Impact Assessment and Project Appraisal

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Socio-economic impact assessment of industrial

projects in India

R Ramanathan & S Geetha

To cite this article: R Ramanathan & S Geetha (1998) Socio-economic impact assessment
of industrial projects in India, Impact Assessment and Project Appraisal, 16:1, 27-32, DOI:
10.1080/14615517.1998.10590184

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Impact Assessment and Project Appraisal, volwne 16, nwnber I, March 1998, pages 27 32, Beech Tree Publishing, I 0 Watford Close, Guildford, Surrey GUI 2EP, UK.
Socio-economics
Socio-economic impact assessment of
industrial projects in India
R Ramanathan and S Geetha
Socio-economic impact assessment (SEIA) is
conducted in advance to determine the socio-
economic consequences of industrial projects.
The focus is on the project-affected people. All
possible data is collected from census inform-
ation and academic institutions. Personal inter-
views are also conducted with the local people
and their administrative heads. The main
phases of the project addressed are pre-
construction, construction and operation.
Issues addressed include compensation pay-
mentfor the land, provision ofemployment, and
alternative accommodation for the people
affected. A decision on the acceptability of the
project is taken after assessing the positive and
negative socio-economic impacts.
Keywords: environmental impact assessment; socio-economic
assessment; India
R Ramanathan and S Geetha are in the Indira Gandhi Institute of
Development Research, General Vaidya Marg, Goregaon (East),
Mumbai 400 065, India.
The authors would like to thank their former colleague Dr T R
Muraleedharan for initiating these studies.
Impact Assessment and Project Appraisal March /998
S
ocio-economic impact assessment (SEIA) is a
study for assessing, in advance, the social and
economic consequences of initiation of any in-
dustrial activity to the human population. SEIA forms
a part of the environmental impact assessment (EIA)
which is mandatory for certain industrial projects in
India.
SEIA of large industrial projects assumes special
importance because these projects are likely to affect
the socio-economic fabric of a section of people,
generally called the project-affected people (PAP).
Socio-economic impacts occur at all the four stages
- pre-construction (planning/ policy development);
construction (implementation); operation (mainte-
nance); and decommissioning (abandonment)- of
industrial projects.' Of these four stages, the first three
are usually given importance, even though for a ho-
listic analysis all the four stages should be considered.
The guidelines and principles' for social impact
assessment have recommended an exhaustive list of
variables, under the following headings, to be consid-
ered for conducting SEIA: population characteristics:
community and institutional structures: political and
social resources: individual and family changes: and
community resources. With these guidelines in the
background, we discuss in this paper the procedure
generally followed for conducting SEIA of industrial
projects in the Indian context. The discussion is based
on the authors' experience in conducting socio-
economic impact assessment of development
projects.
In India, specific environmental guidelines for sit-
ing of industries are available. 2 SEIA and EIA are
mandatory for obtaining environmental clearance.
SEIA, and for that matter EIA, is usually carried out
1461-5517/98/010027-6 US$08.00 © IAIA 1998 27
Socio-economic impact assessment
after the basic economic and financial analyses of the
concerned project are completed. 3 The role ofEIA or
SEIA, in influencing the site selection and other ac-
tivities associated with the planning stage, is usually
limited. However, SEIA is highly useful in identify-
ing the socio-economic impacts of the ensuing indus-
trial project and taking remedial measures for
minimising the adverse impacts, if any. These reme-
dial measures form the socio-economic environ-
mental management plan of the SEIA.
Methodology of assessment
Identification of the PAP and the impact area forms
the first step in any SEIA. The definition of impact
area is guided by proximity criteria. The impact area
is typically defined as the area covering a 10 km radius
from the site of the industrial project. The size of the
impact area varies according to the nature of the
industrial project. For example, for a project to lay
petroleum pipelines, the impact area may consist of
about one km on either side of the pipeline route. The
PAP will form a part of the people living in the impact
area.
