"

516

Int. J. Environment al1li Pollution, Vol. 19, No.5, 2003_

Economic insight into solid waste management

511

Economic insight into municipal solid waste management in Mumbai: a critical analysis Sudhakar Yedla* and Sarika Kansal
Indira Gandhi Institute of Development Research, Goregaon (E), Mumbai 400065, India (e-mail: sudhakar@igidr.ac.in) Abstract: Mumbai generates 6256 tonnes of waste every day, of which 17-20% is recyclable, but only a fraction of this is retrieved by rag-pickers. The cconomic value of the retrieved material is not considcred by the Municipal Corporation of Greater Mumbai in valuing the waste management system as there is no retrieval mechanism except the informal rag-picking activity. Moreover, the cost of land used for the dumping of waste is also not accounted for. In the present paper, a comprehensive cost-benefit analysis for the present system of municipal solid waste management in Mumbai is carried out, with due consideration for implicit or hidden costs and benefits. Accounting for the implicit costs and benefits showed a difference of $6 per evel)' tonne of waste disposal. This could show a considerable difference in policy development at the municipality level. Demand supply analysis proved that the present system of waste management would not yield a feasible market solution without private sector participation. With the increasing demand for improved waste management, private sector participation is essential and a Pigouvian tax is a necessary tool to make the private sector participation in solid waste management a success. Keywords: economic tools, implicit costs, municipal solid waste, waste tax. Reference to this paper should be made as follows: Yedla, S. and Kansal, S. (2003) 'Economic insight into municipal solid waste management in Mumbai: a critical analysis', Int. J. Environment and Pollution, Vol. 19, No.5, pp. 516527.

Conventional MSW management fails to deliver quality services for various reasons, including poor eiiiciency and lack of coordination between concerned departments [3]. In contrast to the failures of cooventionai't1lanagement systems, economic approach and market instruments have been proved to st: '~ngthen waste management [4]. Mumbai, the largest metropolitan city in India, presents the most critical solid waste management system in India. The present study examines various reasons for the failure of the MSW management system in Mumbai. Further, it gives an economic insight to the system in Mumbai with due importance to external costs and benefits, which remain unaccounted for in the conventional management system. -.

Objectives
Critical examination of the existing MSW management system in Mumbai. Cost-benefit analysis (CBA) of the MSW management system in Mumbai, with emphasis on various implicit costs and benefits.

Present scenario of MSW management in Mumbai

Introduction

Waste is an unavoidable byproduct of human activities. Economic development. urbanization and improved living standards in cities increase the amount and complexity of solid waste [I]. This results in degradation of the urban environment, puts stress on natural resources, and undermines sustainable development [2, 3]. Inefficient management and disposal of municipal solid waste (MSW) is the cause of environmental degradation in most developing cities [1]. Improper disposal of waste leads to obnoxious conditions and the spread of communicable diseases [1, 2]. Cleanliness is an indicator for development, which is adversely influenced by improper solid waste disposal.

Mumbai generates 6256 tonn.e;: of garbage per day [5] with a per capita generation of 0.5 kg, higher than any other Indian city [6]. Though not comparable with the waste generation of many developed cities. this is considerably higher than that of many developing cities [1]. Though it is an important ::ivic sector, very few studies have been conducted on the feasibility and performance eyaluation of MSW management in Mumbai. In 1994. ,10<; National Environmental Engineering Research Institute (NEERI) carried out a detailed study of MSW management ir: ~vlumbai. This report looked into the system of collection, transportation and disposal of MSW, with the help of laboratory tests to find out the composition and characteristics of MSW. Since then, there have been very few studies on MSW management and its functionality and failures. With the changing approach to the emironment and towards sustainable development, economic inputs to the environmental system, such as, MSW management, have become an essential part of analysis. This approach yielded many positive outcomes [7]. Parikh and Parikh [8] have developed a conceptual framework for MSW accounting for India with an objective of internalizing the MSW management system in national accounts. In such efforts, in concurrence with the above-mentioned studies, Yedla and Parikh [9] applied economic valuation to prove the potential and economic feasibility of an enhanced landfill system in handling MSW in Mumbai. From the above-mentioned studies, it is clear that certain costs are not included in the valuation and as a resuh they become social costs. The present study is an attempt to take account of the entire MSW system and provide economic analysis to determine the possibility of private sector participation in MSW management so as to internalize the social cost of this important urban civic service.

