Market And Demand Analysis?

 

Market And Demand Analysis

In most cases, the first step in project analysis is to estimate the potential size of the market for the product proposed to be manufactured (or service planned to b offered) and get an idea about the market share that is likely to be captured. Put differently, market and demand analysis is concerned with two broad issues:

1) What is the likely aggregate demand for the product/service?
2) What share of the market will the proposed project enjoy?

Given the importance of market and demand analysis, it should be carried-out in an orderly and systematic manner:

1) Situational analysis and specification of objectives,
2) Collection of secondary information,
3) Conduct of market survey,
4) Characterization of the market,
5) Demand forecasting,
6) Market planning.

1) Situational Analysis and Specification of Objectives: In order to get a “feel” of the relationship between the product and its market, the project may informally talk to customers, competitors, middlemen, and others in the industry. Wherever possible, h may look at the experience of the company to learn about the performances and purchasing power of customers, actions and strategies of competitors and practices of the middlemen.

If such a situational analysis generates enough data to measure the market and get a reliable handle over projected demand and revenues, a formal study need not be carried- out, particularly when cost and time considerations so suggest.

2) Collection of Secondary Information: Secondary information is the information that has been gathered in some other context and is already available. Primary information, on the other hand, represents information that is collected for the first time to meet the specific purpose on hand. Secondary information provides the base and the starting point for the market analysis.

General Sources of Secondary Information
i) Census of India,
ii) National sample survey reports,
iii) Plan reports,
iv) Statistical abstract of the Indian union,
v) India year book,
vi) Statistical year book,
vii) Economic survey of industries,
viii) Annual survey of industries,
ix) Annual reports of the development wing, Ministry of Commerce and Industry, etc.

3) Conduct of Market Survey: Secondary information, though useful, often does not provide a comprehensive basis for market and demand analysis. It needs to be supplemented with primary information gathered through a market survey, specific to the project being appraised.

The market survey may be census survey or a sample survey. In a census survey, the entire population is covered. The word ‘population’ is used here in a particular sense. It refers to the totality of all units under consideration in a specific study.

The market survey, in practice, is typically a sample survey. In such a survey a sample of population is contacted or observed and relevant information is gathered. On the basis of such information, inferences about the population may be drawn.

The information sought in a market survey may relate to one or more of the following:
i) Total demand and rate of growth of demand,
ii) Demand in different segments of the market,
iii) Income and price elasticities of demand,
iv) Motives for buying,
v) Purchasing plans and intentions,
vi) Satisfaction with existing products,
vii) Unsatisfied needs,
viii) Attitudes toward various products,
ix) Distributive trade practices and preferences,
x) Socio-economic characteristics of buyers.

4) Characterization of the Market: Based on the information gathered from secondary sources and through the market survey, the market for the product/ service may be described in terms of the following:

i) Effective Demand in the Past and Present: To gauge the effective demand in the past and present, the starting point typically is apparent consumption which is deemed as:

Production + Imports - Exports - Changes in stock level

The figure of apparent consumption has to be adjusted for consumption of the product by the producers and the effect of abnormal factors. The consumption series, after such adjustments, may be obtained for several years.

ii) Break-down of Demand: To get a deeper insight into the nature of demand, the aggregate (total) market demand may be broken-down into demand for different segments of the market. Market segments may be defined by:
a) Nature of product.
b) Consumer group, and
c) Geographical division.

iii) Price: Price statics must be gathered along with statistics pertaining to physical quantities. It may be helpful to distinguish the following types of prices.
a) Manufacturer’s price quoted as FOB (Free on Board) price or CIF (Cost, Insurance and Freight) price,
b) Landed price for imported goods,
c) Average wholesale price and
d) Average retail price.

iv) Methods of Distribution and Sales Promotion: The method of distribution may vary with the nature of the product. Capital goods, industrial raw materials or intermediates and consumer products tend to have different distribution channels. Likewise, methods used for sales promotion (advertising, discounts, gift schemes, etc.) may vary from product to product.

v) Consumers: Consumers may be characterized along two dimensions as follows:

Demographic and Sociological		Attitudinal
Age		Preferences
Sex		Intentions
Income		Habits
Profession		Attitudes
Residence		Responses
Social background

vi) Supply and Competition: It is necessary to know the existing sources of supply and whether they are foreign or domestic. For domestic sources of supply, information along the following lines may be gathered;
a) Location,
b) Present production capacity,
c) Planned expansion,
d) Capacity utilization level,
e) Bottlenecks in production and
f) Cost structure.

