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PROJECT EVALUATION
Project identification →is an important step in project formulation.
Projects are a means to achieving certain objectives and all the other alternatives to do it, must be considered with justificati

Sectoral studies, opportunity studies, support studies, Project identification essentially focuses on screening the number
opinions and to come up with a limited number of project options which are promising.

“Project Formulation”→ is the processes of presenting a project idea in a form in which it can be subjected to comparative
attached to a project.
Project Formulation involves the following steps-- PROJECT FORMULATION → OPPORTUNITY STUDIES/Support Studies →
(TECHNO ECONOMIC FEASIBILITY) → PROJECT APPRAISAL → DETAILED PROJECT REPORT

An OPPORTUNITY STUDIES identifies investment opportunities and is normally undertaken at macro level by agencies invo
types of study – Area Study, sectoral and Sub-sectoral Studies and Resource Based Studies. Opportunity Studies and Suppor

A PRE FEASIBILITY STUDY study should be viewed as an intermediate stage between a PROJECT OPPORTUNITY STUDIES an
the project. . Pre feasibility study lays stress on assessing market potential, magnitude of investment, , technical feasibility
the time available and the confidence of the decision maker. Pre feasibility studies help in preparing a project profile for pre
project. They cover one or more critical aspects of project in detail. Since it relates to a vital aspect of the project the concl
preparation.

FEASIBILITY STUDY (TECHNO ECONOMIC FEASIBILITY forms the backbone of PROJECT FORMULATION and presents a balan
practicalities, ways of achieving objectives, strategy options, methodology, and predict likely outcome, risk and the consequen
decision. The preparation of a feasibility study report is often made difficulty by the number of alternatives (regarding the ch
decisions are made. The project feasibility studies focus on Economic and Market Analysis, Technical Analysis, Financial An

Economic and Market Analysis-- The demand forecast and projection of demand supply gap for products / services can n
has to look at multiple parameters that influence the market. Demand projections are to be made keeping in view all possible
have failed not because of technological and financial problems but mainly because of the fact that the projects ignored custo

Technical Analysis--- Technical analysis is based on the description of the product and specifications and also the requirem
Technology (Availability- Alternatives- Latest / state-of-art,Other implications ), Plant capacity - (Market demand, Technologic
Availability skilled man power\Location Logistics, Environmental consideration – pollution, Requirement buildings/ foundati
 Financial Analysis---The Financial Analysis, examines the viability of the project from financial or commercial consideratio
financial analysis are ----1. Pay-back period., 2. Return on Investment (ROI), 3. Net Present Value (NPV). 4.Profitability Index
. 1. Pay-back period--- This is the simplest of all methods and calculates the time required to recover
the investment amount by the sum of the annual returns (income – expenditure) until it is equal to the capital cost. The
assumes equal value for the income and expenditure irrespective of the time.
Investment (ROI)--- The ROI is the annual return as percentage of the initial investment and is computed by dividing the annu
Computation of ROI also suffers from similar limitation as of pay-back period. It does not differentiate between two projects o
gestation period say about 2-3 years. Both the pay-back period and ROI are simple ones and more suited for quick analysis o
other discounted cash flow methods such as Net Present Value (NPV), Internal Rate of Return (IRR) and Benefit-Cost ratio.
. 2b. The principle of discounting is the reverse of compounding and takes the value of money over time.
year at a discount rate of “d” is as follows; PV= Cn / (1+d)n
Net Present Value (NPV)--- It is considered as one of the important measure for deciding the financial viability of a project. Th
implementation gives present value of the cost (say C). Similarly sum of discounted returns yields the present value of benefi
values (B- C). Higher the value of NPV is always desirable for a project.
Profitability Index (PI)----- The B-C Ratio also referred as Profitability Index (PI), reflect the profitability of a project and comp
investments (B/C). Higher the (B/C) ratio better is the return.
indicates the limit or the rate of discount at which the project total present value of return (B) equals to total present value o
= Zero. In other words it is the discount rate at which the NPV of the project is zero. The IRR is computed by iteration i.e. Com
projects with higher IRR.

