Feature

Unleashing Opportunities through Development of Urban Infrastructure

Posted on 11 February, 2010 | Tags: Waste Management

High degree of urbanization has exposed the challenges of government agencies in handling Municipal Solid Waste (MSW). Increase in generation of electronic, bio and industrial hazardous waste have further compounded the problem. The concern to manage the waste has increased in accordance with rapid industrial growth of our country.

India has registered stellar economic performances by consistently clocking GDP growth rates of 8-9 percent over the past five years. The robust and inclusive growth is a strong vindication of the success of economic liberalization and reforms initiated in the early 90s. As such, implementation of holistic developmental policies to aid in sustainable and inclusive growth has been the top priority of successive Governments that came into power since the 1990s.

As the size of our economy is growing, Indian cities are fast becoming the pivot of innovation and growth. The role of India's urban sector in socio-economic transformation is crucial as it currently contributes about 62 percent of the GDP. The tremendous pace of urbanization has strained the existing infrastructure, which is certainly inadequate to support the ambitious growth rate of 8-10 percent envisaged by the 11th Planning Commission. The high degree of urbanization accomplished in a short time has exposed the frailties and constraints of state level agencies and urban local bodies in ensuring adequate coverage of sewage and solid waste for the urban population. Outdated urban management practices have failed to understand the needs of rapidly growing cities and thus have not focused on improving capture efficiency, service delivery, finances, and social development. It comes as no surprise that in a recent study by MasterCard on the role of 75 major cities in the world driving global business, Indian cities are languishing at the bottom of the list. In order for our cities to become the nodal points of global trade and commerce, long term policies aimed at making our cities more livable, competitive, and bankable must be implemented.

Rank of Leading Cities in Driving Global Commerce

The large base of growing middle income population of around 300 million spread across 5000 towns and cities represents 30 percent of the total population. The economic growth and the consequent rise in disposable incomes led to increased consumerism and waste generation. Compounding the problem of mounting urban waste is the increased generation of industrial hazardous waste, electronic waste, and biomedical waste. The concern for treatment and safe disposal of hazardous waste is growing in conjunction with the rapid industrial growth that India has achieved in the last 5-6 years.  The chemical industry is growing at an average rate of 12.0 percent every year. The pharmaceutical industry is also registering a growth rate of about 13.0 percent. The healthcare industry, pegged at about INR 1600 billion in 2008 is clocking a Compound Annual Growth Rate (CAGR) of 15 percent. With greater emphasis on healthcare, the number of hospital beds is expected to grow to 2.2 million by 2012 at a CAGR of 11 percent. High consumption and higher obsolescence rates of major electrical and electronic appliances/ gadgets have created an alarming situation that should be tackled effectively. In 2008, approximately 7.4 million computers were sold and this number is expected to grow at nearly 20.0-25.0 percent in the next 2-3 years.

Facts and Figures of Waste Generation

The dismal state of solid waste management in India is evident in the low collection efficiencies. The open dumping and burning of municipal solid waste in the outskirts of the cities is rampant, causing profound damage to the environment besides degenerating the quality as well as the ability of our cities to be livable and competitive. The low collection efficiencies are the result of several issues plaguing the nascent market such as lack of funds, lack of awareness, weak enforcement, and no stringent penalties on illegal dumping. These constraints must be surmounted in order to provide 100 percent coverage for sewerage, sewage treatment, and solid waste management. In line with this objective, the 11th Five Year Plan (2007-12) has proposed a fund requirement of INR 1292 billion for upgrading and creating capacities to enhance coverage. Initiatives such as Jawaharlal Nehru National Urban Renewal Mission (JNNURM) aiming to improve civic infrastructure, governance, and basic services to urban poor, are expected to accelerate the flow of investments into urban infrastructure and the renewal and redevelopment of cities. The substantial need for leveraging the efficiencies and expertise in development, management, implementation, and financing of projects of the private sector by providing a conducive atmosphere is gaining momentum.

