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Privatisation
A Formula for Provision or Perversion ofMunicipal Solid Waste Management?
Brooks Anderson
June 2011
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PrivatisationA Formula for Provision or Perversion ofMunicipal Solid Waste Management?
Brooks AndersonClear Impression Documentation Services
June 2011
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Contents
ACKNOWLEDGEMENTS AND CREDITS
ABBREVIATIONS AND ACRONYMS
PREFACE: PRIVATISATIONS OBJECTIVE IS PRIVATISATION
Too Good to be True?
A Few Words about the Meanings of Privatisation and Municipal Solid Waste
EXECUTIVE SUMMARY
NEW PURPOSE FOR WASTE MANAGEMENT ON A PLANET IN PERIL
A THWARTED OPPORTUNITY: COMPETING AGENDAS FOR SOLID
WASTE MANAGEMENT
THE MEANING AND HISTORY OF PRIVATISATION
PRIVATISATION: A THEORY IN SEARCH OF SUCCESS
PRIVATISATIONS RECORD
Privatisations Problems Have Hampered Progress on the Millennium
Development Goals
Costs under Privatisation Are Often Comparable to, and in Some Cases Higher
than Public Provision
Contracts Force Residents to Pa Fees above Market Rate
Government Loses Cost Control
WHY PRIVATISATION FAILS
GoalDivergence:Protvs.PublicHealth
Privatisations Success Depends upon Administrative Capacit that Exists Onl
Rarel
Privatisation Focuses the Governments Resources on Attracting the Private
Sector Rather than Serving the Needs of the Poor
Contracts Tend to Create Monopolies
Contracts Are Renegotiated Soon after Being Awarded
Collusion
EXAMPLES OF PRIVATISED MSWM IN INDIA: PUDUCHERRY,
BANGALORE AND CHENNAI
ALTERNATIVES TO PRIVATISATION
CONCLUSIONS AND RECOMMENDATIONS
REFERENCES
ABOUT THE AUTHOR
i
i
ii
vi
1
5
9
11
15
19
25
31
33
35
42
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ABBREVIATIONS AND ACRONYMS
BMP Bengaluru Mahanagara Palike
BBMP Bruhat Bengaluru Mahanagara Palike
BOOT Build Own Operate Transfer
CEM Communit Environmental Monitoring
CMAM Cit Managers Association of
Maharashtra
COC Corporation of Chennai
DFID Department for International Development
ESG Environment Support Group
GIZ Deutsche Gesellschaft fr Internationale
Zusammenarbeit
IAS Indian Administrative Service
JNNURM Jawaharlal Nehru National Urban
Renewal Mission
KSPCB Karnataka State Pollution Control Board
MDGs Millennium Development Goals
MCH Municipal Corporation of Hderabad
MoF Ministr of Finance
MoEF Ministr of Environment and Forests
MoUD Ministr of Urban Development
MP Madha Pradesh
MSW Municipal Solid Waste
MSWM Municipal Solid Waste Management
NGO Non Governmental Organisation
NMF Neel Metal Fanalca
NRW Non Revenue Water
PMSPL Puducherr Municipal Services Private
Limited
POPs Persistent Organic Pollutants
PPCC Puducherr Pollution Control Committee
PPIAF Public-Private Infrastructure Advisor
Facilit
PPP Public Private Partnership
PSIRU Public Services International Research
Unit
PSP Private Sector Participation
PUDA Puducherr Urban Development Agenc
PUPs Public-Public Partnerships
PwC PricewaterhouseCoopers
RILRamkyInfrastructureLtd.
SWM Solid Waste Management
TERI The Energ and Resources Institute
TOIThe Times of India
UIDSSMT Urban Infrastructure Development
Scheme for Small and Medium Towns
ULB Urban Local Bod
UNCED United Nations Conference on
Environment and Development
UNDP United Nations Development Program
USAID United States Agenc for International
Development
ACKNOWLEDGEMENTS AND CREDITS
I am extremel grateful to people who sent me papers, exchanged thoughts or commented on drafts
during the production of this report, particularl: Moshe Adler, Gerald Anderson, Kate Baliss,
Jaap Broekema, Emanuele Lobina, David McDonald, Suneel Pande, Rosie Sanderson, Pria
Sangameswaran,ElliottSclar,RaviSrivastavaandDavidVanSlyke.IthankShripadDharmadhikaryfor
makingthispaperavailableonthewebsiteofManthanAdhyayanKendra.Ialoneamresponsibleforthe
content,conclusionsandanyerrorsinthepaper.
Photographs b Brooks Anderson
Thecartoononpage14isreproducedwithpermissionfromCointreau-Levine2000.
Authors photograph b Shano Anderson
Laout b AV DZINES, Auroville
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PREFACE:
PRIVATISATIONS OBJECTIVE
IS PRIVATISATION
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Over the past decade, the Indian governmenthas encouraged localities to privatisemunicipal solid waste management (MSWM),
an essential public service that local bodies have
tendedtoperforminadequately.1 Surprisingl,
the reasons for, and consequences of this major
change in governance have been subjected to far
lessscrutinythaniswarrantedbyitssignicance.This paper compares the theor and expectations
of privatisation with the performance record of
privatised public services in several countries in
order to inform and stimulate scrutin of Indias
determinationtoprivatiseMSWM.
Advocates of privatisation of municipal solid
waste management promote privatisation as
a recentl devised solution for man of the
problemsplaguinggovernment-runservices.For
example, USAID claims that privatisation offers
cost savings, new technologies, improvements in
efciencyandeffectivenessandreductioninthe
needforpermanentsanitationstaff....Thisnew
approach, which emphasizes commercial viabilit,
enables Indian cities and urban authorities to
respond more effectivel to the greatest needs:
increasing access to services and improving
servicelevels.Signicantbenetsforthepoor,in
particular, can be achieved through a commercial
orientation(USAID1999:1&4).
Too Good to be True?
WhenIrstencounteredsuchclaims,privatisation
soundedsobenign,benecentandmiraculous
thatitarousedskepticism.2 Several premises of
privatisation are questionable:
Is it trul less expensive for government to hire
afor-protcorporationtomanagewaste,than
for government itself to manage waste?
How could privatisation introduce new waste
management technolog that the government
couldnt otherwise afford?
Wh would an corporation pass cost savings
to the government rather than use such savings
to increase shareholders dividends or fatten
corporate executives bonuses?
Whatsignicantbenetsforthepoorwould
privatisation achieve?Is privatisation reall a new approach to
governance?
M search for answers began b asking
proponents of privatisation for examples of
privatised MSWM that operate in compliance
with Indias municipal solid waste management
regulations, and achieve the governments waste
managementobjective,minimizationofwaste.