To ascertain the socio-economic impacts, it is es-
sential to study the present status of the people living
in the impact area with special reference to the PAP.
This is done using the baseline data from various
published sources, as well as actually visiting the
places in the impact area and collecting information
through personal interviews with the local population,
representatives of the people and· administrative
heads, to assess their views on the proposed industrial
project on the topics:
• awareness and perception about the proposed
project;
• the short-term impacts (the direct effect of the
particular industrial project); . available for cultivation. Cultivable waste includes
• the long-term impacts (due to the general industri-
alisation of the area); and
• the problems faced by them in the past due to
industrial projects.
Responses from various groups will finally be cross-
checked for accuracy and for the possible presence of
biases.
General background and database
As background information for conducting the SEIA,
data on the socio-economic profile of the impact area
are gathered. The following are the typical charac-
teristics considered for this purpose: demographic
characteristics (such as area, population, population
density, number ofhouseholds, average size ofhouse-
hold, sex-ratio and concentration of socially weaker
sections such as scheduled caste and scheduled tribe
population), educational level, literacy rate,
28
workforce and occupational patterns, patterns ofland
use, and availability of infrastructural facilities such
as water, medical, educational, sanitation, electricity
and communication.
Census is conducted throughout India with uni-
form conditions. Hence, a major source of inform-
ation is the census data. Other sources include: state
and central government publications such as the eco-
nomic surveys, records maintained at the local
government bodies (such as the corporations,
municipalities and panchayat (village council)
unions), and results of surveys carried out by various
agencies including academic institutions. Data are
also available through electronic media (for example,
the NICNET available at the National Informatics
Centre). In addition, specific information required for
the SEIA will be obtained by a special survey using
specifically designed questionnaires.
The socio-economic consequences of initiation of
any industrial project vary with respect to the different
stages of development of the project. Therefore, it is
imperative to discuss the issues involved in SEIA at
three main stages of any industrial project - plan-
ning, construction arid operation - separately. In
addition, it is essential to report the feelings and
apprehensions of the PAP on the industrial project as
part ofSEIA. A suggested comprehensive socio- eco-
nomic environmental management plan completes
the SEIA study.
Planning stage
At this stage, the site of the industrial project is
finalised. This leads to the next step of acquiring land
for establishing the industry. According to Census of
India classification, land can be categorised as forest
land, irrigated and unirrigated land (collectively
called agricultural land), cultivable waste and area not
pasture, grazing land and tree-groves. Land not avail-
able for cultivation includes house sites, roads, rivers,
nullahs (ravines) and hillocks. The socio-economic
impacts will be greater when agricultural land is
acquired for industrialisation.
Acquisition of agricultural land for industrial pur-
poses involves several issues. Some of the important
ones are payment of compensation for the land, and
provision of employment, alternative accommoda-
tion and other rehabilitation measures to the PAP. If
the PAP includes some special tribal groups, addi-
tional efforts should be made to protect their welfare.
Compensation
Generally, in India, the state government is expected
to acquire land and allocate it to industries. According
to the Land Acquisition Act, 1894, the owners ofthe
land that is being acquired are monetarily compen-
sated for their forgone land. The amount to be paid is
fixed by the government after considering the
Impact Assessment and Project Appraisal March 1998

The legislation for land acquisition
should be modified, to arrive at the
compensation amount based on the
actual price prevailing in the market,
so that the interests of the
project-affected people as well as the
country are protected
potential loss of revenue, the market price, and other
relevant information (Section 23 of the Land Acqui-
sition Act, 1894). . through proper education and training. Efforts should
One of the most frequent complaints of the PAP is
about the compensation amount. In general they feel
that the compensation paid by the government is very
low compared to the amount they would have re-
ceived if they had sold their land to private parties.