* Author for correspondence. Copyright (:> 2003 Inderscience Enterprises Ltd.

no 4

.).

ema ana ::>.Kansal

Economic insigh! into solid waste management

51S

Critical analysis of MSW management

and location of bins and frequency of their cleaning, etc. [3]. rrns could be another reason for the poor system efficiency ....

4.1 Organizational structure and manpower management

The municipal authority, through its conservancy and transportation functions, collects, transports and disposes of the MSW. In a survey and personal interviews conducted with municipal authorities, it was found that poor coordination between these functions is leading to a major system blockage and failure. Disproportionate allocation of budgets, with more than 70% going towards the salaries of staff, demonstrates the lack of efficient allocation of resources [10]. This leads to malfunctioning of the system at a later stage. Appendix I presents typical indicators of MSW in Mumbai to explain these inefficiencies. From finance allocation to manpower allocation, work norms for different levels of staff are not rationalized. In the absence of certain criteria, manpower allocation across wards is randomized, leaving 'hollow pockets' in the system. Estimation of waste generation in Mumbai started as late as 2000 [5, II]. The composition of MSW in Mumbai (Figure I) is dominated by compostable material and dust, and the fraction of recyclable material is low.

4.3

Transportation

.,,

Unlike developed cities, waste transportation in Mumbai is based on randomly allocated routes. In the absence of optimally designed routing, the transportation of waste is inefficient and large amounts are left on the streets. This adds to the bad environmental consequences as the transport vehicles pass through crowded places creating problems for the public. The problem is aggravated because the Municipal Corporation of Greater Mumbai (MCGM) hires part of its fleet from private contractors, which have a more commercial outlook. To achieve improved Oiltput, a continuous dialogue needs to be maintained between the conservancy and the transport functions, especially at the midlevel operators.

4.4 Processing and disposal

Of the total waste collected by MCGM only a small amount is being processed while the remainder is dumped in open areas. Various methods of disposal adopted in Mumbai are the following: Open dumping: Disposal ofMSW in Mumbai was catered for by four open dumps, but one of these is now closed because of increased opposition from citizens.

0.75 0.8
0.4

o Paper
[) Plastics

& cardboard

Incineration: This method is adopted for biomedical waste in major hospitals. Vermi composting: This method of disposal was recently initiated on trial basis and the following are few pilot plants in operation with the help ofNGOs: Colaba sewage treatment plant, capacity - 1.5 tonnes and can be extended up to 5 tonnes. Dadar sewage treatment plant, capacity 4 tonnes and can be extended up to 5 tonnes Deonar dumping ground, capacity 5 tonnes Aerobic composting: Private and informal sector participation has started with Excel Industry Limited handling waste by aerobic composting. Subsequently, a number of NGOs, such as Shtri Mukti Sangathan, Force, Dignity, etc., are involved in vermi composting of municipal waste at some selected localities. These NGOs have employed rag-pickers for house-to-house collection of waste and its disposal. Almost 95% of the waste generated in Mumbai is disposed off in open dumps. At present, there are three dumpsites in operation and their particulars are shown in Table I. These dumpsites are almost full to capacity, and this is a major cause of concern for MCGM. A decentralized approach to waste management is taking the front seat with the exhaustion of dumpsite capacity. Table 2 presents the capacity statistics of all dumpsites in Mumbai.
Table 1 Location Deonar Mulund Gorai Area of disposal sites in Mumbai (source: NEERI, 1994). Area (ha)
]11

37.5

o metals (ferrous) o Glass o Sand & fine earth

; Compostable DOthers matter

Figure 1

Composition

ofMSW

in Mumbai.

