Policy Options for Sustainable River Sand Mining in Sri Lanka
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~ Policy OptIons ~~. for Sustainable ~ 5i ~ ~ ~ River Sand ~ g~ Mining in Sri ~ -=---~ ~ ~ Lanka Dr. L.H.P. Gunaratne Department of Agricultural Economics and Business Management, Faculty of Agriculture, University of Peradeniya, Peradeniya 20400, Sri Lanka Phone: 94-81-239.5506 Fax: 94-81-2395550 Email: [email protected] Illegal and ind iscriminate river sand mining is causing a large number of environmental and social problems in Srj lanka. To find solutions to these significant challenges, a new EEPSEA study has identified policy options for sustainable river sand mining that ~ minimize environmental degradation while meeting the requirements of industry and local people. The study is the work of L.H.P. Gunaratne from the University of Peradeniya, Sri lanka. It finds that a number of site-specific management alternatives can reduce the negative impacts of river sand mining. These are: the restriction of mining at vulnerable sites, the establishment of an environmental trust fund to pay for environmental restoration and involving the community in managing this resource. It also finds that using offshore sand is the best way to decrease the environmental pressure on rivers. It outlines various policies to make this happen, including making the use of offshore sand compulsory for large construction projects. I Published by the Economy and Environment Program for Southeast Asia (EEPSEA) 22 Cross Street, #02-55 South Bridge Court, Singapore 048421 (www.eepsea.org) Tel: +65-6438-7877, Fax: +65-6438-4844, Email: [email protected] EEPSEA Research Reports are the outputs of research projects supported by the Economy and Environment Program for Southeast Asia. All have been peer reviewed and edited. In some cases, longer versions may be obtained from the author(s). The key findings of most EEPSEA Research Reports are condensed into EEPSEA Policy Briefs, available upon request. The Economy and Environment Program for Southeast Asia also publishes EEPSEA Special Papers, commissioned works with an emphasis on research methodology. ISBN: 978-981-08-7709-5 The views expressed in this publication are those of the author(s) and do not necessarily represenVhose of the Economy and Environment Program for Southeast Asia or its sponsors. Unless otherwise stated, copyright for material in this report is held by the author(s). Mention of a proprietary name does not constitute endorsement of the product and is given only for information. This publication may be consulted online at www.eepsea.org. Policy Options for Sustainable River Sand Mining in Sri Lanka L.H.P. Gunaratne July, 2010 Comments should be sent to: Dr. L.H.P. Gunaratne, Department of Agricultural Economics and Business Management, Faculty of Agriculture, University of Peradeniya, Peradeniya 20400, Sri Lanka. Phone: 94-81-2395506 Fax: 94-81-2395550 Email: [email protected] The Economy and Environment Program for Southeast Asia (EEPSEA) was established in May 1993 to suport research and training in environmental and resource economics. Its objective is to enhance local capacity to undertake the economic analysis of environmental problems and policies. It uses a networking approach, involving courses, meetings, technical support, access to literature and opportunities for comparative research. Member countries are Thailand, Malaysia, Indonesia, the Philippines, Vietnam, Cambodia, Lao PDR, China and Papua New Guinea. EEPSEA is supported by the International Development Research Centre (IDRC) the Swedish International Development Cooperation Agency (Sida); and the Canadian International Development Agency (CIDA). EEPSEA publications are also available online at http://www/eepsea.org. ACKNOWLEDGEMENTS The researchers would like to express their gratitude to the Economy and Environment Program for Southeast Asia for providing the financial support to conduct this study. We are especially indebted to Dr. Herminia Francisco for her encouragement and technical support, and to Ms. Cathy Ndiaye for making everything run smoothly. We would also like to express our sincere appreciation to Dr. Ted Horbulyk for his valuable comments. Our heartfelt thanks go to Professors Priyan Dias and Anura Nanayakkara at the University of Moratuwa for making valuable reports available to us. Thanks are also due to Mr. S.M.A.T.B. Mudunkotuwa and Mr. Anil Peiris and the officers of the Geological Survey and Mines Bureau of Sri Lanka for their support in collecting information. We would like to extend our gratitude to Professor Ron Janssen, Institute of Environmental Studies, Vrije Universiteit, the Netherlands, for granting permission to use DEFINITE software to carry out multi-criteria analysis. The secretarial support given by Ms. Judith Gunawardana and the staff of the Agribusiness Centre, University of Peradeniya, is also gratefully acknowledged. TABLE OF CONTENTS EXECUTIVE SUMMARY 1.0 INTRODUCTION 1 2.0 RESEARCH OBJECTIVES 2 2.1 General Objective 2 2.2 Specific Objectives 2 3.0 OVERVIEW OF THE STATUS OF THE INSTITUTIONAL SET-UP OF SAND MINING AND THE SAND MARKET 2 3.1 Present Status 2 3.2 Institutional Set-up 3 3.3 Demand for Sand 4 4.0 COMPARISON OF PRIVATE BENEFITS AND SOCIAL COSTS 7 4.1 Analytical Framework 7 4.2 Field Data Collection 8 4.3 Results and Discussion 8 5.0 ANALYSIS OF PREFERENCES OF SAND MINERS 12 5.1 Theoretical Framework 12 5.2 Survey Development 14 5.3 Results and Discussion 15 6.0 EVALUATION OF POLICY ALTERNATIVES 17 6.1 Analytical Framework 17 6.2 Data Collection and Analysis 18 6.3 Results and Discussion 24 7.0 EVALUATION OF ALTERNATIVES TO RIVER SAND 26 7.1 Potential Alternatives to River Sand 26 7.2 Off-shore Sand Mining Process 28 7.3 Potential Negative Externalities Associated with Off-shore Sand Mining 30 8.0 CONCLUSIONS AND RECOMMENDATIONS 32 8.1 Conclusions and Recommendations 32 8.2 Suggestions for Future Research 33 REFERENCES 34 APPENDICES 36 Appendix 1. Sand mining locations 36 Appendix 2. Questionnaire 37 Appendix 3. Detailed private costs 41 Appendix 4. Sensitivity analysis of multi-criteria analysis 43 LIST OF TABLES Table 1. Projected sand demand (2007-2011) – x 10 6 m3 per year 5 Table 2. External cost of sand mining (LKR) per year 11 Table 3. Summary of private and social costs and benefits (LKR) per year 11 Table 4. Attributes and levels used in the choice experiment 14 Table 5. Estimates of the Multinomial Logit Model 16 Table 6. Effects table for the Ma Oya River 21 Table 7. Effects table for the Mahaweli River 22 Table 8. Effects table for the Deduru Oya River 23 Table 9. Alternatives to sand mining 27 Table 10. Description of off -shore sand mining costs 29 Table 11. Off-shore sand tender prices without transportation (per cube) 30 LIST OF FIGURES Figure 1. Supply and demand for river sand, 2007-2011 time periods (values are m3 106 per year) 6 Figure 2. The basin of the Ma Oya River 15 Figure 3. Rank of management alternatives for the Ma Oya River 24 Figure 4. Rank of management alternatives for the Mahaweli River 25 Figure 5. Rank of management alternatives for the Deduru Oya River 26 POLICY OPTIONS FOR SUSTAINABLE RIVER SAND MINING IN SRI LANKA L.H.P. Gunaratne EXECUTIVE SUMMARY Indiscriminate 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 over- mining 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 off- shore 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. 1.0 INTRODUCTION 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.