Circular economy: What Hyderabad can teach the rest of India

Re Sustainability (formerly Ramky Enviro Engineers), one of the largest environmental management services companies in Asia, runs the Jagadgiri Gutta station and 64 other such transfer points across the city. The company bears the responsibility for managing the 9,000 tonnes of municipal waste that Hyderabad generates every day.

As one drives into Jawahar Nagar, on the outskirts of the city, it is hard to believe that it was once the dump zone for Hyderabad’s municipal waste. That waste, unloaded day after day for decades, had created a mountain estimated to hold 14 million tonnes of garbage. Today, it houses one of the largest single-location solid municipal waste processing facilities in the world.

The facility comprises two large waste-to energy plants with a combined capacity of 48 MW, India’s largest compost plant, a plastic recycling unit, an advanced refuse-derived fuel (RDF) plant, a landfill, and a facility to tap the gas from legacy landfills and convert it into compressed biogas for use as auto fuel.

Once the waste reaches Jawahar Nagar, it is segregated using trommels and ballistic separators, equipment that separates materials based on size, shape and density, resulting in three types of waste. Organic or wet waste is used to make compost and sold to fertilizer companies. Combustible waste is converted into RDF, which is then used as fuel for waste-to-energy plants or sold to cement companies, which use it to fire their kilns. The third type is inert waste, which has low calorific value. Such waste is sent to the landfill.

“Almost all the municipal waste that Hyderabad generates is collected and processed,” said Masood Mallick, managing director and chief executive officer, Re Sustainability Ltd, which is backed by global investment firm KKR. The city also processes all its industrial, construction & demolition, and bio-medical waste. Thanks to this record Hyderabad has come to be known as the circularity capital of India. Circularity is a concept that involves minimising waste and maximising use of resources through reuse, repair and recycling.

“The city started its scientific waste management journey 25 years ago. Today, it leads the nation not just in waste management but also in exploring new business models, developing technologies and incubating various innovations in this space,” Mallick added. The initiative actually has deeper roots. It began with industrial waste management in the late 1990s and then moved to biomedical waste before processing municipal solid waste. Since the turn of the century, successive governments have taken those efforts forward to make Hyderabad a champion of circularity.

However, this success has not been replicated across the country. India, it is estimated, generates about 62 million tonnes of municipal solid waste every year. “About 70% of this waste is collected and just 30% is processed,” said Aditi Ramola, technical director, International Solid Waste Association (ISWA), a global non-profit focused on solid waste management and circular economy.

Globally, the US, Europe and Japan collect and process almost 100% of the waste they generate. “India has a high import dependence for many resources and it just cannot afford to ignore the recycling potential of its waste or continue disposing it in an unscientific manner, adding to its social, environmental and health costs,” said Mallick, who is also the chairman of Confederation of Indian Industry’s national committee on waste-to-worth technologies.

Rough estimates put the loss on account of ineffective collecting and processing of municipal waste at ₹40,000 crore per year. An investment of ₹20,000 crore a year is needed to create the capacity to handle the waste generated.

A combination of factors, including fragmented governance, lack of viability, inadequate budgets and poor awareness is holding back the nation’s efforts to become a circular economy that recycles and regenerates all of its waste.

Rough estimates put the loss on account of ineffective collecting and processing of municipal waste at ₹40,000 crore per year.

In recent months the government has taken some far-reaching measures, such as expanding the Expanded Producer Responsibility rules and mandating the use of recycled materials, to address the viability gap and boost private sector participation. Will these measures provide the impetus needed to increase circularity in the Indian economy?

A no-brainer

Four compelling reasons make embracing a circular economy an absolute necessity for India. The country is at the early stage of its consumption journey. Its waste generation—at 400 grams per capita, per day—is still far lower than that of the developed world, which generates 2 kg per capita, per day. As the Indian economy evolves, the waste it generates will rise rapidly. “We cannot continue doing what we are doing now,” said ISWA’s Ramola. Solid waste management would become a nightmare.

Secondly, the composition of waste is changing. Earlier, what households discarded was predominantly wet waste. But today the waste that is thrown out contains plastics, paper, glass and critical metals, which have a lot of value and energy.

Thirdly, recycling waste enhances the nation’s self-sufficiency. Plastic is made from crude oil, 80% of which is imported. Critical metals such as nickel, cobalt, manganese and lithium, which are found in batteries and electronic gadgets, are entirely imported. More than 60% of copper consumed in India is sourced from outside.

An industry-wide study by Opengate, a company that formulates strategies to embrace a circular economy, suggests that India loses approximately ₹80,000 crore annually due to informal handling of e-waste, plastics, batteries and end-of-life vehicles.

Finally, recycling waste cuts the country’s carbon footprint significantly. For instance, recycling a tonne of aluminum saves 95% of the energy required to produce it from bauxite and saves up to 9 tonnes of carbon dioxide. The same is the case with steel, plastics and glass (see chart).

Experts have said that India could unlock as much as ₹3.5 trillion annually by 2030 by becoming a circular economy. Considering the benefits, India should ideally be investing heavily in circularity. But this is not the case today because of multiple factors.

Regulatory nightmare

Multiple ministries have a say in how waste is managed. This includes the ministry of environment, forests and climate change, ministry of housing and urban affairs, ministry of rural development, ministry of jal shakti, ministry of electronics and information technology, and ministry of chemicals and fertilizers. This often results in overlapping mandates causing policy confusion.