The market value of the land perceived by the gov-
ernment and the PAP are different. For determining
the compensation under the existing legislation, the
government considers market value as the price at
which the land is registered; this is often less than the
money needed to acquire the land in practice. 4
Hence, in general, the existing method of compu-
tation of compensation seems to undervalue the land
being acquired, resulting in large-scale discontent-
ment among the PAP. Over the years, as the literacy
level among the.people increases, the PAP can think
oflegal options to voice their dissatisfaction. This will
lead to inordinate delays in executing industrial pro-
jects, thereby affecting the growth of the economy.
Thus it has been suggested by the authors that the
legislation for land acquisition should be modified, to
arrive at the compensation amount based on the actual
price prevailing in the market, so that the interests of
the PAP as well as the country are protected.
Employment and rehabilitation measures
When agricultural land is acquired for industrial pur-
poses, traditional agriculturalists and agricultural
labourers are rendered jobless. When residential land
is acquired, the PAP lose their place of residence as
well as their basic support system (for instance, space
for livestock and other common property resources)
that has been sustaining them.
According to Section 23 of the Land Acquisition
Act, 1894, "if a person is compelled to change his
residence or place of business, the reasonable ex-
penses if any incidental to such change" should be
considered in determining the compensation. Hence
the industries for whom land is being acquired are not
required to provide employment and other rehabilita-
tion measures to the affected people but only have to
pay cash compensation. As the PAP do not possess
any other skill, they cannot effectively make use of
the compensation money to sustain themselves.
Impact Assessment and Project Appraisal March 1998
Socio-economic impact assessment
In this connection, the authors have suggested that
the legislation could be modified suitably to make
employment and other rehabilitation measures man-
datory, so that the adverse socio-economic impacts to
the PAP are minimised. Further, in lieu of cash com-
pensation, alternative equivalent .land that has the
potential for agriculture could be provided. This
would have at least two benefits: the loss of agricul-
tural land would be minimised, and the PAP would
continue to be engaged in 'their traditional well-
acquainted profession.
Government should also take the initiative by ask-
ing all the industries to provide jobs preferentially to
the PAP. In the long run, conscious efforts should be
made to uplift the skill level of project-affected people
also be made to encourage them in the developmental
activities of their locality in the changed scenario after
the industries are established.
Construction stage
The socio-economic issues which need to be ad-
dressed during the construction stage of an industrial
project are mainly the effect of employment genera-
tion and of new construction activity leading to an
additional burden on local infrastructural facilities.
These are only short-term impacts lasting during the
construction phase of the project.
Effect of employment generation
During the construction phase, the major positive
socio-economic impact will be in the sphere of gen-
eration of temporary employment of very substantial
numbers. The size and composition of the construc-
tion workforce depends on the nature of the project.
This additional employment generation may lead to
an influx of people into the impact area.
It is necessary to analyse, as part of SEIA, the
demographic and other relevant characteristics of the
impact area in order to predict the effect of migration.
Specifically, knowledge on population density,
average size of household, sex ratio, educational
level, literacy, workforce and occupational patterns,
availability of infrastructural facilities will be use-
ful. The additional employment generation will put
pressure on the existing infrastructure such as water,
housing, medical, educational, electricity and roads.
This can be minimised with proper planning and
management.
Effect of construction activity
Construction activity involves movement ofboth per-
sonnel and materials, leading to additional transport
requirements. Transport due to the movement of peo-
ple can be minimised by providing efficient mass
transport modes (for instance, buses). As far as pos-
sible, personalised travel (such as cars) should be
29
Socio-economic impact assessment
discouraged, and if that is not possible, car sharing
should be encouraged.·
Traffic due to the movement of construction mat-
erials is likely to be a strain on the existing road
infrastructure in the case of large engineering pro-
jects. This impact has to be handled by suitably min-
imising the incremental traffic, and using parallel
routes for the movement of vehicles. Timely offload-
ing of the construction material from the trucks is
necessary to avoid them queuing up on the road. The
effect of construction activity on other infrastructure
facilities, such as water and electricity, should be
properly managed.
