Cost-Benefit Analysis of Vishnugad-Pipalkoti Hydro-Electricity Project

Abstract

Hydroelectricity is often considered to be “clean” in view of less carbon emissions especially in comparison to thermal power. However, hydropower is intrusive in the natural environment and has many environmental costs that may outweigh the benefits from reduced carbon emissions. Hydroelectricity projects (HEPs) in India are required to submit a Cost-Benefit Analysis (CBA) statement in the approval processes. However, the monetary value of the environmental costs is not required to be calculated and not considered in the approval process. Thus, the projects are approved even if the costs are greater than the benefits. The projects are required to submit an “Environment Management Plan” (EMP) to mitigate the adverse environmental impacts. However, the proposals made in the EMP are inadequate to mitigate the impacts and are more cosmetic than real. The calculation of monetary value of environmental impacts is resource intensive. This paper suggests that proxy values can be used to arrive at an estimate. Ignoring the environmental costs because of absence of robust estimates is tantamount to assuming that the environmental costs are zero which is not plausible. Taking the Vishnugad-Pipalkoti HEP as an example, it is shown that the project overestimates the benefits and underestimates the costs. The Cost-Benefit Ratio (CBR) is less than 1 irrespective of whether the environmental benefits and costs are included or excluded. The paper argues that hydropower is not as green as often said to be.