Problems of economics and cost control in charcoal productio

Problems of economics and cost control in charcoal production

14.1. Economic analysis and cost control

14.2. The methods of economic project analysis 14.3. Cost control in established enterprises

Charcoal producers fall into two groups. The first are subsistence producers who only market charcoal to acquire cash needed to buy goods or pay taxes, etc. Economics and cost control are of little interest to this producer. He needs the cash and selling some of his charcoal is a way to acquire it.

The second group produce and sell charcoal as a business in which the circulation and growth of the capital they have invested in the business is their main concern. Economics and cost control are important for them.

Although the first group is personally not much concerned with economics, government authorities concerned with improving the charcoal industry must study the economics of subsistence charcoal production. An economic analysis must be the basis of any assistance programme to enable these producers to make more and better charcoal. In many countries subsistence produced charcoal is a major part of total charcoal production. Economic analysis is important to define the future of this sector of the industry, reveal its positive and negative features, and its long term viability.

14.1. Economic analysis and cost control

It is difficult to draw a sharp line to divide these two activities. Generally, economic analysis is of direct use in the planning phase of the development of the enterprise to project the cost of constructing and getting it into production. The objective is to demonstrate the economic feasibility of the proposal, then mobilise the investment funds required and lay down how they will be managed and repaid. Cost control, on the other hand, is concerned more with an enterprise which is up and running. It is the management tool which enables the enterprise to remain economically viable.

Production cost control is built around and forms part of the operations of a producing enterprise. It can be carried out with a background knowledge of accountancy or even just bookkeeping. The main requirement is to always use production data and statistics which are measured in the plant itself. On the other hand, economic analysis of projects requires a deeper knowledge of economics and a technical knowledge of the processes which will be used. A large project calls for a team of technicians, some more qualified in economics, others in technology and engineering.

14.2. The methods of economic project analysis

The process of economic analysis of projects is often called a feasibility study but, strictly speaking, this is only one step along the road to setting up a complete project. For large and

medium size charcoal projects (3, 22) a team of professionals is required who must cover the fields of economics, forestry, building and civil engineering, technology of the process of production, finance and marketing. The complete study for the charcoal industry has the following aims:

1. To provide that a market or end use of adequate size exists for the charcoal and any by-products and to quantify it in detail.

2. To prove that suitable and adequate wood raw material exists and can be harvested economically for the expected life of the plant or to prove that a suitable raw material resource can be economically generated by forest plantations.

3. To choose the production technology to be used and to design the entire production system from wood harvesting through to packaging and marketing of the finished charcoal.

4. To prepare complete financial projections showing the method of financing, detailed expenditure budgets for land plant, site preparation, infrastructure, construction, start-up and training costs. The financial projections must be carried forward approximately twenty years to a point where debts incurred in construction of the plant have been liquidated and the enterprise is functioning as an established business. For the manufacturing enterprise about twelve to fifteen years projection may be sufficient but, if the enterprise is to establish plantations for wood supply, then it is necessary to extend the financial projection till the plantation has gone through a complete rotation, involving replanting which could be twenty years or more. The financial projections will be in the form of a financial model showing profit and loss, sources and expenditure of funds, taxation and cash flow.

5. To prepare documentation for negotiations with government agencies on questions of forest resources, plant site, power and water supplies and other tax concessions, infrastructural needs, control of pollution, etc.

6. Prepare documentation and negotiate with financing agencies, both national and international, to secure financing for the project.

The list of requirements is formidable and costly and time-consuming to accomplish. Fortunately, more or less routine procedural sequences for accomplishing this work have been worked out by international finance authorities and the process is divided into a number of steps which are designed to test the feasibility of the project before committing funds for a complete technical and financial study. Normally the complete project study is preceded by, at least two steps, called a pre-feasibility and a feasibility study. If the results of these studies are positive, then it is worth committing funds for a full project planning exercise leading to the financing and construction of the enterprise.

The value of the complete study depends, in the long run, on the quality of the basic data on which the study rests. A study based on false premises is useless. Only experience in the field can

indicate whether the data base is reasonable or not. As a guide to the effect …… 此处隐藏：11944字，全部文档内容请下载后查看。喜欢就下载吧 ……