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Section-A, Group 9

Nirmal Rayons Limited

The consultant has used regression analysis and chain ratio method. While methods are appropriate to forecast the

demand, the assumptions and variables used are incorrect at certain places.

Evaluation of consultant’s estimates Decision

In Exhibit A4, production is greater than installed capacity. The

cellophane demand estimates is based on production figures andhence are not reliable.

The use of time variable by

consultant is incorrect, though thefigures might be correct.

The regression technique used for estimating cigarette production

uses time (year number) as independent variable. Though the R-

Squared value is very high, there is no cause-effect relationship

underlying this value. Hence regression based on year number as

independent variable is not correct.

In Exhibit A6, unorganized sector growth numbers have been

calculated using a growth rate of 6% when actually it is 5%. Hence

the cellophane demand numbers projected by consultant are

incorrect.

 Numbers given under the

unorganized sector are incorrect.

In Exhibit A7, growth rate of 10% has been used for total

  pharmaceutical market in terms of volumes of tablets. The

cellophane requirement is based on these numbers. But 10% growth

has been given for industry for sales. Assumption of value growth

 being equal to volume growth might be incorrect and hence the

number estimates are unreliable.

The assumption made is

incorrect. Hence we will use

 planning commission figures for 

arriving at our estimates.

There are significant differences in the projected numbers for 

fireworks, adhesive tapes and tear tapes ribbon. Moreover the

analysis used for arriving at these numbers has not been described in

the consultant’s report.

In absence of any reliable

measures described in

consultant’s reports, we will use

 planning commission’s figures

For the year 1973-74 

Planning Commission

Numbers Consultant's numbers Our estimates

Textiles 2200 2300 2300

Ciagrettes 2020 1972 2020

Confectionery 775 700 775

Pharmaceutical 655 222 655

Fireworks 98 206 98Biscuits 466 124 466

Chewing Tobacco 115 145 115

Tea and Coffee 335 93 335

Tape 800 202 800

Miscellaneous 2220 836 2220

Total 9684 6800 9784

Advice to MD:

• Our estimate for demand in the year 1973-74 is 9784. Based on the growth figures given for different

users of cellophane, this number is not likely to increase significantly by the year 1977.

• Current capacity of Nirmal Rayons together with other market player is around 9000. With letter of intent being offered to other players, some capacity addition in the industry with entry of some other 

 players will take away some of the market share of these two players.

• Hence based on demand projections and current capacity figures, it is recommended that Nirmal

Rayons should not install additional capacity.