All proponents replied identicall, assuring me
thattherearemanyexamples.However,whenIsubsequentlyaskedthemtogivespecic
examples,theyfailedtoprovideany.This
intensiedmyskepticism,soIbegantocollect
and review studies and reports about privatisation,
in search of evidence of privatisations purported
benets.
What emerged from m research was an account
of privatisation that bears no resemblance to its
proponentspromises.Booksandarticlesrecount
centuries of unsuccessful attempts to improve
publicservicesthroughprivatisation.Thereason
for such failure is eas to recognize: privatisation
does not primaril intend to improve public
services.Rather,privatisationisastrategyof
free market enthusiasts to shrink government b
transferring public mone, work and assets to the
privatesector.Asitsnamesuggests,theobjective
of privatisation is simpl privatisation, or, to
generate new business and increase revenue for
theprivatesector.
The track record, political agenda and dubious
theoretical integrit of privatisation are cause
to question the governments determination to
privatisemunicipalsolidwastemanagement.The
appropriationofsignicantfundinganddedication
of considerable institutional resources to facilitate
the privatisation of MSWM commit the nation to a
discrediteddevelopmentpath,makeprivateprot
1 In 2010, the Ministr of Environment and Forests reported
thatmunicipalsolidwastecollectionefciencyisonly
around 60% and the rest 40% lies uncollected and scattered
all over our towns and cities, polluting the surrounding land
andwaterresources(MoEF2010:3).
2USAIDsdepictionofprivatisationisespeciallydifcultto
reconcile with the sentiment of Canadian labor movement
authorit, Eugene Forse: Privatisation [is] just a fanc
name for the biggest international romp ever mounted b the
richforskinningthepoor(Forsey1980).
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a higher priorit than public health, waste precious
time and resources, and foreclose more promising
andlogicalpolicyoptions.Theopportunitycostof
continued tinkering with privatisation is exorbitant
andunaffordable.
The empirical record indicates that privatisation
isunlikelytoassistIndiaseffortstofulllitscommitments to international agreements, such as
the Millennium Development Goals, Agenda 21
and the Stockholm Convention, and does not help
localities compl with the governments waste
management regulations, namel, the Municipal
Solid Wastes (Management and Handling)
Rules,2000.Rather,privatisationundermines
andfrustratessuchimperativesbyredening
objectivesandreorientingincentives.Justas
privatisation of militar services has created an
extremel powerful industr that has a compelling
interest in perpetual war, privatisation of waste
management creates and consolidates an industr
thatthrivesonwasteandbehavesaccordingly.
Just as privatisation of military services has
created an extremely powerful industry that
has a compelling interest in perpetual war,
privatisation of waste management creates and
consolidates an industry that thrives on waste
and behaves accordingly.
Therefore, privatisation does not deserve the
governments wholehearted backing, and should
be used judiciousl and onl under stringent
regulation.Thispapercallsforthegovernmentto
explore and initiate alternatives to privatisation
that retain public control over the governments
obligationsandduties.Indiassolidwastecrisis
will be solved onl b cooperation between thegovernment and the public around a shared sense
of responsibilit and determination to leave a
cleanernationforourdescendants.
A Few Words about the Meanings of
Privatisation and Municipal Solid Waste
When I speak of privatisation, I am referring
to the wholesale outsourcing of public work
toprivatelyowned,for-protrmsthrough
contracts, concessions, public subscription or
franchises.Themunicipalsolidwastediscussedin
this document refers to commercial and domestic
wastealso known as trash, garbage or rubbish
nottoindustrial,medicalorotherwastes.
PONDICHERRy STREET CORNERThe private sector has no inherent interest in maintaining clean public spaces
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KARUVADIKUPPAM DUMPyARD, PONDICHERRy
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EXECUTIVE SUMMARy
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This paper reviews the histor, theor andoutcomes of public service privatisation inorder to weigh its merit and foresee the impact
privatisation is likel to have on municipal solid
waste management (MSWM)and thereb upon
publicwelfareinIndia.
In 2000, in response to a Supreme Court order,the Government of India formulated and enacted
the Municipal Solid Wastes (Management and
Handling) Rules (hereafter referred to as the
Rules)tomitigateaburgeoningsolidwastecrisis.
Pollution from haphazard municipal solid waste
disposal was gravel jeopardizing public health,
thereb undermining the nations development
gains.TheRulesmandatedmeasuresbywhich
local bodies were to minimize waste, in an attempt
to avert a projected 500 percent increase in annual
wasteproductionincomingdecades.TheRules
prime objective was to protect public health and
the environment b minimizing disposal of waste
inlandlls,therebyaligningthegovernments
municipal waste management polic with its
commitments to international treaties to reduce
greenhouse gas emissions, control the production
ofpersistentorganicpollutants,conservenite
resources,andachievebroaddevelopmenttargets.
Had the been implemented assiduousl, the Rules
stood a strong chance of transforming India into
oneoftheworldscleanestnations.However,in
November 2009, nearl a decade after the Rules
enactment, Minister for Environment and Forests
Jairam Ramesh publicl declared Indias cities the
worlds dirtiest: the government had done little to
bringtheRulesintoeffect.
This paper argues that Indias solid waste crisis
is now worse than ever because, rather than
earnestl implementing and enforcing the Rules,
the government instead instituted a polic of
privatising solid waste management, a polic
promoted aggressivel b the World Bank and
USAID.PrivatisationofMSWMisdemonstrating
detrimental environmental and public health
consequences.Hence,thispaperexaminesthe
rationaleforprivatisation,reviewsthendingsofstudies of privatisation, and presents the impacts
of privatised MSWM in three Indian cities to
assess whether privatisation is an appropriate
instrumentforsolvingthesolidwastecrisis.
Threemajorndingsemergefromthisstudy:
1. Privatisations objectives diverge distinctly from
the governments objectives.
Privatisations objective is to transfer public
mone, work and assets to the private sector,
whichstrivestomaximizeprot.Inthecase
of municipal solid waste management, such
objectives do not serve the governments
objectives and obligations, particularl
to safeguard public health and protect the
environmentbyminimizingwaste.
2. Rather than improving public service
performance, privatisation unleashes a plethora of
undesirable outcomes.
Privatisation creates incentives that undermine
theRulesobjectiveofminimizingwaste.Studies
of privatisation in other countries have declared
privatisedservicesatbestnomoreefcientthan
thepublicalternative,andsometimesworse.
