Livestock Research for Rural Development 21 (5) 2009 Guide for preparation of papers LRRD News

Citation of this paper

Cost-benefit analysis of nomads’ settlement project based on nomadic production systems (NPS) - A Case study: Bakkan region in Southern Iran

Gh R Badjian, D Ismail*, M S Othman** and A A Mehrabi***

Fars Research Centre for Agriculture and Natural resources, P.O. Box: 71555-617 Shiraz-Iran
badjian@farsagres.ir
*Department of Animal Science, Faculty of Agriculture, Universiti Putra Malaysia, 43400 UPM Serdang, Selangor, Malaysia
**Rainforest Academy, Universiti Putra Malaysia, 43400 UPM Serdang, Selangor, Malaysia
***Faculty of Natural Resources, University of Teheran, Karaj, Teheran, Iran

Abstract

Bakkan region located in Southern Iran is the first governmental project for nomad settlement and is unique as a pilot for regional socioeconomic analysis. This study looks at four sites of tribes of Recently Settled Nomads (RSNs) in the Nomad Production System (NPS) with 465 families. The “without” project provides for a transhumance (migratory) style of life, which for the nomads in this study, relies on animal husbandry, dependent on the highland and lowland ranges, with a cycle of 19 years. Therefore in this study the transhumance living style of the nomads is called “without” project. The “with” project, or the nomad settlement project, provides a life style of farming-animal husbandry, dependent on highland range and cropland residues. The project analysis started from 1983, to allow tracking over a cycle of 19 years, but settlement was performed from 1994. For economic analysis of NPS, an ecological impact study was done to assemble information on the vegetation cover, the ecological process of the rangeland, the ecological impacts, the available forage and energy of the rangeland, the energy requirements of the grazing animals, carrying capacity of the rangeland, and cropland capacity. Since carrying capacity analysis was implemented in this study, at selected sites in the “with” project, estimated costs could be applied. So this study attempts to determine the economic impact of the main components of the Bakkan project through analysis of "NPS" and the effect on nomad income before and after settlement over the period from 1983 to 2001. The cost-benefit (C/B) approach has been the traditional way of conducting project evaluation.

 

The results indicate that for a study in a region such as the Bakkan region, with the crucial role of ecological impacts, discounting effects are not strong unless environmental benefits significantly outweigh the cost savings benefit. The sensitivity analysis of incremental net present value (INPV) showed that with real discounted rates of 4%-54%, the “with” project is economically attractive and under these circumstances, could be considered as a viable alternative. The sensitivity analysis for the B/C ratio also showed greater economic efficiency for the “with” project, with consideration of the ecological forces. The sensitivity analysis for the C/B ratio of the “with” project, with a longer sustainable life cycle, showed much less economic efficiency due to the consideration of ecological effects. Finally in this project, discounting effects, however, are not noticeable unless environmental benefits significantly outweigh the influence of the cost savings benefit.

Key words: carrying capacity analysis, net present value, sensitivity analysis, socioeconomic analysis, transhumance


Introduction

The government project for nomad settlement started from 1983 in Bakkan, in the south of Iran. Each settled nomad family received 10 hectares of cropland with a rangeland subject to common exploitation, named Samman Orfi (SO) in 1996. They agreed to reduce the number of their animals and simultaneously to give back their rangeland in the lowlands to the government. In other words, the nomads agreed to change their living style from transhumance to a settled life style(Badjian 2005).

 

This study attempts to determine the economic impact of the main components of this project in Bakkan through analysis of the Nomad Production System (NPS) and the effect on nomad income before and after settlement over the period from 1983 to 2001. The NPS includes four new villages, namely Igdir, Ghottelloo, Safikhani, and Ardkapan that were settled during the project. There are also two old villages as another part of the NPS, namely Islamabad and Abbasabad, and Bakkan village and Galezan, the nomads who still migrate yearly. The Abbasabad, and Bakkan established themselves (without support of the government) just after the Islamic revolution in 1979, and the Bakkan have been settled there for about 200 years. The NPS has two major production systems, namely the Cropland Production System (CPS) and the highland Range Production System (hRPS), which provide the energy requirements of sheep and goats. The hRPS produces forage during a grazing period mostly in the spring and autumn, and the CPS produces alfalfa hay and grain (concentrates) used as supplements and crop residuals that are mostly used by direct grazing on the farms during summer. The hRPS and CPS models were linked together by the energy intake models of grazing animals (sheep and goats). The converted croplands belonging to RSN1-RSN4 are located on the plain of the Bakkan, with soil and slope types suitable for farming. Due to limitations of the underground water capacity, about 62% of the converted croplands could be harvested and only 37% had enough water for irrigated farming: the rest were considered to be rain-fed. In the four new villages, nine nomad families were grouped with heads appointed for farming and other activities. This project had some socio-economic welfare benefits for the settled nomads, although it had some serious environmental impacts too. The remit of this study obviously falls within the socio-economic component of the project’s impact. The technique that has been most widely used in the past, and which is favored by many authors is some form of social cost-benefit analysis. The cost-benefit approach has been the traditional way of conducting project evaluation. This can be underpinned as appropriate by the use of a herd model, simulating the output from the livestock population under the influence of the project being implemented, with its consequently improved production parameters, and comparing this to the situation in the absence of the project(Shaw 2003). Benefits and costs defined in this study are related to agricultural activities, animal husbandry (in form of income per capita) and consideration of ecological changes. This method seeks to identify the incremental costs and benefits which occur over time as the result of a project and then uses some form of discounting to consolidate these into a measure of whether or not the project will create value.

 The currency of the Islamic Republic of Iran is the Iranian Rial (Rls), and the exchange system is based on the "oil-notional" rate and is Rls. 1,733 per US$ (based on PPP) in 2001, which applies to a part of oil and gas export receipts, which is allocated to imports of essential goods and services, debt services, and imports related to large national projects (CBI 2004). PPP is Purchasing Power Parity; an international dollar has the same purchasing power with respect to the goods and services making up the Gross Domestic Products (GDP), as a U.S. dollar has with respect to the same goods and services purchased in the United States.

