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