4.2 Collection
Sophistication has not reached the boundaries of waste collection, even in recent times. Manual sweeping and collection and inefficient allocation of workforce results in low productivity. The poor social status of these workers further aggravates the inefficiency of the system [3]. The design, size and spacing of community bins are inadequate and fail to cater for the associated needs. With one bin provided for 2500 people on average, people are left with no option but to dump their waste in 'back yards' or drainage. Public participation and cooperation in solid waste collection is very marginal. A survey of citizens done by NEERI indicated that citizens complain that they have not been involved in decision-making regarding the type of system to be used, the type, capacity

Quantity (tonnes per day) 3140 275 424

25.20 14.50

520

S. Yedla IUIdS.Kansal

Economic insight into solid waste management

52]

16--21 4928690life9ofas 6131978 8 life ofdumpsites MSW 410034 of 629 856064site 19.22212 13-16 1~17 14.5 1986 1985 26--31 411946 852565 Volume1994 Year on 25.26 1988 5283939 169851 Area (m3) Total as 1025915 1465835 10 821980 Table 2 filled270Total (ha) volume starting dump insight (years) 13 in Mumbai (SO!lrces: in Mumbai Remaining capacity Remaining Capacity16 N of(m3) dump Economicsitedetails170 the 526 359 managementEERI, 1994; MCGM, SWM Dept, into Aug2001). Disposal

III

Municipal authorities conduct the valuation exercise based on certain rules of thumb, and arrive at a unit cost of waste disposal. This approach has two disadvantages:
'J':, ,gnores certain implicit costs and benefits;

It ieads to a greater degree of error. Therefore, in the present study, each activity of MSW management has been formulated into multivariate functional models based on 'theoretical considerations with due consideration given to all the implicit costs and benefits. Earlier work by Yedla [12] was used to arrive at these multivariate functional models. Subsequent to this, valuation of each c~mponent and MSW management as a whole is done by collecting data for various parameters from MCGM. The following section presents multivariate functional models for each activity of MSW management, followed by valuation of those components of MSW management in Mumbai. The unit cost of waste disposal is used to measure the efficiency of the system:
3

lei -hi
MSW management as a sector involves various activities, viz. collection, transportation. processing and disposal. Each activity involves various costs and benefits. In the conventional valuation, certain hidden costs are ignored, making the valuation process incomplete. With the increasing importance of environmental economics as a tool for sustainable development, these implicit costs and benefits are also considered in the valuation of any system. Figure 2 shows various costs and benefits, both direct and hidden, involved in MSW management. unit cost of waste disposal (Rs. per ton), where municipal soud waste generation per year (million tonnes) cost of collection (Rs. million) cost of transportation (Rs. million) cost of disposal (Rs. million) benefits
Collection cost Tran'ltlOrtation cost Cn..t< Disoosal cost Value ofland (Hidden) COD

~i=~I __ Wa

Wa el
e2 e3

bI

Cost of collection (eJ

waste generated per day (million tonnes) waste that can be collected by each worker per day (tonnes)
Wd

Ww
l/Ww
IV

~w
Reduced expenditure on public health (Hidden)

number of workers per ton of waste per day salary of each worker per day (millions) collection cost per day (millions) waste generated per year number of bins used for collection
(Hidden)

Reduction in pollution due to wiIste burning (Hidden)

[I/Www]Wd Wd365

"'--rib:

Value of recyclable materials (Hidden) Compost generation Public image enhancement

Wa

Nb
Cbin NbCbin

cost of each bin total cost of bins

annual cost of collection (el) (Rs. millions) = Figure 2 Various costs and benefits involved in solid waste management.

(~wll'ra+ NbCbin

+ misc.

[misc. includes cost of minor equipment, shovels, trolleys, etc.]

