Cost of project

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The cost of the project can be broadly classified into the following

–          Land and site development

–          Building

–          Plant and machinery

–          Transportations erections and commissioning

–          Miscellaneous assets

–          Preliminary and pre- operative expenses

–          Contingency expenses

–          Working capital margin

Though the cost of machinery often constitutes a major element in the total project cost, its estimation need not pose problems since this can be based on competitive quotations. On the other hand, cost of items such as land, site development expenses, ancillary facilities like power and water connections, intangibles like preliminary expenses and preoperative expenses, necessitates a careful inquiry and assessment. A realistic assessment of project cost with built in cushions (a reasonable contingency margin) for absorbing normal cost escalations could take care of the consequences of delay and cost overrun. Inflation factors are also considered.

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