“There is an urgent need for a single institution to coordinate or oversee all issues involving solid waste management and circular economy,” said Ramola. Experts also blame the fragmented governance for poor enforcement of rules.

Inadequate budgets

In the last decade, a lot of emphasis has been placed on the collection of waste. Indeed, municipal corporations expend a significant portion of their budgets doing exactly this. But they do not have the funds to process the waste once it is collected. “Lack of funds means waste takes the least-cost route to disposal, which is being dumped in an open area away from habitation,” said Ramola.

Lack of funds means waste takes the least-cost route to disposal, which is being dumped in an open area away from habitation.
—Aditi Ramola

Most Indian cities are now grappling with what to do with the mountains of waste they have built up over the years. The rules say that such waste, if not recycled or converted into energy, must be processed and put in a landfill. But cash-strapped local governments are not in a position to create and manage proper landfills.

Viability gap

The lack of resources has forced many governments to reach out to the private sector for collection and processing of waste. The biggest challenge such initiatives face is lack of viability. The cost involved in collecting and processing waste is far higher than the revenue that the venture makes either by way of a user fee from the government (for collection) or proceeds from sale of products made from recycled material, or both.

Take the case of Abellon Clean Energy Ltd. The company operates a waste-to-energy plant at Jamnagar in Gujarat on a public-private partnership (PPP) model. Unsegregated waste is delivered to the company by the Jamnagar municipal corporation. The company then segregates it, taking out recyclable waste such as plastic, metal, glass, textiles and paper. These are then sold to third-party recyclers. Waste that cannot be recycled is used as fuel in a waste-to-energy plant to generate 7.5 MW of power. The facility uses 700 tonnes of such waste every day. But its operations are not profitable. “Our cost of operations is about ₹10.15 per unit but what we get for selling power is ₹7 per unit,” said Aditya Hande, founder and MD, Abellon Clean Energy.

The money the company makes selling recyclable waste is not much. “We are working with stakeholders to resolve the issue,” Handa added. Abellon Clean Energy has invested about ₹180 crore in this facility and is setting up similar plants in Ahmedabad, Rajkot and Vadodara.

At Jeedimetla in Hyderabad, Re Sustainability’s construction and demolition waste facility sprawls over 17 acres. It processes 300 tonnes of construction waste per day. The waste is crushed, washed and then separated based on size. It produces sand and aggregates of different sizes. The problem is that people are not willing to pay for these recycled materials. They are willing to pay ₹2,300 per tonne of virgin river sand but not more than ₹200 for recycled sand.

Robert Kaplan, founder and CEO of Circulate Capital, a Singapore-based investment management firm that invests in recycling companies, is of the view that such companies need to scale up, choose the right technology and put in place quality systems to ensure good demand for their products. But lack of viability in their operations makes this a challenge. Two recent measures by the government of India are set to change this.

Tailwind

In 2022, India introduced the Extended Producers Responsibility (EPR) rules. These rules require a producer to recycle the waste it generates. For instance, it is the responsibility of a soft drink company to collect and recycle a percentage of the plastic bottles it uses. Those who cannot meet the target can buy EPR certificates that recycling companies generate.

“This has opened a new revenue stream for the recyclers, helping them bridge the viability gap. In 2022, the rules mandated this for plastic waste. It has now been extended to e-waste, batteries, tyres, used oil, construction and demolition waste and end-of-life vehicles,” said Vinod Babu, a former director at the Central Pollution Control Board. “EPR will be the engine that drives the circular economy ecosystem,” he added.

EPR will be the engine that drives the circular economy ecosystem.
—Vinod Babu

After creating a new revenue stream for the recyclers, the government has now catalyzed demand for recycled products. A few months ago, it mandated targets for producers to use recycled plastic. It is expected that these rules will be extended to other sectors soon. “This will go a long way in creating demand for recycled materials,” added Babu.

“EPR and rules mandating use of recycled material go hand in hand and are a huge tailwind for the recycling sector in India,” said Kaplan. His company has so far invested in seven plastic recyclers in India. These moves, if implemented effectively, will make recyclers a lot more viable, and investments should start flowing into the sector soon, he added.

Japanese model

As India starts its circular economy journey, experts suggest that it should follow the Japanese model of dealing with waste. In Japan, it starts with reducing waste creation and flows from a minimalistic approach to consumption. Also, products are designed for repair and reuse unlike in the West, where they are designed for obsolescence. Then comes collection and processing, which is at almost 100%.

The biggest stumbling block to adopting this strategy is lack of awareness among Indians about a circular economy and the virtues of beneficially processing waste. This is best exemplified by what is happening today in Kodungaiyur in North Chennai, which houses the city’s largest waste dump.

The biggest stumbling block to adopting this strategy is lack of awareness among Indians about a circular economy and the virtues of beneficially processing waste.

The Greater Chennai Corporation wants to set up a waste-to-energy plant at the site to process garbage, but residents of the area are up in arms. They say such a project would make the area toxic. What they do not seem to understand is that the massive unprotected open dumpyard is already hurting them, whereas modern waste-to-energy plants have negligible emissions.

As much as regulation, viability and investment, creating awareness is an imperative policymakers have to address if India is to become a truly circular economy.