project & project report

8/6/2019 Project & Project Report

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Project Report

Project:Project is the foundation of an enterprise. It is an idea or plan that is intended to becarried out. It is a scheme, design, a proposal, of something intended or devised tobe achieved.

Newman defined that A project typically has a distance mission that it is designedto achieve and a clear termination point, the achievement of the mission.

Gillinger defines project As the whole complex of activities involved in usingresources to gain benefits.

According to Project Management Institute, USA, A project is a systeminvolving coordination of a number of separate department entities through theorganization, and which must be completed within prescribed schedules and timeconstraints.

Project Identification:Project identification is concerned with collection, compilation and analysis ofeconomic data for the eventual purpose of locating possible opportunities forinvestment and with the development of characteristics of such opportunities.Opportunities, according to Druckerare of three kinds:

1. Additive Opportunities: Which enable the decision-maker to better utilizethe existing resources without in any way involving a change in the characterof business.

2. Complementary Opportunities: Involve the introduction of new ideas andlead to certain amount of change in existing structure.3. Break-through Opportunities: Involve fundamental changes in both the

structure and character of business.

Project Life Cycle: Project Life Cycle consists of three main stages:1. The Pre-investment Phase: It is the first phase in the life of a project. It is

primarily concerned with objective formulation, demand forecasting,selection of optimal strategy etc. The project idea is developed into aninvestment proposition during this phase.

2. The Construction Phase: This phase begins after the investment decisionis taken. Resources are invested during this phase in building the basic

assets of the project. The construction phase consists mainly of developingthe infrastructure for the project.

3. The Normalization Phase: This phase starts after the trial run of theproject framework developed during the construction phase. It involvesroutine procedures which are performed in cyclic order. The primary objectiveof this phase is to produce the goods and services for which the project wasestablished. Thus the assets created in construction phase are utilized duringthe normalization phase.


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Meaning of Project Report: Project report is a written statement of what an entrepreneur proposes to

take up. It is a kind of guide or course of action what an entrepreneur hopes to

achieve in his business and how is he going to achieve it.

In other words, project report serves like a kind of big road map to reach thedestination determined by the entrepreneur. It can best be defined as a well evolved course of action devised to achieve

the specified objective within a specified period of time.

Uses project report:1. The Entrepreneur: The project report is a blueprint that helps to explain the

idea of entrepreneur in factual terms. It facilitates him to plan his course ofaction and evolve business strategy.

2. Financial Institutions: For extending financial existence the bankers wouldlike to know the feasibility and profitability of enterprise. They would also liketo know whether the entrepreneur will be able to generate the necessary

funds periodically , to repay the loan together with interest.3. The Government: Some of the legal requirements like water and power

connection, pollution control certificate, etc. must be fulfilled. The projectreport contains a complete and detailed information which helps thegovernment in taking decisions.

Significance of Project Report: Project report serves two essential functions-1. It describes the direction the enterprise is going in, what its goals are, where

it wants to be, and how it is going to get there. It also enables entrepreneurto know that he is proceeding in the right direction.

2. The second function of project report is to attract lenders and investors.Although, it is not mandatory for the small enterprises to prepare project

reports, yet it is useful and beneficial for various reasons.a) On the basis of project report the financial institutions make appraisal if

the enterprise required financial assistance or not. If yes, how much.b) The organizations which provide various assistance such as work shed,

raw material etc are equally interested in knowing the economicsoundness of the proposal.

Contents of Project Report: A good project report should contain the followingcontents:

1. General Information: Information on product profile and product details.2. Promoter: His/her educational qualification, work experience, project related

experience.

3. Location: Exact location of the project, lease or freehold, locationadvantages.

4. Land and Building: Land area, construction area, type of construction, costof construction, detailed plan and estimate along with plant layout.

5. Plant and Machinery: Details of machines required, capacity, suppliers.Cost, various alternatives available, cost of miscellaneous alternatives.


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6. Production Process: Description of production process, process chart,technical know-how, technology alternatives available, productionprogramme.

7. Utilities: Water, power, steam, compressed air requirements, costestimates, sources of utilities.

8. Transport and communication: Mode, possibility of getting there, etc.

9. Raw Material: List of raw material required by quality and quantity, sourcesof procurement, cost of raw material, tie-up arrangements for procurement ofraw materials, alternative raw material.