 

Materials and methods 

Site selection

 

This study looks at four sites of tribes of Recently Settled Nomads (four new villages) in a NPS with 465 families. These were the first governmental sites for nomad settlement and the nomads are now living in four new villages. In this study, the sites for settlement of nomads were considered as to whether they could be used for some alternative investments as part of this project. The Principal Investigator selected these sites based on the following criteria:

* Visibility and accessibility for educational opportunities

* Representation of the disparate rangeland conditions and trends, climate, and erosion types common to the south of the Fars province, in Iran

* Illustration of environmental changes, soil types, slope types, range condition and trend techniques that could be used on large and small range management sites, and combined treatments based on traditional knowledge

* Allocated dollars and the availability of additional funding

* Recommendations by the Organization for Nomadic Pastoralists Affairs (ONPA 1995) in the Fars province.

The sites chosen have some similarities, but also some differing characteristics. All are located on the plain of Bakkan, receiving the same amounts of precipitation, but have different sized areas of rangeland (SO) and cultivated cropland. The SO are located on different types of soil and slope, with differing range conditions and range trends. For a better understanding of the impact of environmental changes on the socio-economic welfare of settled nomads, this study was done during drought years (Badjian 2005). Traditionally, the economic analysis of a project has been undertaken as the last step in a series of studies covering the technical, institutional-organizational-managerial, social, commercial-marketing and financial aspects (Gittinger 1982).

 

For the Bakkan problem, this approach has recently been formalized with the development of a Carrying Capacity (CC) model based on four criteria: Socio-economic, managerial, indigenous knowledge, and environmental (Badjian 2005). The various options for intervention are then scored and ranked according to these criteria, and conflicts between the results for the different criteria are explored.

 

Decision rules

 

The impact of a project is the difference between what the situation in the study area would be “with” and “without” the project. When a project is being evaluated the analysis must estimate not only what the situation would be “with” the project but also what it would be “without” the project.

 

The “without” project provides for a transhumance (migratory) style of life, which for the nomads in this study, relies on animal husbandry, dependent on the highland and lowland ranges, with a cycle of 19 years. Therefore in this study the transhumance living style of the nomads is called “without” project. The “with” project, or the nomad settlement project, provides a life style of farming-animal husbandry, dependent on highland range and cropland residues. The project analysis started from 1983, to allow tracking over a cycle of 19 years, but settlement was performed from 1994.

 

Determination of the “with” and “without” project scenarios is always difficult. In this study the first data source for the “without” project scenario was the existing data from the Organization for Nomadic Pastoralists Affairs (ONPA) in the Fars province, covering aspects of development such as building, road construction, and electrical supply. A completed study on the Bakkan (Soltani and Mansour 1998) was the second source of data. Local experts’ and other stakeholders’ ideas were the third data source in this study.

 

The data sources for the “with” project scenario were based on a participatory technique, relying on deep interviews and a semi-structured questionnaire in a survey that covered all of the heads of 53 farming groups in Bakkan. A site-specific survey of the nomads, including data on household demographics, consumption characteristics, income characteristics and land use was done in this study. This survey provides the decision-maker with the information needed to assess the likely impacts on the nomads of conservation or conversion, and also possible mitigation strategies (McNally Mohammad Shahwahid 2003).

For consideration of a sustainable system such as the one in Bakkan, this study focused on the four new villages' stakeholders that were affected by the settlement project. The study compares the impact of ecological changes on the highland range without and with the settlement period, based on carrying capacity and the reduction in the number of grazing animals, the loss of the lowland range from the agreement of the nomads with the government as part of the settlement project, and the cropland capacity provided as compensation for supplying animal feed. An ecological impact study was done to assemble information on the vegetation cover, the ecological process of the rangeland, the ecological impacts, the available forage and energy of the rangeland, the energy requirements of the grazing animals, carrying capacity of the rangeland, and cropland capacity. The carrying capacity and cropland capacity models, showing the number of animals within the project, are used as data sources for the economic analysis of the project. In this study, the net present value (NPV) was defined as the sum of the discounted annual total benefits minus the sum of the discounted total annual costs. The project is economically viable as long as the incremental net present value (INPVp) -the “with project” scenario minus the “without project” scenario- is greater than or equal to zero. The alternative generating the highest INPV is the most economically attractive. The CBA framework can be presented in the following manner (McNally Mohammad Shahwahid 2003):

INPVp  NPVw – NPVwo ≥ 0                                                             (1)

INPVp =∑ (Rtw - Ctw) / (1+r)t - ∑ (Rtwo - Ctwo) / (1+r)t                        (2)

where:

NPVw is the net present value of conducting a project where the benefits and costs, which may or may not be transacted in the market place, are included in the analysis;
NPVwo is the net present value of not conducting the project;
INPVp is the incremental net present values of conducting the project after taking into account both benefits and costs of on-site and off-site impacts,
Ct is the costs in time "t",
Rt is the benefits in time "t" and
"r" is discount rate.

In all of the rules that follow, the discount rate clearly plays a key role. The higher the discount rate the greater the emphasis on start up costs and short term benefits and the shorter is the decision maker’s effective time horizon. The lower the discount rate, the greater the emphasis on long term costs and benefits.

 

The basic tool used in farm management in order to quantify the costs and benefits of a proposed modification to the production system is partial analysis, which is also sometimes called partial budgeting. It provides a useful framework for categorizing benefits and costs, and when the framework is completed it acts as a checklist (Putt et al 1987; Dijkhuizen and Morris 1997; Rushton et al 1999).

