India’s recycling industry is collapsing, ignoring it will land us in an urban nightmare

The already recession-hit industry has received a huge blow from rupee demonetisation and GST rollout, and if we don't implement the right policies, it will worsen our plastics problem.
India’s recycling industry is collapsing, ignoring it will land us in an urban nightmare
India’s recycling industry is collapsing, ignoring it will land us in an urban nightmare
Written by:

As Chanda Pasha takes me around his godown in Bengaluru, he points to a largely empty space leading to the ceiling and laments, “I used to have bags filling up until there. The entire warehouse used to be full. My vehicles used to run 24/7. In the past three months, all that has changed.” He had employed 8 people until last year. Now, he manages with a 3-member staff.

Pasha is a trader in recyclable materials. Owner of a godown in Nayandahalli, Bengaluru’s recycling hub which houses several small and large-scale waste aggregators and recyclers, Pasha has been running this business for the last 20 years. He buys all kinds of dry waste - plastic, glass, metal, paper and cardboard, from waste pickers and scrap dealers, and sells them to a secondary aggregator or a recycler.

Up until November 2016, just before the rupee demonetization was announced, he used to handle 20 tonnes of waste every day. But, business started dwindling owing to the cash crunch. Like most waste aggregators and scrap dealers, he used to sell dry waste for cash. When the cash flow got affected, his material started getting accumulated since no one had the cash to pay.

Gradually, from November 2016 to July 1, 2017, when the announcement of 12-18% GST on scrap material was made (this amount has been reduced to 5% as of October 6, 2017), his business had dropped to handling 5 tonnes of waste a day.

“The business did not recover from November 2016,” he says, “When GST got implemented in July 2017, it was just an added blow.”

Chand Pasha at his godown.

This is not Chand Pasha’s story alone. Nayandahalli contributes significantly to the Bengaluru’s waste management, since the 250 godowns here collect over 7500 tonnes of dry waste every month. The recycling industry as a whole has seen a significant hit over the last 2 years, and if the industry collapses, Indian cities will become a waste-management nightmare.

Recycling Industry and The Third Recession

Hasiru Dala, a Bengaluru-based organisation of waste pickers’ and informal waste collectors’, says that with the implementation of GST, the recycling industry is seeing its third recession in recent times. The first recession hit in 2015, which was the result of the global crude oil price drop. The second recession happened when currency demonetization was introduced. The recession has affected not just waste aggregators and scrap dealers, but a number of people along the informal chain of recycling in India.

India has a very vibrant recycling industry. We have one of the highest PET bottle recycling rates in world with 70% of PET being recycled (all water bottles, and carbonated soft drink bottles are made from PET). We also have a very well-established system of recycling newspapers. Chitra Mukerjee, Head of Programmes, Operations at Chintan Environmental Research & Action Group says, “We are one of the top recyclers in the world. In a way, we are teaching the West how to recycle.”

This thriving economy has always operated informally. According to a study done by Columbia University in 2012, the informal sector recycles 70% of plastic waste and up to 56% of all recyclable waste. A report published by Centre for Science & Environment in 2016, titled “Not In My Backyard – Solid Waste Management in Indian Cities” says, “The informal sector forms an important part of the recycling chain of our country that is preventing our cities from drowning in their own waste.”

The chain begins with waste pickers, who collect waste from households, or other dump yards. They sell it to scrap dealers (who are primary aggregators), who in turn sell a larger quantity of waste to other (secondary) aggregators. These secondary aggregators later sell to recyclers. Sometimes this also goes to tertiary aggregators. From the recyclers, the material reaches manufacturing units.

Baled plastic bottles, their value has been dwindling. 

So, every time there is a reduction in the price of recyclable material, the reduced price, travels down the chain, affecting everyone, with the waste-pickers taking the heat from the reduced cost.

The crushing force of any economic fluctuation in the market, is felt most by the waste pickers - those who make the least income in the chain, and live & work in very poor conditions.

Chintan Group published a research report in 2009, titled “Scrap Crash”, to understand the impact of reduced scrap prices on waste-pickers and other recyclers. The report says, “There is no doubt that the crash (in price of scrap) increased the livelihood insecurity, already threatened by other factors such as privatization, lack of land for the recycling trade, re-zoning and faulty urban planning and public perceptions.”

The Crude Oil Price Drop

This effect on waste pickers, scrap dealers and recyclers was felt very significantly in 2015, when the global crude oil prices dropped. The crude oil price saw a huge dip globally, in 2014, with this the demand for recycled plastic also went down. Since virgin material was available at lower costs, industry started preferring virgin plastic to recycled plastic. This effect was felt very harshly worldwide, with certain large-scale recyclers in the developed world shutting shop.