Competition from substitutes and near-substitutes should be specified because almost any product may be replaced by some other product as a result of relative changes in price, quality, availability, promotional effort and so on.

vii) Government policy: Thee role of the government in influencing the demand and market for a product may be significant. Governmental plans, policies, and legislations, which have a bearing on the market and demand of the product under examination, should be spell-out. These are reflected in:
a) Production targets in national plans,
b) Import and export trade controls,
c) Import duties,
d) Export incentives,
e) Excise duties,
f) Sales tax,
g) Industrial licensing,
h) Preferential purchases,
i) Credit controls, financial regulations and
j) Subsides/ penalties of various kinds.

5) Demand Forecasting: On the basis of analysis and interpretation of information gathered about various aspects of market and demand from primary and secondary sources, an attempt is made to forecast the future demand of the proposed product or service. There are various methods of demand forecasting available to the market analyst.

Methods of Demand Analysis

The various methods of forecasting demand may be grouped under the following categories:

1) Opinion Polling Method: In this method, the opinion of the buyers, sales force and experts could be gathered to determine the emerging trend in the market. The opinion polling methods of demand forecasting are of three kinds:
i) Consumers Survey Methods: The most direct method of forecasting demand in the short-run is survey method. Surveys are conducted to collect information about future purchase plans of the probable buyers of the product. Survey methods include:
a) Complete Enumeration Survey: Under the Complete Enumeration Survey, the firm has to go for a door to door survey for the forecast period by contacting all the households in the area.
b) Sample Survey and Test Marketing: Under this method some representative households are selected on random basis as samples and their opinion is taken as the generalized opinion. This method on random basis as samples and their opinion is taken as the generalized opinion. This method is based on the basic assumption that the sample truly represents the population. A variant of sample survey technique is test marketing. Product testing essentially involves placing the product with a number of users for a set period. Their reactions to the product are noted after a period of time and an estimate of likely demand is mad from the result.
c) End–use Method: In this method, the sale of the product under consideration is projecting on the basis of demand survey of the industries using this product and intermediate product. In other words, demand for the final product is the end use demand of the intermediate product used in the production of this final product.
ii) Sales Force Opinion Method: This is also known as Collective Opinion Method. In this method, instead of consumers, the opinion of the salesman is sought. It is sometimes referred as the “grass roots approach” as it is a bottom-up method that requires each sales person in the company to make an individual forecast for his or her particular sales territory. These individual forecasts are discussed and agreed with the sales manager. The composite of all forecasts then constitutes the sales forecast for the organization.
iii) Delphi Method: This method is also known as Expert opinion method of investigation. In this method instead of depending upon the opinions of buyers and salesmen, firms can obtain views of the specialists or experts in their respective fields. Opinions of different experts are sought and their identity is kept secret. These opinions are than exchanged among the various experts and their reactions are sought and analyzed. The process goes on until some sort of unanimity is arrived at among all the experts. This method is best suited in circumstances where intractable changes are occurring.

2) Statistical or Analytical Methods: Statistical methods are considered to be superior techniques of demand estimation because:
i) The element of subjectivity in this method is minimum,
ii) Method of estimation is scientific,
iii) Estimation is based on the theoretical relationship between the dependents and independents variables,
iv) Estimates are relatively more reliable and
v) Estimation involves smaller cost.

