- FLOOD CONTROL AND COST-BENEFIT ANALYSIS
The project studied in this chapter has considerable significance in terms of the problems
discussed in Chapters 1-8, especially in the following respects. Firstly, the benefits of a
flood-control project during a particular year depend on whether or not a flood occurs in
that year, and this cannot be known in advance. Hence, in evaluating such a project, the
problems of risk and uncertainty, considered in Chapter 8, are involved in an essential
way. Our discussion in chapter 8, are involved in an essential way. Our discussion in
Chapter 8 reached the conclusion that under conditions of risk and uncertainty the
expected utility criterion provides the most generally acceptable method of project
evaluation. We shall attempt to use this approach in the present case, subject to the usual
limitation that utility has to be measured in monetary units, appropriate price data being
used for this purpose. In a sense, the whole of the present chapter can thus be regarded as
an extended appendix to Chapter 8.
Secondly, our objective is to develop a method for evaluating the benefits not only of the
project as it now stands but also of possible variants of it. The question of the potential
benefits of ‘complete protection’ against possible floods compared to the partial
protection that is currently provided by the D.V.C. project is relevant here. The D.V.C.
project as originally conceived was supposed to build at least six dams and provide
enough flood storage capacity to prevent any flood damage in the area. Subsequently it
was decided to provide only partial flood protection and the number of dams was reduced
to four. It has often been suggested that the storage capacity should actually be increased
so that the original purpose of the project may be fulfilled. An evaluation of the social
benefit of complete protection in the area is thus a matter of some practical importance
and relates clearly to the problem of evaluating ‘given’ as opposed to ‘variable scale’
projects discussed in Chapter 5. We shall attempt to develop a conceptual framework
which enables us to make such an evaluation.
Thirdly, we shall confine ourselves to the evaluation of benefits only. We make no
attempt at a systematic analysis of costs. In particular, the existing allocation of storage
capacity costs as between different objectives of the system, e.g. irrigation, power, flood
control, etc., is taken as given. Since a multiple-purpose rive-valley scheme such as this
one can properly be regarded as an indivisible unit, such an allocation is necessarily
arbitrary in some degree.
Finally, our main concern throughout is to illustrate principles rather than to deal
exhaustively with all the problems that actually arise.
- THE ‘OFFICIAL’ APPROACH TO BENEFIT ESTIMATION
While there has been a great deal of study of flood-control problems in India from
the engineering and hydrological points of view, on the economic aspects of flood
control little systematic research appears to have been done.