Cost benefit analysis of road projects
... There is a great need to improve the basic road; railways and airports network in India. Given the magnitude of development efforts required, financial constraints on funds that can be allocated for such projects, the inordinate delays that increase the project cost many folds it is necessary to have an evaluation methodology for analysis of infrastructure development project. ... Present paper takes a look at the way project assessment is done in case of road projects, who are the stakeholders in any particular project, are there any limitations to the current cost benefit analysis methodology and makes an attempt to come up with a framework for evaluation of road development projects. ... NEED FOR COST BENEFIT ANALYSIS With a GDP growth rate hovering around 6% for last few years India aims to be among the developed nations of the World. ... An attempt is been made to improve the road infrastructure in India with projects like Golden Quadrilateral that aims to build world-class expressways connecting the four metros Bombay, Calcutta, Chennai and Delhi. At the same time projects are one at state level connecting cities with high traffic densities like Bombay Pune expressway and Bangalore Mysore Infrastructure corridor. At the same time there is a limit on allocation of funds for projects. Given this constraints public sector is under pressure to establish priorities amongst the various projects it intends to undertake. ... Many of the projects in a developing country like India are funded by World Bank or by international organizations. There is a demand from financers of the projects for an appropriate valuation of the projects. Projects need to meet environmental guidelines laid down by the government of India. This is one aspect why cost benefit analysis is necessary for a project. Another aspect of the need for cost benefit analysis is due to the huge amount of costs involved and the effect a road project can have on the society. ... There are impacts that are not only related to the improved transportation, but a well thought out road project can change the economy of that part. Before laying out a road project one needs to understand what are the benefits that can be derived from such an effort, what will be the impact on social fiber of the community, impact on ecology and environment? ... To do full justice for all the concerns there is a need for a proper cost benefit analysis of a project in the planning phase itself. ... In the proceeding sections of this paper one takes a look at the possible cost benefits of Bangalore Mysore Infrastructure Corridor (BMIC), what are the benefits in a road project of the size of BMIC, costs involved, the factors which are not considered by government agencies in the planning phase and frameworks provided by World Bank and IRF for road project appraisal. ELEMENTS OF COSTS AND BENEFITS INVOLVED In this section, we take a look at the various types of costs and benefits that are commonly taken into account when evaluating the feasibility of any road infrastructure project. ... The various benefits that occur in a road development project can be grouped into direct and indirect benefits. ... On the other hand, indirect benefits accrue in the long run and may not be solely the consequence of the road development but may be the result of many other factors. The various benefits are follows: q Direct Benefits: These include the following: Ø Lower Operating Costs: This is an important benefit in existing roads that have been upgraded and developed. Since the new road is of a much better quality than the old one, it offers lesser problems and thus improves the performance of the vehicle. ... Ø Reduced Traveling Time: This is probably the most obvious benefit of any transport development project. In fact, it is the very reason why many road development projects are taken up in the first place. This is a significant benefit to be considered. ... of regular passengers on that road, the total savings of man-hours becomes quite significant. Ø Lesser Number of casualties: This again becomes an important benefit to consider when a road is built in place of an existing road that has been deemed unsafe or when it passes through dangerous terrain. For example, an important benefit of the Mumbai-Pune expressway is the safety it offered to passengers especially while traveling through the Western Ghats. ... While it is not always possible to put a monetary value to this benefit, the very fact that it saves human life make it priceless. q Indirect Benefits: In addition to the direct benefits stated above, any road development project, as like any other infrastructure project, has indirect benefits that occur not only to its users but also to people in the surrounding areas. ... The three main indirect benefits are: Ø Generation of Employment: Road development projects are typically complex projects involving a lot of manpower. Thus, they provide employment to a lot of people who are involved in the building of the road or highway. ... For them, the road development project is a source of employment and helps to improve their standard of living. ... Developing a road, or any other means of transport, to connect to a previously less-connected area increases the volume of passenger and goods flow to and from that area.