The statistical methods, which are frequently used, for making demand projections are:

i) Thread Projection Method: An old firm can use its data of past years regarding its sales in past years. These data are known as time series of sales. A trend line can be fitted by graphic method or by algebraic equations. Equations method is more appropriate. The trend can be estimated by using any one of the following methods.
a) Graphical Method: A trend line can be fitted through a series graphically. Old values of sales for different areas are plotted on a graph and a free hand curve is drawn passing through as many points as possible. The direction of this free hand curve shows the trend. The main draw back of this method is that it may show the trend but not measure it.
b) Least Square Method: The least square method is based on the assumption that the past rate of change of the variable under study will continue in the future. It is a mathematical procedure for fitting a line to a set of observed data points in such a manner that the sum of the squared difference between the calculated and observed value is minimized. This technique is used to find a trend line which best fit the available data. The trend is then used to project department variable in the future. This method is very popular because it is simple and in expensive.
c) Time Series Methods: Time series forecasting methods are based on analysis of historical data (time series; a set of observations measured at successive times or over successive periods). They make the assumption that past patterns in data can be used to forecast future data points.

Moving averages (simple moving average, weighed moving average); forecast is based on arithmetic average of a given number of past data points.

Components of Time series Demand
• Average: The mean of the observations over time.
• Trend: A gradual increase or decrease in the average over time.
• Seasonal Influence: Predictable short-term cycling behavior due to time of day, week, month, season, year, etc.
• Cyclical Movement: Unpredictable long-term cycling behavior due to business cycle or product/service life cycle.
• Random Error: Remaining variation that cannot be explained by the other four components.

d) Exponential Smoothing: It is one of the methods of trend projection methods. Exponential smoothing is distinguishable by the special way it weights ach past demand. The pattern of weights is exponential in form. Demand for the most recent period is weighted most heavily; the weights placed on successively older periods decrease exponentially. In other words , the weights decrease in magnitude the future back in time the data are weighted ; the decrease is non-linear (exponential).

ii) Regression method: This is a very common method of forecasting demand. Under this method a relationship is established between quantity demanded (dependent variable) and independent variables such as income, price of the good, prices of the related goods etc. Once the relationship is established, we drive regression equation assuming relationship between dependent and independent variables. Once the regression equation is derived the value of Y i.e. quantity demanded can be estimated for any given value of X.

iii) Simultaneous equations Methods of Forecasting: The econometric model forecasting involves estimating several simultaneous equations, which are, generally, behavioral equations, mathematical identities and market-clearing equations.

The econometric model technique is also known as simultaneous equations method and complete system approach to forecasting. This technique uses sophisticated mathematical and statistical tools.

iv) Barometric Method: It is also known as ‘leading indicators forecasting’. National bureau of Economic Research of U.S.A. has identified three types of indicators, coincidental indicators and Lagging indicators.

The analyst should establish relationship between the sales of the product and the economic indicators to project the correct sales and to measure to what extent these indicators affect the sales. To establish relationship is not easy task especially in case of new product where there is no past record.

6) Market Planning: The market plans usually have the following components:

i) Current Marketing Situation: This part of the marketing plan deals with the different dimensions of the current situation. It examines the market situation, competitive situation, distribution situation and the macro-environment. In other words, it paints a pen-picture of the present.

ii) Opportunity and Issue Analysis: In this section a SWOT (Strength, Weakness, Opportunity, Threat Analysis) is conducted for Alpha and the core issues before the product are identified.

iii) Objectives: Objectives have to be clear cut, specific and achievable.

iv) Marketing Strategy: The marketing strategy covers the following: target segment, positioning, product line, price, distribution, sales force, sales promotion and advertising.

v) Action Programme: The last component of market planning is the action programme. Action programmes operationalize the strategy.

 FINANCIAL ANALYSIS

The primary objective of any firm is to maximize profits; the financial aspects of a project idea must be studied carefully. Even if the project is marketable and technically feasible, it cannot be implemented if it is not financially viable in the medium to long-term. To assess the financial feasibility of a project idea, the project manager must examine the capital costs, operating costs and revenues of the proposed project.

Financial analysis is largely an effort to assess financial performance, i.e., how well or how poorly a firm performed with money entrusted to it. Financial analysis is considered a part of firm’s accountability. Exactly how financial reporting is done depends in part on the model selected. In addition, many types of financial reports can be generated but a considerable amount of attention is given to the quantitative financial statements, which are one type of report, but usually the major consists of financial, sources, budgeted estimates and expenditures.

