORMAT
5.CAPITAL INPUTS
5.1. Land and Buildings
5.2. Machinery
5.3. Miscellaneous Assets
5.4. Raw Materials and Packing Materials
6. MANPOWER REQUIREMENTS
7. IMPLEMENTATION SCHEDULE
8. DETAILS OF THEPROPOSED PROJECT
PROJECT FORMAT
8.1 Building
8.2 Machinery
8.3 Miscellaneous Assets
8.4 Preliminary & Pre-operative Expenses
8.5 Working Capital Requirements
Particulars of Margin from promoters and
Bank
8.6 Cost of the Project & Means of Finance
PROJECT FORMAT
9. PROFITABILITY CALCULATIONS
9.1 Production Capacity & Build-up
9.2 Sales Revenue at 100%
9.3 Raw and Packing Materials Required at 100%
9.4 Utilities
9.5 Selling Expenses
9.6 Interest
9.7 Depreciation
PROJECT FORMAT
10. PROJECTED PROFITABILITY
A. Installed Capacity
B. Cost of Production
C. Profit before Interest & Depreciation
PROJECT FORMAT
11.BREAK EVEN ANALYSIS
ANALYSIS WITH FACTORS GIVEN BELOW
[A] Sales
[B] Variable Costs
[C] Contribution
[D] Fixed Cost
[E] Break-Even Point
PROJECT FORMAT
12.FINANCIAL ANALYSIS
Pay Back Period
Debt Service Coverage Ratio (DSCR
Internal Rate of Return (IRR)
Net Present Value (NPV)
PRIVATIZATION-APPROACHES
Little risk
No capital employed in non core business assets
No need to operate or maintain equipment
Assurance of a well-run and well-operated system
Significant cost savings
Considerable reduction in costs.
Costs fixed for the term of the contract
Lower environmental liability
Customer Benefits
Little risk
No capital employed in non core business
assets
No need to operate or maintain equipment
Assurance of a well-run and well-operated
system
Significant cost savings
Costs fixed for the term of the contract
Lower environmental liability
BOT/BOOT
Concessions from Government/ Public/
Private Sector
Finance, design, construct & operate a
facility
Contract period
Project proponents recover investments &
operating and maintenance expenditure
Infrastructure to be transferred after
concession period
BOT/BOOT
Extensive application in infrastructure
projects and in publicprivate partnership.
A third party
design and construct infrastructure
operate and maintain these facilities for a
certain period.
BOT/BOOT
Responsibility to raise the finance for the
project
Entitled to retain all revenues generated
by the project
Owner of the regarded facility.
BOT/BOOT