Scholars have found instances in which user tariffs
after privatisation went up rather than down, and
of clients locked into contracts that set prices
considerablyabovemarketrates.Governments
were distressed that, rather than creating greater
cost control, privatisation considerabl diminished
their abilit to control costs as privatisation led
to monopolistic markets and contractors dictated
prices.Onendingisespeciallyalarming:
privatisations problems and governments efforts
to rescue privatised services have hampered
nations efforts to achieve the Millennium
DevelopmentGoals.
3. There is increasing evidence that administrative
reforms can dramatically improve municipal solid
waste management services.
Onthebasisofthesendings,thispaper
recommends that the government retain public
control over its waste management duties, andinstitute administrative reforms to vigorousl
implementandenforcetheMSWRules.
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KURUMBAPET DUMPyARD, PONDICHERRyIs privatisation creating a cleaner nation for future generations?
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NEW PURPOSE FOR WASTE
MANAGEMENT ON A PLANET
IN PERIL
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In 2000, the Government of India enacted theMunicipal Solid Wastes (Management andHandling) Rules (hereafter referred to as the
Rules) to avert a burgeoning municipal solid waste
crisis.Theincreasingproductionofmunicipal
solidwasteprojectedtoincreasenearlyve-
fold, to 260 million tons per ear b 2050 (Singhal
and Pande 2001)3with widespread litteringand indiscriminate dumping were impeding
the nations efforts to achieve the Millennium
Development Goals, control the production and
spread of persistent organic pollutants (POPs)
and reduce the nations contributions to climate
change.4 To halt these destructive trends, the
Rules revised the meaning and objectives of
solid waste management, thereb aiding the
governments efforts to develop the nation
sustainably.
The Rules were a relevant, transparentl-
formulated5 response to a perfect storm of
problems.Theconvergenceoffossilfuel
depletion, climate change, urbanization,
populationgrowth,afuenceandenvironmental
degradation made it imperative that municipal
solidwastemanagement(MSWM)beredened
fromasynonymforlandllingtoacomprehensive
strateg forminimizingwaste.TheRulesclearly
indicated that solid waste management is no
longer a matter of onl collecting, transporting
anddumpinggarbage.Thegovernmentsnew
guidelines directed authorities of local bodies
to initiate dail, house-to-house collection of
segregated trash, compost biodegradable waste,
and recover recclable materials in order to
safeguard public health, protect the environment,conserveniteresourcesandminimizelandlling.
Thegovernmenttherebyformallyandofcially
established that the objective of MSWM was to
safeguard public health and the environment b
minimizingwaste.Wastemanagementsnew
objective was acknowledged across ministries:
The Ministr of Finance: The objective of solid
waste management is to reduce the quantit of
solid waste disposed of on land b recover of
materials and energ from solid waste in a cost
effectiveandenvironmentfriendlymanner.
...Thegoalofanyintegratedsolidwaste
management plan is the recover of more valuable
products from the waste with the use of less
energ and more positive environmental impact
(MoF2009:5&38).
3 The McKinse Global Insitute (2010:56) projects that
MSW production in urban India will reach 377 million tons
peryearby2030.
4Thenationssmolderingdumpsitesaresignicant
producers, reservoirs and emitters of hazardous persistent
organic pollutants and climate warming gases (Subramanian
andTanabe2007).Suchsitesarealsodamagingmunicipal
air qualit and water supplies (CEM 2007; ESG 2010;
Moretal.2006;Rawatetal.2007;Vasanti,Kaliappanand
Srinivasaraghavan2008;WHO2010).
5 The MSW Rules were the product of a Supreme Court-
ordered nationwide stud conducted b a panel of eminent
Indianexpertsonwastemanagement.Thepanelheldpublic
hearings in Indias major metros to devise a solution to the
wastecrisis.Privatisation,ontheotherhand,hasbecome
apolicywithoutsuchpublicconsultation.In2006,Sanjay
K.Gupta,anauthorityonsolidwastemanagementinIndia,
observed: Private sector participation has been accepted
as a result of advocac b private parties and forums which
supportprivatisation.Themunicipalitiesaloneseldom
decideonplanstoprivatizeaservice(Gupta2006:6).
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The Lok Sabhas Standing Committee on Urban
Development: The most important aspect in solid
waste management [is] reduction of waste and the
segregationofwasteatsource(MoUD2010:35).
The Ministr of Environment and Forests:Sustainable waste management needs to be
based on the waste management hierarch of,
rstly,avoidinggenerationofwaste,followedby
reducing, reusing, reccling, recovering, treating
and disposing whatever waste is produced
(MoEF2010:iv).
The Rules aligned the aims of Indias solid waste
management polic with Agenda 21, the action
plan of the World Commission on Sustainable
Development of the United Nations Conference
on Environment and Development, which India
signedinRiodeJaneiro,Brazil,inJune1992.Agenda 21 states that governments should
promote waste prevention and minimization
as the principal objective of national waste
management programmes, and develop and
implement national plans for waste management
that take advantage of, and give priorit to waste
reuseandrecycling(UNCED1992).
To maximize weightand thereb revenueand minimize operating costs, private operators often indiscriminatel
combine, rather than segregate waste
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A THWARTED OPPORTUNITy:
COMPETING AGENDAS FOR SOLID
WASTE MANAGEMENT
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Had the been implemented assiduousl,the Rules stood a strong chance oftransforming India into one of the worlds
cleanestnations.Instead,theRuleswerewidely
outed.Consequently,nineyearsaftertheRules
enactment, Minister for Environment and Forests
Jairam Ramesh exclaimed, I think that our cities
have the dubious distinction of being the dirtiestcities in the world (Times of India 2009).
The Rules failed to arrest the solid waste crisis
for several reasons, which have been pinpointed
in a performance audit b Indias Comptroller
andAuditorGeneral(CAG),publishedin2008.
The CAG (2008) concluded that the waste
crisis persisted because of the governments
administrative weaknesses and other issues,
including: imprecise and incomplete data about
waste production, lax monitoring and enforcement
of the Rules, a lack of comprehensive planning for
waste management, ambiguit and disagreement
about responsibilit and accountabilit for
regulator oversight at the level of the central
government, a lack of coordination and integration
of the nations waste management policies, and
improperbudgetingandinadequatestafnglevels
forwastemanagement.Inotherwords,theRules
couldworkonlyifaccompaniedbysignicant
administrativereforms.
The CAG called for critical administrative reforms
to achieve waste minimization, and thereb
fulllthegovernmentscommitmenttoprotect
public health and the environment, in accordance
withAgenda21andotherinternationaltreaties.
However, the CAGs recommendations had to
contend with a competing prescription for solving
thewastecrisis.
