Secondary costs and benefits: These costs and benefits are particularly relevant for the capital expenditure decision in public enterprises. They are external to the project implementing body and there for called external cost and benefits, or simply “externalities”. These are the costs and benefits, which are imposed on other sectors- government, society or the economy as a whole – during the construction and operation of the project and for which nothing is paid or received. There are two types of externalities, viz., technological and pecuniary. The smoke and dust pollution and noise etc., are examples of technological externalities pecuniary externalities are such as increasing rates of hire for factors of production, reduction in prices of substitute projects, etc. secondary benefits are the increase in profits that can be attributed to the increased activity of processors, merchants and others who handle the project’s output or input. The major problems associated with these costs and benefits are their identification and measurement. However, for easy identification they should be related to the socioeconomic objectives assigned to the project. To measure these costs and benefits, shadow prices or imputed prices should be used.
One Comment