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Saturday , 4 December 2021

Cost-Benefit Analysis for Transport Projects

Road Infrastructure Projects

States and cities often spend large sums of money making new roads and other road infrastructure such as flyovers. The stated intention for this is to ensure ?smooth flow of traffic?, so that various economic and social activities can be carried out. With increasing congestion, there is a commensurate demand to build more road infrastructure. The assumption is that adding more road infrastructure will help ease the traffic congestion. Simple rules of thumb are typically used (at times even this is ignored) such as a flyover is needed at a junction if the traffic volume exceeds 10,000 PCU per hour and if other ?solutions? such as making one-ways and increasing signal timing has not ?reduced congestion?. Rarely are these conditions (?congestion?) quantified. New roads and flyovers are very expensive, may involve acquisition of land, create long periods of hardship while the projects are being implemented and may degrade the quality of life for people living in the vicinity. They may even make it more difficult for other road users, such as pedestrians and cyclists and provide only marginal benefits to public transport users. Often the projects once completed fail to even provide the expected ?benefit?, such as a smooth flow of traffic. It therefore bears some value in looking at the cost-benefit equation for these projects and what, if anything they might reveal.

The Indian Roads Congress publication, ?Guidelines for the Design of Interchanges in Urban Areas? (IRC:92-1985) admits that interchanges (technical word for flyovers) are expensive and that ?it will be necessary to carry out cost-benefit study taking into account the total transportation cost, i.e. the cost of construction, maintenance and vehicle operation, to evaluate the techno-economic merits of the individual cases before a final decision is taken?. Right away we notice the rather limited scope of the costs to be considered, it fails to mention environmental and social costs. But most cities do not even carry out this basic (and mandatory) CBA and those that do, do so in an utterly flawed manner.

Standard Cost-Benefit Analysis

The typical calculation made (this is the case of a flyover currently being constructed in the city of Pune) is as follows

1. Do a traffic volume count by mode and convert the traffic into PCU (passenger car units, essentially considering a bus as 3 car ?equivalents? and a two-wheeler as 0.5 car ?equivalents? ? since they occupy 3-times and half as much space as a car on the road).

2. Use some standard survey to determine the occupancy of each mode (bus, car, two-wheeler etc) and calculate the number of people passing through the junction

3. Assume that once the flyover is built, vehicles will pass through the junction without any congestion and so the benefits that will accrue will be (a) vehicle operating costs will decrease due to fuel savings and (b) people will travel without delay through the junction and save the equivalent ?value? of the time thus saved

4. Assume a growth in the vehicles passing through the junction and do the calculation for a period of 20 years or for the life of the structure

5. Consider the cost of the flyover and the cost of maintenance over the life of the project

6. Compare the total cost to the total benefit and ascertain if the project is desirable

These simplistic cost-benefit analyses are deeply flawed since they conveniently assume that once built the junction will be congestion-free forever, despite increase in traffic volumes and thus the fuel saving and time saving benefits will continue to increase and accrue for the life of the project. Even a simple correction, one that takes into account that the traffic increase will lead to greater volumes, which will soon lead to increasing congestion and thus steadily decrease the fuel and time savings, show that total benefits cease in a few years. This drastically reduces the benefit-cost ratio, making the project un-desirable.

The analysis also utterly ignores the total increase in the pollution with increasing traffic and its health impacts. It fails to address the problems faced by pedestrians while crossing at such junctions (increasing the risk of an accident) and the fact that flyovers make roads even less desirable for a cyclist. Public transport (buses) too barely benefit from a flyover, since they tend to use the slip road, which is usually even more congested. Buses that use the flyover are less convenient for bus users, for whom distance between stops is sometimes increased considerably. Yet standard cost-benefit studies ignore all these ?costs?.

Induced Traffic ? the joker in the pack

In the West, even when cost-benefit analysis was done more comprehensively and in a much more sophisticated manner, using modeling software and other techniques, planners of projects often found their calculations went awry. Projected benefit of the project, be it a new road, an addition of a lane to an urban highway or a flyover, would often not be attained in real life, with congestion setting in much sooner than expected. This phenomenon, now known as ?induced traffic?, flummoxed transport planners and officials, until it was better understood. It turns out that when road capacity is added, existing trends are affected; the project induces more use, provides encouragement to people to use the road (now freed of congestion) until the congestion comes right back, faster than the models would have predicted.

A more systematic analysis of what a project costs, what else can be done with that money and whether the goals of a policy are being met by that project is needed; something that proper cost-benefit analysis can help towards. Ensuring that these studies/analyses are not only done by qualified agencies, but also in a manner that is transparent, for instance by making sure that there is public scrutiny of the reports, is the need of the hour

Ranjit is involved in various urban transport initiatives, with his current interests including non-motorised transport, street designs and Bus Rapid Transit Systems. He has a Masters in Physics from IIT Kanpur. He studied at Cornell University and also worked as an IT consultant for several years in the U.S before returning back to India.

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