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Urban planning projects are generally large in scale in terms of financial and non-financial aspects. These aspects are carried into consideration of project implementing party or any other stakeholder associated with it. The scope is diverse and needs certain attention to understand in a comprehensive style. Where the general consideration of the project is based on the terms of money and the effects associated with it are out of scope of purely profit-making organizations. The benefit is analyzed merely on the terms of finance by such profit making organizations. Rather if the consequences of such project are out of the only financial terms then it is termed as social cost benefit analysis. Such analysis is carried out by the government agencies and other non-government agencies which are not profit making organizations.

The Social Cost Benefit Analysis is an economic tool of analyzing the urban planning projects. Such projects need attention in multidimensional survey to find out the effects on heterogeneous and complex issues. Such issues may be related to finance, environment, pollution, urban poverty, job, market, safety etc. The main aim of a social cost-benefit analysis is to attach a price to as many effects as possible in order to uniformly weigh the above-mentioned heterogeneous effects. (Anon., 2013)

The social cost-benefit analysis is used to calculate the different issues related to urban projects as follows:

• Direct effects: The costs and benefits that are directly linked to the stakeholder of the project. The effect on the user or the owner of such project come under such consideration.

• Indirect effects: The costs and benefits that are passed to outside of the market with which the project is involved. The affected ones of such category may be positively influenced or negatively influenced. Though they are neither the owner nor the users of the consequences of the project directly.

• External effects: The costs and benefits that cannot be passed on to any existing market because they relate to issues like the environment (noise, emission of CO2 etc.), safety (traffic, external security) and nature (biodiversity, dehydration etc.). (Anon., 2013)

Hence from the above discussion, we can decide that there are different layers of affected groups in the community as a result of any Urban Planning project so the methods of addressing them are also unique and special.

There are different aspects to be taken into understanding before social cost benefit analysis are described as follows:

1. Criteria for Social Cost Benefit Analysis:

   The financial term for the analysis in economics is Benefit (B) and Cost (C). Among the other different relationship between B and C, the ratio of Benefit and Cost is called B/C ratio, is most reliable criteria for project evaluation and analysis.

In this criterion, the benefit-costs ratio is the measure for the evaluation of a project. If B/C = 1, the project is marginal. It is just covering its costs. If B/C > 1, the benefits are more than costs and it is beneficial to undertake the project. If B/C < 1, the benefits is less than costs and the project cannot be undertaken. The higher the benefit-cost ratio, the higher will be the priority attached to a project. (Kwatiah, 2016)

2. Identification of Benefit and Cost:

The identification of benefit and cost is necessary to analyze the project. Basically the Benefit part and Cost part are independently calculated under different sub headings to undertake the real ground of the issues related to respective project as described follows.

The Benefit is identified on the prime priority. Since the reason driving any project is the factor of benefit for an organization we identify the project benefit as;

• Real or nominal benefit: In cost analysis of the project real benefit is calculated rather the nominal benefit coming from the project.

• Direct and Indirect Benefit: Direct benefits are such benefits which are directly attainable from the project. The indirect benefits are such benefits which do not result into the direct benefit to the stakeholders or the other of the stakeholders. Such benefits are also in calculation because the external benefits to the project is added with the indirect benefits too.

• Tangible and Intangible benefits: The tangible benefits are such benefits that are attained through the implication of the project and can be measured in terms of money i.e. measured in the monitory terms. The intangible benefits cannot be measured in terms of money rather they are the benefits only incorporated in economic analysis.

The Cost is identified on the high priority. Since the project is only driven with the investment of capital including other inputs. Similar to the different types of benefits, there are different types of the costs as well.

• Project Cost: They are the value of the resources used in constructing, maintaining and operating the project. They relate to the cost of labour, capital, intermediate goods, natural resources, foreign exchange, etc., including allowance for induced adverse effects.

• Indirect or Secondary Cost: The indirect costs are the resources that are used in the project which benefit to the project. The resources like schools, hospitals, houses, working people etc. These components also contribute to the project.

