Financial and Strategic Management

What is Project Appraisal Under Normal Conditions?

Once the feasibility study gives the positive affirmation for undertaking the project, the next stage comes Project Planning. Study Project planning defines the project activities and end products that will be performed and describe how the activities will be accomplished.


Appraisal means to critically examine with a focus of attention on specific aspects, areas of operations, and target goals to ensure the conformity of the performance to the proposed goals. The basic task before the appraiser is to study progress in terms of cost productivity ratio, time schedule relationship, inter-action between different agencies, and performance of personnel in terms of their responsibilities and objectives of the company.

Important ingredients of appraisal are the following:

  1. Objectives as defined in the proposal to be kept in view for satisfactory assessment of operational courses;
  2. Accuracy of methods and measurements planned to be adopted is well adhered to;
  3. The objectivity of the proposal is highlighted so as to keep off from the bias and personnel prejudices;
  4. Ensure the reliability of the data and projected statements;
  5. Predictors made to conform to reality and should be objective.

In project appraisal above points should be kept in view by the members of the appraisal team irrespective of the fact whether the appraisal is being done for an industrial project being implemented by a corporate unit or the project devoted to the national economy sponsored by the state agency.

Form the angle of a company unit the project appraisal of the project may be done at three stages as under:

  1. Projects appraisal by the corporate unit itself i.e. the promoters of the company is interested in ensuring that on the successful implementation of the project whether or not it would generate the required rate of return on the total investment. The promoters make a selection of the projects following investment criteria of obtaining the required rate of return. In this appraisal, all aspects with reference to the project idea are identified and evaluated. As a matter of fact, it is a feasibility study done to identify the project, identify internal constraints and external difficulties, environmental constraints including government placed restrictions and regulations. Once the promoters are satisfied with this aspect, they have the formal feasibility report prepared and consider it for investment purposes.
  2. The second stage of project appraisal arises when a project report duly accepted by the promoters is submitted by the corporate unit of the financial institution for considering for grant of financial facilities to finance the cost of implementation of the project.
  3. Project appraisal is done by Government agencies according to approvals required to clear a particular project under the different statutes or state regulations. The main criterion followed by Government agencies is the cost-benefit analysis and social gains.

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Shreya Kushwaha

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