Assumptions in Financial Analysis

Demand and price estimates are derived from the market feasibility study. Project costs and operating costs are derived from the technical feasibility study. The estimates need to be supplemented with:

1) Tax implications depending upon the prevailing tax laws, and
2) Financial costs enacting from the financing alternative are considered for the project.

That provides enough information for the calculation of the financial bottom-line of the project. The financial feasibility check involves a detailed financial analysis.

The financial analysis includes quite a few assumptions, workings and calculations. They are follows:

i) Projections: Projections are made for prices of products, the cost of various resources required for manufacturing goods and capacity utilization. Use of the thumb rule or actual data of some comparable projects are generally included in the estimates.
ii) Period of Estimation: The period of estimation id determined and the value of the project at the terminal period of estimation is forecast. The period of estimation should be justified by factors like the product life cycle, business cycle, ability to forecast, period of debt funds, etc.
iii) Financing: financing alternatives are considered and a tentative choice of financing mix is made together with assumptions regarding the cost of funds and repayment schedules.
iv) Basic workings: Basic workings are shown in different statements. Some of the schedules made for this purpose include:
• An interest and repayment schedule,
• The working capital schedule,
• The working capital loan, interest and repayment schedule,
• The depreciation schedule for income tax purposes,
• The depreciation schedule for the purpose of reporting under Companies Act, 1956 (if depreciation policy is different than income tax rules).

V) Financial Statements: Some financial statements are prepared in the project feasibility report. They include:
• Profit and Loss accounts of the company,
• Balance-Sheets of the Company,
• Cash flow statements for the proposed project.

vi) Financial Indicators: Financial indicators are calculated using data derived in various financial statements. Two basic financial parameters are used for judging the viability of the project:
• Debt-Service coverage ratio (DSCR): Debt- Service Coverage Ratio (DSCR) uses the same numerator as the interest cover ratio, but that is compared with the interest payment and principal sum repayment in a particular year. The formula is DSCR=PAT + Depreciation + Interest/Interest+ Principal Sum Repayment

Academically and according to many lading financial institutions and average DSCR of 1.5 is considered very well. This is also the safety indicator for lender of money. A project that generates enough funds during the period of loan taken for the project is considered good from the business prudence angle.

** Net Present Value Method: The net present value method is a modern method of evaluating investment proposals. This method takes into consideration the time value of money and attempts to calculate the return on investments by introducing the factor of time element. It recognized the fact that a rupee earned today is worth more than the same rupee earned tomorrow. The net present value of all inflows and outflows of each occurring during the entire life of the project is determined separately for each year by discounting these flows by the firm’s cost of capital or pre-determined rate.

Some firms also prefer to calculate:
• Payback Period: The payback period is defined as the number of years required for the proposal’s cumulative cash inflows to be equal to its cash outflows. In other words , the payback period is the length of time required to recover the initial cost of the project. The payback period therefore, can be looked upon as the length of time required for a proposal to ‘break even’ on its net investment.
• Interest Cover Ratio: The interest cover ratio indicates the safety and timely payment of interest to lenders of money. It is calculated with the help of the following formula: Interest cover ratio = PAT + Depreciation + interest/Interest

This shows how many times the operating cash flow before interest is earned against the interest liability. However, this is not a very important indicator of project viability.

ECNOMIC ANALYSIS

The terms ‘economic viability’ and ‘financial viability’ are not different for companies. However, from thee national angle and from the view-point of the economy as a whole, economic feasibility and financial feasibility are not considered to be the same. Cost and benefits to the nation due to the proposed project are considered in the economic feasibility test. Tax revenue, generation of employment, saving of foreign exchange and such other factors, differentiate economic viability from financial viability. The government and government agencies calculate the economic indicator of a project permitting the project or financing it.

Techniques in Economic Analysis

Techniques for checking economic viability are:

1) Economic Rate of Return (ERR): A new project of a firm may have an impact on the economy in many ways. Revenue generation for government, conservation or earnings of valuable foreign exchange and creation of employment are most important among them, especially in under-developed and developing economies. The cost and benefits of a project to the national economy can be better seen through the calculation of the economic rate of return.

A firm’s financial cash flow is modified in the ERR, with basically two elements:
i) Those inflows and outflows which only change hands within a single economy, and
ii) Those elements which address the grave concerns of the nation.