Donors of development aid, notabl the World
Bank and USAID, claimed that privatisation
wasthemostefcientwaytotacklethewaste
crisis,andusedtheirnancialleverageandother
resources to persuade India to privatise waste
management.AUSAID-supportedpaperasserted,
Involvement of the private sector is essential for
the effective implementation of the MunicipalSolid Waste Management Rules 2000 (CMAM
2005).
In 2000the same ear that the Rules were
enactedthe World Bank published a 153-
page toolkit entitled Guidance Pack on Private
Sector Participation in Municipal Solid Waste
Management, advocating privatisation and
providingtemplatesforcontracts.TheGuidance
Packillustrates how, rather than working with
governments to strengthen their capacit toimplement and enforce locall-formulated waste
management regulations, aid donors vigorousl
promote the private sector as a provider of
municipal services (Cointreau-Levine and Coad
2000:6).
According to the Banks logic, administrative
reforms to improve the governments abilit
to manage waste were unwarranted because
waste management was an improper role for the
state.TheBankarguedthat,ratherthandirectly
performing services, governments should become
regulators and facilitators of private sector
involvement(Cointreau-Levine2000,Zhuetal.
2008).In2008thesameyearthattheCAG
called for administrative reforms to achieve
waste minimizationthe World Bank published
Improving Solid Waste Management in India:A
Sourcebook for Policy Makers and Practitioners,
which is devoted largel to promoting
privatisation of MSWM and construction of
massiveregionallandlls.
According to privatisations proponents,
the objective of privatisation is low costs
(Cointreau-Levine2000:11).TheBanks
Sourcebookclaims that privatisation cuts MSWM
costsby50percent(Zhuetal.2008:57).In
another Bank publication,Improving Management
of Municipal Solid Waste in India: Overview
and Challenges,published in 2006, privatised
solid waste management is promoted as costing
two thirds as much as government production
(Hanrahan, Srivastava and Ramakrishna
2006:67).6
6A reason for such dramatic savings ma be that privatised
costs are compared to the costs of unreformed public
services.Hanrahan,SrivastavaandRamakrishna(2006:68)
claim that government production is more
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The Bank regarded the low cost-effectiveness of
government-runMSWMasapivotalproblem.
Privatisation, the argued, would control the cost
ofwastemanagement,andlandllswouldcontrol
pollution.
The Banks advocac of massive, regional,
privately-operatedlandllsovershadoweditsconsiderationofwasteprevention.TheBanks
Water and Sanitation Programme promoted
massiveregionallandllsintwodocuments:
Implementing Integrated Solid Waste Management
Systems in India: Moving Towards the Regional
Approach (WSP 2007),and Secured Landlls: The
Bucket at the End of the Solid Waste Management
Chain (WSP2008).
Theproposaltocreatelandllsonthescale
advocated b the WSPlarge enough to contain
all waste from up to 20 localities for up to 30
ears (WSP 2007:20)was a major departure
from the governments objective of minimizing
landlling.Massivelandllswouldpostpone
pressure to reccle and minimize waste,
whilecausingsevereenvironmentaldamage. 7
Furthermore,massivelandllscreateanadditional
incentivetomaximizewaste,asprivatelandll
operators earn lucrative tipping fees for each ton
ofwastedisposed.Ratherthanbeinganefcient
solution,massiveregionallandllsrequirewaste
tobetransportedlongdistance,aninefcient
arrangement that becomes more expensive over
timeandisenvironmentallycounterproductive.
The Banks promotion of privatisation in India
followed its similar activit in man other
countries.Throughoutthe1990s,aiddonors
favored privatisation ostensibl because of
their certaint that the private sector would
expand coverage and reduce costs of public
servicesinlowandmiddle-incomecountries.
Theyproclaimedthat,undertheinuence
oftheprotmotiveandthedisciplineof
competition, the private sector would deliver
essential services to more people at lower prices
thanthepublicsectorcould.TheBankwasso
condentofprivatisationsadvantagesthattheymade privatisation a condition for sanctioning
development assistance in the forms of loans
and grants (Baliss and Kessler 2006:7-10,
Dharmadhikary2008:xiii,Dorvil2007:5).
It is important to recognize that privatisation
has not spread around the world on the basis
of its inherent strengths, nor is privatisation an
inevitableoutcomeofeconomicdestiny.Rather,
it has been imposed on low and middle-incomecountries b aid donors as a tactic of their
crusade to stimulate private sector growth b
shrinking government activit, particularl service
provision,taxationandregulation.Privatisation
is central to this campaign because privatisation
transfers public mone, work and assets to the
privatesector.
The donors intention was the opposite of
strengthening government: privatisation actuall
intended to shrink government (Sclar 2000:94,
BaylissandKessler2006:21).Accordingtothe
Bank, Private sector participation involves
reducing government control, ownership and/or
activitywithinaservice...traditionallyprovided
bygovernment(Cointreau-Levine2000:17).The
Bank explicitl proposed that government sharpl
curtail direct provision of waste management
services; turning 70% over to the private sector at
rst,andincreasingtheprivatesectorsshareto
80%afterveyears(Cointreau-Levine2000:23).
expensivebecauseoftheinefcientfunctioningofpublic
emploees, as if nothing short of la-offs can remed such
indolence.TheBanksclaimsofprivatisationssignicant
costsavingsandtheinefciencyofpublicemployeesare
contradictedbyndingsofotherstudiesbytheBank(cited
later in this paper), which found negligible, if an, savings,
as well as cases in which public emploees performed on par
withtheefciencyofprivatesectoremployees.
7 Steisel and Miller (2010) calculated the environmental
cost of hauling New york Cits waste to private regional
landlls:HaulingNewYorkCityswastetolandllsuses
halfasmuchfueleveryyearasthecitystaxieetrunning
24/7.Thecombinedannualgreenhouseemissionsfrom
haulingandputtingthiswasteinlandllsamounttohalfas
muchasisreleasedtoproducethecityselectricity.
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The Banks diagnosis of Indias solid waste crisis
as being a smptom of overpriced, unproductive
government services, is distinctl discordant
from the Banks prescription of privatisation
andmassiveregionallandlls.Thesuitability
andaffordabilityofmassivelandllsare
additionall questionable in light of the Ministrof Environment and Forests assertion that land
disposal [is] the most expensive option for solid
waste management anwhere in the world
(MoEF2010:4).TheBanksadvocacyofthe
mostexpensive,highlyinefcientremedydoesnt
matchitsprofessedconcernforscalrationality
andefciency.
