Factors Influence Site Selection For Greenfield And Brownfield Projects
The ultimate effectiveness and successful ongoing activities of industrial plants depend on the site selection procedure. However, sometimes, the selection of sites for Greenfield and Brownfield Projects in India can be a daunting task. A faulty selection of industrial sites can lead to unbearable losses for the companies. Also, it will be difficult to make any alteration in the setup once it is invested and constructed. Therefore, foreign companies looking for lucrative investments opportunities must consider a list of pivotal factors crucial for selecting the Greenfield and Brownfield Projects in India. In India, various management consulting firms provide assistance to foreign ventures by developing a 360-degree strategy for a specific site.
Overview of FDI in Greenfield and Brownfield Projects In India
In the context of FDI, there are two types of investment strategies – Greenfield and Brownfield investments. Foreign companies opting to invest in Greenfield projects implies building their own brand new facilities or industrial set up from ground level. Whereas a company that purchases or makes a lease agreement with an existing facility is called Brownfield investments.
The Government of India has allowed a 100% allowance on foreign direct investment in Greenfield projects. Different sectors like health care, aviation, automobile, steel industries, etc., are allowed 100% FDI on Greenfield projects under the automatic route. On the other hand, the Government has allowed 74% FDI on Brownfield automobile projects.
7 Factors That Impact Site Selection For Greenfield And Brownfield Project
A Greenfield investment is a lucrative option for foreign companies who want to expand Indian market shares, acquire new assets and resources and increase profits. This type of investment allows entry and expansion in a new market with complete optimum control over all of its operations. Companies facing trade hindrances or looking for in-depth regional or country-specific marketing skills opt for Greenfield investments.
Seven common factors influence the selection of Greenfield and Brownfield projects. For companies to fund these projects, they must consider before investing to avoid unnecessary risks.
- Accessibility of Basic Infrastructure
The proper industrial project work must acquire basic infrastructural benefits. Every industrial project consumes huge amounts of power. Hence continuous and sufficient supply of power is essential throughout the year. Similarly, like power supply, accessibility of water is essential for process industries like paper, chemical, etc. The shortage of these basic elements will lead to the biggest survival problem for the industry. In addition to this, another common infrastructural factor to keep in mind is the waste disposal facility.
Various environmental elements have a strong impact on the location of a construction site. The setup plan for the projects mostly depends on the land’s topography. There are common elements to avoid while laying the foundation of the construction site.
- Extremely porous soil can cause a barrier in the formation of the foundation.
- Avoiding rigid slope is necessary as it might lead to runoffs and water corrosion.
- Allocation of Labor & Wages
The allocation and employment of the right number of skilled/semi-skilled labor are pivotal. The process of importing labor is very expensive. Hence, the foreign firms will require the guidance of business consulting firms in India to identify the best set of labor. Also, the cost of living, wage pattern, and other amenities provided to the laborers are to be considered.
- Appropriate Technical Process
The process of choosing the types of machinery and other technological ingredients is a tough job. Understanding the best set of pieces of machinery that can offer maximum utility will require an expert team. The quantifiable research will help to derive information like
- Source of the machines.
- The present condition of technology to check whether it is obsolete.
- Presence of service centers for repair and maintenance in close proximity.
- History checks of the suppliers, etc.
All these factors determine the purchasing costs and the procurement costs of the machinery and any specific technical parts.
- Uninterrupted Supply Of Raw Materials
It is the work of the organization to identify selective qualities of raw materials. Also, the supply of raw materials depends on countless factors like keeping the right records like Bill of Quantities (BOQ) and Bill of Materials (BOM), locating quality vendors for raw materials, etc. In addition to this, the amount spent on the transportation of import of raw materials affects the business’s agenda. The procurement cost of raw materials will also have an impact on the budgetary level of the firm.
One of the fundamental factors that greatly impact the operation’s uninterrupted functioning is meeting regulatory compliances and maintaining proper documents. Documents like industrial license, SSI (Small Scale Industry) registration (if required), license to use the land for industrial purposes, and permission to commence the projects involving any hazardous compounds detrimental to the environment will be necessary to keep up-to-date. Misrepresentation or faulty submission of any document will negatively affect the functioning of the industrial project work.
An expert team of engineers will obtain a general idea of all the blueprints of the project and will carry out their functions within the budgetary estimation. The foundation of a successful industrial project is to scrutinize environmental aspects, power consumption needs, machinery, and technological requirements and implementation according to the plan. To carry out these operations, engineering competence is required at every level of the process.
Disadvantages of Selecting a Wrong Site
The above-mentioned factors are considered fundamentals for choosing the appropriate site based on requirements. However, some of the common mishaps that a company will face for selecting the wrong site locations are
- Choosing an inappropriate site with inadequately skilled labor will lead to extreme project delays.
- Selecting a site without considering different attributes like topography, geotechnical and archaeological conditions will tamper with the site’s feasibility.
- Not opting for professional guidance to analyze key site parameters like logistics, human resources, engineering, and legal issues will steer wastage of money and time.
How do Consultancy Firms provide assistance in Site Selection?
Global Business Consulting Firms like Tecnova offer outstanding assistance by utilizing their expert knowledge in performing extensive analysis and understanding of:
- Allocation of manpower
- Availability of raw materials
- Supply chain management
- Documentation
- Regulatory framework and other factors.
Reference
Site Selection Criteria and Development in Green Buildings
Major factors to consider while starting with the “Greenfield Project
Greenfield Project Requirements for new business?
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