Ivey Publishing
Rajghat Power House: The Economy or the Environment
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9 pages (5 pages of text)
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Case (Pub Mat)
In response to a recommendation at a government-sponsored power forum, Delhi’s aging and inefficient Rajghat Power House (RPH) was scheduled to close its doors. The coal-based plant had reached the end of its 25-year useful life, and its outdated equipment spewed toxins into Delhi’s air and water on a daily basis. Environmentalist bodies and power-distributing units in Delhi had made similar recommendations for the RPH’s closure over the years, and while the government had gone so far as to approve some of those plans, nothing had ever come of them. With the arrival of the forum’s recommended date of October 2015 for the plant’s closure, Delhi’s government officials faced a difficult decision. Should they ignore the environmental degradation to achieve a high growth rate in the short run, or should they protect the environment to achieve a sustainable growth rate in the long run?
Learning Objective:
This case has been primarily designed for a course on the economic environment of business; however, it can also be used in a managerial economics course. Teaching objectives include the following goals:
  • Helping students assess the industrial environment and its impact on industry structure, society, and the environment
  • Illustrating the short-term and long-term trade offs involved in policy decisions
  • Explaining the difference between private costs and social costs
  • Illustrating the concept of negative externalities
  • Helping students understand the implication of ignoring social costs in the presence of large negative externalities
  • Illustrating the difficulty in ascertaining the market structure of an industry
General Management/Strategy,  International
India, Medium, 2010-2015
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