Cost Benefit Analysis In Airport Development

CHAPTER 1

INTRODUCTION

SUMMARY

Cost-Benefit Analysis (CBA) assists in making capital investment decisions by determining whether the benefits of the proposed action rationalize its costs. This synthesis supports preparing airport improvement programme and defines as well as describes the benefit assessment parameters used by airports along other modes. It also highlights the best practices and identifies inconsistencies of how benefits are calculated and where there is discrepancy in cost benefit guidelines.

CBA is a tool to aid agencies in prioritization in project selection. At its core it is computational tool to determine if an investment will generate benefits that will outweigh its costs. This analysis is accomplished by expressing

SCOPE

The study focuses on potential airport investment projects in Indian context, considering two types of airport projects : expansion of existing airports and new airport development. The report is not an investment analysis but rather an analysis of cost and benefit that has to be accounted for to estimate the impact of airport expansion or new airport development for society as a whole.

ECONOMIC IMPACT ASSESSMENT OF AIRPORT INVESTMENTS

A CBA is defined as an evaluation method which is used consider the impact of policy decisions. It provides the overview of current and future pros and cons of a particular investment or policy project for society as a whole as objectively as possible. It is based on a broad definition of term welfare and include public, private and government beneficiaries and costs. CBA therefore differs fundamentally from a financial analysis (Business Case), which reveals the costs and benefits for a particular party.

A CBA comprises of four steps

In order to prioritize the allocation of public spending, regularly used for national and regional policy making, for example in the field of infrastructure investments (such as rail roads and aviation), river basin management, flood risk management and spatial development. Besides goods and services, CBA takes into account intangible impacts and expresses them in monetary terms. These includes effects on environment landscape, nature and spatial quality.

The method of CBA is used in transport investment appraisal and other ex-ante policy evaluations in Indian and in many other countries. They are recommended by European Union (EU), World Bank, Asian Development Bank (ADB), for appraisal of infrastructure investment. Apart from CBA, there are also other inputs that play a role in the decision making process, such as employment, legitimacy, distributional effects, legal, public opinion, equity