Questions on the ‘Value’ of a river for Indians - A review of the book "Economics of River Flows" by Dr. Bharat Jhunjhunwala

In his last book, 'Economics of hydropower' Dr. jhunjhunwala comes to a conclusion that we have neglected some very important costs of hydropower, while overestimating its benefit. Along with significant economic, social and ecological impacts of dams, he has also surveyed pilgrims and devotees at Dev Prayag, Rishikesh and Haridwar and, using methodologies from environmental economics, has tried to assess the huge spiritual value of rivers.

The United States, despite being world’s number one large dam builder, is actually decommissioning (literally removing) some of its dams, after a reality check about their benefits. According to the editor, he embarked on the journey of putting this book together after witnessing that more and more dams are being put up in India, while they were being removed in the US, “both for securing economic growth.”

The book is a collection of papers from a wide range of actors active in the dam discourse in US, including activists from American Rivers, researchers from American universities, private sector officials from hydropower companies, as well as government officials from the US Army Corps of Engineers. Each paper is prefaced with the Editor’s introduction, comparing issues in India and US.

The book is divided in five parts dealing with:

• Why Dams are being removed in the US?
• Examples of Dam removals from US
• Cost Benefit analysis of Hydropower Dams
• Environmental Impacts of Hydropower Dams
• Economic Value of Free flow of rivers

The initial part deals with the reasons and examples of dam decommissioning in the US which range from economic unfeasibility due to use of cheaper sources of electricity, increasing importance of conservation in the minds of people, stringent environment regulations which make some dams economically unviable, dam safety regulations, etc. For example in case of Edwards dam on the Kennebec River in Maine, the owner, facing a $ 9 million price to build a fish ladder, agreed to decommission the dam. In the case of lower Snake River dams in the Pacific Northwest, the Federal Energy Regulation Commission (FERC) conducted a Cost Benefit Analysis for two conditions, first was restoring endangered Salmon fish with existing dams, repairs, restoration and modifications and other was restoring the salmon population without dams. After a thorough study, it was concluded that the costs of restoration with dams was higher than the costs of restoration without dams, which included decommissioning as well as replacing the power being generated by the current dams .

As the editor reiterates in many sections of the book, in US the FERC also conducts cost benefit analysis of its projects in house and compares these figures with the benefits of the dams, while in India the CEA (Central Electricity Authority) and the MoEF are two independent entities. The CEA assumes any demand for power a justification enough for embarking on electricity projects and the MoEF undertakes EIAs accepting this, and the cost of environmental and social mitigation is not included in the project costs of CEA. It is possible that after including mitigation costs, most projects may appear unviable.

Elwha Dam was decommissioned through a second EIA (in India, an EIA is rarely revised, never even reviewed after the dam is commissioned), responding to increasing endangered species, sediment deposition and closing of one of the industrial customers. The result was largely driven by the inclusion of non use value of the Elwha River to the local tribes. According to the author, such inclusion of non use values of rivers is crucial for a country like ours.

The section on Cost Benefit Analysis of hydropower dams begins with an introduction to the ‘US Government Guideline for undertaking Cost Benefit Analysis of Regulatory Actions’, which demands inclusion of aspects like making a schedule of non quantitative costs and benefits, specifying intergenerational equity, specifying gains and losses to different groups, examination of alternative scenarios, specifying uncertainty (like climate change) etc. None of the factors is included in Indianour CBAs. The FERC, while conducting economic analysis of its projects, works on the net costs of three or four scenarios, consisting of relicensing with no mitigation, relicensing with applicant proposed mitigation to reach to a much more informed and balanced decision.

