Project formulation report or pre-feasibility report is the document which elicits the preliminary sanction or the first stage clearance by the Government and/or the Board of Directors of the enterprise, for further feasibility study of a project. A clearer report will elicit a faster clearance. The objective of appraisals in the various stages of evolution and project decision is to ensure that the project is viable from the following angles :
- Market demand for the projects' end-product and plant capacity,
- Materials and inputs,
- Location and site,
- Project engineering and investment costs,
- Plant organisation and overhead costs,
- Manpower,
- Implementation schedule,
- Financial and Economic evaluation, and
- Statutory clearance.
While it is true that one should expect a pre-feasibility report to contain precise details and accurate figures, it is necessary that attempts are made to give even in the pre-feasibility report the best available information. Also, if any aspect, favorable or adverse, calls for special attention in making a decision, that aspect should be highlighted in sufficient detail. Particularly to be highlighted is the cost of any foreign process/technology to be acquired, its age and obsolescence and its Indianisation plan.
A gross idea of cost components are also considered in pre-feasibility estimates. The principal types of estimates are as follows :
Order of Magnitude Estimate
This is desired from the clots reports of completed projects. Probability of this estimate's accuracy is generally between 25 and 40 percent.
Preliminary Control Estimate.
This is prepared generally after the completion of the process design and major equipment listing. Accuracy of this estimate may be between 15 and 25 percent,
Definitive Estimate
This is prepared as soon as the basic engineering is completed, and bulk material take off sheets are made. Accuracy of this may range from 10 to 15 percent.
Detailed Estimate
This is prepared when design engineering and preparation of production drawings and final material lists halve been completed and prices of all materials ascertained. This may improve the accuracy to 5 percent, leading to revision of provisional budgets.
The Industries and Commerce Department of several State Government offer incentives to the entrepreneurs for rapid industrialist development. These incentives may include the following :
- Relief of sales tax or introit or entry tax,
- Land for setting up new units and for expansion of existing units,
- Contribution towards the cost of feasibility and project report,
- Subsidy on power
- Financial assistance in the form of term loan or working capital loan, and
- Housing scheme.
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