2) Social Rate of Return (SRR): The process of calculating the social rate of return is also known as social Cost Benefit Analysis (SCBA). In the economic analysis of a project, financial costs and benefits are adjusted with:
i) Those costs and benefits that only change hands, and
ii) Some factor for economic concern like the foreign exchange involved in the project.

The social rate of return is that rate which equates the present value of social benefits to the present value of social cost. The project is accepted if SRR is higher than an alternative project, which is forgone due to shortage of funds or if SRR is greater than the consumption rate of interest in the economy.

Environment Impact Analysis

ENVIRONMENTAL ANALYSIS

The performance of a project may not only be influenced by the financial factors stated earlier. Other external environmental factors, which may be economical, social or cultural. May have a positive as well. The larger projects may be critically evaluated by lending institutions by taking into consideration the following factors:

1) Employment potential.
2) Utilization of domestically available raw material and other facilities.
3) Development of an industrially backward area as per government policy.
4) Effect of the project on the environment, with particular emphasis on the pollution of water and air that will be caused by it.
5) The arrangements for effective disposal of effluent, as per government policy.
6) Energy conservation devices, etc., employed for the project.

Meaning and Definition of Environmental Impact Assessment (EIA)

Environmental Impact Assessment (EIA) and the Environmental Impact Statement (EIS) are said to be the instrument through which the environmental management tries to accomplish its objective. The basic premise behind the EIS/ EIA is that no one has any right to use the precious environmental resources resulting in greater loss than gain to society. From this, it follows that the aim of EIS is to seek ways by which the project can proceed without any irreparable losses to environment and minimum losses if any, so that the net effect will be a desirable gain.

Environmental Impact Assessment (EIA is defined as, “An activity designed to identify, predict, interpret and communicate information about the impact of an action on man’s health and well-being (including the well-being of ecosystems on which man’s survival depends). In turn, the action is defined to include any engineering project, legislative proposal, policy program, or operational procedure with environmental implications.”

An EIA, therefore, is a study of the probable changes in the various socio-economic and bio-physical attributes of the environment, which result from a proposed action.

On the other hand, Environmental Impact statement (EIS) is defined as: A report, based on studies, disclosing the likely or certain environmental consequences of a proposed action, this altering the decision-maker, the public and the government to environmental risks involved; the finding enable better informed decisions to be made, perhaps to reject or defer the proposed action or permit it subject to compliance with specific conditions.

The EIS is a document prepared by an expert agency on the environmental impact of a proposed action/project that significantly affects the quality of environment. The EIS is used mainly as a tool for decision- making. At times, the EIA and EIS are used interchangeably as synonyms. But both are difference between the two is that the EIA is carried-out by the expert agency while the EIS as a tool is given to the decision-makers in different formats. As a matter of fact, the EIS is the outcome of EIA.

Objectives of EIA

1) To identify and describe (in as quantified manner as possible) the Environmental Resources/ values (ER/Vs) or the environmental Attributes (EA) which will be affected by the proposed project, under existing or “with or without project” conditions.

2) To describe, measure and assess the environmental effect that the proposed project will have on the ER/Vs (again, in as quantified manner as possible), including positive effects which enhance ER/Vs as well as the negative effects which impair them. Direct or indirect and short-term or long-term effects are to be considered. This would also include the description of the specific ways by which the project plan or design will minimize the adverse effects and maximize positive effects.

3) To describe the alternatives to the proposed project which could accomplish the same result but with a different set of environmental effects. Energy generation by thermal, hydel and nuclear would explain the case in point. Further, alternative locations are also considered.