Such massive investments are necessary to install more plants to treat, recycle, and reuse sewage as well as for scientific and safe disposal of solid waste. It is imperative that creation of urban infrastructure should be accorded the highest priority; otherwise cities could implode throwing a spanner in the objectives of achieving a balanced and sustainable development.

Municipal Solid Waste Management Services Market
With the opening up of municipal solid waste management to the private sector, the current market for municipal solid waste management services was estimated to be approximately INR 7100.0 million in 2008. This market is in its development stage, where an increasing number of Public Private Partnerships (PPPs) are coming up in areas such as composting, waste to energy, and sanitary landfilling. This is a highly fragmented market where most of the participants are engaged in collection and transportation. In many small cities, the service provider is any one of the following entities: the local municipality or a Non-Government Organization (NGO), a resident welfare association or a small contractor who does the door-to-door collection of waste. Much waste is being disposed of and burned in open lands on the far corners of the cities in spite of the Municipal Solid Wastes (Management and Handling) Rules 2000 mandating each urban local body to construct sanitary landfills to dispose the waste in a scientific and environment-friendly manner. Furthermore, the rules stipulated December 2003 as the deadline for the identification and setup of landfill sites. However, of late, only a handful of cities have constructed sanitary landfills. Identification and construction of more sites are in progress. Entangled in its own maze of bureaucratic divisions coupled with lack of resources and technical know-how, Urban Local Bodies (ULBs) are relying on service contracts involving collection and transportation of waste, followed by open dumping and burning. The advent of adequate policy drivers like JNNURM and an opportunity for wealth generation from waste streams through reuse, recovery, and recycle are significantly attracting private participation under Design, Build, Operate (DBO), and Build, Operate, and Transfer (BOT) processes.

Industrial Waste Management Services Market
The growth of the hazardous waste management services market in India correlates with the growth of industrial production. The industrial sector grew consistently between 9.0 and 10.0 percent between 2004 and 2008. The promulgation of Hazardous Wastes (Management and Handling) Rules, 1989, provided the necessary impetus to the evolution and subsequent growth of this market. With nearly 25 Treatment, Storage, and Disposal Facilities (TSDFs) in operation, the market in 2008 was estimated to be INR 1730.0 million. In addition to the 25-odd common facilities, few large-scale industries have their own captive treatment facility. The focus during the 10th and 11th Five Year Plans is on setting up of TSDFs for Small and Medium Enterprises (SME) as these enterprises have insufficient funds to build and operate such facilities.

Biomedical Waste Management Services Market
In 2008, the biomedical waste management services market was estimated to be approximately INR 850.0 million. The market has the potential to grow at a CAGR of nearly 20.6 percent from 2008 to 2013 as the Biomedical Waste (Management and Handling) Rules, 1998, calls for safe disposal of medical waste. Currently, there are about 150-odd Common Biomedical Waste Treatment Facilities (CBWTF) covering major cities and towns, with a potential for establishment of more facilities to meet the demands of growing medical infrastructure. The regulatory environment is highly encouraging with key authorities such as Central Pollution Control Board (CPCB) and State Pollution Control Board (SPCB) playing a crucial role alongside NGOs in ensuring compliance and promoting awareness. Owing to the air pollution issue associated with incinerators, clean burn technologies such as plasma incineration are likely to receive greater support in the future.

Electronic Waste Management Services Market
Electronic waste management or recycling market is another lucrative segment in the overall waste management services market in India. The market was valued at approximately INR 510.0 million in 2008. There is a large base of unorganized recyclers who adopt rudimentary methods such as burning e-waste in open places, thereby exposing themselves to carcinogenic substances like lead, mercury, cadmium, and chromium. These unorganized recyclers are not certified by the respective SPCBs, but are still thriving in the market. The installed capacities of the organized and registered recyclers are not sufficient to handle the increasing amounts of e-waste, and thus, much of the waste is diverted to scrap dealers and informal recyclers. Currently, there are no large e-waste recycling facilities in India as in developed countries, though there are small organized firms that perform recycling in a safe manner. However, the promulgation of e-waste guidelines by the CPCB, prescribing procedures for handling of e-waste in an environmentally sound manner, is expected to provide the required thrust to generate interest among international electronic waste (e-waste) recycling companies.