Risk and Uncertainty--- It is associated with every project. Risk is related to occurrence of adverse consequences and is q
inherently unpredictable dimensions and is assessed through sensitivity analysis.
Economic Benefits----Apart from the financial benefits (in terms of RoI) the economic benefits of the project are also ana
economic development of the area where the project is located, foreign exchange savings in case of import substitutes or ea

Management Aspects----It covers the background of promoters, management philosophy, the organization set up and s
decentralization and delegation, systems and procedures, the method of execution and finally the accountability.
Project Appraisal--- It is the process of critical examination and analysis of the proposal in totality. The appraisal goes be
analysis of project dimensions are undertaken. At the end of the process an appraisal note is prepared for facilitating decisi
The appraisal process generally concentrates on the following aspects.
• Market Appraisal: Focusing on demand projections, adequacy of marketing infrastructure and competence of the key marke
• Technical Appraisal: Covering product mix, Capacity, Process of manufacture engineering know-how and technical collabora
Manpower requirements and Break- even point.
• Environmental Appraisal: Impact on land use and micro-environment, commitment of natural resources, and Government p
• Financial Appraisal: Capital, rate of return, specifications, contingencies, cost projection, capacity utilization, and financing p
• Economic Appraisal: Considered as a supportive appraisal it reviews economic rate of return, effective rate of protection and
• Managerial Appraisal: Focuses on promoters, organization structure, managerial personnel, and HR management.
• Social Cost Benefit Analysis (SCBA): Social Cost Benefit Analysis is a methodology for evaluating projects from the social poin
the costs incurred in monetary terms and benefits earned in monetary terms by the project SCBA may be based on UNIDO me
project are considered in terms of economic (efficiency) prices also referred to as shadow prices. As per the L-M approach the
traded goods and services; and (3) Labor. All over the world including India currently the focus is on Economic Rate of Return (
 Detailed Project Report (DPR)---- Once the projects are appraised and the investment decisions are made a Detailed Projec
specifications, detailed cost estimates etc. and this would act as a blue print for project implementation.
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 Assets are of two types- one is current assets and other is fixed assets. Current assets which are shown in the Balance Sh
Bank Balance etc. whereas Fixed Assets are infrastructure of the company such as Land, Building, Apparatus & Plants, Com

Fixed assets are further classified under the following categories- 1. Tangible assets: Tangible assets are those assets havi
Plant and machinery etc. These are governed by Accounting Standard 10. 2.Intangible Assets: Intangible assets are those a
trademark, computer software, patents etc.

Expenditure incurred on behalf of company will either be revenue expenditure or capital expenditure. The capital nature
Work in Progress or directly under Asset. The difference between Work in Progress expenditure and Fixed asset expenditu
depreciation on such assets starts. If Capital nature of expenditure is booked under WIP or Inventory, the depreciation do

Shifting: The expenditure on shifting and re-installation of existing assets/equipments without increasing its capacity/ efficienc
No asset is unserviceable/scrapped unless declared so by the competent authority after having been surveyed by a committee
removed from the fixed assets register and transferred to current assets (assets) at their book value or estimated net realisa
immediately in P&L (Profit/loss)Account. Profit/loss on sale of fixed assets derived from book value is accounted for in P&L Acc

The asset registers will be maintained & identified with reference to estimate files (showing quantitative provisions,) works re
Management Certificates as well as work schedules of civil / Electrical Wings. All assets are verified at least once in every 3 y

Whenever the asset is de-commissioned, the fixed asset and the accumulated depreciation is to be relieved to that extent and
Inventory schedule. If the sale proceeds is more than the depreciated value or Net Realizable Value (NRV) it will be treated
entries will be made in the accounts.

BOOKING OF CAPITAL NATURE OF EXPENDITURE:--- On the basis of nature of activities, capital nature of expenditure is either
Asset
EXPENDITURE CHARGEABLE TO WORK- IN- PROGRESS(WIP):--- Expenditure chargeable to Capital Works is initially booked un
of employees engaged on construction jobs. salary, DA etc. of concerned officers/staff directly relating of project works will be
under this caption are allocated to the Work in Progress and Gross Block in the following manner:
1. Whenever the material is received at the site or received by the consignee, it should invariably be noted down in the prescr
maintenance or repair expenses as the case may be.
stores which are directly received and issued by the stores organization of BSNL will be classified as Work in progress with the
as the case may be.
3. If the material is not immediately used for any purpose, i.e. for installation, maintenance or repair, it should be treated as a
installation, the value of such item be booked under Work in progress (with the project estimate duly approved).

There is imperative need to ensure that the works in progress are completed well in time and converted in to assets. Only wh
will be in a position to claim the benefit of depreciation. While WIP should be completed at the earliest, in any case, it should
remain in Work in progress without any valid reason.