10.Manpower: Manpower required by skilled and semi-skilled, sources ofmanpower supply, cost of procurement, requirement for training and its cost.

11.Products: Product mix, estimated sales, distribution channels, competitorsand their capacities, product standard, input-output ratio, product substitute.

12.Market: End-users of product, distribution of market as local, national,international, trade practices, sales promotion devices, proposed marketresearch.

13.Requirement of working capital: Working capital required, sources ofworking capital, need for collateral security, nature and extent of credit

facilities offered and available.14.Requirement of Funds: Break-up of project cost in terms of costs of land,

building, machinery, assets, working capital.15.Cost of production and profitability of first ten years.16.Break-even Analysis of the project.17.Schedule of Implementationof project.

Planning Commissions guidelines for formulating of a ProjectReport:In order to process investment proposals and arrive at investment decisions, thePlanning Commission of India has also issued some guidelines forpreparing/formulating realistic industrial projects. Summarized form of theseguidelines is as under:

1. General Information: It should include following: An analysis of the industry to which the project belongs. Past performance of the industry. Description of the type of industry. Priority of the industry. Role of public sector. Allocation of invested funds. Choice of technology.

1. Preliminary Analysis of Alternatives: This should contain Present data on the gap between demand and supply for the outputs

which are to be produced. Data on the capacity that would be available from the projects that arein production or underimplementation at the time the report isprepared

Complete list of all existing plants in the industry, giving their capacityand level of production actually attained

A list of all projects for which letters of intents/licenses have beenissued and a list of proposed projects.


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The rate of return on investment should be calculated and presented inthe report.

Location of the project as well as its implications. Foreign exchange requirement.

1. Project Description: The report should provide a brief description of technology/process chosen for the project. An assessment of environmental effects of a project, every feasibility

report must present the information on specific points, i.e., population,water, air, land, flora and fauna, effects arising out of projectspollution, other environmental discretions etc.

It should also contain a list of operational requirements of plant,requirements of water and power, requirements of personnel, transportcosts, etc.

1. Marketing Plan: It should contain following items: Data on the marketing plan. Demand and prospective supply in each of the areas to be served. The method and data used for main estimates of domestic supply and

selection of market areas should be present. Estimates of the degree of price sensitivity should be present. An analysis of past trends in prices.

1. Capital Requirements and Costs: The estimates should be reasonablecomplete and properly estimated. Information on all items of costs should becarefully collected and presented.

2. Operating Requirements and Costs: Operating costs are those costswhich are incurred after the commencement of commercial production.Operating costs relate to cost of raw materials, fuel, utilities, labour, repairand maintenance, selling expenses and other expenses.

3. Financial Analysis: The purpose of financial analysis is to present somemeasures to assess the financial viability of the project.

A proforma Balance Sheet for the projected data should be presented. Depreciation should be allowed on the basis specified. Foreign exchange requirements should be cleared by the department

of economic affairs. The feasibility should take into account income-tax rebates for priority

industries, incentives for backward areas, etc.1. Economic Analysis: Social profitability analysis needs some adjustment in

the data relating to the costs and returns to enterprise. One important type ofinvestment involves a correction in input and costs, to reflect the true valueof foreign exchange, labour and capital. The enterprise should try to assessthe impact of its operations on foreign trade.

Common errors in Project Formulation1. Product Selection: Sometimes entrepreneurs commit mistake in selecting a

wrong product for their enterprise. They select product without giving dueattention to product related other aspects such as size of the product market,its future demand, competition, life cycle, availability of required labour, rawmaterial and technology.

2. Capacity utilization and estimates: The entrepreneurs usually make over-optimistic estimates of capacity utilization based on completely false marketconditions, competitive atmosphere, etc.


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3. Market Study: Some entrepreneurs make wrong market study based onscanty and scattered information of demand and supply of their product.

They conclude that market is just there waiting to be tapped.4. Technology Selection: The requirement of technology differs from product

to product. Sometimes entrepreneurs plan for a technology not possible toset up within limited financial resources.

5. Location Selection: Government offers financial incentives and concessionsto establish industries in particular location. To avail the aforesaid benefitsthe entrepreneurs overlook other factors such as market proximity,availability of manpower, availability of raw material, etc.

6. Ownership Form: Many enterprise fail because they lack suitable form ofownership which is chosen without taking a comprehensive view of all therelated factors.

project & project report

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