Operation stage
The operational stage of the industrial project covers
the entire life span of the plant. Hence the impacts of
the operational phase extend over a long period of
time. As in the construction stage, these impacts in-
clude the effect of employment generation and of
operation of the plant leading to an additional burden
on local infrastructural facilities. Hence, the discus-
sions on the construction stage apply well for the
operational stage too. However, as the impacts in the
operational stage last for a longer term, additional
care is required for proper socio-economic planning
and management.
Feelings and apprehensions of the people
The authors consider that eliciting the views of the
people in the impact area, particularly the PAP, about
the industrial project is one of the significant compo-
nents of SEIA. This is done through personal inter-
views. These interviews bring out important
information, which is not otherwise available. They
are designed to elicit: positive/negative feelings of the
people on the particular project; the general opinion
of the people on industrialisation; and their experi-
ences based on similar industrial projects in the local-
ity. The SEIA team can obtain first-hand information
regarding the reasons for, and the extent of, dissatis-
faction among the PAP on issues such as compensa-
tion and other rehabilitation measures.
Generally, industries fulfil their social obligations
by carrying out welfare activities which benefit the
people in the impact area. Information regarding this
can also be obtained, so that such schemes can be
adopted by the proposed industrial project for which
the SEIA is being conducted. This will help in build-
ing good relationships between the people and the
industries.
The SEIA team conducts interviews with the local
administrative heads as well. These interviews pro-
vide valuable information regarding the health and
risk-management aspects, and the general perception
that the heads have about the nature of industries and
industrialisation.
30
The apprehensions and expectations
of project-affected people are
discussed with officials of the
proposed industrial project: by
balancing the people's feelings with
tbe management proposals it is hoped
to have successful completion
Before finalisation of the SEIA report, the different
apprehensions and expectations recorded on the basis
of the socio-economic survey are discussed with the
officials of the proposed industrial project. Their
opinions are taken into account, while suggesting
remedial actions to be taken for minimising the ill-
feelings, if any, expressed by the PAP. The authors
hope that balancing the feelings of the PAP with the
proposed actions of the management will ensure suc-
cessful completion of the industrial project.
Environmental management plan
Based on the discussions outlined above, a decision
is taken as to the acceptability or otherwise of the
proposed industrial project. If the SEIA team feels
that the adverse impacts are not significant and can be
mitigated by undertaking suitable remedial measures,
appropriate suggestions are made as part of a socio-
economic environmental management plan
(SEEMP). The project is recommended with the con-
dition that the management implements the SEEMP.
Usually the final decision is subjective. This is true
not only for SEIA but also for the EIA as a whole. As
the costs associated with accepting an unacceptable
project or rejecting an acceptable project are high, it
has been suggested that objective methods be used to
arrive at the final decision. 5 A useful methodology for
making the final decision is the analytic hierarchy
process (AHP). 6•7 Wherever possible, the SEIA team
adopts such methodologies to arrive at an objective
decision.
SEIA in India compared with elsewhere
It is interesting to compare the Indian practice of
SEIA with the practices in different parts of the world.
A brief comparison is provided in this section.
A report prepared by the task force constituted by
the Environmental Quality Committee 8 emphasised
the consideration of several social aspects. Impor-
tance is placed on identifying and involving the stake-
holders of the project and carrying out an extensive
consultation with them. An extensive survey, using
different questionnaires for different types of stake-
holders, is used for the purpose. The considerations
Impact Assessment and Project Appraisal March 1998

specified in the report are, in principle, equally valid
and followed in the Indian context.
The document on the Camisea project9 mentioned
the importance of working with the communities to
ensure that the activities of the project bring net
benefits to the region. It emphasises promoting
constructive dialogues and seeking input from the
native communities and other representatives, non-
governmental organisations and government agen-
cies. In the Indian context, the opinions ofthe ordinary
people, the village heads and government officials
such as Executive Officers are elicited to assess the
impact of the social and economic aspects of the
project.