 

In this step all the potential impacts –the costs and benefits- resulting from implementation of the project will be identified. For that, the information in the following three subsections is required:

 

Cost assessment

 

As this analysis is based on a comparison, costs were determined for “without” project as well as for “with” project. Since carrying capacity analysis was implemented in this study, at selected sites in the “with” project, estimated costs could be applied. The costs included capital costs, operation and maintenance costs, and also the cost of animal husbandry and farming at each site. The author interviewed nomads to assist in estimating the traditional costs (Badjian 2005). The nomads were asked what costs would have been used for the feeds and feeding of animals and for traditional range management and farming at the four sites. Costs were suggested for the “with” project based on climate, soil and slope condition, range trend and condition, and past experience. Those related to the “without” project were based on daily feed requirements of animals. The costs of livestock both in “with” and “without” settlement were based on results from the survey. Costs were estimated using bid tabs of Soltani and Mansour (1998) for those particular geographic locations. The costs of the settlement project, determined from Soltani and Mansour (1998) that were assessed in this study are; Maintenance cost, Opportunity (implicit) cost, Nomads cost/ha (as investment), Direct costs (road, building, etc) value. Direct cost considered such items as building, establishing a management plan, staff costs, training and maintenance costs related to government and to the private sector. Indirect costs in this study were considered also, including such factors as damage to the rangeland in converting to cropland, reduction of the herd sizes due to the project, health of the rangeland on consideration of ecological changes and reduction of the carrying capacity. Opportunity costs included such factors as the forgone benefits to the nomads from restricted access to resources like the rangeland that they had previously used for grazing their animals.

 

Benefits assessment 

 

In order to determine which benefits would be assessed for this analysis, a thorough review of the existing literature was carried out (Badjian 2005). Timing and budget did not allow independent studies to be completed for these particular sites. Therefore, some benefit assessments described by Soltani and Mansour (1998), (e.g. rangeland value in “without” project) were assumed to be valid at the study sites. There are many other environmental and aesthetic values associated with the settlement project but they were not assessed because of either their intangibility or because of time constraints. The benefits of the settlement project, determined from the survey in this study during the drought years that were assessed are; irrigated and rain-fed crop yield values, body weight values of live animals, rangeland values.

 

In Bakkan, the benefits tend mostly to accrue to livestock and crop yields belonging to nomads, while the expenditures are usually shared between the government and the nomads. The benefits of the “with” project were estimated based on data collected from a survey for this study, or derived from the results obtained during drought years and the findings of similar studies. Crop yield values from the converted rangeland (in irrigated and rain-fed farming) and body weight values of live animals were based on sustainable harvesting and animal production, and especially based on the carrying capacity model during drought years, which was constructed in this study. The environmental factors in this study showed that the amount of precipitation has a serious effect on the nomad settlement project, which is the reason for carrying out the analysis during drought years.

 

In this study, the rangeland values (rangeland vegetation cover ) in “with” project (in 2001) were based on the Available Metabolizable Energy (MEA) per hectare, including consideration of ecological changes and the Proper Use Factors (PUF) model constructed in this study (Badjian 2005). The PUF model shows the sustainable grazing levels of the nomads’ animals, considering soil erosion, rangeland condition and rangeland trend. The MEA value was converted to the ME value of alfalfa as an index for estimation of its price. The estimation of rangeland value in “without” project was based on the feed requirements (Dry matter per day) of animals, constructed from a deep interview with the nomads in this study(Badjian 2005).

 

Discounting

 

Discounting was used to make benefit and cost streams directly comparable over the life of the project. In other words, the discount rate forces the future price down, reflecting the smaller present investment that would be needed to pay the future price, without undervaluing the future, so that future prices can be compared to present prices. Benefits accrued at different times can thus be compared.

 

Discount rates used in agricultural and livestock analysis generally range from 8 percent to 15 percent and in the field of human health they range from 3 percent to 5 percent (Acharya and Murray 1997). The effect of the discount rate on the benefit-cost ratio is a factor that was most influential to the results that were established and to the key determinants that were identified. Table 1 shows the Real Discount Rate (RDR) from 1983-2001.


Table 1.  Real discount rate used in decision rules, Bakkan

Year

Real discount rate, %*

1983

13.2

1984

6.7

1985

3.6

1986

17.4

1987

27.1

1988

22.3

1989

16.9

1990

8.6

1991

15.1

1992

22.6

1993

22.8

1994

43.7

1995

53.6

1996

26.6

1997

18.9

1998

27.3

1999

27.6

2000

19.3

2001

14.8

* Source: Central Bank of Islamic Republic of Iran (CBI 2004)


The minimum RDR occurred in 1985 (3.6%) and the maximum RDR occurred in 1995 (53.6%). RDR was considered for calculation of the benefit-cost ratio and of INPV.

 

Sensitivity analysis

 

A sensitivity analysis was completed to test the impact of uncertain variables. In order for this study to be effective, certain variables were initially set and then analyzed at the end to determine how results would change if some of those assumptions were to change.

Sensitivity analysis is required because of uncertainty, risk, and inaccuracy of estimations. Results for different values of the uncertain variables were obtained and tested for sensitivity.

 

The following process may be used as an example to show how results of an analysis may change when there is a change in some of the assumptions on which the analysis is based.

 

The mean of RDR, as the value of future gains, with an uncertainty (+/-) of its standard deviation (SD) is considered for sensitivity analysis. Based on Table 1 and consideration of minimum, maximum, and mean RDR values, an RDR of 4% (Min. RDR value), 21.5% (mean RDR value), 54% (Max. RDR value), 33% (21.48+12) and an RDR of 10% (21.48-12) were evaluated in the sensitivity analysis to verify what effects varying discount rates would have on this study.

 

Choice of an option

 

Finally, the analyst can recommend which project alternative to select, taking into account the result of the CBA and the sensitivity analysis. If there is only one alternative, the analyst can recommend the project when INPV≥0 subject to the sensitivity analysis. If there is more than one project alternative, the analyst can recommend the one with the highest INPV.

