Potential Benefits and Earnings from Improving the Hussain Sagar Lake in Hyderabad: A combined revealed and stated preference approach

Hussain Sagar, a lake constructed in 1562, joins the twin cities of Hyderabad and Secunderabad in India, and is used for a variety of recreational purposes. Like many lakes in urban India, this lake is threatened by its increasingly polluted waters. In this study, we seek to estimate demand for improvements in the lake's environmental quality. We adopt a combined revealed and stated preference approach to measure gains in welfare as a result of changes in environmental quality. Most studies that combine stated and revealed preference methods confine themselves to an on-site sample survey. Our study improves on this approach by interviewing off-site citizens as well. Our estimates indicate that the park provides recreational benefits or consumer surplus of INR 2,082 (USD 35) for on-site respondents and INR 965 (USD 16) for off-site respondents per visit to the park. Furthermore, improvements in environmental quality will likely increase these benefits, on average, by 9% for on-site visitors and significantly more for off-site residents. We recommend that park authorities increase the access fee from the current INR 10 (USD 0.16) to at least INR 20 (USD 0.33) per visit. With an entry fee of INR 20, the government can potentially earn INR 22-89 million (USD 0.36 - 1.48 million) in revenues per year, which will make it possible to improve the quality of the lake and its surroundings.