Inventories of BSNL are included under Broad accounting schedules as follows:

a) Building material b) Lines and Wires c) Cables d) OF Cable e) A&P f) Telephone instruments g) Telegraph & Telex i
i) AC Plants j) Internet equipments k) Masts and Aerials l) Store in stock- General Store j) Store in stock- Finished Goods i
n) Store in stock- Raw Materials in Telecom Factories o) Decommissioned assets p) Obsolete unserviceable stores q) Broa
inventories & Stores in transit.
ASSETS DEPRECIATION
Depreciation means a fall in the quality, quantity or value of an asset. The net result of an asset’s depreciation is that sooner o
depreciation are:
a) Wear and tear due to actual use
b) Efflux of time- mere passage of time will cause a fall in the value of an asset even if it is not used.
c) Obsolescence- a new invention or a permanent change in demand may render the asset useless;
d) Accident; and
e) Fall in market price

CLARIFICATIONS ON ASSETS WHICH ARE OBSOLETE / NON-PERFORMING/ SURPLUS:---- All these items should be i
and disposed off finally through MSTC (Metals and Scrap Trading Corporation). The definition of :-
● Non Performing Assets: An asset which is producing no income, may be termed as a non performing asset. Such
income generation unless and until declared so by competent authority as per rule.
● Obsolete Assets: The Asset which has outlived its economic life, or due to change of technology it is not useful to
as obsolete asset.
● Unserviceable assets: The asset which is not useful for the department being beyond economic repairs and as su
● Surplus Assets: An asset may be treated as surplus when the same is in excess of requirement for a specified per
● Non-moving/slow moving inventories: The terms non-moving & slow moving are not applicable to fixed assets,
items. The inventory items/store items may be considered as `non-moving’ if an inventory item is lying in stock/dep
issue. The store items are termed `slow moving’ when only 10% to 15% of the said items in stock are issued each ye

END USER TRAINING ON SCRAPPING THROUGH ERP --------TYPES OF SCRAPPING MATERIALS

There are 3 types of scrapping material:-
1. Asset (ZSOA type).
2. Non-Asset (ZSON type).
3. Inventory (ZSOI type)
ZSOA type material Number starts with 62xxxxxx.
ZSON type material Number starts with 65xxxxxx.
ZSOI type material Number starts with 61xxxxxx.

STEPS FOR SCRAPPING

It is the responsibility of the owner to physically identify the material /assets to be scrapped as per the lives / depreciation val
The life of asset is shown in table below:

To decide ACE-9 value, committee has to consider the following points:-

1. The ACE 9 value of the same item sold by different units in BSNL or other departments.
2. Valuation from local vendor through calling Quotations.
3. Current depreciated value of the material as per ERP data.
4. You can request to MSTC for sending information regarding the same sold items from different units through MSTC with au
of any item to be sold
5. The competent authority may approve the ACE-9 & recommendation of the committee for Scrapping.
6. After sanctioning of ACE-9, the asset is to be decommissioned by Account Section.
7. And then, we can go for selling/scrapping the asset on online auctioning portal like MSTC.
8. After successful bid and getting complete payments form purchaser, then only we can go for creating invoice through ERP
AUCTION THROUGH MSTC:
1) For this we have to register in the MSTC (Metals & Scrap Trading Corporation) Site “www. mstcecommerce.com” with your
2) After that, you will collect the approved ACE-9 and make a valid lot and send the lot for auctioning through your registered
3) Then, MSTC will upload the lot for the auction in MSTC portal and server will automatically inform this to all the buyers regi
approximately 5 lakhs buyers are registered in MSTC.
4) Then we have to enter the Reserve Price with STA (Subject To Approval %) for this ongoing auction till one day before the a

facility with Reserve price provides the facility of holding the auction for taking time for deciding the H1 bidder may be accept
6) MSTC will charge 1.9% commission on the sold value for successful lot only.
7) 10% of sold material value as Security Deposit (SD) is to be deposited by successful buyer within 7 days of auction. It is com
later stage, which will lead to forfeiture of his SD.
8) Remaining 90% payment including 1% TCS and GST is to be deposited within 15 days of auctioning, otherwise 1% panel inte
9) After getting full payment including late payment penalties if applicable, MSTC will issue Delivery Chalan by mentioning last
payment.
10) After one month, if customer fails to lift the material, BSNL will charge penalty (as Ground rent) for late lifting of material w
lifting the material. This is another income.
11) MSTC provides forward auctioning; this is the main advantages of auctioning through MSTC. It means after completion of
that bidding is continuing and up to what extent.

KEY POINTS TO BE NOTED

1. Coordination is very much essential between Technical (Planning/MM) and Accounts (Planning/Cash) wings at all stages.
2. No Inventory (De-commissioned Asset) shall be sold without being decommissioned.
3. All scrap related procedures i.e. ACE-9 approval, Decommission of Asset etc., shall be taken care of by the owner before initi
4. Respective owner needs to physically identify the assets to be scrapped and ACE-9 process need to be completed
12.8.6 PREREQUISITES FOR SCRAPPING IN ERP
1) Decommissioned Asset ID:-abumn
2) Scrapped Material Code :- MM03, ZMM60
3) Customer Code :- XD01
4) MSTC Vendor Code :-XK01