J:.conomic insight into solid waste management

52~

Cost of transportation (e-j

length of travel per truck per year cost of travel per truck per tonne in a year number of trucks required travel cost per tonne
(Ctr) Lan-km Clrltlyr

Value of reusable/reCyclable material OJ)

,,

Tn
CtrltlyrTn C1rW.ecoll
ecoll

If fwp,fwr> fwg' /PI and fm are the fractions of t=Jper, rag, glass, plastic and metal in waste, and Pp, Pro Pg, Ppl and Pm are the prices of paper, rag, glass, plastic and metal, respectively, then
by

= w"

lfl,fwp

+ P.fwr + P.gfwg + fl,Jpl + Pmfm

total cost of transport (e2) (Rs. million) collection efficiency

Cost of disposal (eJ

cost of maintenance of disposal sites (Rs. million) MCGM ignores the cost of land, hence total cost of disposal (Rs. million)
(e_~)

Approximately 100000 rag-pickers individuai7ypick around 12 kg of waste every day [8]. Table 3 shows the different recyclable materials picked up by rag-pickers and their economic values. Rag-pickers get only half the price of what the wholesalers get in the market. Every day, rag-pickers inject Rs. 0.8983 miJlion ($18769.33) to 1.795 miJlion ($37505.22) into the economy. In a year. this estimate comes out to be Rs. 327.8795 miJlion ($6.85 million) to Rs. 655.57 million .($13.7 million). Rag-pickers do provide a great service to the society by retrieving recyciable materi"ll in the economy.
Table 3 Economic value of recyclable material (sources: NEERI. 1994: Parikh and Parikh. 1997). 1795472 1500 estimate 80344080 Totalestimate 3500500480 by 100usingvalue 1000 192 high v~luevalue 400938400 3000 5.57 estimate 5500 (Rs/t) 4.831.29 c~t~mate 200Totallow 469200 218960 (Rs/t)Low (Rs/day) using2512 Ligh 1Quantity Proportion10009.60.86value c<,lIected (Rs/day) 898362 2.00

Valuation ofMumbai MSW management

Wd

(tonnes)

6256 0.2165909 4.61668 200.1765 ($4.18) 2283440 6960 8000 ($167.15)

Material
(0) 38.98 1.00 8 5.00

per rag-picker one day (kg)

Ww (tonnes) I/Ww (tonnes) w (Rs.)

Compostables Glass Paper and cardboard Plastics Metals Total

waste generated per year (tonnes) number of containers price per container (Rs.) total cost of containers (Rs.) misc. expo (stores, uniforms) (Rs. miJlion) total cost of coJlection (Rs. miJlion)

55 680 000 ($1.16 miJlion) 4.332 ($90514) 2170.258 651 ($45.34 million)

Value of land (bJ

hectares of land required per year rent per hectare per year (million) rent on land required per year (R) discount rate net present value (NPV) ~ NPV RI R2 Rt'rl. b WIth zero as the ase year
Llf

Owing to lack of data, the cost of transportation is taken from MCGM estimates. The total cost of solid waste management, without considering implicit costs, is as follows:
el
e2 e3

r
Llf rd

Rs. 2170.258651

million ($45.34 million)

r x discount for land value

Rs. 1618.05 million ($ 33.81 million) Rs. 20.098 million ($0.42 million) Rs. 3808.406 million ($79.57 million) Rs. 1667.84 ($34.85) Rs. 1532.86 ($32.03)

total cost ofMSW unit cost of disposal

unit cost of disposal calculated by MCGM

=-

+--) ~+~ + --\2~+~J

+ ... + ~+~~-

The difference in the estimates of the unit cost of disposal could be due to errors in the rule of thumb approach adopted by MCGM.

[where R is rent at time density of waste

t, rd is the rate

of discount and n is the life of open dump in years] 380 kg/m3 (source: ref. 13) 13 526 359 x 380 kg 5.140016420 million tonnes

waste that can be filled in disposal sites

524

S. YedJa and S.Kansa/ waste th;;:: can be dumped on I ha of land 5.14/170 (from Table 2) 30235.39 tonneslha waste that can be filled in disposal sites in a year 5.14/25 205600.65 tonnes/year land used per year 205600.656/30235.39 6.8 halyear rent that land could demand per year Rs. 87.796 million (S I.gj million) (rent at the rate ofRs. 20/sq. ftlmonth, 0.5 discount factor on the land)
>

Economic insight into solid waste management

52~

Analysis and discussion

,,

Taking life of landfill as 20 years and discount rate of 10%: NPV ofland Rs. 867.707 million ($18. \3 million)

Owing to the range of benefits from recyclable material, the unit cost of disposal was found to be in the range from Rs. 1904.247 ($39.79) to Rs. 1760.739 (S36.79). The average unit cost of disposal with implicit costs and benefits was found to be Rs. 1832.493 ($38.29). This is higher than the value arrived at using conventional valuation. Figure 3 shows a bar chart comparing unit cost of waste disposal with different approaches of valuation. There is a difference of 6 US$ per tonne of waste disposal between the conventional valuation and the valuation with implicit cost and benefits. which is significant and could make a huge difference in policy development at aggregate level.

