Feasibility Study Dr R Bista Ms Gyan Laxmi

Feasibility Study Dr. R Bista Ms Gyan Laxmi Shrestha Basic Administration Project 2017

China's Three George Hydro Electric Dam • Begun in 1994, the dam is massive in scale. It stretches 1. 5 mile and rise to a height of over 600 feet. It is expected to store 51. 4 billion cubic yards of water and raise the current level of the Yangtze River above the dam site over 570 feet. The Three Gorges Dam is the world's largest with installed capacity of 22, 500 MW (http: //en. wikipedia. org/wiki/Thr ee_gorges_dam). Construction cost is US$26 billion. It is the world's largest hydroelectric dam.

Feasibility Study - Feasibility study is related to analyse the viability of the identified project to support decision making of investment. - As its name implies, it is a study to decide whether the identified project is attractive enough to go for implementation - The study needs inputs from many professional disciplines for various areas of the study

Feasibility Analysis: A Schematic Diagram P r e l i m i n a r y w o r k A n a l y s i s (P Chandra (2003) Projects: Planning………, Tata Mc. Graw –Hill, New Delhi. page 13). Generation of ideas Initial Screening Is the Idea Prima Facie Promising? Yes Plan Feasibility Analysis Terminate Conduct Technical Analysis Conduct Market Analysis E v a l u a t i o n No Conduct Financial Analysis Conduct Economic and Ecological analysis Is the project Worthwhile? Yes Prepare Funding Proposal No Terminate

Why Feasibility Study? - To find if there is adequate demand for the project’s output. - To find if there is availability of suitable technology and inputs - To find the best options - To answer if the project meets the environmental regulations and priority of the nations - To examine the project’s financial and economic viability

Areas of Analysis in Feasibility study • • Demand/ Need and Market Analysis Technical Analysis Management Analysis Financial Analysis Economic Analysis Environmental Analysis Social Analysis

Demands • Should government made six lane fast track road? • Should proposed cement factory plant be able to produce 100 metric ton of cement per day? • How many rooms to build in Sheration Hotel?

Market and Demand Analysis • Market and demand analysis look at the need of the project and help to estimate demand • It is the key activity for determining the scope of an investment, the possible production programs, the technology required and often the choice of location.

Market and Demand Analysis The analysis cover mainly: Aggregate demand for the product/service The share of unfulfilled demand Demand forecasting Market price of product/service Analysis of competitors, their strength weakness Distribution mechanism

Technical Analysis • Every project must be technically feasible. • Technical analysis is related to examine whether the project under study is technically feasible to setup and operate to produce service/product. For example, in agriculture project of Apple farming, types of field, soil test, temperature required in selected location, location selection, plantation distance of between plants, variety etc needs to be analyzed.

Technical Aspects to be Considered Technology: • Choice of technological process and/ or appropriate technology, • Is the technology proven or tested? • Does the technology/ process/ equipment technically fit with the facility’s existing technology/process/ equipment & machinery? • Equipment capacity & whether it is as per requirement • List of recommended equipment suppliers. • Reputation of the suppliers and performance guarantees

Technical Aspects to be considered Cont. • Investment cost and operational cost of different technology/process • Environmental aspects of different technology Location aspects of the project and availability of infrastructural facilities with probable alternative locations Inputs: Availability of electricity, water, fuel, raw materials Size and scale of operations: based on the demand, capital requirement, and technology, inputs available

Management Analysis - If the management is incompetent, even a good project may fail. So it looks at: - Types of organisation - Academic qualification, and experience of key persons - Availability of personnel required for project execution. - Assessment of other specific skills required for the project - User’s role in case of development projects etc.

Financial Analysis The scope of financial appraisal varies considerably with the nature of project and whether it is revenue producing (e. g. industry, agriculture) or not (e. g. roads, public schools). Financial analysis covers: - Investment Cost Estimation - Operating Cost Estimation - Benefits Estimation - Cost Benefits Comparison - Project Selection Decision

Economic Analysis • Economic analysis estimate and analyze the project’s net contribution to the whole economy of the region or country. • It helps determine whether the project increases the net wealth of a region or country as a whole or not. • Estimation of Economic Costs of Projects • Estimation of Economic Benefits of Projects • Comparing Costs and Benefits

Economic Analysis • Calculation of Economic Net Present Value (ENPV), Economic Internal Rate of Return (EIRR) and Economic Benefit Cost Ratio (EB/C Ratio) • Decision: - If ENPV > 0, accept, if ENPV < 0, reject - If EIRR > discount rate (cost of capital), accept project - If EB/C ratio > 1 accept, < 1 reject project

Environmental Analysis • A project may causes environmental impacts in many ways • Identification and analysis of adverse effects on the environment • Identification of positive impacts • Required Mitigation measures • Designing environmental management plan • Provision of fund for environment management plan

Environmental Analysis • Main acts/guidelines in Nepal are Environment Protection Act 1996, the Environment Protection Regulation 1997, National Environmental Impact Assessment Guidelines, 1993. The analysis should meet the requirements mentioned by these acts and regulations

Social Analysis • A project may causes social impacts in many ways • Will the project have any adverse effects on the society? • What are positive and negative impacts • Viable measures to address negative impacts • Estimating cost for addressing social impacts

Initiating the Feasibility Study • Appointment of an experienced manager and Selection of study team members • Scope of the study • External Advisers to support study team • Plan and Schedule the Study • Starting study as per plan and schedule • Controlling study to complete as per plan and schedule

Completing the Feasibility study • The feasibility study should act as a springboard for the next phase in the project life cycle. – design and appraisal – ensuring that it is able to commence in a focused way. The end product of Feasibility Study should therefore comprise a clear, concise report, called Feasibility Study Report

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