Page 44 - Banking Finance April 2022

ARTICLE

have necessary technical qualifications & adequate reduce the overall cost of product and there is no
experience in the proposed line of activity so that he interruption in manufacturing of the product.
will able to set up the unit / business and run it in a Land: The area of the land should be sufficient for its
profitable manner. If he does not have some knowledge
present requirement. The area should not only be
about the manufacturing process and marketing of the adequate for its manufacturing facilities and for storage
product then he has to totally depend upon the some etc. but some space is there for its future expansion.
external hired person or technical consultant. But in that
One should ensure that the title of the land should be
scenario he should at least have knowledge required for
clear and land should be marketable. The proposed land
sale of the product. Sometimes borrower may not have
should be non agricultural and approved for industrial
required technical qualifications or experience in the
use. The cost regarding land development should be
field. For example, a trader in Fast Moving Consumer added in the land cost.
Goods (FMCG) who is doing business since couple of
decades having good reputation and financially sound, Building: The building proposed to be constructed
may go for business diversification, say propose to set should have all the government approvals and approved
up iron powder manufacturing unit by engaging services building plan should be there. The constructed area is
of technical consultant. Here the reputation / enough for the installation of all the machineries and
credentials of consultant needs to be verified by market its overall manufacturing but it is to be ensured that no
enquires as the critical aspect in this case for success of extra construction is proposed because it is going to
unit will depend on the technical consultant. increase the overall cost of project. As a Banker we have
to ensure that in schedule of implementation first main
2. Technical appraisal building is constructed then any building is constructed.
Technical appraisal is done to assess the technical Sometimes it happens that borrower first constructs its
feasibility of the proposed unit / business. Feasibility office building and all its margin is used for construction
means possibility of setting up the unit / business. The of office premises and the borrower do not have margin
various aspects considered in technical appraisal in case for carrying out any other activities.
of manufacturing unit are as under:
Site Selection: The location of unit where the borrower Water: Some industries require water for
wants to set up its manufacturing plant is the first factor manufacturing activities. Then we have to ensure the
for deciding the technical feasibility. The locations arrangement for water, bore well available, approval
selected by the borrower should be such that all the from local authorities, Industrial Development authority
basic amenities are available required for etc. and storage arrangements made so that there is
manufacturing the product. Like in case of cement no problem for the availability for water.
plant, the location may be near to limestone mines to Power & Fuel: Electricity is required for the
reduce the transportation cost. In case of perishable manufacturing and other activities. The electrical power
goods the location should be near to the market. The requirement and sanction letter for power from
location is such that in one way or another that it should Electricity boards to be verified. If there are power cuts
in the area, then arrangements for DG Sets to be
ensured for smooth production. Some of the unit is
proposed to be set up in remote areas in that case the
approval for respective electricity company and overall
cost is to be included in the project cost.

The units which require high power consumption, the
unit should be located at a place where all the time
power is available at reasonable cost like mini steel or
aluminium plant. In case other fuel like gas etc. is used
for manufacturing activities, the location of the unit
should be such that there is no problem for its
availability.

44 | 2022 | APRIL | BANKING FINANCE