PROJECT FEASIBILITY STUDY

A project is a temporary and one-time endeavour

undertaken to create a unique product or service,
which brings about beneficial change or added value.

Project planning refers to the plans of an undertaking

to build up productive capacities or to diversify its
business or to extend its existing capacities.

Project management is the discipline of organizing

and managing resources (e.g. people) in a way that
the project is completed within defined scope,
quality, time and cost constraints

Generation of ideas
SWOT analysis
Clear articulation of objectives
Cost reduction
Productivity improvement
Increase in capacity utilization
Improvement in contribution margin
Expansion into promising fields
Fostering a conducive climate

Generation of ideas
Initial screening
Is the idea prima facie promising?
Yes

NO

Plan feasibility analysis

Terminate

Conduct market analysis

Conduct technical analysis

Conduct financial analysis

Conduct Economic and Ecological analysis

Is the project worthwhile?

Yes

Prepare funding proposal

NO
Terminate

Scouting for project ideas

Analyze the performance of existing industries
Examine the input and output of various industries
Review import and export
Study plan outlay and government guidelines
Look at suggestion of financial institutions
Investigate local material and resources
Analyse economic and social trend
Study new technological developments
Explore possibility of reviving sick units
Identify unfulfilled psychological needs
Attend trade fair

.
Preliminary Screening
Compatibility with promoters
Consistency with government priorities
Availability of inputs
Adequacy of market
Reasonableness of cost
Acceptability of risk level

MARKET & DEMAND ANALYSIS

Situational analysis and specification of objectives

Collection of secondary information
Conduct of market survey
Characterization of the market- effective demand in
the past and present, breakdown of demand, price,
methods of distribution and sales promotion,
government policy
Demand forecasting
Uncertainty in demand forecasting
Market planning

TECHNICAL ANALYSIS

Whether the preliminary tests & studies have been

done or provided for ?
Whether the availability of raw materials,power &
other inputs have been established?
Whether the selected scale of operation is optimal?
Whether the production process chosen is suitable?
Whether the equipment & machines chosen are
appropriate?
Whether the auxiliary equipments & supplymentary
engineering works have been provided for?
Whether provision has been made for treatment of
effluents?

TECHNICAL ANALYSIS .

Whether the proposed layout of site ,building &

plant is sound?
Whether work schedule has been realistically
drawn up?
Whether the technology proposed to be employed
is appropriate from the social point of view?

ENVIRONMENTAL ASPECT

What are the types of effluents and emissions

generated?
What needs to be done for proper disposal of
effluents and treatment of emissions?
Will the project be able to secure all environmental
clearance and comply with all statuary
requirements?

FINANCIAL ANALYSIS

Investment outlay & cost of project

Means of Financing
Cost of Capital
Projected profitability
Break-Even Point
Cashflows of Project
Projected Financial position
Level of Risk

ECOLOGICAL ANALYSIS

What is likely damaged caused by the project to the

environment?
What is the cost of restoration measures required
to ensure that the damage to the environment is
contained within acceptable limits?

PROJECT REPORT

A Project can be undertaken only on the basis of

project report. Project report is pre-investment &
comprehensive study of investment proposals of an
organization which encompasses a thorough
investigation relating to economic, technical, financial,
social, managerial & commercial aspects.

It seeks to evaluate the socio-economic & technical

viability of a project before it is undertaken.

A project report deals with the various aspects of a new

project with reference to :

Location of a project
The size & capacity level.
The technological aspects production process
,availability of raw material, requirements of labour &
machines
Management policies regarding organization &
control aspects of a project.

ADVANTAGES OF A PROJECT REPORT

It lays down objectives in various spheres of

business.
It evaluates the objectives in the right perspective.
It identifies constraints on resources Viz. manpower,
equipment, financial & technological well in advance
to make remedial measures in due course of time.
It paves the way for management to seek financial
accommodation from financial institution & banks.
They require a detailed project report to evaluate
project viability for raising funds from capital market.
Successful implementation of a project depends upon
the line of action as suggested in the project report.
Besides,comparision of results will depend upon the
projected profitability and cashflows ,production

The foregoing discussion thus shows the

necessity of preparing a project report in
advance. It requires a team of specialized
and technical experts to cover different
aspects viz. financial, technical, commercial,
socio-economic & government rules and
regulation and also to follow a multidisciplinary approach to analyse the following
factors

CONTENTS OF A PROJECT REPORT

Information about industry and its status in the

economy, present production and demand pattern,
indicating licensed, installs capacities, Government
policies & export potential.

Broad market trend of the product and by products

within & outside the states for 5 years

Raw material survey, giving specification and quality of

raw materials required & their sources of availability.

Production process broad description of different

processes & their relative economies

Availability of technical know-how within & outside

CONTENTS OF A PROJECT REPORT

Location of Plant , its advantages & justification.

Water requirement of water for process ,boiler feed,

cooling etc. Sources of water available & making it
usable for factory & to townships

Power total power requirements for the factory

specification of power & choice between purchased
power & generated power.

Fuel-its requirement for steam raising or processing

source and price at which it will be available for
factory including taxes & surcharge.

COST OF PROJECT ..SPECIFY FOREIGN EXCHANGE COST ,IF ANY

Land inclusive of development expenditure to be

incurred on land.
Building to be erected for housing the plant &
Machinery ,the administrative office, stores,
services..Cost estimate to be included in the project
cost.
Plant & machinery including other equipments & their
estimated cost.
Offsite facilities, utilities & auxiliary facilities.
Preliminary expenses (Share issue, stamp duty, cost
of raising equity etc)
Contingencies.
Cost of Spare, repairs & maintenance during trial run
& commissioning period.
Pre-commissioning & commissioning period.

Details of Capital Structure or financing mix-broad

pattern to be indicated in report.
Cost of Production-Project broad pattern for five
years vis-a-vis design capacity. Break even point of
production cost should be given, effect of variation of
cost of raw material, utilities, selling price etc be
indicated & elaborated. Price trend of raw material &
finished goods be discussed.
Profitability for five years after commission of the
project should be worked out in the prescribed
format.
Cashflow statement & pay back period should be
worked out for the project.
Technical feasibility be discussed in detail with
financing viability.
Organisation & Management Description of
corporate management ,promoters experience &
background ,organizational chart, key personnel &