32 34 33 38 37 S 40 36 35
Cost per ton of waste disposal withoul
implicit costs and benefits

41

39.79
Year 2000-01 1

llCost

per ton of waste disposal with implicit

(loYoer value for

costs and benefits

recyclable material) mCost per ton of waste disposal with implicit

costs and benefits (higher value for

recyclable material)

Figure 3

Cost per tonne of waste disposal with and without implicit costs and benefits.

Unlike developed cities, MSW in Mumbai is handled by the Municipal Corporation without muc,h private sector or NGO participation. However, as the efficiency is declining rapidly owing to the increasing load, private sector participation in MSW management is likely soon. The trend of involving the private sector and NGOs in MSW management has started recently with the appearance of private industries. such as Excel Industry Limited [14] in MSW management and disposal activities. The market controls the participation level of the private sector in the services sector. Thus, it would be timely to apply the market approach to explain the implications of the implicit costs and benefits in MSW management that are essentially ignored in the conventional valuation process. This approach would explain the reasons for the declining system efficiency and a possible remedial approach. The budget for Mumbai MSW management is derived from taxes collected by the Government. As MSW management has always faced funding crises, private sector participation and direct public participation are essential to rejuvenate this activity. However, there exist very few studies explaining people's willingness to pay for improved waste management [15]. Hence, the only possible way to capture the demand for improved waste management and a cleaner en\'ironment is by the supply and demand curves approach; In Figure 4, MCo represents the marginal waste-handling costs to a private firm A handling waste. AB is the demand for such activity. Under ideal market conditions, firm A would handle Tm tonnes of waste with a price of Pm per tonne coming from the public. Pm is arrived at from the present level of willingness to accept. As the cost per tonne of waste disposal increases with the inclusion of explicit costs and benefits, the marginal private cost cun'e will shift to MCj This would shift Pm to Pm-'- tax, for the same level of w!!>~te be handled by firm A. Essentially. for firm A to operate at Tm to requires a -higher willingness to accept, in the absence of which the equilibr..lm of producers and consumers surplus would shift to Tme. This essentially increases Pm to P me' This condition would result in a fall in the net benefits to society. Therefore, under the present conditions the market will fail to handle waste at the required level unless a tax of 'f' is imposed (in the form of Pigovian tax), which is paid by the consumer in addition to Pm' Equitable distribution of tax on consumers and producers hold the key for its successful implementation. This tax can be imposed as a part of property tax or as a direct waste tax, as is practised in many developed cities. Therefore, it is essential to undertake a thorough economics analysis with all variable costs to determine the level of people's participation to design a more sustainable waste management system. The present system of waste management would not yield a feasible market solution without private sector participation. If the explicit costs can reduce the unit cost of disposal over the existing cost. that could present an interesting case of reduced producer swplus and increased consumer surplus. This essentially increases the activity of the firm A, which in turn means increased waste management operations for better waste management.

526 S. Yedla and S.Kansal Economic insight into solid waste management
6 MCo Pm+ 8 9 7 Indiastat (2003) http://www.indiastat.com/indialtabledisp.asp?secid=6890&ptid=261 Env:~'j'1ment%20and%20Pollution

~~

52;
&sec= in

Croppc?', M.L., Simon, N.B. and Sharma, P.K. (1997) 'The health effects of air pollution Delhi, India', Policy research working paper 1860, TheWorld Bank.