However, the Banks prescription undoubtedl
appealstotheprivatesector.In1992,Michael
DeGroote, then chairman of Laidlaw Industries,
the worlds fourth largest waste management
company,describedlandllsas,likeanoilwell
inreverse.Withanoilwell,themoreyoutakeout
ofit,themoreyoumake.Withalandllsite,the
more garbage ou put in it, the more ou make
(Crooks1993:21).In1979,theannualreportof
Service Corporation of America, then the worlds
third largest waste management compan, stated,
Disposalserviceisourmostprotablebusiness...Landlloperations...arecharacterized
byhighxedcostsandlowvariablecosts,and
the receipt of additional tonnage at a site which
alreadyhassufcientvolumetocoveritsxed
costswillproduceadramaticincreaseinprot
andmargin.(Crooks1993:22)
Clearl, the Banks agenda of minimizing
governmentandmaximizinglandllsundermines
the Indian governments objective of minimizing
waste.
KARUVADIKUPPAM DUMPyARD, PONDICHERRy
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THE MEANING AND HISTORy
OF PRIVATISATION
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Privatisation refers to the process oftransferring the provision of an existingservice or ownership of a facilit from
governmenttotheprivatesector(Coad2000:17).
Although the 1979 edition ofWebsters New
Collegiate Dictionary does not include the words
privatisation or privatise, privatisation is not a
newpractice.Governmentshaveexperimentedwith privatisation for centuries, often calling the
practicecontractingorcontractingout.
Several American cities repeatedl attempted
to privatise solid waste management in the
nineteenthcentury.AccordingtoAdler,bytheend
of that centur: the realization that ever possible
improvement to contracting out had been tried led
cityaftercitytodeclareitsfailure....Practically
all American cities discarded contracting out
at that time and switched to governmental
production(1999:88).
However, in 1965, privatisation was reinvigorated
inadvertentlybythepassageoftheU.S.Solid
WasteDisposalAct,whichsignaledofcial
recognitionofAmericassolidwastecrisis.The
Act, and subsequent environmental legislation
at state and federal levels, led to the closure of
thousands of open municipal dumps and their
replacement b a far smaller number of regional
securedlandlls(Crooks1993).
Such regulations, although enacted to protect the
environment, also functioned as an economic
selection pressure, creating a decisive competitive
advantageforrmsthatcontrolledlicensed
landlls.Inthe1970sand1980s,thewaste
management industr experienced phenomenal
growth and consolidation, triggered b recognition
that, under the new regulations, those who
controlledlicensedlandllswouldbepositioned
to turn the garbage crisis into an extraordinar
bonanza(Crooks1993:8).Whereasthe
private sector viewed the new laws as creating
unprecedentedopportunity,publicofcials,
intimidated b the staggering cost of creating
landllsandthepotentialwindfallfromoperating
them, were inclined to cede waste management totheprivatesector(Crooks1993:8-9).
Consolidation of North Americas waste
management industr in the 1970s and 1980s
gaveahandfulofrmsanoverwhelmingshare
ofthebusiness.Amongstthemselves,these
rmsnegotiatedtermsforprotablecoexistence,
creating captive, monopolistic markets of
residential, commercial and institutional clients
whobecamevictimsofpricexing,bidrigging,racketeering, and other forms of uncompetitive
behavior b the waste management behemoths
(Crooks1993).Asinformationregardingwaste
production and operating costs became corporate
tradesecrets,publicofcialslostaccesstodata
necessar for oversight of the industr and for
thepreparationoftendersandevaluationofbids.
Crooks concludes that the industrs daunting
nancialpowerenablesittoinuencewaste
management polic so effectivel that the waste
industr now constitutes a veritable shadow
government, in opposition to which citizens not
onl feel compelled to defend themselves but
also dut bound to resist destructive powers of a
misbegottenbottomline(1993:259).
Americas waste management regulations, rather
than mitigating the solid waste crisis, ironicall
gave rise to an industr that, while charging
extortionate rates, has concentrated the garbage
crisis at disposal sites that, like nuclear waste
sites, will require expensive monitoring and
maintenance for periods ranging from several
generationstoforever(Crooks1993:256).
Despite this long, cautionar histor, the Bank
and other development agencies promote
privatisationasaninnovation.InImproving
Solid Waste Management in India: A Sourcebook
for Policy Makers and Practitioners, the Bank
advises Indias government to seriousl
consider new concepts and approaches to
solidwastemanagement(Zhuetal.2008:74).
However, instead of offering trul new concepts
and approaches, the Sourcebookadvocates
privatisation, a strateg distinguished b
centuriesoffailureanddisfavor.Thereasonsfor
privatisations disrepute become clearer when
we examine the theor and performance ofprivatisation.
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PRIVATISATION: A THEORy
IN SEARCH OF SUCCESS
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Privatisations formula for success is awork in progress, repeatedl revised inefforts to explain and correct for privatisations
dysfunctionsandunderperformance.Thetheory
thatcompetitivelycontractedprivatermswill
provide cheaper and better public services than the
government can is based on man assumptions,
which collectivel represent an enormous leapoffaith.Theseassumptionsinclude:competitors
will exist, competitors will compete rather than
collude, competition will endure despite contracts
that last in some cases for two or three decades,
savings from competition will reduce customer
tariffsratherthaninateinvestordividends,public
ofcialswillbeexperiencedenoughtodesignand
negotiate contracts that save mone and improve
services,ofcialswillbevigilantandskilled
enoughtomonitorandenforcecontracts,ofcials
will be impartial in the awarding of contracts, and
contracts awarded through a competitive bidding
processwillnotberenegotiated.
According to privatisations proponents, the
objective of privatisation is low costs
(Cointreau-Levine 2000:11), which will be an
outcome of competition between contractors to
wincontracts.Proponentsregardthecostsavings
achieved through competition as a measure of
theprivatesectorsefciency.TheBankasserts:
Governments should focus on privatising those
activitiesthataremostinefcientlydoneby
governmentandconsumeasignicantportionof
governmentbudgets.Forexample,solidwaste
management should be a privatisation priorit
(Cointreau-Levine2000:17).
The theor of privatisation is recited in a recent
paper b the German governments development
agency,GIZ(formerlynamedGTZ):SWM...
is increasingl becoming a business opportunit
fortheprivatesectorinIndia.Thiswillleadto
increased competition and improved services b
the private sector while the national institutions
face the challenge of providing the rules and a
levelplayingeld.AtthesametimeMunicipal
Corporations will gain experience in shaping and
monitoring sensible PPP projects (Dube, NandanandGudipudi2010:8).
