Stages of project formulation

1. Feasibility analysis
2. Techno-Economic Analysis
3. Project Design and network analysis
4. Input analysis
5. Financial analysis
6. Cost-benefit analysis
7. Pre-investment analysis

Feasibility Analysis

1. It is the first stage in project formulation
2. Examination to see whether to go in for a detailed investment proposal or not
3. Screening for internal and external constraints

Conclusion could be;

1. The project idea seems to be feasible
2. The project idea is not a feasible one
3. Unable to arrive at a conclusion for want of adequate data

Techno-Economic Analysis
Screens the idea to –Estimate of potential of the demand of goods/services choice of optimal technology. This analysis gives the project a platform for preparation of detailed project design.

Project Design and Network Analysis

1. It is the heart of the project entity
2. It defines the sequences of events of the project
3. Time is allocated for each activity
4. It is presented in a form of a network drawing
5. It helps to identify project inputs, finance needed and cost benefit profile of the project

Input Analysis

• It‘s assesses the input requirement during the construction and operation of the project
• It defines the inputs required for each activity
• Inputs include materials, human resources
• It evaluates the feasibility of the project from the point of view the availability of necessary resources
• This aids in assessing the project cost

Financial Analysis:

• It involves estimating the project costs, operating cost and fund requirements
• It helps in comparing various project proposals on a common scale
• Analytical tools used are discounted cash flow, cost-volume-profit relationship and ratio analysis
• Investment decision involve commitment of resources in future, with a long horizon
• It needs caution and foresight in developing financial forecasts

Cost –Benefit analysis

• The overall worth of a project is considered
• The project design forms the basis of evaluation
• It considers costs that all entities have to bear and the benefit connected to it.

 Pre-investment Analysis

• The results obtained in previous stages are consolidated to arrive at clear conclusions
• Helps the project-sponsoring body, the project implementing body and the external consulting agencies to accept/reject the proposal