Guidelines on the Scope and Contents of EIA

The following are the accepted points to be covered in an EIA study / report:
1) A description of the project proposed action; a statement of its purpose and a description of all relevant technical details to give a complete understanding of the proposed action, including the kinds of materials, manpower/resources, etc., involved.
2) The relationship of the proposed action to the land-use plans, policies and controls in the affected area or the project- vicinity. It is necessary to gain a complete understanding of the affected environment.
3) The probable impacts of the proposed project on environment are a very important aspect to be considered in details. It is necessary to project the proposed action into the future and to determine the possible impacts on the environmental attributes. The changes are to be quantified wherever possible.
4) Alternatives to the proposed action, including those not within the existing authority/ agency.
5) Any probable adverse environmental effect that cannot be avoided and stating how each avoidable impact will be mitigated.
6) The relationship between local short-term uses of man’s environment and thee maintenance of and enhancement of long-term productivity.
7) Any irreversible and irretrievable commitments of resources (including natural, cultural, labor and materials).
8) An indication of what other interests and considerations of government policy or program are through to off-set the adverse effect identified.

Process of EIA

The EIA process makes sure that environmental issues are raised when a project or plan is first discussed and that all concerns are addressed as a project gains momentum through to implementation. Recommendations made by the EIA may necessitate thee re-design of some project components, require further studies, and suggest changes which alter the economic viability of the project or cause a delay in project implementation. To be of most benefit it is essential that an environmental assessment is carried out to determine significant impacts early in the project cycle so that recommendations can be built into the design and cost- benefit analysis without causing major delays or increased design costs. To be effective once implementation has commenced, the EIA should lead to a mechanism whereby adequate monitoring is undertaken to realize environmental management. An important output from the EIA process should be thee delineation of enabling mechanism for such effective management.

The way in which an EIA is carried-out is not rigid: it is a process comprising a series of steps. These steps are outlined below:
1) Screening,
2) Scoping,
3) Prediction and mitigation,
4) Management and monitoring,
5) Audit,

1) Screening: Screening is the process of deciding on whether an EIA is required. This may be determined by size (e.g., greater than a predetermined surface area of irrigated land that would be affected, more than a certain percentage or flow to be diverted or more than a certain capital expenditure).Alternatively it may be based on site-specific information. The output from the screening process is often a document called an Initial Environmental Examination or evaluation (IEE). The main conclusion will be a classification of the project according to its likely environmental sensitivity. This will determine whether an EIA is needed and if so to what detail.

2) Scoping: Scoping occurs early in the project cycle at the same time as outline planning and pre-feasibility studies. Scoping is the process of identifying the key environmental issues and is perhaps the most important step in an EIA. Scoping is important for two reasons:
i) So that problems can be pinpointed early allowing mitigating design changes to be made before expensive detailed work is carried out.
ii) To ensure that detailed prediction work is only carried-out for important issues.

It is not the purpose of an EIA to carry-out exhaustive studies on all environmental impacts for all projects. If key issues are identified and a full EIA considered necessary then the scoping should include terms of reference for these further studies.

3) Predictions and Mitigation: Once the scoping exercise is complete and the major impacts to be studied have been identified, prediction work can start. This stage forms the central part of an EIA. Several major options are likely to have been proposed either at the scoping stage or before and each option may require separate prediction studies. Realistic and affordable mitigating measures cannot be proposed without first estimating the scope of the impacts, which should be in monetary terms wherever possible. It then becomes important to quantify the impact of thee suggested improvements by further prediction work. Clearly, options need to be discarded as soon as their unsuitability can be proved or alternatives shown to be superior in environmental or economic terms, or both. It is also important to test the “without project” scenario.

An important outcome of this stage will be recommendations for mitigating measures. This would be contained in the Environmental Impact Statement. Clearly, the aim will be to introduce measures which minimize any identified adverse impacts and enhance positive impacts. Formal and informal communication links are needed to be established with tams carrying-out feasibility studies so that their work can take proposals into account.

4) Management and Monitoring: The part of the EIS covering monitoring and management is often referred to as the Environmental Action Plan or Environmental management plan. It not only sets-out the mitigation measures needed for environmental management, both in the short and long-term, but also the institutional requirements for implementation. The term ‘institutional’ is used here in its broadest context to encompass relationships:
i) Established by law between individuals and government,
ii) Between individuals and groups involved in economic transactions,
iii) Developed to articulate legal, financial and administrative links among public agencies,
iv) Motivated by socio-psychological stimuli among groups and individuals.

