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VALUATION of Plant and Machines
By Sushil Jain, M.Tech.,FIV, MICA, MIEEE - Delhi

Valuation of Plant and Machinery is a very interesting area and calls for a lot serious work, expertise and experience (especially industrial) on the part of Valuer.

Amount of work involved depends on the size of the plant. Considerable preparation is necessary before the physical inspection can be undertaken. Detailed checklist should be used to take down the necessary information from the documents and during inspection.

No two plants or machines are the same. These may be different in designs, standards followed, technologies, sizes, capacities, makes, applications, maintenance requirements, installations etc.

Then there are old and new plants and machinery, sick industrial units, units that are not in operation for many years etc. One may come across Plant and Machines which is indigenous or Imported or a mix of some indigenous and Imported. Still others which have been fabricated on site.

Quality of initial installation, unit layout, environment, level of operators, type of maintenance, availability of spare parts, life of plant and machines economic viability etc. also play a major role in valuation.

For the Valuer, substantial help comes in from the owner of the Plant and Machinery himself. The documents and information available with the accounts department: list of plant and machines, purchase bills, balance sheets, year of purchase, chartered engineers certificates, addresses of manufacturers for taking the new machine prices if necessary, life of machines indicated by manufacturers, installation costs, duties paid, exchange rates, technical specifications of plant and machinery, etc. can give lots of useful information for the valuation work.

Further information comes from the inspection of plant and machines i.e. information on the name plates, environment, maintenance schedules, level of operators, in-operation or idle, type of installation, physical existence, technology etc. Representatives/staff of owner helps around in inspecting and collecting the necessary information.

The valuer has to analyze the information collected from the unit/documents and during inspection, in detail, to workout fair estimates. The information and factors that need to be considered during the analysis and workout are listed below:

Purpose of Valuation
Description of Plant and Machinery
Model No.
Country of Origin
Purchased New or Old
Cost of Plant or Machinery
Year of Manufacture
Year of purchase or fabrication
Year of installation
Cost of Similar New Plant and Machinery
Cost Index in the year of purchase
Cost Index on the date of valuation
No. of years used.
Import duties at the time of purchase
Import duties on the date of valuation
Exchange rates at the time of purchase
Exchange rates on the date of valuation
Life and accurate estimate of residual value of plant and machines to decide on the depreciation rate.

Estimate of Factors to be applied for Design, Technology, Environment, Maintenance, level of operators, Idle Plant and Machinery etc. Economic viability factor, which depends on Government Policies, Custom Duties, Excise, International prices of raw materials and end products may be applied to work out overall commercial value of the Plant and Machinery.

Report should contain the basis of valuation i.e. the information collected from the owner/documents and during inspection, description of the plant and machines, cost, depreciation, cost indexes and other factors considered. A certificate is issued mentioning the total value of Plant of Machinery as per the opinion of the Valuer.

Conclusion:
A Valuer for Plant and Machinery, therefore, has to keep himself updated on new technologies, manufacturers and sources of old and new plant and machines in India and abroad, import regulations & duties, standards, installations, maintenance, economics, life of plant and machines etc. Major part of Plant and Machinery consists of Mechanical and Electrical Equipment. Knowledge of automation, controls, electronics is also important.

The information and expertise builds up slowly with each valuation and other printed sources. Young engineers entering into the profession are advised to work under Senior Valuers to know the intricacies and gain experience before going it alone.