The document discusses the process of project formulation, which involves systematically developing and investigating project ideas to determine if they should be invested in. It involves experts from various fields conducting feasibility analyses from technical, market, financial, and social perspectives. If the analyses show a project is feasible, a detailed project report is created that serves as the work plan for implementation and helps obtain necessary approvals and funding. Project formulation helps decide whether to accept or reject a project idea before significant resources are invested.

1. Revathy Rajasekaran
Co-ordinator, EDC
V.V.VanniaperumalCollege forWomen
Virudhunagar

2.  Project formulation is the systematic
developments of project ideas for eventual
objective of arriving at an investment
decision.
 Project formulation involves step by step
investigation and development of project
idea.
 It helps in taking decisions of accepting or
rejecting an idea.

3.  Project formulation process involves involves
experts from various fields
 Industrial economist
 Market analyst
 Technologist/Engineer
 Mechanical & Industrial Engineer
 Civil Engineer
 Management accounting expert

4.  Well formulated project is passport for
obtaining required assistance from financial
institution.
 A well formulated project is the best way of
selling a project idea.
 It is also a great assistance for obtaining
necessary government clearance and
sanctions without difficulties

5.  Selection of appropriate technology –
Modern technology in developed country
may not be suitable for adopting in
developing country. Due to limited market for
the products and limited availability of capital
and skilled labour.
 Hence the entrepreneur has to examine the
project idea thoroughly in regard design,
production & marketing

6.  Influence of external Economics- No project
can function independently in economy.
 It depend on other industries for raw
material, power tools, spare parts, technical,
financial and managerial service,
communication &Transport facility.
 Dearth of technical qualified personnel-
lack of skilled personnel for coping with
modern technology.

7.  Resource mobilization-The capital required
is difficult to generate.
 Knowledge about government regulations-
an entrepreneur has to undergo numerous
government regulations.
 The ‘Guidelines for Industries’ published by
ministry of industrial development provides
information about industrial policy, licencing
procedure, import –export control orders.
 Gives information about the future prospects
of industry

8. 1. Feasibility Analysis
2. Techno-economic Analysis
3. Project design and network analysis
4. Input Analysis
5. Financial Analysis
6. Social Cost-Benefit Analysis
7. Project Appraisal

9.  It is the process of evaluating the future of a
project idea within the limitations.
 It determines the desirability of investing in
future development of project idea.
 3 possibility are:
 Feasible(Positive)- proceed to invest resource
 Not feasible- no investment is made
 Data not adequate for arriving decision then
additional information must be collected to
take decision

10.  Project are analysed from angles of technical,
marketing, financial etc.
 There are 3 stages in feasibility study namely
 Prefeasibility study
 Feasibility study
 Project report

11.  The objective of prefeasibility study are
 The investment decision can be taken on
information on prefeasibility study.
 Futher detailed analysis can be done or not.
 Need for in-depth study on critical aspects of
projects.
 The information collected at this stage
include market & plant capacity, material
input, location, technology, manpower,
financial analysis

12.  It is the detailed analysis on different aspects
relating project like economic, technical,
managerial, organizational, commercial and
financial.
 The feasibility study is an iterative process
covering alternative solution for production,
location, technology etc.
 If there is any non-viable project the
parameters should be adjusted to make it
viable.

13.  It is concerned with identification of project
demand potential and selection of
technology for the project.
 There are 2 parts namely
 Determination of project demand potential
 Selection of optimal project strategy.

14.  Estimation of the demand potential of the
project is done by demand forecasting.
 This is done in 3 stages viz. 1.Situation
analysis 2.Data collection & compilation,3.
interpretation & presentation.
 Situation analysis involves identifying the
dimension of demand forecasting.
 Future trend is projected by collecting &
compiling past, present & future market data.
 The data collected is compiled and presented
in a table and interpretation is done to
estimate the future demand.

15.  There are infinite series of strategy to achieve
the project objectives.
 One single optimal strategy which attains the
objective with minimum cost & time is
selected from the list of strategy.
 The techno economic report contains the
details of the selected strategy with which
the further project development is done

16.  It is the heart of the project. It defines the
individual activity comprising a project and
interrelationship between these activities.
 The activity & its relationship is shown in
network diagram.
 It shows the detailed work plan & time profile
 The network analysis is done to identify the
optimal course of action to execute it within
the minimum time within the resources.

17.  Input Analysis is mainly concerned with
identification, quantification and evaluation
of project inputs.
 This include identify the nature of resource,
estimate the magnitude of the required
resource, evaluate the possibility of
uninterrupted supply.
 Resource are needed in 3 stages
 Preinvestment stage, Construction stage &
normalisation stage

18.  Pre investment stage- resource for
investigation of various aspects of project
idea. Less resource is needed.
 Construction stage- non-recurring resource
to develop the project structure. Maximum
resources is needed
 Normalization stage- raw material & other
consumables on recurring basis
 Input requirements includes the cost
estimate of the resource

19.  Financial analysis is done to know the
financial feasibility of the project.
 It involves estimation of the project cost &
revenue and funds required for project.
 It analyse if the project generates the
revenue.
 The information obtained is to do
commercial profitability analysis, break even
analysis & ratio analysis.

20.  Cost benefit analysis estimates the social cost
and social benefits . It analyze the social
profitability of the project.
 It evaluates the impact of the project of the
society.

21.  The details gathered from feasibility studies
are presented in tables reports and
statements are consolidated into one master
report called project report or feasibility
report.
 It contains background information of
industry to which project belong and the
company.
 It provides information for project evaluation
appraisal before the funding agencies finance

22.  Project formulation is investigation process
before investment decision.
 It helps to accept or reject project.
 Detailed project report is a post investment
decision.
 It is the detailed specifications of design,
engineering drawings, site, process design
and time schedule for implementation. It is
the work plan for project

23.  The project profile consist of
 Economic size
 Status of industry or scope
 Raw material availability
 Cost of production
 Capital cost
 Utility requirements
 Infrastructure facility
 Profitability
 Government policy

24.  The criteria of project selection includes
 Investment size
 Location
 Technology
 Equipment
 Marketing

25.  Power &Water
 Others Performance
 Working capital requirements
 Labour component
 Economic viability