Guidelines for preparation of Project Reports by SLPEs
GOVERNMENT OF ASSAM
DEPARTMENT OF PUBLIC ENTERPRISES
No. PE 90/89/293 Dated Dispur the 5th
From : Shri Prabir Sengupta IAS
Commissioner & Secretary to the Govt. of Assam
To : The Special Commissioner / Commissioner / Secretary to the
Govt. of Assam
All Concerned (Administrative Deptts.)
The Chairman / Managing Director / Executive Director/ Chief
Sub : Guidelines for preparation of Project Reports by SLPEs
I am directed to inform you that the Department of Public
Enterprises, after careful considerations have prepared a set of
guidelines for preparation of Project Reports by the SLPEs, which if
adhered to, will facilitate the Govt. in obtaining quicker decisions
on investment proposals.
I am therefore to request you to spare some time to go through
the guidelines and to ensure that all concerned in your department /
Organization adhere to the guidelines in preparing investment
proposals. The Department of Public Enterprises will welcome any
suggestions as regards these guidelines.
Enclo : Guideline sd/- (PROBIR SENGUPTA)
Commissioner & Secretary to the Govt. of
Department of Public Enterprises
Memo No. PE 90/89/293-A dated Dispur the 5th October
Copy To : (With copy of guideline )
All members of Public Investment Board
All members of Screening Committee
All officers of Deptt. of Public
Director, AIMA, Chandmari, Guwahati -3
By order etc.
Sd/- ANUP THAKUR
Secretary to the Govt. of
Department of Public
FOR PREPARATION OF PROJECT REPORTS BY STATE LEVEL PUBLIC ENTERPRISES
The Govt. vide notification no. PE 43/88/155 dated
23.06.1989 issued modified instructions on procedures to be
followed for obtaining approval of the PIB on investment proposals
for setting-up of new public enterprises, in existing enterprises,
on cost & time overrun in implementation of an approved
project, for augmentation of authorized capital and for providing
Govt. guarantee on institutional loans. His notification provided
brief guidelines on preparation of preliminary reports, detailed
project reports etc.
During about last 2 years, it has been experienced that most
of the investment proposals do not consider some vital issues to
facilitate obtaining decisions quickly by the Screening Committee
and the Public Investment Board. It has therefore been considered
essential to issue guidelines on preparation of feasibility/project
These guidelines do not revoke the need of preparation of
Preliminary reports covering:
The economic and social benefits that would accrue and the
extent to which Govt. objectives would be fulfilled.
The desirability of implementing the project in public
sector to provide the stated benefits in physical & financial
terms and why the existing arrangements and other possible
alternatives are insufficient for their provision and how the
proposed alternatives will improve the situation.
Likely sources of funds, amount of institutional finance
expected on preliminary negotiations.
Arrangement for management, the availability of skilled
manpower, steps proposed to train manpower in required skill.
The possibility of utilizing existing manpower, equipments
etc. of the existing organization of the Govt. / PE, keeping in
view the need of implementation of a new work culture.
These guidelines also do not revoke the remaining
provisions of the aforesaid notification unless
GUIDELINES FOR PREPARATION OF FEASIBILITY/PROJECT REPORTS
Feasibility/Project reports, both for setting-up of new enterprises &
in investment in existing enterprises should discuss the following
issues as applicable :
About the Company:
Description of the Company; the sponsors; activities in brief and
performance of the company including its subsidiaries both in
physical and financial terms in case of existing enterprises etc.
organization: Type of organization; particulars of persons
in top & middle level of management with qualification &
experience; internal control systems for looking after functions;
planning, scheduling and budgeting on scientific lines; delegation
of powers and responsibility/accountability; labor relations,
wage/pay structure; workers' participation in management and
working conditions etc.
The process & the
machinery: Nature of the project, its purpose; process &
technology, justification for selection of particular technology
amongst others; suitability, cost and availability of the plant &
machinery supported by proforma invoices of 2/3 alternative
suppliers; specification & capacity of each principal machine,
compatibility between different machines in the project;
availability of stores & spares; equipments and facilities for
controlling pollution & effluent disposal; quality control
aspects and laboratory equipments required for testing; relative
advantages & disadvantages between imported/indigenous
machinery; compatibility between imported/indigenous machinery in
case of combinations etc.
Locational advantages / disadvantages with regard to availability
of raw-materials, other essential inputs, proximity to the market,
availability of infrastructural facilities like power, transport,
water etc., topography, position in relation to flood level;
availability of required land in compact area, present use and
benefits of industrialization; rehabilitation of affected families;
position of ownership - freehold/lease/rental basis etc.