The impact of this gradually came to India in 2015. Although recycling of plastic continued, the prices of recyclable plastic significantly reduced. India produces approximately 8 million tonnes of plastic products every year. And plastic waste a fairly significant and high value component of municipal solid waste. According to a World Bank paper titled, “What a Waste”, plastic waste comprises 34% of all recyclable waste in India. So, this had a huge impact on the recycling industry. This reduced price travelled down the recycling chain, and hit waste pickers’ livelihood the worst.

Fathima Khanum is a waste worker who has been working at Chand Pasha’s warehouse for the last 15 years. One of her children has serious & regular medical needs.

Fathima explains how the price drop affected her. “We get paid on a weekly basis. When the owner does not get money, our salary gets delayed. Since I have to pay for my child’s medical expenses, I could not wait for the money to come in. So, I took a loan with a high interest rate. Since 2015, this cycle of borrowing & repaying is ongoing,” she says.

Source: Hasiru Dala

When incomes dip, families start being affected. Nalini Shekar, founder of Hasiru Dala, explains the extent of the impact. “In 2015, the impact of the reduced rate of plastic was so huge, we suddenly saw malnourishment in children of waste pickers.”

Chintan observed a similar impact back in 2009 as well. The study says, “Over 80% of the waste recyclers explained that one of their coping strategies was to tighten their household budgets and stop consuming all ‘luxury foods’, such as milk, fruits and meats. Not surprisingly, over 24% of those adults interviewed mentioned that they were forced to cut down on nutritious food for their children. In fact, 41% reported reducing or entirely stopping all milk consumption at home. Twenty-six percent cut down on meat.”

Hasiru Dala had to find interventions to address these large-scale consequences for the members of the collective. “We started a project where we encouraged waste pickers to grow mushrooms, to supplement nutrition. We also worked with waste pickers to expand the scope of work, by picking up castor seeds and coconut shells. The markets to aggregate them gradually started being formed,” says Nalini.

These were just coping mechanisms. Many in the recycling value chain never recovered. Fathima recalls a time when their warehouse used to sell PET bottle waste for Rs. 40-45 per kg. This price dropped to Rs. 30 per kg as a result of the crude oil price drop. As everyone was still getting used to the reduced prices, with the currency demonetization, the price once again dropped. In November 2016, Chand Pasha’s warehouse had to sell PET bottle waste at just Rs. 15 per kg. And, after the implementation of 12-18% GST on scrap material, this further dropped to Rs. 12 per kg.

The GST Impact

Although the percentage of GST implemented on scrap material has now been revised, the initial 3 months had a significant impact on the value chain of recycling. Chitra Mukherjee from Chintan, asks a pertinent question, “When municipal solid waste has no tax on it, how come the materials that come out of it has a tax associated?”

With a sudden increase in the percentage of tax on scrap material, the value of scrap material once again saw a dip. So, the drop in the income once again travelled down the chain, impacting everyone along the way.

However, a more pertinent reality is that while businesses could still get a refund of their input tax, waste pickers get hit significantly, since they are not registered entity. So, most scrap dealers and waste pickers are in a state of confusion over the implementation of GST.

Krishnamurthy is a small-scale scrap dealer who runs a shop in Hyderabad. While he agrees that most prices have not recovered since November 2016, he explains that with the implementation of GST, his biggest problem is at the purchase end. This is because the waste pickers he buys from are not an organized enterprise. So, when he pays a tax on their material, he cannot charge the same from them. He says, “I used to run 20-25 vehicles every day, but now it is down 12. The quantity of waste I handle has also significantly gone down. Additionally, I now have to pay an auditor to find a way to include the waste pickers I am buying from, while I am making lesser money.”

With reduced prices of scrap material, one of the key complaints that everyone has is that although the amount of work they put in continues to be the same, the income they earn has been on the decline.

R Annamma, who runs a dry waste collection centre at Kamaskmipalya in Bengaluru, explains this in numbers. She has been operating this centre since 2013 – it has been four years. Jointly run by her and her husband, they worked hard at ensuring they improve waste collection in the ward and currently handle 1 tonne of waste every day. They have also built up a team of 8 staff members. Despite all these changes, the income of the centre has barely changed by Rs. 20,000 per month. She says, “When we started, our income was good. But now, the value of all plastic items has dropped so low, unless my husband and I also regularly work in segregation, we will not be able to pay the salaries of all our staff.”

R Annamma overlooking her dry waste collection centre

However, Chintan feels that the revised GST percentage will provide a relief to waste pickers and scrap dealers. They have welcomed this reduction of tax rate under GST for scrap material. Their statement, however, mentions that it will still take a few weeks for the change to reflect on the ground.

Another section of the recycling industry that has been impacted by the implementation of GST is the recycled yarn producers. There are 35 PET bottle scrap-recycling companies in India, which produce polyester staple fiber from PET bottles. This fiber goes to spinning mills from which they are made into cloth. A good example of this material is the T Shirts that the Indian cricket team wore in the World Cup in 2015 – they were made from recycled plastic bottles.

