Review of economic appraisal of water resources projects in fast changing & complex

This paper reviews the present Economic Appraisal Techniques viz. Benefit Cost Analysis, Internal Rate of Return being carried out for Water Resources projects (WRP). Considering the fast changing & complex development scenario, it is high time to introduce the Social Benefit Cost Analysis for appraisal of water resources projects. Social Benefit Cost Analysis (SBCA) is a methodology for evaluating projects specifically designed for welfare of either the entire community or nation or a section. Because of the serious distortions in market prices, highly dynamic economy, the usual benefit -cost–Cost analysis approach does not reflect the true social valuation of benefits and costs. The need for Social Benefit-Cost Analysis in preference to market valuation arises mainly due to; market imperfections, uncertainties & risk, externalities, concern for income distribution and concern for environment and environment impact assessment. Valuation of social benefits and costs, SBCA assigns weights for merit goods. It is indeed a very complex exercise, however some clear guidelines may help carryout the SBCA. The paper also emphasizes the need for a “Third Water & Irrigation Commission” at centre, for river basin wise planning and to review the whole process of appraisal of water resources projects.