A project appraiser’s approach
Delhi Chief Minister Arvind Kejriwal does not believe in taking decisions on merit. Nor does he care for the public money He wants to satisfy his ego and show his authority.
The way Delhi government first, in a knee-jerk reaction to the High Court’s concern over air pollution, ordered that odd and even number motor vehicles would ply on Delhi roads on alternate days, then assured that the order could be reviewed after a month and has now said that it would be introduced on a trial basis for 15 days, shows utter lack of application of modern management techniques. It could be due to ignorance or political rulers habit of imposing their decisions without going into details of implications. To be fair to the present Delhi government, I must add that the central government and state governments are also equally guilty of not bothering about the modern management techniques. During my long association with different aspects of project management in the Government of India, I had seen numerous examples of this.
To give one example, more than three decades ago when I was Joint Adviser in the Project Appraisal Division of the Planning Commission, I was asked to appraise a project to set up an incineration plant in Delhi. The offer to set up the plant had come from a small European country. According to the feasibility report, garbage collected from different parts of the city was to be transported to a central incineration (burning) plant; the heat generated from incineration was to be used for generation of electricity. After going through the details I found that the calorific value of the garbage was so low that large quantities of garbage had to be burnt to generate one unit of power; the marginal cost of generation was coming to Rs. 10/unit which made power generation completely unviable. Moreover, wet garbage could not be burnt effectively during the monsoon season. My main findings were: generation of power made no economic sense; if incineration was considered a better method of disposal of garbage, there was no need to set up a big imported incineration plant in one part of the city, it would make more economic sense to set up smaller plants, which could be manufactured indigenously, in different parts of the city, an option that would drastically reduce the cost of transportation ; in any case garbage had better alternative uses.
The foreign country was eager to set up the plant in India as part of its marketing program. The then Prime Minister, Mrs Indira Gandhi, rejected my advice. The plant was set up in North Delhi. When it proved completely unviable, it was closed down but by then it had incurred loss of more than Rs. 30 crore.
The widespread resentment over the Delhi government’s odd-even number formula to check air pollution, originally recommended by the Centre for Science and Environment, was quite natural. The resentment could not and cannot be brushed aside merely as the people preferring short-term comfort and convenience at the cost of their own health. The issues raised e.g. lack of public transport to cope up with the increased demand specially because the formula would be applicable even to taxis, three-wheelers and public transport other than the CNG-driven ones, the possibility of increase in the number of old as well new vehicles running (those who can afford opting for an additional car) as seen in some countries etc. are quite serious.
The modern management has given us a technique called ‘project appraisal’ to deal with such situations. In a narrow sense the term is used for ex-ante examination of investment projects but it is a generic term that refers to detailed and objective assessment of any proposal or policy from all aspects. The methodology is well developed and has wide application. It is a multidisciplinary task. For control of air pollution in Delhi, the important stages preceding appraisal are briefly as follows.
Establishment of the need/objective. The need arises if the quality of air has gone down below the threshold. The remedial measures to be considered would depend on the daily, weekly, monthly and seasonal variations and also variations during different hours of the day. In addition, it is also necessary to know the sources of pollution and the magnitude of pollution from each source along with variations.
Generation of options. There could be several options to achieve a given objective. When there are different sources of pollution, it is necessary to examine the contribution of each source and measures required to control pollution from each source. There could be more than one measure (including technology) to control pollution from a particular source. The contribution of each source along with variations and the available technology or measures should be tabulated to before options are generated. The experts should be able to identify the major sources of pollution which need to be tackled first and the measures to be adopted. Since there are different sources of pollution, independent of each other, and there may be alternative measures to deal with each source, several projects would be needed. On the basis of the data collected, exports may identify a hierarchy of projects to be taken up in order of priority. Naturally, the maximum emphasis will be on the sources which are contributing the maximum. The may be need to take up more than one project simultaneously for achieving the objective.
Preparation of feasibility report. Once the option has been identified, a proper feasibility report has to be drawn. A feasibility report is a self-contained document which is expected to contain sufficient information on the need, options generated and examined, choice of technology, basic technical parameters, capital and operating cost estimates, cost-benefit/cost-effectiveness analysis, organisational set-up, state of preparedness, status of clearances required, capacity to implement, etc.
