Report Witing
On
Social Cost Benefit Analysis of a Project
Prepared & Submitted By
Name :- Subhroneel Baidya
Stream :- BBA (H) 6th Sem.
Subject :- Project Management
Subject Code :- BBA 601
Under the Guidance
Of
TARUN CHATERJEE
(Assistant Professor) In Bachelor of Business
Administration Department
Management Institute of Durgapur
G.T, ROAD (NH-2), RAJBANDH, DURGAPUR, PASCHIM BURDWAN, PIN – 713212, WEST BENGAL
Content
S No. Topic Page No.
1 Introduction in Social Cost Benefit Analysis 2
2 Scope of Social Cost Benefit Analysis 3
3 Measured impacts on Social Cost Benefit Analysis 4
4 Different Approaches of Social Cost Benefits Analysis 5
5 Results of Social Cost Benefits Analysis with Conclusion 6
6 Conclusion 7
Introduction in Social Cost Benefits Analysis
• A social cost benefit analysis, also known as economic analysis, is a
decision-making strategy which helps in assessing the impact of
investment business projects on the society as a complete.
• It is an organised and cohesive mechanism to contemplate the impact of
development projects on society.
• The objective of analysing the social cost benefit is to weight the
heterogeneous impact of your development project on societal elements
such as pollution ,real estate, legal prospects ,health , environment etc
• Social cost-benefit analysis is a systematic and cohesive economic tool
(method) to survey all the impacts caused by an urban development
project. It comprises not just the financial effects (investment costs, direct
benefits like tax and fees, et cetera ), but all the social effects, like :
pollution , safety , indirect (labour) market, legal aspects, et cetera.
• The main aim of a social cost-benefit analysis is to attach a price to as
many effects as possible in order to uniformly weigh the above-
mentioned heterogeneous effects .
Scope of Social Cost Benefit Analysis
SCBA's purpose is to establish the financial benefits of each venture in
perspective of shadow prices because initiatives impact people's savings and
investments and the development's impact on the revenue sharing in society.
Additionally, it is critical to consider how certain factors like employment and
self-sufficiency will be achieved if the strategy is delivered.
SCBA can be used to engage both in the public and private sectors.
1. Public investment: conducting social cost analysis for economic infrastructure
development is critical for the developing world. When the national government
contributes to shaping that country's economy, it is essential to analyze the
development's social impact.
2. Private investment: Evaluating the social impact of private development
initiatives is vital as federal and quasi-government authorities authorize these
initiatives.
Measured Impacts on Social Cost Benefit Analysis
The social cost-benefit analysis calculates the direct (primary), indirect
(secondary) and external effects :
• Direct effects are the costs and benefits that can be directly linked to the
owners /users of the project properties (e.g., the users and the owner of a
building or highway ).
• Indirect effects are the costs and benefits that are passed on to the
producers and consumers outside the market with which the project is involved
(e.g., the owner of a bakery nearby the new building , or a business company
located near the newly planned highway ).
• External effects are the costs and benefits that cannot be passed on to any
existing market because they relate to issues like the environment (noise ,
emission of CO2 etc. ), safety (traffic , external security) and nature (biodiversity
, dehydration etc.).
The model engineers try to quantify and monetise as much effects as possible.
Effects that cannot be monetised as much effects as possible. Effects that cannot
be monetised are presented in such a way that they can be compared. This way,
policy-makers can include these effects in their final judgement if an urban
planning project (or a particular variation ) is worth investing in.
Different Approaches of Social Cost Benefits Analysis
By the late 1960s and early 1970s, two distinct approaches to SCBA are as
follows :
1. UNIDO's Approach
The UNIDO (United Nations Industrial Development Organization) planning
methodology is as follows: The UNIDO method was reflected in the project
assessment principles, establishing a systematic assessment for SCBA in
developing economies. However, due to the severity and complexity of this task,
concise and functional guidance for project evaluation in execution was
required. Therefore, the fundamental principle of the method is the
introduction in 1978 of the UNIDO Guidance to Practical Project Assessment.
The UNIDO project evaluation technique consists of five phases:
1. Assessment of the proposal's market performance at market values.
2. Determining the net benefit from a financial perspective.
3. Adaptation to account for the development's implications on savings and
investment.
4. Adaptation to account for the program's impacts on wealth distribution.
5. Modifying the program's results on merit products with a social worth is
not equivalent to their economic importance.
2. L-M (Little-Mirrlees) Approach
I.M.D. Little and J.A. Mirlees pioneered this technique in social cost-benefit
analysis. The essential principle of this method is that in developing countries,
the social cost of using a product varies significantly from the amount charged
for it. As a result, Shadow Prices are required to signify the actual worth of a
resource to the community. The LM Strategy covers all aspects of SCBA in
developing nations.
Results of Social Cost Benefits Analysis
1. An integrated way of comparing the different effects. All relevant costs and
benefits of the different projects implementations (alternatives) are identified
and monetized as far as possible. Effects that cannot be monetized are
described and quantified as much as possible .
2. Attention for the distribution of costs and benefits. The benefits of a project
do not always get to the groups bearing the costs. A social cost-benefits
analysis gives insight in who bears the costs and who bears the costs and who
derives the benefits.
3. Comparison of the project alternatives. A social cost-benefits analysis is a
good method to show the differences between project alternatives and
provides information to make a well informed decision.
4. Presentation of the uncertainties and risks. A social cost-benefits analysis
has several methods to take economic risks and uncertainties into account.
The policy decision should be based on calculated risk.
5. The managers need to identify and measure the costs and benefits of the
project. Every project for society will have a positive impact in the form of
social benefits as well as a negative impact in the form of social cost.
Conclusion
• Social cost-benefit analysis in project management helps us to
undertake viable developmental projects for the welfare of
society as a whole. Managers can make an informed decision
after comparing several options and choosing the best one.
• The analysis also provides an insight into the social costs or
harmful impact of any project, too, and not just the financial or
social benefits.
• However, managers sometimes fail to have a balanced outlook.
They may just go for projects that provide maximum
profitability.
• The social cost-benefit analysis sometimes overstates the
significance of social benefits. Also, the concept of shadow
prices and the conversion of social costs and benefits into
monetary units is an area of subjectivity and approach.
• It is based on the judgment and understanding of the project
managers, and they can be wrong. Hence, managers should
take a cautious approach while using this analysis.
