The key elements of effective Capital Investment Plan are:
- Defined service levels and performance standards linked to strategic objectives;
- Optimal investment;
- A long-term (life-cycle) approach.
Capital Investment Planning typically include:
• Consultation with stakeholders and definition of strategic goals;
• Ongoing review of service levels and performance standards;
• Planning for future infrastructure requirements and reviewing the adequacy of current infrastructure, based on growth projections and service levels;
• Continually assessing and reviewing capital improvement options to ensure that optimal operations, maintenance, renewal, acquisition, and disposal decisions are made, taking into account both social and economic objectives;
• Accounting for capital investment in such a way that the true cost of services provided can be calculated, and future investment needs required to maintain the ‘service potential’ of infrastructures can be determined; and
• Auditing capital investment performance (the practices, procedures, and systems used to make asset management decisions) and continuously monitoring and improving these processes to ensure improvement.
Although capital improvement plans (CIP) are prepared normally for five years, the size of the municipality’s capital investment programme and the typical length of time required to complete investment projects may suggest a plan of seven to ten years. The process consists of five distinct steps or stages:
1.Inventory of capital assets;
2.Development of investment plan;
3.Programming investment priorities over time;
4.Development of the financing plan;
5.Development of the capital budget.
Step 1: Inventory of Capital Assets
The first step involved in preparation of a Capital Improvement Plan is Inventory of Capital Assets. Although responsibilities vary greatly throughout the world, the most important capital infrastructure assets for which municipalities are responsible are:
• Water and sewer lines and treatment plants;
• Urban road network;
• Storm drainage systems;
• Sanitary landfills or other solid-waste disposal sites;
• Public buildings, sports facilities, educational and social programme facilities, markets and so forth.
Step 2: Development of Investment Plan
Decisions to undertake capital investment are stimulated by six major considerations:
o The degree of urgency of the project, i.e., the need to reconstruct or replace existing
facilities in order to maintain existing levels and quality of service;
o The need to upgrade or add to existing facilities in order to improve either the quality
of service or coverage;
o The need to undertake new programmes or new services beyond the range of current
municipal services, for economic and social reasons;
o Benefits derived form the project;
o Cost and financial impact of the project; and
o Acceptability to the local government
Step 3: Programming Investment Priorities over Time
The third stage in the capital investment planning process is to programme the investments required to meet the priority schedule established in the previous stage. This stage requires additional detailed engineering and cost estimation activities, sufficient to establish the approximate costs, and the approximate feasible completion dates for the projects listed in the priority schedule.
Step 4: Development of the Financing Plan
Although some general financial evaluation may have been made during the third stage so as to preclude the development of a five-year investment plan that is completely beyond the municipality’s financial capacity, the fourth stage of the capital investment planning process consists of conducting a detailed financial analysis of the municipalities capacity to undertake the investment programme. Several financial alternatives are considered at this stage:
• Cost recovery elements for individual projects;
• Availability of cost sharing by central or regional levels of government;
• Possibilities for improving the revenue generated by existing, general municipal sources;
• Possibilities for new, general municipal revenue sources; • Availability of credit and the possible terms of credit.
Step 5: Development of the Capital Budget
The fifth and final stage of the capital-investment planning process is the development of the actual capital budget. The capital budget can be divided into a three-part budget:
• The projects portion should show all annual construction costs, designs costs, interest costs, and any other costs attributed to each investment project, regardless of the actual financing mechanisms and the time in which payments will actually be made;
• A second part of the capital budget, the annual capital costs, should show only the actual financial outlay for direct payments for construction and/or principal repayment on credit financed projects; this would include all financial outlays from those projects that are part of previous planning cycles (even from those which the 5- year planning horizon has been passed); an alternative has to include only a summary line for the total amortization for previous credit-financed projects rather than a project-by-project statement.
•A third portion of the capital budget, current account transfers, should show separate statements of costs to be transferred to the current, operating budget; these would include: design costs, future operation, and maintenance costs, and interest and fees on credit.
