Ppt on Social Cost Benefit Analysis by Anup Kumar Ojha

8/2/2019 Ppt on Social Cost Benefit Analysis by Anup Kumar Ojha

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P R E S E N T E D B Y

A N U P K U M A R O J H A

M B A I V

2/21/2012USHA MARTIN ACADEMY KOLKATA

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Social Cost Benefit Analysis



INTRODUCTION


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Social Cost Benefits Analysis means to analyze thesocial cost and total social benefits if we accept any project.

We all know that for completing the big project, weneed big investment.

In social cost benefit analysis (SCBA), we see whether return or benefits on this investment aremore than its cost from point of view of society in

which we are living.



ADVANTAGE OF SCBA


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In public investment, we analyze andcompare government expenditure with total benefitsto society through SCBA.

It is also good technique of financial evaluation of a project because we leave that project whose

benefits to society are less than total cost which willto society because all resources are from society.

Problems which can be solved by Social Cost Benefits

Analysis



What is social cost benefit analysis?


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It refers to the study of feasibility of a project interms of its total economic cost and total economic

benefits.

it means to compare total cost with total benefit if weadd external cost with private cost, its called totalsocial cost if we add external benefit with private

benefit, called total social benefit.



1st Problem: Rationale for SCBA


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a) Market imperfection : We will not analyze social cost benefit; we can not find market imperfections. After study of market rates following factors come in to our knowledge.

i) Rationing factor : It means some of raw material prices are controlled by Govt. So, it may increase our project cost but its social benefit will go to poor community.

ii) Regulation for providing minimum wage factor: It also affects social cost and benefits of

any project. Because company must have to pay this minimum wages.

iii) Foreign Exchange Regulations factor: Sometime, we have to deal at currency rate which isless than actual market rate due to regulation on FOREX. So, we should analyze this point also.

b) Externalities :Externalities are non-cash or benefits which an organization suffer or get if it startsthe project. For example, if govt. makes road near your project plant, you can get this facility without

any payment. On the other side, if any other organization is polluting and spreading diseases, its costmay suffer due to absence of your employee for going to hospitals.

c) Tax and Subsidies: Tax is payment on the earning of the project and it will reduce our overall benefits. On the other hand,if govt. gives us subsidy for operating any project, it will count for our cost benefit analysis.

http://www.svtuition.org/2010/03/income-tax.html

http://www.svtuition.org/2010/03/income-tax.html



society from a project?

With UNIDO approach, we can evaluate net benefit from any project. Formula is given below


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3rd Problem: To Know the Effect of usingone more Unit of Resources


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With shadow price, we know the effect of using onemore unit of resources on the social cost and

benefits. Shadow pricing is relating to decision of project manager. Before accepting the project, wehave to find the price if we have to use extra unit of resources. Suppose, we have to use one more hour of labor, what will we pay and what will its effect on

social benefits.



More Resources of Analysis in Finance:


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1. Fund Flow Analysis 2. Break Even Point Analysis 3. Option Analysis

4. Decision Tree Analysis 5. Investment Analysis 6. Leverage Analysis7. Financial Analysis 8. Ratio Analysis

9. Cash flow Analysis 10. WCM Analysis

http://www.svtuition.org/2010/02/fund-flow-analysis.html

http://www.svtuition.org/2010/05/break-even-point-analysis.html

http://www.svtuition.org/2010/11/option-analysis.html

http://www.svtuition.org/2010/03/decision-tree-analysis.html

http://www.svtuition.org/2010/03/investment-analysis.html

http://www.svtuition.org/2008/10/leverage-analysis.html

http://www.svtuition.org/2010/02/financial-analysis.html

http://www.svtuition.org/2010/02/ratio-analysis.html

http://www.svtuition.org/2010/02/cash-flow-analysis.html

http://www.svtuition.org/2010/02/working-capital-management-analysis.html

http://www.svtuition.org/2010/02/working-capital-management-analysis.html

http://www.svtuition.org/2010/02/cash-flow-analysis.html



http://www.svtuition.org/2010/02/financial-analysis.html



http://www.svtuition.org/2010/03/investment-analysis.html

http://www.svtuition.org/2010/03/decision-tree-analysis.html

http://www.svtuition.org/2010/11/option-analysis.html

http://www.svtuition.org/2010/05/break-even-point-analysis.html

http://www.svtuition.org/2010/02/fund-flow-analysis.html



So what makes things more complex? There area variety of factors:


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Benefits and costs may accrue to different sets of people.

If this is so we need some way to aggregate and

compare different benefits and costs across people. Benefits and costs may occur at different points in

time. In this case we need to

compare the value of outcomes at different points in

time.




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Benefits and costs may relate to different types of goods and it may be difficult

to compare their relative values. This usually occurs

when one of the goods does not have an obvious and agreed upon price. For

example, we may be spending

standard capital goods today in order to obtain

environmental benefits tomorrow.




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Benefits and costs may be uncertain.

Benefits and costs may be difficult to calculate and,as a result, there may be widely differing views about

their sizes. One might think this could be subsumed under

uncertainty, however the two points are ratherdifferent: two people agreeing that an outcome

follows some probability distribution is differentfrom them arguing about its mean and variance.




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Usually, in real-world cases the dominant issue isusually the last one: the basic job of calculatingestimates for the project's costs and benefits. Thisespecially true in the 'social' case where the projectsunder consideration may involve costs and benefitsthat very difficult to quantify { what is the benefit of the national security derived from military spending,

how large are the benefits from education, etc etc.Necessarily this quantification only makes sense on acase-by-case basis..



Example of cost benefit Analysis


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Social Cost Benefit Analysis of the POSCOSteel Project in Orissa






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Thank You

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Ppt on Social Cost Benefit Analysis by Anup Kumar Ojha