The importance of technical appraisal in project evaluation is quite obvious. Technical appraisal of a project broadly involves a critical study of the following parameters:

(a)    Location. Technical feasibility study should define the location and site suitable for the project. Selection of location refers to the selection of geographical area and the site refers to the exact plot in the geographical real where the project is to be put up. The first step, therefore, is the selection of the location and site selection comes only after the geographical location is finalized. However, the required site characteristics should also be kept in mind while selecting the location.

There are a number of factors that influence industrial location. it is very important to carefully consider all the relevant factors while deciding the location because location may significantly influence the cost of project and distribution distributional efficiency, operating environment, etc. The problem of selection of the location is complicated by the fact that at a particular location where one or a few factors are favorable, other factors may not be favorable. Selection of the optimum location, therefore, revolves around the evaluation of all the relevant factors.

(b)    Plant Capacity or Size. The size of the plant or scale of operation is an important factor that determines the economic and financial viability of project. In many industries, there are certain technological sizes which are economical. If uneconomic size is one of the important reasons for the poor performance of many industrial units in India. The uneconomic size results in high cost and makes survival in a competitive market, particularly in the international market, very difficult. The competitive market, particularly in the international market, very of operation should be economic size.

(c)    Plant and Equipment. The feasibility study should define the technology required for a particular project, evaluate technological alternatives and select he most appropriate technology in terms of optimum combination of project components. The various implications of the acquisition of such technology should be assessed, including contractual aspects f technology licensing, when2 applicable.

The feasibility study should consider the adequacy and suitability of the plants and equipments and their specifications, plant layout, blending of different sections of the plant, proposed arrangements for procurement of plants equipments, reputation of the equipment suppliers, etc.

The selection of technology has to be related to the nature of the principal inputs that may be available for the project and to an appropriate combination of factor resources for both short and long periods. For example, the quality of limestone is a factor that determines whether the wet of dry process should be used in a cement plant. When there are foreign exchange problems or import restrictions, a technology that uses indigenous inputs may be preferable to one which will have to depend on imported inputs. In a labour abundant economy, labour-intensive technology which does not impair efficiency will be preferable to a capita-intensive technology.

(d)    Infrastructure. Proper functioning of a projects depends a lot on the sufficiency and efficiency of infrastructure like facilities to transport raw materials and other inputs, feasibilities to transport and distribute the output, power and fuel supply, water supply, storage and warehousing facilities, etc.

(e)    Effluent Treatment and Discharge. Disposal of effluents is a major problem for a number of industries like chemical industry, paper industry, etc. Industrial pollution become a serious-ecological problem and causes service problems for civic life. Heavily polluting industries should pay particular attention to their location. They must be located at the place where the social impact of pollution will be the minimum.

Project which produce effluents should have proper facilities and arrangements for the treatment and disposal the effluents without causing harm to the environment. The feasibility report should provide relevant details about the plan for effluent treatment and disposal. It may new mentioned here that while evaluating the application for industrial license, government considers the arrangements proposed to ensure the safe disposal of effluents and gases into air, water and soil.

 (f) Foreign Collaboration. The project report of a project involving foreign collaboration should contain the relevant details about the collaboration. The terms fo collaboration should strictly adhere to the government policies and guidelines in this regard.

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