with due acknowledgement to Shri Nagarajan Sr SO/CN/MAS
Project Appraisal
1) Introduction:
i)
Project
appraisals are highly necessary at the present financial position of IR where
resources are becoming scarce and demand from various sections of the society
are more.
ii)
Any commercial
undertaking will attempt project evaluation methods to budget their capital
expenditure for the following:
(a)
Expansion of
operation
(b)
Diversification
of operations
(c)
Replacement/Renewals
(d)
Research and
Development
2) Need for
project appraisal:
i)
Involvement of large
sums of money
ii)
Involvement of
greater amount of risk on account of unforeseen situations
iii)
Irreversibility
once investment Decision is made
iv)
Appraisals
facilitate the identification of relatively superior proposals.
3) Project
report:
i)
Project report
not only projects financial data related to outflows and inflows but also a
meticulous traffic survey exercise for a New line, GC and Doubling/Augmentation
of line capacity works to enhance the rly working
ii)
Traffic
potential, existing and anticipated
iii)
Traffic Density
present and future volumes
iv)
Technical
feasibility
v)
Financial
viability
4) Definition
i)
Detailed study of
traffic conditions of an area
ii)
Assessment of
Traffic prospects
iii)
Financial
implication
5) Objective of
Traffic survey
i)
Estimate of total
traffic likely to be generated in the foreseeable future with special reference
to the catchments area
ii)
Inter-0model
allocation of total streams of Traffic between rail and other modes of
Transport
iii)
Computation of
earnings and working expenses for each year of the economic life of the project
which is taken as 30 years
iv)
Appraisal based
on annual cash flows and application of Discounted cash flow method (DCF)
v)
Minimum yield of
rate of return of 10%
6) Filed work
i)
Fixing of most
suitable alignment for the proposed rail line in close collaboration with
Engineering team
ii)
Collection of
data from various sources like local bodies, prominent citizens, business
community, Transport authorities, Industrialists, chamber of commerce of the
alignment region and catchment areas.
7)
Data to be collected
i)
No. of bus trips
(from Transport sector), plying on the alignment and its catchment area,
occupancy, running time, fare structure and other road vehicles
ii)
Bus traffic
during festival days and national Holidays
iii)
Assessment of
passenger preference for Rail mode
iv)
Tourism and
tourist prospects
v)
Local area
profile from Panchayat/Municipal bodies
vi)
Educational
institutions, banking and hospital facilities
vii) Agricultural/mineral resources generated from the
alignment section
viii)
Existing
industrial scenario and anticipated development of industries on the alignment
and catchment area
ix)
Plans for
economic development of the area by the local/central Govt.
8) Estimate of
passenger traffic & earnings
i)
Diversion from
road to rail mode based on existing trends and pattern
ii)
Propensity of the
traveling public for rail mode due to competitive rail fare
iii)
Travel time,
comfort and safety
iv)
Travel pattern
based on importance of places of travel
v)
Travel pattern
based on importance of places of travel
vi)
Earnings at
current rail tariff level
9)
Estimate of freight traffic and earnings
i)
Existing goods
traffic pattern both inwards and outwards on the alignment region
ii)
Requirement of
specific commodities for specific needs
iii)
Trading &
commercial centers on the alignment
iv)
Industries on the
alignment
v)
Incremental
traffic from existing rail goods shed due to increasing trend in traffic
volumes over years
vi)
Addl. new goods
traffic for existing/coming up industries
vii) Addl. Traffic in foreseeable future as diversion from
existing road net work
viii)
Mineral wealth
and additional traffic from mines if any
ix)
Port development,
if any, on the alignment region
x)
Rail transport
clearance from Railway Board
xi)
Earnings
estimated from origination to destination point of movement of goods tfc. Using
latest freight tariff
10) Passenger traffic
Working expenses
i)
Based on the traffic
assessed running of passenger/express trains are determined for rake
composition, trips
ii)
A check list is
prepared to arrive at facets like train km, vehicle km, vehicle days and gross
tonne km
iii)
Based on the
checklist and applying the various cost elements from unit cost, working
expenses is worked out. General OH
charges, central charges are added to the working as a percentage. The total working expenses is further
escalated to the present level by applying escalation factor given by the Board
11) Assessment
of goods traffic working expenses
i)
Terminal services cost
(a)
Cost of
documentation and cost of other terminal expenses per wagon (in terms of units)
(b)
Cost of
marshalling per wagon per yard handled (in terms of units
(c)
Cost of provision
and maintenance of carrying units per wagon day(based on wagon turn round)
ii) Line haul
services cost
(a)
Cost of traction
per 1000GTKM (depending on traction)
(b)
Cost of other
transportation services including cost for train passing staff per 1000 GTKM
(c)
Cost of provision
and maintenance of track & signaling per 1000GTKM
iii)
After computing
total working expenses, general OH and central charges as a % of cost is added
iv)
78.5% of
operations and maintenance and cost over existing rail system is also added to
the project working expenses
v)
The total cost of
working expenses is escalated to the current level of survey with escalation
factor furnished by the board.
12) Estimate of
net earnings
i)
Gross working
expenses arrived both for coaching and goods traffic assessed is deducted from
gross earning to compute net earnings
13) Assessment
of Rolling stock and investment
i)
Requirement of
rolling stock like coaches, VPUs and locos for running the proposed
passenger/express trains is assessed utilizing train km., trips/rakes,
ii)
Rly. Bd.
Statistical elements pertaining to Zonal Rly is made use of. The current cost of rolling stock from Pink
Book (Rolling stock Programme) is used for working out investment.
iii)
Requirement of
Rolling stock like wagons and locos for running the proposed goods tfc. is assessed
utilizing net tonne km., train km., Engine km., and engine usage. Railway Board statistical elements pertaining
to Zonal Rly is made use of the current cost of rolling stock from Pink Book
(Rolling stock programme) is used for working out investment.
14) Savings
i)
On GC Surveys, in
addition to addl. tfc. Assessed, savings in the different operational &
maintenance cost between MG & BG systems is to be reckoned
ii)
Savings due to
avoidance of transshipment cost on GC works also computed
iii)
Savings in
operations cost due to shorter lead of the project section, if any will also be
credited duly debiting the loss in earnings if any
iv)
Savings on engine
hours and wagon hours due to elimination of detention enroute on single line
section is also reckoned while working out financial appraisals for
Dlg/Augmentation surveys.
15) Engineering
estimate
i)
Engineering
estimate includes civil, signal telecommunication and electrical (g) , OHE
cost, wherever proposed is also debited.
ii)
Credit on
released railway material is credited wherever applicable
16) Terminal
value of assets
i)
The life of any
rail project is reckoned as 30 years for financial appraisal purpose. The value of physical assets of different
categories outliving the project life of 30 years is also computed and credited
at appropriate years. Replacement cost
for the assets which expires before the life of the project is debited at
appropriate years.
17) Financial
appraisal
i)
Fin. Appraisal on
Rly. Projects are undertaken using the DCF method
ii)
This method is
more scientific since it takes into account the real time value of money
iii)
It also takes
into a/c realistic earnings, cash expenditure and accurable savings
iv)
IRR is done under
DCF technique which gives max. ROR possible from a project a given cash flow
wherein the rate of discount is located by interpolation for bringing NPV (Net
present value) = Zero
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