Components and Methodologies That Comprise a Project Appraisal

Topics: Net present value, Time value of money, Economics Pages: 2 (654 words) Published: November 2, 2010
Project appraisal- A methodology

Appraisal involves a careful checking of the basic data, assumptions and methodology used in project preparation, an in-depth review of the work plan, cost estimates and proposed financing, an assessment of the project’s organizational and management aspects, and finally the viability of project. It is mandatory for the Project Authorities to undertake project appraisal or atleast give details of financial, economic and social benefits and suitably incorporate it. These projects are examined in the Planning and Development Division from the technical, institutional/organizational/managerial, financial and economic point of view depending on the nature of the project. On the basis of such an assessment, a judgement is reached as to whether the project is technically sound, financially justified and viable from the point of view of the economy as a whole. In the Planning and Development Division, there is a division of labour in the appraisal of projects prepared by the concerned Executing Agencies. The concerned Technical Section in consultation with other technical sections i.e; Physical Planning & Housing, Manpower, Governance and Environment sections undertake the technical appraisal, wherever necessary. This covers engineering, commercial, organizational and managerial aspects, while the Economic Appraisal Section carries out the pre-sanction appraisal of the development projects from the financial and economic points of view. Economic appraisal of a project is concerned with the desirability of carrying out the project from the standpoint of its contribution to the development of the national economy. Whereas financial analysis deals with only costs and returns to project participants, economic analysis deals with costs and returns to society as a whole. The rationale behind the project appraisal is to provide the decision-makers with financial and economic yardsticks for the selection/rejection of projects from among...
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