Raw materials &
products: Product specification, quality, application,
end-uses, product mix, justification of selection of particular
mix; output volume and seasonal factors influencing production;
sources of raw-materials, availability, quality; prevailing prices,
price trends, involvement of foreign exchange, if any for
raw-materials and other inputs; inventory level required; packing
material type, specification, availability, cost; wastage disposal
and bye-products etc.
Staff & labor:
Types of skill needed, availability in the area; need of technical
know-how and expertise; training facilities required; advance
action on human resource skill development; working conditions and
labor relation; labor utilization and efficiency; wage/pay
structure - long term settlement; piece rate payment, incentive,
bonus; disincentives and penalization etc.
Cost & financing:
Cost of the project with break-up of fixed costs, computation of
working capital with norms; seasonal cyclic variations,
contingencies, pre-operative & miscellaneous expenses; equity,
grant, loan, margin, repayment schedule, availability of financial
resources, investment climate credit measures of FIs etc.
Market conditions &
prospects: Consumption pattern f same or identical goods in
domestic and foreign markets; classes of buyers, end-uses;
country's licensed, installed and actual production capacities;
existing competitors - competitive prices, competitors' image;
degree of competition and expected market share; selling prices,
sales promotional incentives, comparison with competitors; export
Cost & economic
evaluation: Cost structure - fixed & variable costs; BE
analysis; operating profits and profitability in each product line;
strategic importance of the project vis-à-vis Govt. policy
and development plan, gestation period etc.
Clearances from various
regulatory & statutory bodies: List of clearances
required, prospects, liaison needed at different levels etc.
Anticipated cash-flows and cost estimates of profitability for at
least 10 years from commissioning; Financial ratios; analysis of
financial statement- liquidity, debt service coverage, internal
rate of return and other profitability ratios (In PEs , the cut-off
is 12 % now); economic evaluation, if the IRR is unattractive but
still the project implementation is considered essential; major
assumptions which could affect performance - sensitivity analysis
etc. for the project & for the company as a whole.
Social & ecological
factors: Impact on employment, on environment etc.
Anticipated bottlenecks and the manner in which these can be
overcome with proper co-ordination.
Summing-up of all the above factors - technical & economic
viability; analysis of strength & weaknesses of the project -
measures suggested to overcome the later.
PROJECT IMPLEMENTATION SCHEDULE
If on analysis, the project is found
feasible, an implementation schedule is to be drawn-up. In the
notification no. PE 43/88/155 dated 23.6.89 referred to above,
application of PERT/CPM techniques were suggested in major
investments only (exceeding Rs 5.00 Crore in terms of both share
capital & loan). But it has been felt that application of
PERT/CPM network technique in all investment proposals referred to
the Screening Committee & Public Investment Board would help
efficient project monitoring to avoid cost & time overrun; to
manage resource leveling; performance budgeting; crashing project
implementation time etc. The FR/PR should preferably be therefore
annexed with a PERT chart with the date of approval of the project by
the SC/PIB as zero date. The Department of Public Enterprises will
monitor the progress of implementation of the projects approved and
data input from the PERT net-work will be called for subsequently.
POINTS TO BE LOOKED INTO BY THE ADMINISTRATIVE
As has been contained in the
notification no. PE 43/ 88/155 dated 23.06.89 referred to above, the
administrative departments should attach appraisal note of the
department with the FR. The administrative departments should offer
its views on all the points discussed in the report (2.1 - 2.14 &
3) especially highlighting the areas on provision of fund (Equity,
Grant, Subsidy); project management set-up, its ability, alternative
set-up/agency; views of other concerned departments, and overall view
on the feasibility of the project.
CASES OF TIME & COST OVERRUN
The guidelines issued vide no. PE
43/88/155 dated 23.6.89 on this aspect will continue to apply.
However, cases for referral to the PIB for approval on these accounts
should have reports and appraisal of the administrative department
covering following aspects :
Date of approval of original Cost
Original cost with foreign exchange component, if any
Revised cost with foreign exchange component, if any
Major variations in the capacity/project concept
Change in pattern of funding
Earlier project schedule
Revised project schedule
Reasons of time overrun in clear terms
Variance analysis of cost increase under :
Change in scope/addition
Qualification of increase in cost on account of time overrun
Present status of physical progress of the project
Expenditures incurred and commitments made so far
Effect of revision in capital cost estimates on the cost of
production and profitability with reference to earlier approved
capital cost of the project
Adequate justifications for cost overrun with explicit
reasons of time overrun, fixation of responsibility on both counts
should be there in the report & appraisal note of the