One of the most interesting parts of the book on ‘Economic value of free flow of rivers’ begins with a paper on calculating Total Economic Value (TEV) of river which includes on site use value, as well as off site passive use value, calculated by various methodologies like contingent valuation method, travel cost valuation method, hedonistic property method, etc. In another paper on Natural Capital, the author, after conducting detailed assessment of ecosystem goods and services, proved that New Jersey’s Natural Capital is worth $ 154,000 / acre, with freshwater wetlands having highest value. Here, the editor stresses the utmost importance of considering non use values of our rivers in CBAs.

Probably the most useful single paper of the book is Ann Riley’s Putting a price on Riparian Corridors as Water Treatment Facilities, in which she succinctly compares annual costs of running and maintaining  Santa Monica Urban Runoff Recycling Facility (SMURFF) for 20 years with a 1.6 km long creek (or stream), with restored riparian corridors. Through various studies, it is proved that riparian areas are efficient at processing organic matter, sediments and sediment bound pollutants, they regulate microclimates, remove phosphorus and nitrogen containing compounds, reduce coliform and pathogens and transform animal waste and chemical fertiliser into less harmful substances. After a detailed cost benefit analysis, Ms. Riley proves that while the SMURFF plant will cost about $ 730,000 annually for next twenty years, a restored natural stream and riparian corridor will do the same for at an average annual cost of $ 15,550 to a median of $ 155,000 for a longer duration and for greater volume of water. At the same time the author stresses that, “There is a range of values intrinsic to a natural environment that a brick and mortar plant cannot emulate”. This paper is of special significance to India, where urban streams are being killed by channelization and encroachments under the guise of development projects.

However, in the introduction of this paper, the author states that the comparison is between ‘waste water treatment’ capacity of a treatment plant and a natural stream. There is a significant difference between the quality of urban ‘waste water’ and ‘storm water’ of developed countries.

‘Our people may never visit Haridwar and take a bath in Ganga, but they would derive satisfaction from knowing that Ganga runs free. The problem is this satisfaction obtained from free flow of Ganga is ignored while that from consumption of electricity is shown in calculations of Cost Benefit Analysis of Dams.’ In a country full of water worshippers of all religions, Dr. Jhunjhunwala, a trained economist and past faculty at IIM Bangalore, is the one of the few who has attempted putting economic value to spiritual importance of rivers.

All in all, the book is a delightful read for anyone who is concerned about rivers, water resources, electricity, hydropower, environmental economics, etc. It exposes the reader to a much more methodical and holistic approach of dealing with ecology and economics. Of course, we are free to turn our backs to lessons from the US, holding that they have already developed (and damaged) their water resources and per capita water storage. However, the fact remains that while destroying ecological balance and degrading ecosystem goods and services, development, material or otherwise, is not possible. It will be beneficial for us to learn our lessons from their mistakes. As the US has learned the hard way, the ecological and economical cost of dam decommissioning is immense. We already have 100 dams, which are more than 100 years old and 381 large dams between 50-100 years. Silting and sedimentation of reservoirs due to soil erosion and faulty catchment management practises is eating away the life of many of our reservoirs. Repairs and maintenance of dams is shoddy and dam & embankment breaches have been happening regularly. Unfortunately, we aren’t objective about our dams & consider decommissioning in case of aging, faulty or dangerous dams.

Considering these facts, maintaining existing, useful dams in good condition, decommissioning the ones which have outlived their capacities, and building new ones only after performing a rigorous, participatory, accountable and comprehensive cost-benefit analysis is the need of the hour. We simply cannot afford to throw away the proverbial baby with the bath water.

The book also has its set of limitations. There are several typos and repetitions, which could have been easily avoided and the book would have gained immensely through a more structured and reader friendly format. Some concepts put forth by the author  like ‘losing our soul by damming rivers like Ganga’, ‘like US, our needs for social and spiritual betterment will become more prominent than our needs for electricity’, etc., are controversial and need to be backed by strong objective research. Also, titles of some of the papers (which are different than their original titles) can be a little confusing. A brief section by the author at the end of the book, tying up the ends and talking about a way forward for India could also have added value.

The article is published on SANDRP