UZAIR KAMAL Mohsin Murad MAJID KHAN

Major Power Project Of The Country 92 miles downstream the confluence of Kabul and Indus Rivers 260 ft high structure and would create a reservoir 6.1 million acres feet (MAF) of usable storage About 11,200 GWh, generated by hydro power plant of 2400 MW capacity Estimated Cost Is Around US $5.153 billion

A cost-benefit analysis (CBA) is an economic evaluation technique. It can be used to appraise whether a dam project is worth undertaking Define a referent group. Select a portfolio of alternative projects. Identify potential (physical) impacts of the project. Predict quantitative impacts over the life of the project. Monetize all impacts. Discount for time to find present values. Sum: Add up benefits and costs. Perform sensitivity analysis. Recommend the alternative with the largest net social welfare value.

Group of individuals whose welfare will be accounted for when assessing the cost and benefit of a project. Not always the people affected by the project. But in Pakistan these projects are undertaken from a national perspective considering the people of all the provinces. Hence the referent group will be the entire population.

Potential Impacts of a Dam Project Impacts Negative ImpactsPositive Impacts Physical costs Resettlement cost Risk of dam failure Land acquisition Externalities Hydroelectric power Irrigation water Reduction of flood losses and seawater intrusion damage Municipal and industrial water supply Net benefits to/from fishery & recreational facilities River navigation Physical impacts are composed of construction, operation and maintenance, mitigation and decommissioning costs.

Negative ImpactsMeasurement Physical costs (Construction, O&M, Mitigation and Decommissioning Costs) Units of employed inputs Resettlement costPhysical property (e.g. # of houses) Risk of dam failurePhysical property (e.g. # of houses) Land acquisition - Deforestation Area unit (e.g. Rai, hectare, acre) - Depends on project site Externalities - Greenhouse gas - Social and cultural loss - Waterlogging and salinity - Volume of greenhouse gas emission - Depends on project site - Decrease in farm productivity Positive ImpactsMeasurement Flood and seawater intrusion controlLevel of flood, days of flood Irrigated waterCubic metre of water (Expansion of irrigation area and multiple crop cultivation) ElectricityKWH/year Net fishery and recreationDay visit - day loss / tonnes of fish Water supplyCubic metre of water River navigationTransportation time saved Once all impacts have been identified, analysts have to quantify them into physical terms. Useful economic life of over 50 years, without requiring any major replacement of machines and E&M equipment

Physical ImpactsAppropriate Valuation Method COSTS 1.Construction, O&M, mitigation, decommissioning Capital goods Materials Labour Market price 2.Resettlement 2.1CompensationProperty lossesMarket price, Revealed preferences (RCM), and stated preferences (CVM) 2.2Assistant expensesCapital goods Materials Labour Market price 3.Risk of dam failurePropertyMarket price, Revealed preferences (RCM) 4.Land acquisitionForest landMarket price Commercial agriculture timber, non- timber forest products and wildlife Market price, Revealed preferences, Stated preferences Non-commercial timber, non timber forest products and wildlife Revealed preferences (RCM), Stated preferences (CVM) Ecosystem and biodiversity losses, species extinctionStated preferences (CVM) 5.ExternalitiesSocial losses (loss in historic site, erosion of cultural identity, community fragmentation) Stated preferences (CVM) Waterlogging and salinity(Inclusively estimated with irrigation water benefits)

BENEFITS 1.Flood and seawater intrusion controlIncremental productivityRevealed preferences (FIM) Market price (for WTP) 2.Water for irrigationElectricity generatedMarket price, Shadow prices, Revealed preferences (RCM) 3.Hydroelectric power Net days of visitMarket price, Revealed preferences (RCM, TCM, HPM, FIM), 4.Net fishery and recreationTime savingRevealed preferences (RCM), Stated preferences (CVM) 5.River navigationTime savingRevealed preferences (RCM), Stated preferences (CVM)

Description With Kalabagh (US $ million) P.V. construction cost of Kalabagh2,234 P.V. construction cost of project0 P.V. construction cost of thermal plant0 P.V. incremental thermal operating cost0 Total P.V. Cost:2,234

Average Annual Power Benefits Rs Billion Average Annual Irrigation BenefitsRs Billion Average Annual Flood Alleviation BenefitsRs Billion Additional Power From TarbelaRs Billion AVERAGE YEARLY BENEFITSRs Billion The total project cost at June 1998 price level, including contingencies, price escalation and interest during construction, is estimated as US$ 5,700 million. The project will pay back its investment cost in a period of less than 10 years, as projected project annual benefits are US $ Million

The alternatives to Kalabagh Dam are: Raising water level in Mangla dam to offset the effect of silting. A de-silted Tarbela would yield the same irrigation benefits as Kalabagh, but at one- seventh the cost in net present value terms A thermal power plant of equivalent capacity to Kalabagh were constructed, the cost would still be lower by one-third Description With Kalabagh (US $ million) Tarbela Action Plan (US $ million) P.V. construction cost of Kalabagh2,2340 P.V. construction cost of project0343 P.V. construction cost of thermal plant0918 P.V. incremental thermal operating cost020 Total P.V. Cost:2,2341,461