 

Results and discussion 

Cost and benefit of rangeland and animal husbandry

 

In order to determine the benefits of the projects in the limited time available, it was assumed that the gross income (benefits) of livestock (animal units) for the “without” project would be the same as the benefits for the “with” project. By accepting this assumption, and with calculations of costs in both projects, it was possible to make a comparison based on cost savings of one project over another. Costs included capital as well as operation and maintenance, or animal husbandry in “with” and “without” projects during drought years (where applicable) with probable costs varying from one project to another. The settled nomads (in “with” project) require more operation and maintenance investment for their animals in comparison with the migrant nomads (in “without” project).

 

Tables 2 and 3 summarize the annual mean life cycle of benefits (gross income) and costs to four new villages for both projects over 19 drought years. The results of Table 2 show total costs of $147/AU and $111/AU for livestock in “without” and “with” projects respectively.


Table 2.  Costs obtained from the survey for herd composition in “with” and “without” projects during drought years-Bakkan

“without” project

Sites

RSN1

RSN2

RSN3

RSN4

Total

n*

25,628

8,926

14,263

18,433

67,249

Transportation, 1000$

207

57.7

115.2

149

523

Vet. Services, 1000$

14,791

5,152

8,231

10,636

38,810

Supplementary, 1000$**

1,468

534

682

1,102

3,786

Residual, 1000$

93.2

29.1

72

59.1

253

mortality***, 1000$

148

51.5

82.3

106

388

Rangeland forage****, 1000$

976

371

593

670

2,610

Shepherd, 1000$

518

180

288

372

1,358

Etc, 1000$

343

123

184

247

896

Total costs, 1000$

3,767

1,351

2,025

2,716

9,859

TC/AU

147

151

142

147

147

*Mean herd based on sheep (no. of goats herd * 0.8 + no. of sheep herd) during drought years, Soltani et al and Mansour 1998)

**Supposed to be used in lowlands during migration

***5.77USD/AU/yr

**** Rangeland production, based on dry matter value of wheat straw ($0.231/kg)-MER:1.5 kg DM/day (grazing duration)

“with” project

 Sites

 RSN1

 RSN2

 RSN3

 RSN4

 Total

n*

5,832

11,152

9,468

9,123

35,575

Vet. Services (1000$)

3.3

6.4

5.5

5.3

20,529

Residual (1000$)

21.2

36.3

47.8

29.3

135

Supplementary (1000$)

334

667

566

545

2,112

mortality**  (1000$)

13.5

25.7

21.9

21

82.1

Shepherd (1000$)

118

225

191

184

718

Rangeland forage***(1000$)

120

125

170

74.3

490

Etc (1000$)

61

109

100

86

356

Total costs (1000$)

671

1,194

1,103

946

3,913

TC/AU (1000$)

115

107

117

104

111

*Mean herd composition (60% sheep + 40% goats), based on the CC model

***based on MEA of alfalfa


This means that the total cost of animal husbandry based on the afore-mentioned herds in the “without” project is more than that of the animal husbandry in the “with” project, with the same cost items (except transportation cost). This Table also shows the rangeland values of both projects while the evaluation of rangeland in the “without” project was based on animal daily feed requirements. The results of the survey indicated that the nomads used to feed their animals with a mean of 1.5 kg dry matter per day (worth $0.231/kg at a price equal to that of wheat straw). The evaluation of rangeland in the “with” project was based on the energy requirement of animals and the CC model during drought years (worth $0.52/kg, at a price equal to that of Alfalfa hay). The results of Table 2 also show $199/ha and $48/ha of rangeland value in “without” and “with” projects respectively. The difference of these two amounts is referring to forage production in highland range and CC in “without” and “with” projects. The Table 3 shows the gross animal husbandry income of nomads during drought years.


Table 3.  Gross livestock income of RSNs during drought years- Bakkan

Sites

RSN1

RSN2

RSN3

RSN4

Total

n1

Sheep

4,948

10,783

9,089

8,778

33,598

Goat

7,152

11,704

10,035

9,639

38,530

LBW, kg

Sheep

50

50

50

50

 

Goat

40

40

40

40

 

Culling, %

Sheep

80

80

80

80

 

Goat

70

70

70

70

 

TLBW2

(1000kg)

Sheep

198

431

364

351.1

1,344

Goat

200

328

281

270

1,079

PLBW3

(1000$)

Sheep

1,142

2,489

2,098

2,026

7,755

Goat

1,040

1,702

1,459

1,402

5,603

Manure

(1000$)4

Sheep

5.7

12.4

10.5

10.1

38.7

Goat

8.3

13.5

11.6

11.1

44.5

Wool

(1000$)5

 

22.8

49.8

42

40.5

155

TGI6 ($)

Sheep

1,171

2,551

2,150

2,077

7,949

Goat

1,048

1,715

1,471

1,413

5,647

GTGI7 , $

2,219

4,267

3,621

3,490

13,596

TGI/AU, $

183

190

189

190

188

1-number of sheep/goat in rangeland (AUGP)+cropland (AUFP) during drought years

2-Total Live Body Weight

3-Price of Total Live Body Weight

4-$1.154 for manure of Animal per Animal Unit (AU)

5-$4.616 USD/AU for wool

6-Total Gross Income per Animal Unit

7-Grand Total of Gross Income


Based on the results, the total gross income per animal unit is $188 and taken to be the same for “with” and “without” project. Comparison of the results in Tables 2 and 3 shows the net profit achieved by animal husbandry.

 

Cost and benefit of farming activity           

 

The characteristics of the nomad population and the cropland belonging to the farming groups are shown in Table 4.


