Presents Ti On on Scba

8/7/2019 Presents Ti On on Scba

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PRESENTSTION ON

BASIC APPROACHES TO SOCIALCOST BENEFIT ANALYSIS

BY DAVINDER KAU


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There a

re two app

r oac

hes to SCBA

1. U NIDO APPROACH2 . L ITT L E AND MIRR L ESS

APPROACH ( L& M)


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UNIDO APPROACH

It was first brought out in the Guidelines forproject Evaluation which provides thecomprehensive frame work for SCBA in

developing countries . These work created demandfor an operational guide for project Evaluation inpractice . To fulfill this need UNIDO came out

with another publication Guide to Practical project appraisal in 1978. the UNIDO method of project

appraisal starts with the measurement of financialprofitability of the project measured at market price. the measurement of financial profitability depends upon the following states :


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1. Determination of net benefits in terms of shadow

prices:

According to this specification UNIDO approach suggest thedomestic currency as unit of account to measure costs andbenefits and this approach measures cost & benefits of terms

of consumption . This approach suggest the following sourcesof shadow prices: A project may lead to increase or decrease in the totalconsumption, production , imports & exports in the country .

While calculating the shadow prices the taxes also impose a lot of difficulties.Tradable inputs and outputsNon Tradable inputs and outputs


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2 . Measurement of the impact ondistribution :

The next stage in the UNIDO approach isconcerned with measuring the impact of project onthe savings and income distribution for thepurposes of measuring the impact of the project onthe society. The society may be divided in to

various groups as:

project Other projectsGovernment EmployeesConsumers

External sectorsEg. Fertilizer project a. Impact on saving and its valuesb. Impact on income distributionc. Impact of the project on merit and demerit

groups


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L ITT L E-MIRR L ESS { L -M}

APPROACH

It was developed by I.M.D. Little & J.A.Mirrless in their worksMannual Of Industrial Project Analysis in Developing Countries.and Project Appraisal and Planning For Developing Countries

There are some similarities between both approaches as

Use of accounting and shadow prices for foreign exchange and skilledlabor and savings considering the fact of equity .


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Some differences are :

UNIDO Approach uses domestic rupee where as L-M Approach uses international & border prices .

UNIDO Approach measures costs & benefits in terms

of consumption while LM approach in terms of uncommitted social income.

UNIDO Approach focuses on efficiency savings &redistribution considerations in different stages under

the stage by stage analysis but LM approach tends to view these consideration together.


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The de t ermin at i o n of sh a d ow p ri c es under L-

M app r oac h a re a s :Shadow prices of traded goods

Shadow prices of non traded goodsShadow wage rate

Accounting rate of return


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