InInnovative Approaches to Solid Waste
Management in India: Focus on Private Sector
Participation, USAID presented privatisation not
onl as something recentl conceived, but also as
benecialforthepoor:
Various approaches to privatisation exist,
offering cost savings, new technologies,improvementsinefciencyandeffectiveness
and reduction in the need for permanent
sanitationstaff....Privatesectorparticipation
in solid waste management offers several
advantages,therstofwhichiscostsavings,
which are closel related to improvements in
theefciencyandeffectivenessofservices.
Privatisation can also open the door to
introductionofnewtechnologies.Moreover,it
can reduce the establishment costs of keeping
and managing a full complement of permanent
staff....Thisnew approach, which emphasizes
commercial viabilit, enables Indian cities and
urban authorities to respond more effectivel to
the greatest needs: increasing access to services
andimprovingservicelevels.Signicant
benetsforthepoor,inparticular,canbe
achievedthroughacommercialorientation.
(USAID 1999:1 & 4, emphasis added)
However, throughout the 1990s, privatised
public services didnt perform as well as
expected.AccordingtotheBankin2000,Many
governments moved toward privatisation in the
last decade, but few have done so successfull
(Cointreau-Levine2000:8).In2005,aUSAID-
supported paper in India reported that a review
of 50 cases of privatised solid waste management
revealed, a wide variet of contracts in place
with unclear deliverables and even more unclear
methods of evaluation, penalt and reward for the
serviceproviders(CMAM2005:29).Dorvil,a
solid waste economist at the European Investment
Bank, also noted privatisations trouble, Ver few
experiencesintheeldofsolidwasteprivatisation
in low and middle-income countries have shown
SWM to have been successfull implemented so
far(2007:228).
The failures shouldnt have come as a surprise to
the Bank, which was full aware that conditions
indevelopingcountrieswerenotconducive.
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According to the Bank:
In man developing countries, the private sector
has had no experience in the provision of solid
waste services and so has no knowledge of
howtorationalizeservicedelivery.(Cointreau-
Levine 2000:11)
The appearance of competition is greater than
therealityinmostdevelopingcountries.In
some, companies register several times, under
different names, with changes in the names
of directors, while the owners are the same in
eachcase.Inothers,thereistheappearanceof
competition but some of the companies that are
bidding are actuall owned b ke government
ofcialsandaregivenfavorabletreatmentin
contractawards.Evenwhencompanieshave
distinctl separate and private ownership, there
is a tendenc for them to get together and agree
onpricesandconditions....Totheextent
that there is an appearance of competition, it is
tpicall prearranged b mutual agreement and
inharmony.(Cointreau-Levine2000:15)
In man developing countries the private
sector solid waste management industr is not
well developed and the ethical framework is
often inadequate to minimize collusion and
procurementirregularities.(Cointreau-Levine
2000:26)
Indeed, privatisation was b all measures an
illogical, inappropriate and improbable solution to
thesolidwastecrisis.
After initial privatised projects failed to improve
efciency,theBankannouncedthatprivatisations
abilit to deliver low costs is contingent upon the
existence not onl of competition, but also of a
condition the Bank has termed contestabilit,
which required the government not onl to ensure
thatrmscompeteforcontracts,butalsothat
the government itself perform a small portion of
theworkwithmunicipalworkers.IntheBanks
revised ideal privatized scenario, the government
would not onl perform municipal servicesdirectl, it would also:
Build local capacit to develop technical
specicationsandtotendercompetitively.
Build local capacit to enable local
governmenttoprovidecontestableservices.
Build local capacit to generate revenues,
and operate as a cost center with segregated
accounts.Createalevelplayingeldbymeansofa
regulatoryframework.
Specif worker safet and environmental
requirements.
Providemechanismstoassureowcontrol.
Denesanctionsandenforcement
mechanisms that discourage non-
performance.
Prepare for agreements that are long enough
toallowfulldepreciationofinvestment.
Prepare separate agreements for different
activitiestooptimizeexpertise.
Prepare agreements that are large enough in
scopetoalloweconomiesofscale.
Ensure contestabilit, enable the
participation of small to medium
sized businesses, and set up decentralized
monitoring.
Include price indexing to allow adequate
cashowandcontinuousprotability.
Include public consensus in all ke
decisions.
Ensure competitive, transparent
procurement, with several competing
tenderstoobtainefciency.
Quantif outputs to enable comparative
performancemonitoring.
Enlistpubliccooperation.
License and control all private sector
involvement.
Monitor performance to compare service
providers.(Cointreau-Levine2000:36)
Through privatisation, the Bank converted solid
waste management from a matter primaril of
material management into a gauntlet of extremel
complicated and specialized administrative
responsibilities that have proven daunting for
municipalofcialsofdevelopednations.
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In its Guidance Pack, the Bank illustrated its
ideal scenario of contestabilit in a cartoon of
three contractors and public waste service at the
startinglineoftheprivatisationgauntlet. 8
When contestabilit failed to consistentl boost
privatisations success rate, the Bank surmised that
risk discourages the private sector from competing
forpublicservicecontracts.Accordingly,theBank
instructed governments to design contracts that
relieve the private sector of risk b, among other
things, assuring levels of revenue, or guaranteeing
prot.BaylissandKesslerexaminedcontractsand
found risk abatement incentives in the forms of
cash subsidies, in-kind grants, tax breaks, direct
capital contributions, as well as guarantees against
risks that are not even under government control
(2006:11).BaylissandKessleradd,Importantly,
risk does not disappear, but rather is borne b the
developing countr governmentor more directl
byconsumers(2006:11).
These revisions of the original theor justifing
privatisationsignicantlycompromiseitsintegrity
andappeal.Byinsistingthatgovernmentcontinue
to perform a portion of municipal services,
contestabilityinatesthecostofprivatisation.
Privatisation in which contracts are packed with
risk abatement provisions looks like a private
sectorstimuluspackage,notfreeenterprise.
8 Cartoon reprinted from Cointreau-Levine 2000:7
Public and private service providers at the starting line of the privatisation gauntlet
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PRIVATISATIONS RECORD
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As privatisation spread through developingeconomies, the terms and aftermath ofthe ensuing auctions and liquidation of public
infrastructure, utilities and services became the
object of academic scrutin, much of which
ultimatel declared privatised services at best no
moreefcientthanthepublicalternative,and
sometimesworse.9 Scholars found instances inwhich user tariffs after privatisation went up rather
thandownindicativeofreducedefciencyand
of clients locked into contracts that set prices
considerablyabovemarketrates.Governments
were distressed that, rather than creating greater
cost control, privatisation considerabl diminished
their abilit to control costs, as privatisation
created monopolistic markets, contractors dictated
pricesandvitalinformationbecametradesecrets.