Table 4.   The characteristics of population and cropland of settled nomads’ project-Bakkan

Sites

Farming group

Family

Population

Cropland area/ha

Wells debi

Irrigated land/ha

Rain fed
land/h

Total cultivated
land/ha

Total fallow
land/ha

RSN1

14

126

845

1,280

66

328

403

731

549

RSN2

9

89

600

825

87

448

302

750

75

RSN3

14

126

970

924

70

390

334

724

200

RSN4

16

144

993

1,685

140

547

155

702

983

Total

53

485

3,408

4,714

363

1,713

1,194

2,907

1,807


Based on this Table, the 53 farming groups have 1,712.7 ha of irrigated farm land and 1,194 ha of rain-fed farm land.  Table 5 shows the characteristics of the crop types.


Table 5.  The characteristics of crop types of settled nomads’ project-Bakkan

Sites

Irrigated wheat

Rain fed wheat

Irrigated bean

Rain fed bean

sugar beat

alfalfa

barley

Area/ha

kg/ha

Area/ha

kg/ha

Area/ha

kg/ha

Area/ha

kg/ha

Area/ha

kg/ha

Area/ha

Ton/ha

Area/ha

Ton/ha

RSN1

137.2

2,500

403

500

0

0

0

0

134

21,000

28

5,000

28

1,500

RSN2

195

3,900

241

700

150

2,500

61

400

51

30,000

52

3,500

0

0

RSN3

192

3,600

247

800

179

1,800

87.5

500

0

0

0

0

18.9

2,000

RSN4

280

3,500

126

500

118

2,400

28.8

450

149

27,500

0

0

0

0

Total

804.2

 

1,017

 

447

 

177.3

 

334

 

80

 

46.9

 


The crop production data, including consideration of the crop area are the basis for calculation of the benefits and costs of farming activity in the “with “settlement project. Table 6 shows the cost, gross income, and benefits of irrigated and rain-fed crop types.


Table 6.  The gross income, total cost, and net benefit of crop types for the settled nomad project during wet years – Bakkan

Sites

Irrigated wheat

Rain-fed wheat

Irrigated bean

Rain-fed bean

sugar beat

alfalfa

barley

Total GI

1000$

Grand TC

1000$

Net

GI*

1000$

TC**

1000$

GI

1000$

TC

1000$

GI

1000$

TC

1000$

GI

1000$

TC

1000$

GI

1000$

TC

1000$

GI

1000$

TC

1000$

GI

1000$

TC

1000$

Benefit

1000$

RSN1

212

  90

131

129

0

0

0

0

496

320

73

43.4

24.7

18.5

  937

601

  336

RSN2

470

128

110

76.9

781

206

57.7

63.4

268

121

135

80.6

0

0

1,822

676

1,146

RSN3

428

127

129

78.6

681

245

79.3

90.9

0

0

0

0

22.2

12.5

1,338

554

  784

RSN4

606

185

  41

40.2

590

162

23.5

23.9

766

355

0

0

0

0

2,026

765

1,261

Total

1,716

530

411

325

2,052

613

160.5

178.2

1530

79

208

124

46,9

31

6,123

2,596

3,527

*Gross income, **Total cost


The results indicate that the net profit of the farming activity of nomads is $3,526,699 during wet years. Table 7 shows the net profit from irrigated and rain-fed cropland during wet years.


Table 7.  The mean gross income, cost, and net profit of irrigated and rain fed cropland in the settled nomad project during wet years-Bakkan

Sites

Mean cost/$

Mean gross income/$

Mean Benefits/$

Irrigated land/ha

Rainfed land/ha

Irrigated
land/ha

Rain fed
land/ha

Irrigated
land/ha

Rain fed
land/ha

RSN1

1,834

319

2,639

326

805

6.9

RSN2

1,111

464

3,693

555

2581

90.7

RSN3

955

508

2,842

622

1888

115

RSN4

1,281

413

3,584

416

2,303

2.6

Mean

1,295

426

3,189

480

1,894

53.7


The results of the survey in this study showed a reduction of 20% in farming area and associated net profit due to reduction of precipitation during drought years. Based on Tables 6 and 7, the net benefits for one hectare of irrigated land and rain-fed land are $1,894 and $54 respectively. The difference of the farming value between the irrigated and the rain-fed lands indicates the impact of environment, especially precipitation, on the net benefits.

 

Capabilities of the projects

 

A set of real and predicted data is shown in Table 8.


Table 8.  The capability data of the project during drought years, Bakkan

Real and predicted data surveyed in the study

Year

Value

Unit

Grazing capacity of crop residues (with settlement)*

2001

28,596

AUFP

Carrying capacity of highland range (without settlement)**

1983- 1994

67,249

AU/GP

Carrying capacity of highland range (with settlement)*

2001

6,979

AU/GP

CC of highland range and cropland (without settlement)*

2001

35,575

AU/GP

Total cropland area (converted rangeland)

2001

4,714

ha/yr

Harvested area (irrigated)

2001

1,713

ha

    Wheat

2001

804

ha

    Bean

2001

447

ha

    Alfalfa

2001

80

ha

    Sugar beet

2001

334

ha

    Barley

2001

47

ha

Harvested area (rain-fed)

2001

1,194

ha

    Wheat

2001

1,017

ha

    Bean

2001

177

ha

Annual fallow area***

2001

1,807

ha

Total rangeland area (After project)

2001

10,223

ha

Total rangeland area (Before project)

2001

13,130

ha

Other assumptions:

Population                                                                      485 Families (3408 persons)

Number of farming groups                                           53 

Discount rate                                                                  Refer to Table 10.1

Reduction factor due to drought                                 0.2 in with and without projects

All other factors are considered constant

* predicted mean herd composition (60% sheep+40% Goats) during drought years

**Real herd data based on the survey results

***supposed to be grazed as rangeland


The introduced real data were based on the survey which showed that the Carrying Capacity (CC) of 67,249 AU was dependent on highland range and rental cropland in “without” project in Bakkan. The predicted CC of 6,979 AU/GP was based on the CC model developed in this study for the “with” project during drought years, introduced in previous chapters. With the inclusion of a CC of 28,596 AU/FP on cropland, the total capability of the Bakkan is shown to be 35,575 AU/GP and FP in “with” project. In “with” project, 4,714 hectares of the rangeland were converted to cropland, but only 2,907 hectares of it could be cultivated at the end of the study (2001) due to an inadequacy of water for irrigation and other ecological restrictions such as lack of precipitation. This means that usually 1,807 hectares yearly is left as fallow and can be grazed upon in a similar fashion to the rangeland. The total rangeland that was considered in the project, as the main resource to support the grazing of the nomads’ animals, was 13,130 hectares.