Appraisal of project. Project appraisal involves an objective examination of information contained in the report to ensure whether it is complete in all respect. Since the quality of appraisal depends on the quality of the feasibility report, the appraisal’s first task is to look at the data available which in turn depends on the quality of studies and investigations carried out. The appraiser examines whether the need is firmly established, whether all the possible options have been examined and the feasibility report has been prepared for the best available option, whether the choice of technology is appropriate and technical parameters have been considered and firmed up, whether capital and operating costs have been stimulated properly and so on. Cost- benefit analysis is an essential part of project appraisal. Briefly, cost-benefit analysis involves identification and to the extent possible quantification of all the components of cost, capital as well as operating, and benefit. Cost-effectiveness analysis, a variant of cost-benefit analysis, is carried out when a given target/objective has to be achieved and what is required is to select a project which will achieve the objective at the minimum cost.
Appraisal of project to reduce air pollution caused by vehicles
If the government is serious about reduction in air pollution caused by motor vehicles, it should have first got a proper feasibility report and then got it appraised by an independent appraiser who is well-versed with the subject. When an appraiser is given a feasibility report on reduction of air pollution caused by vehicles for appraisal, some important issues (just by way of illustration) he will examine are as follows.
o The contribution of vehicles plying on the roads to pollution. This has to be quantified as far as feasible. There are different types of pollutions. The contribution of vehicles to each type of pollution has to be quantified.
o The total number of different type of vehicles plying on the roads and contribution of each type of vehicles. The available data show that motor vehicles running on diesel contribute maximum, followed by vehicles running on petrol. The vehicles running on CNG contribute within acceptable limits. It is also a common knowledge that would end badly maintained vehicles pollute more than the new or element in ones.
o The impact of withdrawal of polluting vehicles on the level of pollution. There are several issues to be examined: the minimum number of vehicles to be removed from the roads; whether removal of only diesel vehicles will serve the purpose or whether petrol-based vehicles should also be removed; whether only buses and cars should be removed or three wheelers and two-wheelers should also be removed; what should be the minimum number of hours of reduction in the number of vehicles to achieve the tolerable limit of pollution.
o What are the alternative arrangements to meet the demand in case the number of vehicles on the roads is reduced; what would be the cost of alternative arrangements and the timeframe within which alternative arrangements would be made.
In the light of what has being stated above, the Delhi government’s proposal to introduce odd-even formula seems to be highly flawed. Consider the issues mentioned below.
· The government order puts all the motor vehicles (barring those running on CNG) in the same category, without making any distinction between those which are new or well maintained and do not contribute to pollution or make negligible contribution. The latest models of vehicles meet stringent standards.
· Years ago the government had produced a rule that vehicle owners should obtain ‘pollution under control certificate’ valid for a fixed time period. If a vehicle meets the prescribed standard, is there any justification for its removal from the road? If the certificate does not serve the desired purpose, what is the justification for obtaining it?
· It is a common sight that large number of vehicles, especially commercial vehicles, pollute much more than other vehicles. These vehicles are either not obtaining ‘pollution under control certificates’ or obtaining false certificates. One often finds delivery vans – three wheelers as well as four-wheelers - parked with engines running for 15-20 minutes or even more while goods are being loaded or unloaded. During the period of waiting such vehicles keep on polluting the area.
· Even at the airports, we find buses standing for 15-20 minutes or even more with engines on, unnecessarily polluting the area (unless these buses are designed not to cause any pollution).
· The simple odd-even formula would mean that while some non-polluting vehicles would be kept off the roads (on the days their odd or even registration numbers do not permit plying), polluting vehicles would be allowed to run.
Now that the Delhi government has decided to try the odd-even formula for a period of 15 days during which samples would be collected from 200 spots in the city, it should use the opportunity to get a proper feasibility report prepared and that feasibility report should be examined by an independent experienced appraiser who can tell the government, without any fear or prejudice, whether it was on the right track or more precautions were needed. Sant Kabir’s advice given centuries ago is eternally valid:
“निन्दक नियरे राखिये, आंगन कुटी छवाय, बिन पानी-साबुन बिना, निर्मल करे सुभाय”
December 9, 2015
A study by IIT-Kanpur shows that cars and jeeps contribute less than 10% of particular matters while trucks are bigger culprits. Road dust contributes 35%. (Economic Times, December 10, 2015)
According to a news item in Mail Today (Dec 30, 2015), two-wheelers are biggest vehicle polluters (32%).
Jan 1, 2015 The (News on internet)
Delhi Chief Minister Arvind Kejriwal on Friday accepted that it is impossible to implement the odd-even formula permanently in the national capital to curb pollution.
In an exclusive interview to CNN-IBN, Kejriwal clarified that the odd-even formula in Delhi is not a permanent measure and will end on January 15, 2016. "After that we will reassess the situation and the future course of action will be taken based on our reassessment meeting," he said.