Project pre investment study or project formulation is essential in examining the most critical aspect of project before making the investment.
The Project Formulation exercise is done with a view to
1.Understand various dimensions of the project from a very broad angle
2.Facilitate the project authorities to take a decision as to whether it is going to be beneficial for the organization to conduct a detailed feasibility study or not. Otherwise the project idea may be dropped at this stage without proceeding or probing any further.
3.A well formulated project is the one which presents a very unbiased picture of the project idea in more clear-cut terms with regard to all the above factors.
4.The project authorities should use the information generated through the formulation exercise to identify the deficiencies and gaps and take remedial measures ahead of time.
5.Projects leading to loss in terms of money, time and desired output need immediate attention.
6.Pre-investment study and investment decision in any project in the government should become the important function.
7.Preparation of detailed feasibility report should be undertaken only when there are evidence of number of positive indicators to go for the project.
8.During the pre-investment study, technical assessment, economic appraisal, input analysis, project design, cost analysis is done to assess whether the inputs that are required for the project implementation are available. Such inputs are identified & quantified so that it becomes an important input for the cost-benefit analysis of the project.
9.The project has also to be assessed from the point of view of social benefits. Most of the urban development projects are aimed to achieve direct and indirect social benefits. For example, a water supply project for a town has direct benefits such as supplying the required quantity of safe water to the house-holds. At the same time, it has indirect benefits such as reducing the water borne diseases, health improvement of the people, increased work out-put because of improved health etc.
Project Formulation has following process :
• Assessing the project idea
• Assessing project components
• Analyzing the components with the help of specialists
• Assessment of an investment proposal
Stages in Project Formulation
1.Feasibility Analysis
2.Technical Analysis
3.Economic Analysis
4.Project Design & Network Analysis
5.Input Analysis
6.Financial Analysis
7.Cost-Benefit Analysis 8.Pre-Investment Analysis
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Professional Practice Study notes for M. plan Sem-IV
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