 

Assumptions of cost and benefit values

 

Table 9 is based on the details of Table 8 and shows the potential catalog of cost and benefit values, in US$, as assumptions for the “with” and “without” projects of RSN1-RSN4.


Table 9.  The benefit and cost values of “with” and “without” nomads settlement project in Bakkan

Drought years

Year

Value

Unit

Without Program

Benefits:

 

 

 

Rangeland value1

1-19

199

US$/ha/yr

Body weight of live animal value5

1-19

188

US$/Head/yr

Settlement project and management costs:

Body weight of live animal value5

1-19

147

US$/Head/yr

Direct cost value (Government cost)2

1-19

96

US$/person/yr

Maintenance cost3

5-19

15

US$/person/yr

With Program

Benefits:

 

 

 

Rangeland value1

1-11

199

US$/ha/yr

Rangeland value3

12-19

48

US$/ha/yr

Irrigated crop yield  value2

12-19

3,189

US$/Ha/yr

Rain-fed crop yield  value2

12-19

480

US$/Ha/yr

Body weight of live animal value4

1-19

188

US$/Head/yr

Settlement project and management costs:

Direct cost value (Government cost)2

1-19

120

US$/person/yr

Nomads'  cost (as investment) and indirect cost3

12-19

773

US$/person/yr

Maintenance cost3

5-19

19

US$/person/yr

Mean cost of irrigated crop production

12-19

1295

US$/ha/yr

Mean cost of rain-fed crop production

12-19

426

US$/ha/yr

Body weight of live animal value5

1-11

147

US$/Head/yr

Body weight of live animal value5

12-19

111

US$/ha/yr

1 Based on the DM production, 1.5 kg DM/AU (MER), and grazing period (Table 10.2)

2 The irrigated and rain-fed cropland value plus the rest of rangeland value is compared with the rangeland value    in without project

3 With consideration of 1,807.4 ha of fallow land as rangeland (Table 10.2)

4 Based on the herds no. in "with" and "without" project benefits (Table 10.3)

5 Based on Table 10.3

US$ = 1,733 Iranian Rial (Rls)


The benefit values in this catalog were rangeland, cropland (irrigated and rain-fed), and livestock, the three base resources for animal feeding and production. The rangeland value in this list for the “without” project, is based on feed requirements of animals unit (AU) per grazing duration without consideration of ecological restrictions, during drought years (Table 2).

 

The rangeland value for the “with” project is derived after calculation of the ecological restrictions on the land during drought years. Therefore, the rangeland value is based on the CC model and is less than the value for the “without” project. The value of the rangeland started to decline starting with the performance of the “with” project during drought years.          

 

The worth of animal husbandry (live body weight) decreased from the start of the project due to the decrease of carrying capacity as a result of the project (Table 9). The main reason for the increasing value of the animals per head was due to changes in feeds and feed prices, which was one of the results of the survey in this study. The government carried out some construction for the nomads’ welfare for such purposes as road construction, provision of electricity, and so on. The cost values in this catalog for the “with” project consist of direct costs that were borne by the government for conversion of rangeland to cropland during the 1983-2001 period, investments by nomads during 1994-2001, and maintenance costs during 1987-2001. The opportunity or implicit costs in “with” project are included in the animal husbandry and farming costs. The “with” project covers 485 nomad families with a population of 3,408 persons and the management of the farming in the project is done by 53 heads of farming groups. The heads of the farming groups were the main partners for the semi-structured questionnaires and the deep interviews in the survey of this study.

The cost values for the “without” project consist of direct and maintenance costs that were borne by the government during 1983-2001 for nomads’ living facilities. These direct costs are considered for 19 years in the “without” project, without investment of the nomads for building construction and public welfare.

 

Cost/Benefit ratio

 

The benefit-cost ratio is a means of comparing the dollar figure of the total benefits derived in relation to the cost of a project. Tables 10 and 11 were produced to illustrate the determination of the benefits and costs and the benefit/cost ratio. These Tables, based on the results of the Table 9,  show that for each dollar spent on the “with” nomads’ settlement project (Table 10), $1.62 in benefits were generated,


Table 10.  The present values of the “with project”, after nomad settlement- Bakkan

“with” project during drought years

Year

Benefits (1000$)

Costs (1000$)

Net benefits
1000$

Present values (1000$)

t

RV

Ic

Rc

Ah

Total

Ah

Ic

Rc

Direct

Nomads

Mainte
nance

Total

Min. real(4%)

10%

Mean real(21.5%)

33%

Max. real 54%

1

2608.9

 

 

12643

15252

9885603

 

 

409

 

 

10295

4957

4766

4506

4080

3727203

3218948

2

2608.9

 

 

12643

15252

9885603

 

 

409

 

 

10295

4957

4583

4097

3358

2802408

2090226

3

2608.9

 

 

12643

15252

9885603

 

 

409

 

 

10295

4957

4407

3724

2764

2107074

1357290

4

2608.9

 

 

12643

15252

9885603

 

 

409

 

 

10295

4957

4237

3386

2275

1584266

881357

5

2608.9

 

 

12643

15252

9885603

 

 

409

 

