Valuation Study

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Cost of Sand Mining

Attributes

Medium: Land

Country: Sri Lanka

Analytical Framework(s): Economic Analysis, Other

Study Date: 2009

Publication Date: 2010

Major Result(s)

Resource/Environmental Good LKR
(2009)
Net income loss from crops 364,397.00
Damage to the riverbanks (adjusted per year) 2,507,000.00
Damage to roads 1,772,490.00
Opportunity cost of the land 1,017,500.00
Total 4,983,110.00
Private cost 49,839,700.00
Private benefit 66,784,200.00
Net private benefit 16,944,500.00
External cost 4,983,110.00
Social cost 54,822,800.00
Net social benefit 11,961,400.00

Study Note: The main objective of this study is to identify appropriate policy options that minimize environmental degradation from river sand mining while meeting the requirements of stakeholders, including the construction industry and local people who depend on sand mining.

Study Details

Reference: L.H.P. Gunaratne. 2010. Policy Options for Sustainable River Sand Mining in Sri Lanka. EEPSEA Research Report, No. 2010-RR7.

Summary: ndiscriminate river sand mining, due to the recent boom in the construction industry in Sri Lanka, has created a number of environmental and social problems. Within this context, this study attempts to identify policy options for sustainable river sand mining that minimize environmental degradation while meeting the requirements of the construction industry and local people. The study followed four separate analyses: comparison of annual costs and the benefits of selected mining sites, analysis of miners' views and preferences using choice modeling, evaluation of expert opinion using multi-criteria analysis, and a comparison of alternative sources of river sand. The comparison of the costs and benefits of sample mining sites revealed that the social cost of river sand mining exceeds the private costs; however, the fact that social benefits were still found to be non-negative at the study sites may be due to the under-reporting of environmental effects and the exclusion of off-site costs. It was observed that although the increased costs of restoration and other costs of overmining are borne by government institutions, government income has remained at a very low level. The results of the discrete choice experiment with the miners indicated that they believe the negative effects of sand mining can be partly mitigated by increasing government revenue towards an environmental trust fund (ETF) with some level of co-management. Strict rules, regulations and awareness programs, as suggested by the media and environment groups, were not found to be productive. Alternative policies for sustainable sand mining in three major rivers were ecologically, economically, socially and technically evaluated using multi-criteria analysis. The restriction of mining at vulnerable sites was found to be the best management alternative followed by the establishment of an ETF for the Ma Oya River, where there are more than 70 mining sites. Community-based management was found to be the best option for the Mahaweli and Deduru Oya rivers. Using off-shore sand was found to be the best way to decrease pressure on rivers for sand. However, at present, the price of off-shore sand is slightly higher than that of river sand and it is less popular because there is the possibility that shells and chlorides are present in it. Prices could be brought down further by expanding offshore sand mining operations because off-shore dredging is sensitive to economy of scale. This could be achieved by mandating the compulsory use of off-shore sand for large construction projects and landfilling, especially in Western Province.

Site Characteristics: Sri Lanka is an island with a land area of 65,525 square kilometers, endowed with 103 distinct rivers and streams and 94 coastal basins. Most of these rivers originate in the central highlands and travel to all corners of the country. Except for the longest river, the Mahaweli, which stretches for 335 km, all of the other rivers are less than 160 km in length. These rivers have always been an integral part of life for the people of Sri Lanka as the location of various resources, including water, and as a means of development for cities and villages throughout the country's 25 centuries of agricultural civilization. River sand is an essential raw material in the construction industry and mining furnishes the rural population with work as miners, transporters and vendors. Sand is a resource that can be freely accessed and mining activities have expanded dramatically - in some river basins by 2.5 times more than the number of original sites . This expansion is related to the boom in the construction industry that followed the Asian Tsunami of 2004. The tsunami changed the appearance of rivers and gave rise to a substantial number of environmental problems.

Comments: The study was limited by not using the spatial data related to the issue. This should be combined with the economic analysis to generate meaningful results. For instance, in representative sites estimation of the optimal rate of sand extraction is very useful. Then this could be compared with renewal and extraction rates.

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