Is SSP Economically Unviable ?

The economic viability of the SSP has been examined critically by the independent national as well as international experts on many occasions in the past. The first economic appraisal was carried out by the Tata Economic Consultancy Services (TECS) Bombay, which indicated that this project will confer substantially large benefits, much larger than the cost involved, with a benefit cost ratio of 1.84 an IRR of 18.3%, both evaluated at economic price.

The Staff Appraisal Report of the World Bank also estimated the Economic Rate of Return (ERR) at 13% in 1985 they had also carried out sensitivity analysis taking into account various favorable and adverse factors. This analysis provided ERR within a range of 7 to 19%. Even former is considered to be an acceptable rate of return for a project of this type serving a drought prone region in India.

The World Bank again updated its economic appraisal of SSP in 1990. This clearly indicated that the original ERR of about 12% was still correct. It may be mentioned here that Nitin Desai Committee constituted by GOI considered rate of return of 9% (7% for drought prone area) as acceptable.

The World Bank again undertook economic reappraisal based on 1991-92 price. Results of this exercise have been reported in the Project Completion Report (PCR) prepared by the World Bank in 1995. This exercise paid particular attention to the environmental cost and benefits which might have been committed or underestimated in the original analysis. It estimated ERR or 12.2% which was found to be within the range of acceptable ERR’s for project of this type. The PCR has concluded that the ‘scale of benefits is large, relative to any feasible alternative, with substantial multiplier effect as well.

The Narmada Planning Group had asked the Ahmedabad based Sardar Patel Institute of Economic and Social Research (SPIESR) to update the economic appraisal earlier made by TECS. This exercise was also done at 1991-92 price. The ERR estimated with three different alternative assumptions of water use efficiency and project cost works out within the range of 16 to 20%. This result should set at rest any doubt about the economic viability of this project.

Agriculture consumes around 43% of the total power in Gujarat State. In absolute terms this works out to be 2700 MW of electricity. It is estimated that around 50% of it (1350 MW) will be saved due to Sardar Sarovar Project by way of surface water irrigation and recharge of groundwater aquifers. Added to this is the production of 1450 MW of power from the Project. In order to have around 2700 MW at the delivery point, a power project of 6000 MW (at 65% PLF and 20-25% Transmission and Distribution losses) is required. The present cost of setting up such a power project at an estimated rate of Rs. 55 million per MW would be Rs. 330 billion (~US $ 8 billion).

This factor alone would more than compensate the estimated cost of the Project. Added to this will be increase in agricultural income, drinking water, prevention of desertification, effective drought mitigation, prevention of forced migration of millions of people and cattle, flood control etc.

Some issues in debate

As per ICOLD (International Commission on Large Dams) definition there are 541 ‘Large dams’ in Gujarat State. However, the ICOLD definition for ‘Large dams’ includes dams with height greater than 15 m and other smaller dams with height between 10 to 15 m with certain special design features. The height considered is the height of the dam from the lowest foundation level to the crest. The definition of ICOLD deals with the design and safety considerations and therefore as per the ICOLD definition for ‘Large dam’ the list also includes smaller dams of Panchayat with a meager storage capacities of about 1 to 10 Mm3.