64.7

10359

4892

4021

3038

1848

1175618

564834

6

2608.9

 

 

12643

15252

9885603

 

 

409

 

64.7

10359

4892

3866

2762

1521

883923

366775

7

2608.9

 

 

12643

15252

9885603

 

 

409

 

64.7

10359

4892

3718

2511

1252

664604

238166

8

2608.9

 

 

12643

15252

9885603

 

 

409

 

64.7

10359

4892

3575

2282

1030

499702

154653

9

2608.9

 

 

12643

15252

9885603

 

 

409

 

64.7

10359

4892

3437

2075

848

375716

100424

10

2608.9

 

 

12643

15252

9885603

 

 

409

 

64.7

10359

4892

3305

1886

698

282493

65210

11

2608.9

 

 

12643

15252

9885603

 

 

409

 

64.7

10359

4892

3178

1715

574

212401

42344

12

490.7

4369

458496

12643

17961

3948825

2218

509

409

2634

64.7

9784

8178

5108

2606

790

266947

45962

13

490.7

4369

458496

12643

17961

3948825

2218

509

409

2634

64.7

9784

8178

4911

2369

650

200712

29845

14

490.7

4369

458496

12643

17961

3948825

2218

509

409

2634

64.7

9784

8178

4723

2153

535

150911

19380

15

490.7

4369

458496

12643

17961

3948825

2218

509

409

2634

64.7

9784

8178

4541

1958

441

113467

12584

16

490.7

4369

458496

12643

17961

3948825

2218

509

409

2634

64.7

9784

8178

4366

1780

363

85313

8172

17

490.7

4369

458496

12643

17961

3948825

2218

509

409

2634

64.7

9784

8178

4198

1618

298

64145

5306

18

490.7

4369

458496

12643

17961

3948825

2218

509

409

2634

64.7

9784

8178

4037

1471

246

48230

3446

19

490.7

4369

458496

12643

17961

3948825

2218

509

409

2634

64.7

9784

8178

3882

1337

202

36263

2237

Total

32623.5

34952

3667968

240217

311460

140332233

17744

4072

77671

21072

971

191963

119496

78859

47284

23773

15281397

9207160

RV: Rangeland value; Ic: Irrigated crops; Rc: Rain-fed crops; Ah: Animal husbandry


while $1.49 in benefits were generated for each dollar spent “without” the nomad settlement project (Table 11).


Table 11.  The present values of the “without project”, before nomad settlement- Bakkan

“without” project during drought years

Year

benefits (1000$)

Costs (1000$)

Net benefits,

1000$

Present values (1000$)

T

Range land value

Animal units (1000)

Total

Animal units
(1000)

Direct costs

Maintenance

Total

Min. real (4%)

10%

Mean real

-21.50%

33%

Max. real

54%

1

2,609

12,643

15,252

9,886

327

51.1

10,264

4,988

4,796

4,534

4,105.2

3,750

3,239

2

2,609

12,643

15,252

9,886

327

51.1

10,213

4,988

4,612

4,122

3,378.8

2,820

2,103

3

2,609

12,643

15,252

9,886

327

51.1

10,213

4,988

4,434

3,747

2,780.9

2,120

1,366

4

2,609

12,643

15,252

9,886

327

51.1

10,213

4,988

4,264

3,407

2,288.8

1,594

889

5

2,609

12,643

15,252

9,886

327

51.1

10,264

4,988

4,100

3,097

1,883.8

1,199

576

6

2,609

12,643

15,252

9,886

327

51.1

10,264

4,988

3,942

2,816

1,550.4

901

374

7

2,609

12,643

15,252

9,886

327

51.1

10,264

4,988

3,790

2,560

1,276.1

678

243

8

2,609

12,643

15,252

9,886

327

51.1

10,264

4,988

3,645

2,327

1,050.3

509

158

9

2,609

12,643

15,252

9,886

327

51.1

10,264

4,988

3,504

2,115

864.4

383

102

10

2,609

12,643

15,252

9,886

327

51.1

10,264

4,988

3,370

1,923

711.5

288

66.5

11

2,609

12,643

15,252

9,886

327

51.1

10,264

4,988

3,240

1,748

585.6

217

43.2

12

2,609

12,643

15,252

9,886

327

51.1

10,264

4,988

3,115

1,589

481.9

163

28.0

13

2,609

12,643

15,252

9,886

327

51.1

10,264

4,988

2,996

1,445

396.7

122

18.2

14

2,609

12,643

15,252

9,886

327

51.1

10,264

4,988

2,880

1,314

326.5

92.0

11.8

15

2,609

12,643

15,252

9,886

327

51.1

10,264

4,988

2,770

1,194

268.7

69.2

7.7

16

2,609

12,643

15,252

9,886

327

51.1

10,264

4,988

2,663

1,086

221.2

52.0

5.0

17

2,609

12,643

15,252

9,886

327

51.1

10,264

4,988

2,561

987

182.0

39.1

3.2

18

2,609

12,643

15,252

9,886

327

51.1

10,264

4,988

2,462

897

149.8

29.4

2.1

19

2,609

12,643

15,252

9,886

327

51.1

10,264

4,988

2,367

816

123.3

22.1

1.4

Total

49,571

240,217

289,788

187,834

6,213

971

194,863

94,772

65,511

41,724

22,625.8

15,048

9,237


By general comparison, it seems that each dollar invested in the “with” project, generated a bit benefits more than the same amount invested in the “without” project, without consideration of ecological restrictions. It is clear that in the “without” project, the benefit of the rangeland in dollars has negative relationship with the constraints required for sustainability. This means that by increasing the sustainability, the benefit of the rangeland will decline, due to the decrease in CC. The opposite applies for the relationship between the benefit of animal husbandry and CC. This means that with decreasing CC, the profit of animal husbandry will decline, but the profit of this activity will be increased due to a decrease in the cost per animal unit (AU).

