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Social Cost-Benefit Analysis of Delhi Metro

  • M N, Murty
  • Dhavala, Kishore Kumar
  • Ghosh, Meenakshi
  • Singh, Rashmi

The growing demand for public transport in mega cities has serious effects on urban ecosystems, especially due to the increased atmospheric pollution and changes in land use patterns. An ecologically sustainable urban transport system could be obtained by an appropriate mix of alternative modes of transport resulting in the use of environmentally friendly fuels and land use patterns. The introduction of CNG in certain vehicles and switching of some portion of the transport demand to the metro rail have resulted in a significant reduction of atmospheric pollution in Delhi. The Delhi Metro provides multiple benefits: reduction in air pollution, time saving to passengers, reduction in accidents, reduction in traffic congestion and fuel savings. There are incremental benefits and costs to a number of economic agents: government, private transporters, passengers, general public and unskilled labour. The social cost-benefit analysis of Delhi Metro done in this paper tries to measure all these benefits and costs from Phase I and Phase II projects covering a total distance of 108 kms in Delhi. Estimates of the social benefits and costs of the project are obtained using the recently estimated shadow prices of investment, foreign exchange and unskilled labour as well as the social time preference rate for the Indian economy for a study commissioned by the Planning Commission, Government of India and done at the Institute of Economic Growth. The financial internal rate of return on investments in the Metro is estimated as 17 percent while the economic rate of return is 24 percent. Accounting for benefits from the reduction of urban air pollution due to the Metro has increased the economic rate of return by 1.4 percent.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1658.

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Date of creation: Oct 2006
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Handle: RePEc:pra:mprapa:1658
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  1. M N, Murty & Kumar, Surender & Dhavala, Kishore, 2006. "Measuring Environmental Efficiency of Industry: A Case Study of Thermal Power Generation in India," MPRA Paper 1693, University Library of Munich, Germany.
  2. Ahmad, Ehtisham & Stern, Nicholas, 1984. "The theory of reform and indian indirect taxes," Journal of Public Economics, Elsevier, vol. 25(3), pages 259-298, December.
  3. Murty, M N & Ray, Ranjan, 1989. " A Computational Procedure for Calculating Optimal Commodity Taxes with Illustrative Evidence from Indian Budget Data," Scandinavian Journal of Economics, Wiley Blackwell, vol. 91(4), pages 655-70.
  4. Chatterjee, Sushmita & Dhavala, Kishore & M N, Murty, 2005. "Estimating Cost of Air Pollution Abatement for Road Transport in India: Case Studies of Andhra Pradesh and Himachal Pradesh," MPRA Paper 1691, University Library of Munich, Germany.
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