Onendingisespeciallyalarming:privatisations
problems and governments efforts to rescue
privatised services have hampered nations efforts
toachievetheMillenniumDevelopmentGoals.
Privatisations Problems Have Hampered
Progress on the Millennium Development
Goals
In an assessment of privatisations impact on
governments efforts to achieve the MDGs,
Baliss and Kessler assert, Market-led policies
fail to contribute to the MDGs and often reduce
thelikelihoodofachievingthem(2006:1).In
2007, Baliss and McKinle found: Privatisation
hasfailedonseveralcounts.Contraryto
expectations, private investors have shied awa
frominvestinginsuchutilitiesintheregion.Soit
has been costl for governments to motivate them
toinvest.Moreover,thefocusofinvestorson
cost recover has not promoted social objectives,
such as reducing povert and promoting
equity(2007:1).BaylissandFineconclude:
Privatisationhasbeenawidespreadfailure.This
has hampered progress on the MDGs for both
water and sanitation, and on man other MDGs
dependent on energ (Baliss and McKinle
2007:1citeBaylissandFine).
Costs under Privatisation Are Comparable to,
and in Some Cases Higher than Costs under
Public Provision
In a review of assessments of privatised services,
Lobina and Hall found: Recent World Bank
studies(Marin2009;Gassneretal.2009)
implicitlyconrmthatthereisnosuperiorprivatesectorefciencyastheyndlittlevariationin
tariff levels between private and public water
operators.However,theWorldBankisstill
promotingPSPasawaytoachieveefciency
eveniftheassumedefcienciesofprivate
operations are not apparentl passed on to end
users in the form of lower tariffs (Lobina and
Hall2009:4).
A review of the performance of privatised services
across America revealed that privatisation
demonstrated no clear superiorit to government
production: The experience with privatisation to
date indicates that the magnitude of actual overall
cost difference between contracting out and direct
service provision, regardless of the direction of
the savings, is tpicall measured in single-digit
percentages.Withsuchslightdifferentials,choices
tend to be and often are based on politics, not
economics(Sclar2000:29citesRehfuss1989).
Sclar concludes: The costs of directl managing
municipal workers are less than the costs of
managingoutsidecontractors....Publicservice
...isoftenlessexpensivethancontracting
(2000:146&155).
A stud comparing the cost of incarceration in
publicl managed and privatel managed prisons
found: Privatel operated prisons can cost more
to operate than state-run prisons even though
[privatel operated prisons] often steer clear of the
sickest,costliestinmates....Despiteastatelaw
stipulating that private prisons must create cost
savings, the states own data indicate that inmates
in private prisons can cost as much as $1,600
9 See, for example, Lobina and Hall 2009, Baliss and
Kessler2006,Bayliss2009.Suchstudiesofprivatisationin
low and middle-income countries echo verdicts of reports
on the outcome of the wave of privatisation that began in the
USAinthe1980s.See,forexample,Sclar,Schaefferand
Brandwein1989.
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more per ear, while man cost about the same
as the do in state-run prisons (Oppel 2011 cites
Lundahletal.2007).
In terms of service qualit, the stud reported,
Qualityofconnementissimilaracrossprivately
and publicl managed sstems, with publicl
managed prisons delivering slightl betterskills training and having slightl fewer inmate
grievances(Lundahletal.2007).
Baliss and Kessler found: There is little
empirical support for preferring privatization of
publicservices.Evidencesuggeststhatpublic
services perform about the same as private
ones even on strict economic terms, where
private providers would be expected to outshine
government.Arecentreviewofinfrastructure
performance conducted b a team of World Bank
researchers concluded, For utilities, ownership
often does not matter as much as sometimes
argued.Mostcross-countrystudiesndno
statisticallysignicantdifferenceinefciency
scores between public and private providers
(Baliss and Kessler 2006:22 cite Estache,
PerelmanandTrujillo2004).
Broekema and Obirih-Opareh, in their stud
comparing privatisation of waste management
in Accra, Ghana, and Hderabad, India, note
privatisations high transaction costs: Although
itisdifculttocalculatetheadditional
costs incurred for contract management and
performance monitoring, it is a fact that the
number of staff positions within the MCH
(Municipal Corporation of Hderabad) has
increased dramaticall (whereas the number of
labourershasdecreased).Thetransactioncostsof
privatisationarecertainlysubstantial(2003:846).
Broekema and Obirih-Opareh note that to some
extent cost cutting b privatisation is achieved b
shifting the cost of waste management to labour
throughwageandbenetcutsandlayoffs:The
success of privatisation in terms of service
efciencycomespartlyfromtramplingonthe
workers(2003:849).
Contracts Force Residents to Pay Fees above
Market Rate
After residents of Washington and Warren
counties in New york State, USA, hired a private
compan to build and operate a publicl-owned
waste incinerator, residents were obligated b a
long-term contract to pa above market rates toincineratetheirtrash.Iftheychosetosendtheir
trash elsewhere, the contract obligated them to
pa a penalt to compensate the compan that
ran their incinerator for the compans operating
losses(Frisch2010).
Anotherwaythatrmsextractextortionateratesis
byusingevergreencontracts(Crooks1993).Fine
print of such contacts states that the contracts will
neverexpire,butclientsrarelyreadtheneprint.
When a client whose service charges increase tries
to terminate an evergreen contract, the client is
informedbythermslawyerthatterminationof
thecontractisillegal.
Government Loses Cost Control
Privatisation supposedl gives government
a powerful wa to control the costs of public
services.However,withcontractorsoften
demanding that awarded contracts be renegotiated,
andpricesforworkdictatedbyprivaterms,the
theoryofcostcontrollosesvalidity.Areviewof
privatised services in the USA found, Available
evidence indicates that true cost comparisons
would show that privatisation has not been
successful as a general strateg to contain costs,
and ma actuall force increased cost onto the
public(Sclar,SchaefferandBrandwein1989:2).
After closing the municipall owned and operated
FreshKillslandllinStatenIsland,NY,and
privatising waste disposal, New york Cits cost
of waste disposal increased from $42 to $96
per ton, as contractors, paid according to ever
mile each ton of waste travelled, transported
thecitysgarbagetoprivatelandllshundreds
ofmilesaway.Intheabsenceofmunicipally
owned and operated disposal options, publicadministrators found themselves at the merc
of the private waste disposal industr, which is
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dominated b three massive corporations (Miller
2000).Miller,apolicyadvisortoNewYorkCity
on waste management, calculated that in 2005:
80 percent of the 124 million tons of waste that
wenttoAmericaslargestprivatelandllswentto
llsownedbyonlythreecorporations.Because
oftheconsolidationofownershipoflandlls
and the absence of publicl-owned facilities, thepublichasnoleverageovertippingfees(2007).