 

Under worse conditions, such as in drought years in both the lowlands and highlands (Bakkan), this study indicates that consideration of environmental benefits such as soil, range trend and range condition, is very important and the sustainability of the nomads life style in the future is strongly dependent on these considerations. Although the performance of the nomad settlement project has a little bigger benefit/cost ratio in comparison with the “without” project, it is a sustainable and viable alternative for nomads living in Bakkan.

 

Incremental net present value (INPV)

 

Tables 11 and 12 showed the discounted annual total benefits and costs in the “with” and “without” projects within the projects’ cycle.


Table 12.  Effect of Discount Rates on Incremental Net Present Values (INPV)

Year

Discounted Net Benefit Values (1000$)

4%

10%

21.5%

33%

54%

NPVw
*

NPVwo
**

INBV
***

NPVw

NPVwo

INBV

NPVw

NPVwo

INBV

NPVw

NPVwo

INBV

NPVw

NPVwo

INBV

1

4767

4796

-29.5

4507

4534

-27.9

4080

4105

-25.2

3727

3750

-23

3218.9

3239

-19.9

2

4583

4612

-28.3

4097

4122

-25.3

3358

3379

-20.8

2802

2820

-17.3

2090.2

2103

-12.9

3

4407

4434

-27.3

3724

3747

-23

2764

2781

-17.1

2107

2120

-13

1357.3

1366

-8.4

4

4237

4265

-26.2

3386

3407

-20.9

2275

2289

-14

1584

1594

-9.8

881.3

887

-5.4

5

4021

4100

-78.4

3038

3097

-59.2

1848

1884

-36

1176

1199

-22.9

564.8

576

-11

6

3867

3942

-75.4

2762

2816

-53.9

1521

1550

-29.7

884

901

-17.2

366.8

374

-7.1

7

3718

3790

-72.5

2511

2560

-49

1252

1276

-24.4

665

678

-13

238.2

243

-4.6

8

3575

3645

-69.7

2282

2327

-44.5

1030

1050

-20

500

509

-9.7

154.6

158

-3

9

3437

3504

-67

2075

2115

-40.5

848

864

-16.5

377

383

-7.3

100.4

102

-2

10

3305

3370

-64.5

1886

1923

-36.8

698

712

-13.6

283

288

-5.5

65.2

66.5

-1.3

11

3178

3240

-62

1715

1748

-33.4

574

586

-11.2

212

217

-4.1

42.3

43.2

-.8

12

5108

3115

1993

2606

1589

1017

790

482

308

267

163

104

46

28

17.9

13

4911

2996

1916

2369

1445

924

650

397

254

201

122

78.3

29.8

18.2

11.6

14

4723

2880

1842

2154

1313

840

535

327

209

151

192

58.9

19.4

11.8

7.6

15

4541

2770

1771

1958

1194

764

441

269

172

114

69.2

44.3

12.6

7.7

4.9

16

4366

2663

1703

1780

1086

694

363

221

141

85.3

52

33.3

8.2

5

3.2

17

4198

2561

1638

1618

987

631

298

182

116

64.1

39.1

25

5.3

3.2

2

18

4037

2462

1575

1471

897

574

246

150

95.8

48.2

29.4

18.8

3.4

2.1

1.3

19

3882

2367

1514

1337

816

522

202

123

78.8

36.3

22.1

14.1

2.2

1.4

.9

Total

78861

65509

 

47276

41723

 

23773

22627

 

15284

15047

 

9207

9235

 

INPV

 

 

13351

 

 

5551

 

 

1146

 

 

234

 

 

-27

* Net Present Value in "with" project

** Net Present Value in "without" project

***Incremental Net Benefit Value


The present values of the “with” and “without” projects showed decline in increasing of the real discount rate of net benefits. This means that with the real discounted rate of net benefits of the “with” and “without” projects, the value of the “with” project is the same even including the costs of its sustainability, while we do not consider the ecological impacts in the “without” project. Table 12 and Figure 1 show decline of INPV value with increasing of discount rates from 4% (the minimum discount rate value) till 33% (mean real discount rate + SD).



Figure 1.  Effect of discount rates on incremental net present values (INPV)


The positive results of INPV value indicated that the project is economically attractive and could be considered as an alternative, especially since sustainability is one of its important characteristics. 

 

Sensitivity analyses with the effect of discount rate on the benefit-cost ratio

 

Sensitivity analysis is required because of the uncertainty, risk and inaccuracy of estimates. Results are obtained for different values of the uncertain variables to test the sensitivity to these particular inputs. This process may show how results of an analysis change when some of the assumptions on which the analysis is based are altered (EAODO 2001). The factors which are most influential to the results are established with the key determinants identified. One of these factors is the effect of discount rate on Benefit/Cost ratio. The discount rate was compared at 4%, 10%, 21.5%, 33%, and 54% to determine whether this factor had any effect on the results of the analysis. Table 12, based on the results of Tables 10 and 11, and Figure 1 demonstrate the effect of discount rates on the INPV value. Comparison of INPV values indicates that the project with the discounted INPV of 4% is more economically viable (most economically attractive) than the others. The project with a discounted rate of 54% has an INPV of less than zero, so can not be accepted as an alternative in this study.

 

Figure 2 shows cost/benefit ratio for the “with” project in comparison to the “without” project for all five discounted rates.



Figure 2.  Sensitivity analysis: effect of discount rate on benefit/cost (B/C) during drought years in Bakkan


The INPV has a range of 0.73-0.79 for different discount rates. It seems that this real result, based on only monetary considerations, indicates that the investment of the government for nomad settlement projects, given the assumed factors, can be a final solution for providing a new life style to the nomads especially when the ecological changes and sustainability are considered in this result.

 

Conclusions 


References 

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Received 15 June 2008; Accepted 17 March 2009; Published 1 May 2009

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