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523
COST-BENEFIT ANALYSIS OF RURAL ROADS INCORPORATING SOCIAL BENEFITS
DR. L.R. KADIYALI* DR. N.B. LAL* & RAKESH SATI*
SYNOPSIS
In the agricultural surplus approach for the Economic Analysis of rural road projects, various factors affecting the EIRR value, like
the Analysis period, maintenance strategy adopted and different levels of investment per unit population have been discussed in detail. The
need for quantifying social benefits in economic terms and incorporating them in addition to the conventionally used economic benefits has
been brought out. The social benefits accrued from an all-weather road access as evaluated through extensive field surveys (carried out
at both village and household levels) like increase in income of low-income group households; increased level of literacy and improved
health standards have been quantified in economic terms. It has been concluded that while computing EIRR for a rural road project, social
benefits should not be ignored, as these can be as significant as the conventionally used economic benefits. Also, the aspect of considering
the population served by a rural road project must be given the due importance while computing the EIRR.
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Even then, the benefits from VOC and VOT are quantifiable
and must be included in the analysis. But there are other more
significant benefits which a Rural Road brings in and these
need to be evaluated. Basically, these benefits pertain to the
increase in future economic activity, brought about by the
road project. This increase may be attributed to the road
investments alone or road investments plus investments on
agriculture, forestry, irrigation, etc.
2.3. Producer Surplus Approach
This approach, pioneered by the World Bank4,5 nearly
three decades ago, is as under:
(a) In the absence of any road, the isolated village
community may be producing just the quantity
needed for its consumption (subsistence farming).
The transport costs are so high that the farmer does
not find it remunerative enough to take it to the market
and sell it at the prevailing market price.
(b) If a road is built, it may result in the following
consequences:
the transport costs come down and the farmgate price (the price received by the farmer for
his product at the farm gate) is high enough to
induce him to grow more of the commodity and
sell it, as seen from the shift in production from
Q1 to Q2 as the farm-gate price increases from P1
to P2 in the Marginal Cost Curve MC1 (Fig. 1).
2.
3.
1
2
3
50%
80%
100%
Scenario II
The full benefits take four years to be realized as under :
Year
Year
Year
Year
1
2
3
4
25%
50%
75%
100%
Scenario III
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1
2
3
4
5
6
7
2.5%
5%
10%
25%
40%
65%
100%
134
considered.
3.
4.
5.
6.
Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
2.
50%
80%
100%
Maintenance
Cost (Rs/km)
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2,00,000
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2,00,000
5,000
10,000
15,000
20,000
7.
8.
135
* Upgradation Project
During the field surveys, the field data collected was
both at the village level and also at the household level in
selected households of each village surveyed. In order to
evaluate the socio-economic impact of an all-weather road
connection, data was collected from both connected and
unconnected villages in the vicinity under similar conditions.
All the 8 selected rural roads are black-topped, and were
constructed about 3 years back.
136
4.
137
138
5.1.
For each of the 8 selected rural roads, a comparison
of EIRR values with and without the consideration of social
benefits is given at Table 2. Two plots of EIRR against initial
investment per unit population are shown in Fig 11; one
considering only the economic benefits and the other
considering the social benefits in addition to the economic
benefits.
5.2. In general, the trends of both the plots in Fig. 11
show that lower the initial investment per unit population for a
rural road project, higher is the EIRR value and also higher is
139
140
9.
REFERENCES
1.
Planning Commission,
planningcommission.nic.in
GOI
Website,
http://
2.
3.
4.
5.
6.
7.
8.
141
Annex-1
142