b Due to a shortage of loan proceeds despite an urgent need for the proposed

B due to a shortage of loan proceeds despite an

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b Due to a shortage of loan proceeds despite an urgent need for the proposed urban infrastructure, some portions of works were fully financed by municipal corporations using their own sources and the Government of India s special funds. However, the cost benefit analysis incorporated the investment costs of the urban infrastructure financed by municipal corporations. c Represents the cost of jetting cum suction machines (Rs4.6 million) and 26.4 km of drains (Rs296.6 million). Source: Asian Development Bank estimates based on the project management unit data.
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Appendix 8 37 7. Economic cost benefit analysis. To assess the economic efficiency of the project investments, the EIRR in 25 years has been estimated. The shadow exchange rate factor 4 and shadow wage rate 5 used in the original economic analysis were applied. 8. Economic costs. There are two types of costs: (i) capital investment, 6 and (ii) operation and maintenance (O&M). Actual disbursements during project implementation are considered project financial costs and are converted into economic costs using the conversion model used at appraisal. The O&M costs include energy, chemicals, salary, and repair and maintenance costs. 9. Economic benefits. The economic benefits of the water supply projects include (i) savings accrued by replacing existing water sources with piped household connections, 7 and (ii) the value of water that consumers are willing to purchase 8 for additional consumption due to greater availability of water. The benefits of improved sewerage and sanitation are primarily improved public health and environment. As these benefits are reflected in the willingness to pay, the economic benefit of sewerage and sanitation projects are valued using the willingness of residential households and businesses to pay. 9 The economic benefits of SWM projects were estimated similarly. 10 As benefits have been valued at 2003 values without any update, they are conservative estimates. The willingness to pay figures used in the revised PCR analysis are the same as in the revised economic analysis in 2008 due to a lack of updated data. Therefore, the analysis is also a conservative estimate. 10. Economic opportunity cost of capital. The level of benefit is measured by willingness to pay and is most likely underestimated. This is because respondents of the willingness to pay survey may have only perceived the immediate benefits and been unable to reflect on the value of other kinds of benefits, being unaware of them. As significant unquantifiable net benefits are believed likely, the economic opportunity cost of capital (EOCC) is placed at 10%. 11 Nevertheless, considering the g overnment’s cost of r aising capital in India, 12 this is likely overestimated. Furthermore, a do-nothing option will cause increasing economic cost of water supply shortages and deterioration of the environment.
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