Estimating the Social Cost of Using Agricultural Land in the Punjab

Pakistan, like any developing country, must regularly divert some of the scarce agricultural land to an alternative use—to another crop, to a site for a reservoir or a plant for processing agriculture’s output, or to industrial, commercial or housing purposes. This paper is an exercise in estimating he social cost of releasing agricultural land in the Punjab for use in another activity. It will, hopefully, serve as a model for planners and policy-makers who are confronted with specific projects requiring cost-benefit analysis. For example, Pakistan’s Fifth Five-Year Plan calls for construction of numerous sugar mills, sites for which will require an estimated 100 acres of agricultural land per mill. The-cost of using this land for sugar refining may be expressed in terms of the net value of the agricultural output foregone. Similarly, if cane cultivation > is extended to provide input for the refineries, its cost must be evaluated by the value of the crops which are foregone.