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CHAPTER NO.
01
PROJECT APPRAISAL AND FORMULATION
AT THE END OF THE CHAPTER YOU WILL BE ABLE TO…….
1. DEFINE A PROJECT
2. UNDERSTAND DIFFERENCE B/W PROGRAMME, PROJECT AND PLANT
3. KNOW CHARACTERISTICS OF PROJECT
4. WHAT TYPES OF PROJECTS ARE?
5. ANALYZE PHASES IN PROJECT LIFE CYCLE
6. IDENTIFY PROJECT OPPORTUNITIES
7. HOW TO SELECT PROJECTS INITIALLY
8. WHICH KINDS OF PROJECTS ARE?
WHAT IS A PROJECT?
• A project is defined as A one-shot, time-tested, goal-directed, major undertaking, requiring the
commitment of varied skills and resources.
• It is combination of human and non-human resources pulled together in a temporary

organization to achieve a specified purpose.
• A project is an organized programme of activity carried out to reach a definite goal, often of a
non-recurring nature with a specified terminal point.
• A project first emerges as a CONCEPT and follows various staged, till it gets
COMMISSIONED.
DIFFERENCE B/W PROGRAMME, PROJECT
AND PLANT?
• A programme is large in scope. It is a activity-oriented and is not generally time bounded.
• A project may be undertaken to set up a plant. When the plant becomes operational, the
project is treated as completed and closed.
• A project is a one-shot major undertaking.
• The term PROJECT is common but the PLANT is not.

KNOW CHARACTERISTICS OF PROJECT?
1. Mission or set of objectives.
2. Termination.
3. Single entity and responsibility assigned to a single person.
4. Requires team work.
5. Has a life cycle represented by growth, maturity and decay.
6. A project is unique and no two projects are same.
7. A project is subject to change.
8. Project is always customer specific.
9. A project is a complex set of things.
10. A substantial portion of project work is done through sub-contracting.
11. A project is exposed to risk and uncertainty. A well-defined project has lesser risk and uncertainty
as compared to ill-defined projects.
DISTINCTIVE FEATURES OF A PROJECT?
I. Project is a non-repetitive and non-routine undertaking, often
clouded by uncertainty.
II. Coordination and good work relationship are essential among the
project team members.
III. Contribution from external agencies are required.
IV. In a project relationships are dynamic, flexible and temporary.

During the execution of a PROJECT
following ISSUES must be considered.
A project management is an organization involves the
following issues:
a) Macro issues
b) Micro issues
MACRO ISSUES:
• Forms and project organization
• Project planning and project control
• Human aspects of project management
MICRO ISSUES:
• Types, objectives and scope of project management
• Concept of various phases of project life cycle
• Feasibility study including preparation of DPR and project selection
• Financial evaluation, cost and time overruns
• Implementation phase of project management
• Other issues like;
(a) Contracting and contract specification
(b) Foreign exchange and import controls
(c) Shortage of facilities viz., power, fuel, etc.
(d) Labor and tax incentives, etc.
TYPES OF PROJECTS:
• New Projects
• Modernization Projects
• Expansion Projects
• Diversification Projects
• Other Projects
PROJECTS LIFE CYCLE:
• Project life cycle consists of sequential phases
which are useful in providing a framework for
budgeting, manpower planning and resource
allocation and for scheduling project
milestones and project reviews.
PROJECT LIFE CYCLE
IDENTIFICATION OF PROJECT
OPPORTUNITIES:
01. Business Environment
a) Industrial Policy
b) Regulation for Industrial Development
c) Regulations for Foreign Companies
d) Monopolies and Restrictive Trade Practices
e) Incentives for Export Oriented Units
f) Incentives for Industries in Backward Areas
g) Incentives for Small Scale Units
h) Liberalization and New Economic Policy
IDENTIFICATION OF PROJECT
OPPORTUNITIES:
02. Sources of Project Ideas
a) Analysis of industries’ performance:
b) Analysis of Inputs and outputs of industries:
c) Analysis of Imports and Exports:
d) Government Policies and Five Year Plans:
e) Suggestions of financial institutions development agencies:
f) Survey of local resources:
g) Analysis of economic and social trends:
h) New technology
i) Emulating consumption patterns from abroad
j) Revitalizing of sick units:
k) Analysis of unsatisfied needs of consumers:
l) Trade fairs and industry exhibitions:
m) Stimulating of creativity for generating new ideas:
n) Chance Factor:
INITIAL SELECTION OF PROJECTS:
In the entire process of project evaluation,
the project selection criteria constitute the most critical choices
a) Financial Profitability
I. Cost and benefits
II. Incremental cost
b) Non-financial Profitability
I. Economic
II. Social
III. environmental
01. Preliminary Consideration
a) Match with the entrepreneur profile
b) Fit with national priorities
c) Availability of inputs
d) Market size
e) Cost
f) Risk
02. Strategies for Implementing Project Ideas:
a) Increase in capacity current product range
b) Vertical Integration____ backward and forward
c) Diversification
d) Mergers
KINDS OF PROJECTS:
OVERVIEW OF A PROJECT:

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CHAPTER NO.

• It is combination of human and non-human resources pulled together in a temporary

• A project is a one-shot major undertaking.

• The term PROJECT is common but the PLANT is not.

I. Project is a non-repetitive and non-routine undertaking, often

project team members.

III. Contribution from external agencies are required.

IV. In a project relationships are dynamic, flexible and temporary.

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