The purpose of monitoring is to compare predicted and actual impacts, particularly if the impacts are either very important or the scale of the impact cannot be very accurately predicted. The results of monitoring can be used to manage the environment, particularly to highlight problems early so that action can be taken. The range of parameters requiring monitoring may be broad or narrow and will be dictated by the ‘prediction and mitigation’ stag of the EIA. Typical areas of concern where monitoring is weak are: water quality, both inflow and outflow; stress in sensitive ecosystems; soil fertility; water related health hazards; equity of water distributions; groundwater levels.

5) Auditing: In order to capitalize on the experience and knowledge gained, the last stage of an EIA is to carry-out an Environmental Audit sometime after completion of the project or implementation of a program. It will therefore usually be done by a separate team of specialists to that working on the bulk of the EIA. The audit should include an analysis of the technical, procedural and decision- making aspects of the EIA.

Technical aspects include:
i) The adequacy of the base-line studies,
ii) The accuracy of predictions and the suitability of mitigation measures.

Procedural aspects include:
i) The efficiency of the procedure,
ii) The fairness of the public involvement measures, and
iii) The degree of coordination of roles and responsibilities.

Decision-making aspects include:
i) The utility of the process for decision–making, and
ii) The implications for developments.

Some Major Issue in the Preparation Of EIA

The following are the major issues reported to be encountered commonly while conducting and preparing the EIS/EIA. Some of the issues cannot be resolved. In the absence of better alternatives, the analyst has to accept the issues as they are:

1) Determining the Environmental Impact: this is the central theme in any EIS/EIA. It is a very complex process. At the out-set, a distinction has to be made between the environmental impact and the changes in environmental attributes. Our interest is on the “impacts” and not on the ‘changes’, which normally take place even without the project. The determination of environmental impacts involves:
i) Identification of impacts on environmental attributes or the ER/Vs,
ii) Measurement of impacts on attributes, and
iii) Aggregation of impacts on attributes to reflect the total impact on environment.

2) With and without the Project: The environmental impacts are measurement of attributes with and without the project or activity at a given point in time. But thee changes in the attributes take place over time without thee activity. Therefore, the impact must be measured in terms of “net” change in the attribute at a given point in time.

3) Identifying the Impacts: The number of attributes to be practically infinite because any characteristic of the environment is considered to be attribute. Therefore, they have to be reduced to manageable numbers. Thus, duplicative, redundant, difficult to measure and obscure attributes may be eliminated in favor of those that are more tractable. This implies that some attributes, which are difficult to measure or conceptualize, may still remain to be examined. In this case, bias and subjectivity are likely to be crept in.

4) Characteristics of the Base: Conditions to the Activity: The nature of the impact is determined by the conditions of the environment existing before the project. The assessment of the characteristics of the bas is a critical factor.

5) Role of Attributes: Though thee impacts are considered to be the effects on the definite discrete attributes of the environment, the actual impacts are not correspondingly well categorized. Nature does not necessary respect man’s discrete categories. Rather, the actual impact may be the effect of varying severity on a variety of interrelated attributes. The issue is one of identifying and assessing the cause condition effect in order to work-out the remedial measures.

6) Measurement of Impact: Ideally, all impacts must be translatable into common units. However, this is not possible because of the difficulty in defining impacts in common units (e.g., on income and on water quality). In addition, the quantification of some impacts may be beyond the state of the art.

7) Aggregation Problem: After measuring the project impacts on various individual attributes or ER/Vs, one encounters the problem of how to aggregate all impacts (quantitative), thus assessed to arrive at a single composite measure to represent the “total activity impact’. This would involve expressing the various impact measures in common units, which is very difficult. Some use a weighting procedure to accomplish this, which is again subjective. There is another associated problem of summing-up and comparing with the impact of an alternative activity.

8) Secondary Impacts; Secondary or indirect impacts on environment should also be considered particularly in relation to the infrastructure investments that stimulate or induce secondary effects in the form of associated investments and changed patterns of social and economic activity. Such induced growth brings significant changes in the natural conditions. Similarly, there can be significant secondary impacts in the bio-physical environment.

