Estimating resettlement cost: why budgets are wrong before they are approved

1. Estimated early, revised reluctantly

The resettlement cost estimate is prepared at feasibility, when the alignment or footprint is provisional and no enumeration has occurred. It then enters the project's economic case, and once there acquires a stability disproportionate to its evidentiary basis: revising it upward requires revisiting an appraisal that has already been approved.

This dynamic — early estimate, weak basis, strong subsequent resistance to revision — is the root of most resettlement budget failures. The estimate is not so much wrong as premature and then defended.

2. Population estimated from area

Absent enumeration, affected population is commonly derived by applying a density assumption to the footprint area. Densities drawn from national or district averages understate settlement along transport corridors and near water, which is where infrastructure is generally routed.

The error compounds because it affects the count, and the count multiplies every unit rate in the estimate. A twenty per cent underestimate of affected households is a twenty per cent underestimate of nearly every line in the budget.

3. Rates that age, and losses that are omitted

Rates applied at estimate are current at estimate. Payment occurs years later, after inflation and after any land price movement the project itself induced by concentrating demand. Estimates that do not provide for escalation are understated by construction rather than by error.

Omission is the second source. Estimates built from a schedule of structures and crops routinely exclude severance and injurious affection on partial takings, loss of access to common property, transaction costs of replacement purchase, and transitional support between displacement and re-establishment. Each is a genuine obligation under the standards; none appears in a schedule derived from an asset inventory.

4. Implementation and livelihood costs

The most reliably excluded costs are those of running the process rather than paying for assets: enumeration, valuation, disclosure, grievance administration, monitoring, and the livelihood restoration programme that runs for years after payment.

Livelihood restoration is the largest of these and the most vulnerable to omission, because it is an outcome obligation with no natural unit rate and because its spending falls long after the construction budget has closed. A budget that funds compensation fully and restoration nominally satisfies the requirement that is easy to price and fails the one on which completion audit will turn.

The mitigation is to treat the feasibility estimate as an explicit range with stated assumptions and a contingency reflecting how little is known, and to re-estimate after enumeration as a scheduled step rather than as an admission of error.