VII. ECONOMIC EVALUATION

7.1 General

The sheet size of the Mahaweli Ganga scheme is a clear testimony to the impact which the project could have on the economy of Ceylon. As already indicated the scheme covers 30 percent of the island country and 55 percent in the Dry Zone. With the development of the three phases the irrigated area of the island is expected to increase from the present 0.94 million acres, an increase of 70 percent, and another to 1.59 million acres, an increase of 70 percent, and another 0.25 million acres would benefit from improved irrigation.

The economic implication of project, both in terms of cost and benefits, are given in table 3. the cost and benefits for all three phases are estimated in terms of prevailing market prices.

TABLE 3
Main features of the Three Phases of the Mahaweli Ganga Scheme
		Phase 1
		Project 1	Project 2	Project 3	Phase I	Phase II	Phase III	Enter Scheme
1	Irrigated area (1,000 acres)
	Total	186	88	54	328	230	342	900
	New area brought under irrigation	84	74	26	184	209	261	654
	Improvement to existing facilities	102	14	28	144	21	81	246
	Equivalent irrigated area	115	78	34	227	215	301	743
2	Hydro - Electric power
	Installed capacity (megawatts)	40	120	40	200	15	293	508
	Annual energy production (million kwh)	200	470	150	820	48	1,169	2,037
3	Capital cost (million rupees current prices)
	Total	576	676	298	1,550	920	3,113	5,583
	Allocated to agriculture	540	476	233	1,249	898	2,659	4,806
	Allocated to power	36	200	65	301	22	454	---
	Rupees per acre or equivalent irrigated land	4,690	6,100	6,850	5,500	4,180	8,830	6,470
	Rupees per K w of installed capacity	900	1,600	1,630	1,505	1,465	1,550	1,530
4	Benefits (million rupees current prices)
	Total	130	118	42	290	291	521	1,102
	Value added in agriculture	118	92	34	244	288	456	988
	Revenue from sale of power	12	26	8	46	3	65	114
5	Capital cost /benefit ratios
	Total	4.4	5.7	6.9	5.3	3.2	6.0	5.1
	Agriculture	4.6	5.2	6.9	5.1	3.1	5.8	4.9
	Power	3.0	7.7	8.1	6.5	7.3	7.0	6.8
6	Internal rate of return (of capital cost)	17	13	12	14	20	12	15

NOTE : 1. Acre of improved land is taken as equivalent to 0.3 acre of newly irrigated land in the case of Phases I and II 0.5 acre in case of Phase III

7.2 Capital Cost Benefit Ratio

The capital cost benefit ratio of the entire scheme is estimated to be 5.1 (4.9 for agriculture and 6.8 for hydropower). For Phase 1 the value of the ratio is 5.3 and varies among the three projects. The ratio being lower in the case of project 1 in comparison with projects 2 and 3.

7.3 Unit cost

The unit cost of irrigated agriculture for the scheme as a whole is estimated as Rs. 6,470 per acre bet varies considerably from one phase to another. It is Rs. 8,830 for phase III and Rs. 4180 for phase II. For phase I the unit cost per irrigated acre is estimated at Rs. 5,500.in the case of electric power the unit cost per irrigated acre is estimated at Rs. 5,500. in the case of electric power the unit cost per k w of installed capacity will be Rs. 1,530 and there is no drastic variation in unit cost between the three phases of the scheme.

7.4 Internal Rate of Return

The internal rate of return is a rough measurement of the overall social profitability of the project to the national economy. This rate has been calculated for all three phases of the scheme project to the national economy. This rate has been calculated for all three phases of the scheme (as well as for the three projects of phase 1). For the scheme as a whole the internal rate of return is 15 percent, which indicates that the scheme could be considered as a bankable project.

7.5 Level of Production

In 1980 the value of the expected crop production for the three projects of phase1 reach approximately 7 percent of the total value added in agriculture in that year and 205 percent of GNP. Ceylon being a food deficit country, most of the expected output would be used for import saving purposes. the contribution of phase I of the Mahaweli Ganga in reducing the 1980 deficit in food and other agricultural product is shown in Table 4 .

TABLE 4

Contribution of phase I of Mahaweli Ganaga in meeting

The food deficit by 1980

(1,000 metric tons)

Crop Demand Production Deficit (--) Percent of

Mahaweli without with deficit met

Ganga Phase I Phase I by Phase I

Phase I

Rice 1,860 200 910 10 0

Sugar 320 34 314 280 8

Maze 110 23 95 72 24.2

Chilies 60 8 35 27 22.9

Vegetable 1200 133 410 277 32.4

Pulses 50 5 44 39 11.4

For 1980 the electric power requirements of Ceylon have been estimated to range from 1,730 2,000 million. k w h. the existing and new power plants (excluding phase I of Mahaweli Ganga) is expected to produce 1,160 million k w h leaving a deficit of 570 – 840 million k w h. with and out put of 820 million k w h expected from phase 1 of the Mahaweli Ganga, even the maximum deficit in electric power could be met.

1 for Phase I and II one acre of improved irrigation is equivalent to 0.3 of new irrigation to 0.3 of new irrigated acre. This co-efficient is raised to 0.5 for phase