9) Cumulative Impact: Here, accumulation refers to thee similar activities spread over in an environmental setting hotels, beach, resorts, surface or underground mines, industrial estates, etc. A single individual activity may produce a negligible effect on environment. However, a series of similar activities may produce significant cumulative effects. Therefore, it is suggested to prepare an Environmental Impact Assessment (EIA) on broad programs rather than on a series of component actions (e.g., industrial estates, mining sector, tourism industry, etc.). Or, alternatively, one can prepare an EIA for a particular geographical area where a series of similar activities are located (e.g., mining areas, coastal line for beach resorts, etc.).

10) Reporting Finding: The result should be displayed in such a way that it makes easy and clear to comprehend the total impacts of an activity from a brief review. It is suggested to display the impacts on a summary sheet in a matrix from.

Impact Assessment Methodologies

The impact identification and assessment can be made through several ways. There are six different methodologies in the literature based on the way the impacts are identified and assessed.

1) Ad Hoc: These methodologies provide a minimum guidance for impact for impact assessment. They merely suggest broad areas of possible impacts (e.g., impacts on lakes, forests, etc.), rather than defining specific parameters to be investigated. This is given exogenously to the analyst.

2) Overlays: These methodologies depend upon a set of maps on the environmental characteristics (Physical, social, ecological and aesthetic) of the proposed project’s vicinity. These maps are overlaid to produce a composite characterization of the proposed project’s vicinity. These maps are overlaid to produce a composite characterization of the regional environment. Impacts are then identified by noting thee impacted environmental attributes within the project boundaries.

3) Checklists: The methodologies present a specific list of environmental attributes to be investigated for possible impacts. They need not necessarily attempt to establish the cause-effect links to project activities. They may or may not include guidelines about how attribute data are to measured and interpreted.

4) Matrices: These methodologies incorporate a list of project activities with a checklist of potentially impacted environmental attributes. Then the two lists are related in a matrix form, which identifies the cause-effect relationship between specific activities and impacts. The matrix methodologies may either specify which actions affect, which attributes, or may simply list the range of project activities and environmental attributes in an open matrix to be completed by the analyst.

5) Networks: These methodologies work from a list of project activities to establish cause- condition-effect relationship. It is generally felt that a series of impacts may be triggered by a project action. They define a set of possible and allow the user to identify impacts by selecting and tracing- networks out the appropriate project actions.

6) Combination Computer-Aided: These methodologies use a combination of matrices, networks, analytical models and a computer-aided systematic approach. Since, this is a combination of difficult methodologies, it is a multiple-objective approach to:
i) Identify activities associated with the governmental policies and programs,
ii) Identify potential environmental impacts at different levels,
iii) Provide guidance for abatement and mitigation techniques,
iv) Provide, analytical models to establish cause-effect relationships and to quantitatively determine potential environmental impacts and
v) Provide a methodology and a procedure to utilize this comprehensive information in decision-making.

Limitations of EIA

Despite the success of EIA as a policy approach, in practice there have been two important shortcomings in its use as a planning tool in the Asia-Pacific region:
1) Severe problems have often arisen with the objectivity of EIA reports,
2) Preparatory work by regulatory authorities, primarily prior agreements on the scope or terms of reference for EIAs, has often missed opportunities for directing sound analysis towards the major environmental problems or opportunities associated with a given project.

Though RIAs are meant to improve project design and decision-making, this is often overlooked in practice. They too frequently are seen only as a stumbling block to investment. Furthermore, it has become common for oversight of the EIA process to be vested in the same line department responsible for promoting development of that sector. This often places environmental staff at odds with others in the department whose principal objective is to encourage investment in, e.g., mining, agriculture, or transportation. Project proponents-conduct EIAs, and it is easy to see that such groups may be reluctant to severely criticize project design if thee proponent is paying their bills and government oversight is weak.

The second major shortcoming in the application of EIA policies in the Asia-pacific region relates to their scope of analysis. The most common methods employed are based on a checklist approach wherein a pre-set range of potentially negative environmental impacts-sometimes refined according to the sector involved-is reviewed and the likelihood of adverse outcomes assessed .EIAs rarely attempt to fully quantify the environmental effects of project-induced change (e.g., the numbers of people with specific types of adverse health conditions resulting from air pollution or the reductions in crop yields due to erosion).They almost never describe these impacts in monetary terms.