Parikh, J.K. and Parikh, K.S. (1997) Accounting and Valuation of Em'ironment, Economic and Social Commission for Asia and the Pacific (ESCAP), United Nations, New York. Yedla, S. and Parikh, J.K. (2001) 'Economic evaluation of a landfill system with gas recovery for municipal solid waste management: A case study', Int. 1. Em'ironment and Pol/ution, Yol. IS, No. ~,pp. 433--447. Municipal commissioner for Brihan Mumbai (2001-2002) 'Appendices to budget estimates A: Revenue income and expenditure (combined) Part-I', Brihanmumbai Mahanagarpalika. Municipal Corporation of Greater Mumbai (MCGM) (2001) management in Mumbai', Solid Waste Management Department. Yedla, S. (in press) 'Development of techno-economic 'A note on solid waste

10 II

o
Figure 4

T me:

Tm

TODSofwaste handled

12 13 14

integrated models: LFSGR and aerobic

Supply and demand curves for improved waste management.

compos!ing for waste minimization', Environment and Development Economics, UK. Excel Industries Lirr.ited (1999) 'Excel Environmental', Capability document, Bombay, India. Lake, I.R., Bateman, 1.1. and Parfitt, J.P. (1996) 'Assessing a kerbside recycling scheme: A quantitative and willingness to pay case study', J. Enl'ironmelll Managemelll, Yol. 46, pp. 239254; reprinted in Vowell, J.e., Turner, R.K. and Bateman. 1.1. (Editors) (2001) /-rasle Management and P:,.nning, Edward Elgar, UK.

Conclusions

The current system of waste management in Mumbai is found to be inefficient. There is a need for improvement in structure, organization and efficiency of both the formal and the informal waste management sectors in Mumbai. Cost-benefit analysis shows that a very important part of waste management, the value of recyclable material and the value of land, is neglected, resulting in undervaluation of the system by $6 per every tonne of waste disposed. In a market approach, it was observed that, under present conditions, private sector participation may not succeed unless the willingness to accept increases over the present value. A possible tax on the polluter would make up the gap between the present willingness to accept and the changed marginal cost due to the inclusion of implicit costs. The cost of open dumping is much higher than is perceived by MCGM. Moreover, existing open dumps have reached their full capacity. At this point it is imperative for MCGM to explore other least-cost options for waste disposal and also to improve private sector participation.

Appendix 1
Area Population Road length (km)

Basics statistics of Mumbai: 2000-2001

437.71 km2 11914398 (as per 2001 census)

1583.456 (as'alt) 278.81 U (cement concrete) 141073 (approx.) as on 31.3.2000 (excluding those of B.E.S. & T. undertaking) 3.344 150.58 6256 tonnes 400~5oo 2000-2500
0.5

:'\0. of municipal employees

:'\umber of workers per 1000 persons Waste handled per worker (kg) Total sol id waste generated per day A verage solid waste collected daily Waste generated per capita (kg)

tonnes ofreflise (approx.) tonnes of debris and silt

References
I 2 3 4 United Nations (2000) State of the Environment in Asia and the Pacific. of Municipal Solid Waste, Ministry of (1994) Solid Waste Central Pollution Control Board (2000) Management Environment and Forests, Government of India. National Environmental Engineering Management in Greater Bombay. Research

Number of bins provided per 1000 persons Expenditure on salary as percentage of total expenditure on solid waste management Total municipal budget (Rs. million) Expenditure on solid waste management as percentage of total municipal budget Total no. of vehicles used daily for refuse collection and debris removal

0.584 79% 52456.100 7.682% 953 contract vehicles and 1240 municipal vehicles

Institute

(NEERI)

Miranda, M.L. and Aldy, J.E. (1998) 'Unit pricing of residential municipal solid waste: Lessons from nine case study communities', 1. Environmental Management, Yol. 52, pp. 7993; reprinted in Powell, J.c., Turner, R.K. and Bateman, 1.1. (Editors) (2001) Waste Management and Planning, Edward Elgar, UK. Municipal Corporation of Greater Murnbai (MCGM) (2000) 'Survey of solid waste transported to four disposal sites in Mumbai from 24 wards in three shifts: Period Dec. 122000 to Dec. 14, 2000', Solid Waste Management Department (Project division),