Need for project formulation

Selection of appropriate technology Influence of External Economics Dearth of Technically Qualified Personnel Resource mobilisation Knowledge about Government Regulations

Significance of a project formulation

Project formulation is the best passport for obtaining the required assistance from financial insitutions. it will also be of great assistance for obtaining necessary Government clearences and in meeting the hurdles of procedure formalities. it will pinpoint the matters for which government sanctions have to be obtained. It will provide an independent assessment of the feasibility of obtaining the sanctions based on the existing government policies.

Elements of Project Formulation

Feasibility analysis Techno-economic analysis Project design and network analysis Input analysis Financial analysis Social cost benefit analysis Project appraisal

Project selection
Economic size Status of industry or scope Raw material availability Cost of production Capital cost Utility requirements Infrastructure facilities needed Profitability government policy

Planning commission guidelines

General information Preliminary analysis of alternatives Project description Marketing plan Capital requirements and costs Operating requirements and costs Financial analysis Economic analysis

Preparation of project formulation

Preliminary study Group discussion Prepare project report Obtain government clearance Submit the application to financial institutions Implement review

3. Prepare project report

Phase 1

Prepare primary data

Technical Estimate Cost of assets Estimate cost of inputs Prepare flow chart

Marketing Demand forecast Estimate of product price Estimate product mix

Personnel Identify promoters Decide organisation Plan man power reqirement

Project Net Work Identify activities Prepare time Estimates Draw network diagram

Phase 2

Financial projections
Estimae of working results Balance sheet and cash flow

Cost of project Means of finance

Phase 3

Economic analysis
Compute break oven analysis Senstivity Debt service analysis Coverage ratio

Compute payback period Internal rate of return

Obtain government clearance

Industrial licence

Controller of capital issues

S.G. cearance

Capital goods

Foreign collaboration approval

MRTP clearance

Submit the application to financial institutions

Obtain funds Create security Comply with terms and conditions

Procure sanction