Challenges
Below are some of the significant challenges enmeshing the Indian waste management market:

• Funding for municipalities and urban bodies has been a critical issue in the management of urban waste.
• Households are unaware of the waste management practices. They, the largest waste generators collectively and also the key entity in the value chain, have low awareness about the segregation of waste into recyclables and non-recyclables.
• Lack of effective enforcement by pollution control boards and tracking mechanism is diluting the efficacy of environmental regulations and the menace continues to grow.
• Attitude of hospital management and lack of training of hospital staff restrain the proper management of biomedical waste.
• Awareness about hazardous waste disposal methods and the fact that generators have to pay prevent many industrial hazardous units, especially the SME, to dispose of or store waste without proper treatment.
• Lack of organized e-waste recyclers and the presence of informal e-waste handlers using rudimentary techniques do not present a complete solution as these handlers cannot deal with the mounting problem by themselves.

Way Forward
The waste management services market offers sustainable and viable opportunities in the long run. Rise in consumerism, changing lifestyles, and unplanned urbanization have increased waste generation, exposing the lack of preparation for solid waste management in Indian cities. In India, like in the developed countries, there is a strong case for bringing in the private sector to invest in waste management. The financial constraints, red-tapism, and lack of eligible staff have prevented municipalities from maintaining an efficient waste management system. The private sector can bring in the adequate technical expertise, increase efficiency, and improve customer service. It also brings in the capital required by municipalities to support efforts toward effective waste management. Though the current private participation is limited to service contracts aimed at mere collection and disposal (open dumping), the comprehensive integrated waste management system is yet to take off.

There are significant opportunities for companies engaged in waste management services through the organic route as the current market penetration is less than 50 percent of the overall waste generation. This business model is most appropriate, considering the vast expanse of the country, mountainous volumes of waste generated, and the enhanced private participation mooted by the central government in urban infrastructure. The strategy should be based on the offering of efficient customer service through a wide network of collection stations, transfer and sorting stations, landfills, recycling facilities, and other disposal facilities such as incineration. Providing the entire gamut of integrated services - collection, transportation, treatment and recycling, and controlled disposal is the optimal business model that is likely to prevail in the long term. Companies offering such end-to-end services are usually large in strength, resources, and scale, having control over waste going into their own landfills and can therefore improve their market positions. Such companies can also earn additional revenues by segregating and selling/ recycling plastics and producing compost out of organic materials found in the waste stream. In an era when nations across the globe are underscoring key aspects such as self sufficiency, reducing dependence on fossil fuels from volatile Middle East region, and lessening greenhouse gas emissions, the preference for waste-to-energy (WTE) is expected to spurt in the future.

Extensive participation of the private sector should be the order of the day if India wants to maintain sustainable growth by achieving equilibrium between growth and environmental protection. Now that months of political uncertainty has ended with a more stable Government in power, the current Government has enough wiggle room to pursue reforms in key sectors at an accelerated pace. The creation of new infrastructures and the up gradation of existing ones are now expected to take the front seat. The urgency to develop and implement a long term policy initiative towards urban management with due emphasis on urban sanitation and waste management is greater than ever before. A concrete step to bridge the infrastructure deficit by hiking the spending on infrastructure to 9 percent of the GDP in the 11th Five Year Plan is a welcome sign. The Indian environmental market in general, and the Indian waste management services market in particular, are on a growth trajectory buttressed not only by the overall economic growth, but also by greater-than-ever pressure from the media and NGOs and stringent regulatory oversight by Central and State PCBs. In sum, the market is likely to offer a win-win situation for each and every stakeholder in the industry.

Sasidhar Chidanamarri is Industry Analyst - Environment & Building Technologies, South Asia & Middle East, Frost & Sullivan E-mail: nimisha.iyer@frost.com