BP Sultania, who heads the All India Recycled Fiber & Yarn Manufacturers Association, explains that these units are in direct competition with the virgin polyester fiber, which is dominated by big players such as Bombay Dyeing and Reliance. Before GST was implemented, the recycled polyester staple fiber was incentivized – they had to pay an excise duty of 2%, as against the 12% that the virgin polyester staple fiber had to pay. But now, the percentage of GST on both materials is fixed at 18%. Earlier, recycled fiber had demand owing to it being cost-effective. But, with the new GST rates, the recycled fiber does not have much of a margin to compete with the virgin fiber. Sultania says, “We are unable to offer any advantage to our customers. This is now a Rs. 5000-crore-industry, expanding at a rate of 20% every year. But, if we do not get the government’s support is terms of the GST rates, the growth will be negative and the existing units will start curtailing production.”

Even the recent change in the GST rate has had no change for this group of recyclers. The All India Recycled Fiber & Yarn Manufacturers Association is demanding an incentive for the recycling industry similar to the excise duty rates pre-GST. Sultania says, “The recycling industry should be placed in a special category and given partial refund of the GST applicable to them. They must be given incentives based on the quantity of PET bottles recycled by them.”

Segregation at a dry waste colleection centre. 

Urban nightmare around the corner

Apart from the direct impact that the reduced prices have had on the people working in this sector, recycling has been affected to a large extent. Over the last 3 months, Chintan has seen a large quantity of waste accumulated in their warehouse. The waste has very few takers, since their value has fallen. Certain materials, which were otherwise being recycled owing to the economic value they carried, stopped being picked up at source. For instance, in the last 3 months, waste pickers had stopped picking up glass bottles, since the value they got for it was negligible in comparison to the amount of work they had to put in. Similarly, milk covers and plastic bags, which were already at lower rate over the last couple of years, stopped having any value for waste pickers or scrap dealers.

Chand Pasha points to bags of mixed plastic waste, which contain things that have many different materials. He picks up a large paintbrush that has a plastic handle, and bristles made of nylon. The plastic and the nylon have to be separated in order to be recycled finally. But, it does not make economic sense for Chand Pasha to split this material at his godown. So, he just bags them all together and sends the bags to another aggregator, who will do this job. He used to get Rs. 4 – 5 per kg for this kind of waste. Now, the value is down to zero. When I asked him what he plans to do about this, he says, “I don’t know. Nobody further up the chain also knows. We just have to wait and see.”

A bag of mixed waste whose value is down to zero.

Recycling is one of the 3Rs, which addresses greenhouse gas emissions. With reduced rates of recycling, more and more garbage gets accumulated on streets and gets carried away to the landfills directly leading to increased environmental impacts. When I spoke to Sanjay Singhal, of PVC market association in Delhi, he asks, “All plastic items need to be recycled. If we don’t recycle, then where will it go? Should we throw it into sea or river? You will just see more trash on the roads now.”

Chitra concurs and extends this argument by asking, “One of the prime causes of urban flooding is plastic bag. How do we not follow this link?” This link was evident in Karnataka, which brought about a plastic bag ban in 2015 to combat the effects of plastic bags not being picked up. They were clogging drains and getting accumulated in landfills as a result of their reduced value.

Stabilising the market

The Plastic Waste Management Rules, 2016, states clearly, based on principles of ‘Extended Producers Responsibility’, that the responsibility to collect used plastic sachets and multi-layer packaging is of ‘Producers, Importers and Brand Owners’ who introduce the products in the market. That is, Lays and Kurkure must also share the burden of collecting the used plastic packets they bring to the market. This rule, however, exists only on paper and implementation is a far cry. If this were well implemented, the collection of low-value waste would not be variable and dependent on external forces.

Roshan Miranda, co-founder of Waste Ventures, a waste management organization based in Hyderabad, says that an important government intervention is required: companies which make non-food-grade plastics – like shampoo bottles – must be mandated to have some percentage of recycled plastics in them. Owing to the huge number of such plastic products being produced, recycled plastics will have a stable demand. “This will maintain the demand for ​recycled ​plastic irrespective of the market rates and also help in formalizing the market,” says Miranda.

Hasiru Dala is currently in the works to launch the Plastics for Change Consortium in Bengaluru, along with Hasiru Dala Innovations, S3IDF and Plastics for Change, Canada. They are creating a platform to ensure transparency in pricing of recyclable plastics, along with ensuring ethical sources of collection, along the entire chain. Nalini says, “We are also identifying corporations who will buy the finished products off from us, which will contain a mix of virgin & recycled material. Essentially, we are trying to create a more stabilized market, that which is not as erratic as it is today.”

However, the recession which has hit and the industry will take a while to adjust to the changes. When I ask Chand Pasha what he plans to do now, he says, “Maybe if I get a loan from somewhere, I can still build the business. But, loans from banks seem like yet another long-drawn process. I will just have to work on cutting my losses for now.”

All images by Swetha Dandapani. 

Loading content, please wait...

Related Stories

No stories found.
The News Minute