The social impact assessment of the Ranomafana
National Park project in Madagascar 10 analysed the
loss of access to natural resources (agriculture, graz-
ing land, house construction, firewood, wild food and
medicinal plants) for the local population. It sug-
gested mitigation measures aimed at increasing agri-
cultural production, health and education levels in the
study area. The study identified employment and
local project expenditure to be the two factors that
have the most immediate impact on the local socio-
economic situation. It strongly suggested maximum
employment of local labour, wherever feasible, for
the manpower needs of the project.
A comparative study on the scope ofEIA in many
developed countries 11 pointed out that socio-
economic impacts are generally eschewed by the
European Directive on EIA but are included in the
EIA systems of most other countries. Where included,
the relevant legislation provides for a comprehensive
coverage of socio-economic impacts. For example,
the California Environmental Quality Act requires
that the following socio-economic parameters, among
other environmental parameters, be addressed in EIA:
land use, natural resources, accident, population,
housing, transportation, public services, energy, utili-
ties, public health, recreation and cultural resources,
and so on. The Resource Management Act, 1991 of
New Zealand requires all the socio-economic impacts
of a project to be assessed. It further requires that the
persons interested in, or affected by, any project are
identified, consulted, and the responses of the project
authorities to the views are documented.
Finally, several impact assessment studies in dev-
eloping Asian countries have also considered the im-
portance of assessing socio-economic impacts. 12 For
example, the EIA of the Tiwi geothermal project in
the Philippines 13 considered the following socio-
economic impacts: land use, demographic profile,
employment and income, public facilities and social
services, and public attitudes and perceptions.
Measures suggested in the paper for mitigating socio-
economic impacts include land expropriations,
proper resettlement plans, and a local hiring policy for
enhancing local employment.
All these studies, just like the Indian practice, have
collected extensive socio-economic baseline data
considered the views and perceptions of the affected
Impact Assessment and Project Appraisal March 1998
Socio-economic impact assessment
stakeholders, stressed compensation and rehabilita-
tion of the affected population, and recommended the
use of the local population for the employment needs
of the projects. In conclusion, the process of conduct-
ing SEIA for development projects in India, in gen-
eral, compares well with the practice followed in
other parts of the world.
Summary
Socio-economic impact assessment is conducted in
advance to assess the socio-economic consequences
of industrial projects. The focus ofthe SEIA study is
on the people living in the impact area, particularly
the PAP. All possible data, published by the state and
central governmertts, and collected by various other
agencies including academic institutions are used for
the study. In addition, the SEIA team conducts per-
sonal interviews to collect important project-specific
information which is not otherwise available.
SEIA mainly covers the first three stages - pre-
construction, construction and operation - of the
industrial project. The issues addressed in these stages
include payment of compensation for the land, provi-
sion of employment, alternative accommodation and
other rehabilitation measures for the PAP, the effect
of employment generation and the industry on the
local infrastructure facilities. If PAP includes some
special tribal groups, they are given special attention
in the SEIA study. In addition, a brief account of the
feelings and apprehensions of the PAP on the indus-
trial project is given as part of the SEIA report.
A decision on the acceptability of the proposed
industrial project is made after assessing the positive
and negative socio-economic impacts. A suggested
comprehensive socio-economic environmental man-
agement plan completes the study.
Finally, a brief review of the SEIA studies con-
ducted world-wide has shown that the Indian practice
compares well with the practice in different countries.
References
1. lnterorganizational Committee on Guidelines and Principles
for Social Impact Assessment, "Guidelines and principles for
social impact assessmenr, Impact Assessment, 12(2), pages
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and Forests, Government of India, New Delhi, 1985.
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6. R Ramanathan and T R Muraleedharan, "The role of the
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31
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Impact Assessment and Project Appraisal March /998