Planning Commission’s Guidelines for Project Reports, Entrepreneurship & Small Businesses | Entrepreneurship & Small Businesses - B Com PDF Download

In order to process investment proposals and arrive at investment decisions, the Planning Commission of India has also issued some guidelines for preparing/ formulating realistic business plans/industrial projects. So far as feasibility report is concerned, it lies in between the project formulating stage and the appraisal and sanction stage. The project formulation stage involves the identification of investment options by the enterprise and in consultation with the Administrative Ministry, the Planning Commission and other concerned authorities.

1. General Information:

The feasibility report should include an analysis of the industry to which the project belongs. It should deal with the past performance of the industry. The description of the type of industry should also be given, i.e., the priority of the industry, increase in production, role of the public sector, allocation of investment of funds, choice of technique, etc. This should also contain information about the enterprise submitting the feasibility report.

2. 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 are in production or under implementation at the time the report is prepared, a complete list of all existing plants in the industry, giving their capacity and level of production actually attained, a list of all projects for which letters of intents/ licenses have been issued and a list of proposed projects.

All options that are technically feasible should be considered at this preliminary stage. The location of the project as well as its implications should also be looked into. An account of the foreign exchange requirement should also be taken. The profitability of different options should also be given. The rate of return on investment should be calculated and presented in the report. Alternative cost calculations vis-a-vis return should be presented.

3. Project Description:

The feasibility should provide a brief description of the technology /process chosen for the project. Information relevant to determining optimality of the location chosen should also be included. To assist in the assessment of the 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 project’s pollution, other environmental discretions, etc.

The report should contain a list of the operational requirements of the plant, requirements of water and power, requirements of personnel, organisational structure envisaged, transport costs, and activity-wise phasing of construction and factors affecting it.

4. Marketing Plan:

A good marketing plan should contain the following items:

a. Data on the marketing plan.

b. Demand and prospective supply in each of the areas to be served.

c. The method and data used for main estimates of domestic supply and selection of the market areas should be presented. Estimates of the degree of price sensitivity should be presented.

d. It should contain an analysis of past trends in prices.

5. Capital Requirements and Costs:

The estimates should be reasonably complete and properly estimated. Information on all items of costs should be carefully collected and presented.

6. Operating Requirements and Costs:

Operating costs are essentially those costs which are incurred after the commencement of commercial production. Information about all items of operating cost should be collected. Operating costs relate to the cost of raw materials and intermediates, fuel, utilities, labour, repair and maintenance, selling expenses, and other expenses.

7. Financial Analysis:

The purpose of this analysis is to present some measures to assess the financial viability of the project. A proforma Balance Sheet for the project data should be presented. Depreciation should be allowed for on the basis of specified rate by the Bureau of Public Enterprises (BPE). Foreign exchange requirements should be cleared by the Department of Economic Affairs (DEA).

The feasibility report should take into account income-tax rebates for priority industries, incentives for backward areas, accelerated depreciation, etc. The sensitivity analysis should also be presented. The report must analyse the sensitivity of the rate of return of change in the level and pattern of product prices.

8. Economic Analysis: 

Social profitability analysis needs some adjustment in the data relating to the costs and returns to the enterprise. One important type of investment involves a correction in input and costs, to reflect the true value of foreign exchange, labour and capital. The enterprise should try to assess the impact of its operations on foreign trade. Indirect costs and benefits should also be included in the report. If they cannot be quantified, they should be analysed and their importance emphasised.

9. Miscellaneous Aspects:

The preceding three areas are deemed appropriate to almost every new small enterprise. Notwithstanding, depending upon the size of the operation and peculiarities of a particular project, other items may be considered important to be applied out in the project report. To mention a few, probable use of minicomputers or other electronic data processing services, cash flow statements, method of accounting etc., may be of great use in some micro and small enterprises.