Agroindustrial project analysi

126 AGROINDUSTRIAL PROJECT ANALYSISthese parties that, in socioeconomic terms, new is not necessarilybetter. Used equipment is also difficult to appraise and, therefore,its purchase complicates the government's task of fiscal assessment.An alternative to buying secondhand equipment is the acquisitionof technology by licensing, subcontracting, or direct foreign investment.This and other aspects of technology selection aredocumented in the fourth section of the bibliography.ENERGY. Another factor of production to be considered in selectingtechnology, and one that is of increasing economic concern toboth developed and developing nations, is the energy requirementof technology. Agroindustries use significant amounts of energy.In the United States, for example, energy use by food processors in1975 accounted for 4.8 percent of all energy used (farm productionalone accounted for only 2.9 percent). 9 Before committing itself toone technology and energy source, the agroindustrial firm shouldassess the supply and price of alternative fuels and the energyusage of various technologies (see tables A-1 through A-3). Rice,for example, can be dried by the sun or by machine (see tableA-1). Solar energy is, of course, free, but the energy savings of thissource would have to be weighed against other factors, such as thequality of the end product. Rice dried in the open air is subject todamage by insects or weather. If the alternative sources were coal,fuel oil, or wood, the product would have to be indirectly heatedto avoid contamination by soot or smoke. If the alternative werenatural gas, the cost might be greater but the processor could usedirect combustion heaters, which have lower capital and operatingcosts and a higher efficiency. Sometimes energy is underpriced (subsidized)by the government. This is true in Saudi Arabia and hasled certain private entrepreneurs to set up vegetable dehydrationplants there. If the energy had been shadow priced at its opportunitycost to society, these projects would have shown a negativesocial cost-benefit ratio. Thus, the need to assess the social, as wellas the financial, costs is as important for determining energy costsas it is for analyzing the labor and capital factors.Procedures for "energy accounting" of food-processing opera-9. Office of Industrial Programs, Federal Energy Administration, EnergyUse in the Food System (Washington, D.C.: U.S. Government Printing Office,1976).