हिंदी Hindi
एक प्रभावी पूंजी निवेश योजना के महत्वपूर्ण घटक होते हैं:
- स्ट्रेटेजिक उद्देश्यों से जुड़े परिभाषित सेवा स्तर और प्रदर्शन मानक: एक पूंजी निवेश योजना के अनुमानित लाभ और व्यय को स्पष्ट ढंग से प्राप्त करने के लिए, योजना को वर्तमान या भविष्य के सेवा स्तर के साथ जोड़ा जाना चाहिए। इसे उद्देश्य से जोड़ा जाना चाहिए ताकि निवेश फैसलों को उन उद्देश्यों के लिए प्राथमिकता दी जा सके।
- आवश्यक निवेश: एक समझौता दर्शाता है कि जब निवेशकों के पास संसाधन असीमित नहीं होते हैं, तो आवश्यकताओं को उच्चतम प्राथमिकता दी जानी चाहिए। इसलिए योजना में सभी निवेश के पीछे का एक विवेकपूर्ण निर्णय होना चाहिए। यह निर्णय सेवा स्तर बनाए रखने के लिए आवश्यक निवेशों के बीच एक संतुलन बनाने के बीच कीमत और लाभ दोनों के मानक का उल्लंघन नहीं करना चाहिए।
- दीर्घकालिक या जीवनचक्र दृष्टिकोण : पूंजी निवेश योजना को स्थायी और दीर्घकालिक लक्ष्यों के साथ बनाया जाना चाहिए। यह लक्ष्यों के संबंध में अधिक समझौता करने में मदद करता है और उचित समय पर निवेश करने से बचात करता है। जीवनचक्र दृष्टिकोण से, योजना के अंतिम लक्ष्यों, उनकी आवश्यकताओं और निवेश की अवधि के संबंध में समझौता किया जाता है, जिससे योजना दौरान किए गए निवेश के संबंध में सही फैसले लिए जा सकते हैं।
पूंजी निवेश योजना में आमतौर पर निम्नलिखित शामिल होता है:
• हितधारकों के साथ परामर्श और रणनीतिक लक्ष्यों की परिभाषा;
• सेवा स्तरों और प्रदर्शन मानकों की निरंतर समीक्षा;
• भविष्य की बुनियादी आवश्यकताओं के लिए योजना बनाना और विकास के आधार पर वर्तमान बुनियादी ढांचे की पर्याप्तता की समीक्षा करना, सेवा स्तरों और विकास के प्रक्षेपणों के आधार पर;
• सामाजिक और आर्थिक उद्देश्यों को ध्यान में रखते हुए, सबसे अच्छे संचालन, रखरखाव, नवीनीकरण, अधिग्रहण और निपटान के फैसलों को लेने के लिए पूंजी सुधार विकल्पों का निरंतर मूल्यांकन और समीक्षा करना।
• ऐसे तरीके से पूंजी निवेश का लेखा-जोखा रखना कि सेवाओं की वास्तविक लागत की गणना की जा सके, और ढांचों की ‘सेवा क्षमता’ को बनाए रखने के लिए आवश्यक भविष्य के निवेश जरूरतों का निर्धारण किया जा सके; और
• पूंजी निवेश प्रदर्शन (संपत्ति प्रबंधन फैसलों को लेने के लिए उपयोग की जाने वाली व्यवस्थाओं, प्रक्रियाओं और प्रणालियों) की लेखा-जोखा रखने की और निरंतर मॉनिटरिंग और इन प्रक्रियाओं को सुधारने की जांच करने की और सुनिश्चित करने की, ताकि सुधार हो सके।
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FD Planning Community Forum Discussion
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- Municipal bond in India
- Bilateral and Multi-lateral Financial Institutions
- Cost recovery
- Investment needs and Budgeting for Infrastructure and Service in Metro towns
- Subsidy Reduction
- Revenue Sources of Controlling Authorities
- Public Private partnership
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