• Real and Nominal Cost: These are the cost that are involved in the project with direct purchase of the goods and services by the organization or the involvement of the people. The cost may be real or nominal.

• Primary or Direct Cost: These are costs properly incurred for the construction, maintenance and execution of a project.

• External Cost: These types of cost can be classified as Monitory and Non-Monitory external cost. In monitory cost, the benefit is the loss of profit to the competitors provided the users are the constant. The non-monitory cost include the cost incurred due to the inconvenience or the environmental degradation etc. (Kwatiah, 2016)

3. Valuation of Cost and Benefit:

In the valuation of social costs and benefits of a public project, the shadow prices of inputs and outputs of the project are used instead of actual market prices. Shadow prices reflect true values of goods and services, including the factors of production.

Their money values are computed on the basis of price indices in different markets, giving weights to inflationary and deflationary situations. Economists estimate three such prices: shadow wage rate, shadow interest rate and shadow exchange rate. However, for many items of social costs and benefits, there may not be any shadow price at all. (Kwatiah, 2016)

4. Social Rate of Discount:

The B/C formula usually used for evaluating social costs and benefits does not take into account the time horizon of the project. As a matter of fact, future benefits and costs cannot be treated at par with present benefits and costs. Therefore, the appraisal rule for a public project requires discounting of future benefits and costs because society prefers the present to the future.

For this purpose, economists use a social rate of discount for discounting all benefits and costs. It is a rate of discount that reflects society’s preference for present benefits over future benefits. The social discount rate is used to calculate the net present value (NPV) of a time stream of benefits and costs of a project where its NPV is calculated as:

NPV = Σt (Bt-Ct/(1 + i)t)

But is the expected gross benefit of the project at time t, C, is the expected gross cost of the project at time I, and i is the social discount rate at time t.

If the government chooses a high rate, the future net benefits will discount mere. As a result, the project with a long life will be-less beneficial than a project which yields a quick’s return. It is, therefore, advisable to choose a relatively low discount rate. (Kwatiah, 2016)

Results of Social Cost Benefit Analysis are discussed under following topics:

• An integrated way of comparing the different effects.
• Attention for the distribution of costs and benefits.
• Comparison of the project alternatives.
• Presentation of the uncertainties and risks.

 (Anon., 2013)

The above discussed way of analysis certainly have lots of benefits and few limitations as well. The advantages and disadvantages of Social Cost Benefit Analysis can be described as:

Advantages:

• The ability to identify the projects that maximize the welfare of the country.
• The ability to objectively assess and quantify the purpose projects in relation to community needs.
• Exposure of the basis for decision-making for projects and opportunity for public criticism.
• Ability to rank and prioritize limited resources so that the maximum benefit is realized.

Disadvantages

• Difficulty in measuring social costs and benefits and converting them in to monitory term.
• Over statement of the value of social benefits
• Complexity
• Conflict between social welfare and financial justification.

(Gaonkar, 2015)

Hence from the discussion we come to conclusion that Social Cost Benefit Analysis (SCBA) is not only a technique but the general approach for toward the Project Formulation in the field of Urban Planning. (Lohani, 1999)

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References

Anon., 2013. securipedia.eu. [Online]
Available at: http://securipedia.eu/mediawiki/index.php/Social_cost-benefit_analysis
[Accessed 14 1 2017].

Gaonkar, N., 2015. slideshare.net. [Online]
Available at: http://www.slideshare.net/NarayanGaonkar1/social-cost-benefit-analysis-scba
[Accessed 14 1 2017].

Kwatiah, N., 2016. economicsdiscussion.net. [Online]
Available at: http://www.economicsdiscussion.net/cost/social-cost-benefit/social-cost-benefit-analysis/18889
[Accessed 14 1 2017].

Lohani, K. P., 1999. Social Cost Benifit Analysis. In: Project Formulation. s.l.:s.n.

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