Miller maintains that the onl effective wa to
control waste disposal prices in the face of an
oligarchic private market is to have access to
publicl controlled waste disposal capacit, [and]
have solid waste management authorities that
offer competitive and predictable rates for both
businessesandresidents(2005).
Sclar concludes, Contrar to the near
conventional folk wisdom that privatisation
almost invariabl represents improvement, this is
simplynottrue(2000:5).Thebottomlineisthat
public contracting continues to be a cumbersome
and expensive instrument for deliver of public
service(Sclar2000:155).
A review of privatisation in the USA found:
TheMassachusettsStateAuditorsOfce
calculatedthatthestatelost$1.1millionby
privatizing highwa maintenance in
onedistrictin1991.
In 1995, two reviews of the costs of Albansprivatisation of municipal vehicle maintenance
concluded that Alban was overspending b
20percentfortheprivatizedservices.
Miamis privatisation of public transport
resulted in a sharp drop in ridership and a 100
percentincreaseinridercomplaints.
IntherstyearthatDenver,Colorado,
privatized public bus service, costs increased
12percent.Overveyears,thecostofprivate
service increased more than 100 percent, while
the cost of publicl operated service increased
only11percent.(Sclar2000)
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WHy PRIVATISATION FAILS
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Privatisation fails because the privatesector and the government have distinctldifferent objectives, and because the world that
privatisations promoters imagine bears little
resemblancetotherealworld.Thetheoryof
privatisationexpectsindividuals,rmsand
governments to generall behave in was that
the seldom do, focuses the governmentsresources on meeting the needs of the private
sector rather the needs of the poor, assumes that
ofcialshavecapacitiesthattheyrarelypossess,
underestimates the cost and trouble of terminating
contractswithbadrms,overestimatesthe
vibranc of competition, assumes collusion wont
occur and that contracts, once formalized, will
not be renegotiated, and generall expects that
contractors will put the public interest above their
rmsinterests.
Sclar, Schaeffer and Brandwein describe the
disjuncture between the theors textbook
world and the real world: The textbook model
of competition is devoid of politics and social
constraints; the real world is crammed with
them.Intheworldoftextbookeconomics,prices
and qualit are the outcome of noncoercive,
competitivemarketforces.Intheworldofreal
actors, competitors do not simpl win or lose
onthebasisofproductandprice.Theyuseany
and ever social and political advantage at their
commandtomaintainmarketshare(1989:22-23).
Sclar, Schaeffer and Brandwein point out that
advocates of privatisation
seldom take into account the real-world market
strategies of public contracting in which
establishingmonopolies,inuencingpublic
ofcials,andobtaininghiddensubsidiesare
commonl used to enrich private investors atpublicexpense.Whencontractingisexamined
against these real world constraints, the evidence
indicates that the market for contracted services
operates less like textbook competition and
more like textbook monopol or oligopol, in
which prices are driven as much b relative
bargaining power and political considerations as
byunderlyingproductioncost.Contrarytothe
claim that privatisation will lessen the political
factor in operating urban transportation sstems,
developing experience suggests the opposite is
true.(1989:2)
Goal Divergence: Proft vs. Public Health
To protect public health, the government
designed the Rules to prevent waste and
minimizelandlling.However,thegovernments
objective is scarcel acknowledged in the Banks
literature promoting privatisation of solid waste
management.Rather,intheBanksview,the
objective [is] low costs (Cointreau-Levine
2000:11).
PMSPL COMPACTORBEING WEIGHED BEFORE ENTERING KURUMBAPET DUMPyARD
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Indeed, contractors aim to reduce and avoid costs
inordertowincontractsandmaximizeprot.The
private sectors objective is clear in a recruitment
adforachiefoperatingofcerbyaBangalore-
basedwastemanagementrm,KivarEnviron,that
states, you will be responsible for effective and
protabledeliveryofservicesbytheoperating
businessunits.
As public service is outsourced to private
contractors, the contractors desire to maximize
protdivergesfromthegovernmentsdesireto
safeguard public health, a common phenomenon
that scholars call goal divergence (Van Slke
2003).Ratherthanmotivatingcontractorsto
fulllthegovernmentsobjective,theprot
motiveleadscontractorstoworkagainstit.
In the case of MSWM, contracts commonl
pa contractors according to the tons of waste
collected, hauled and dumped, thereb creating a
powerful,directnancialincentivetomaximize,
ratherthanminimizewaste.Fromthecontractors
perspective,morewasteisgood,lesswasteisbad.
Dorvilnotes:Itisdifculttocomparethe
performanceofprivatermsandmunicipal
managementintheeldofsolidwaste
management, since these organizations pursue
differentgoals...Privatermsareindeed
interestedinmaximizingprot,whereasthe
objectives of municipal management are much
morecomplex(2007:9).
Paing contractors on the basis of the weight of
waste collected, hauled and disposed discourages
contractors from reccling and composting
waste because collecting, hauling and dumping
are the simplest and least expensive wa to earn
prot.Segregatingwaste,maintainingsegregated
waste streams and producing compost would
considerabl increase the cost and reduce the
protabilityofwastemanagement.
Privatisations Success Depends upon
Administrative Capacity that Exists Only
Rarely
Privatisationsassumptionthatlocalofcialswill impartiall and vigilantl design, negotiate,
regulate, monitor and enforce contracts with
powerful,inuentialcorporationsisanother
reasonforprivatisationsshortcomings.The
CAGs (2008) performance audit found that
all levels of governmentcentral, state and
localsufferfromashortageofqualiedstaffto
implement and monitor solid waste management,
et privatisation imposes several new, daunting
responsibilities upon government departments
that, under privatisation, are also likel to bedownsized.
Baliss and Kessler note: A lot of advice from
industrialized countries becomes irrelevant
when applied to low-income countries with
weakinstitutions.Manydevelopingcountries
have(underpressurefromdonorsandnancial
advisors) imported regulator regimes from
industrialized countries, such as the UK and USA,
which rel heavil on information, technical
expertiseandtransparentinstitutionalnorms.
Such models are rarel adapted to take account
of conditions in developing countries, where,
for example, the advanced accounting, auditing
and taxation sstems required are largel absent
(2006:13).
Privatisation Focuses the Governments
Resources on Attracting the Private Sector
Rather than Serving the Needs of the Poor
Governments appropriate considerable funding
toattractprivatesectorinvestment.Such
commitments decrease the funding available to
improvepublicwelfare.BaylissandKesslerpoint
out, The adoption of market-based frameworks
hasto varing degreesput the polic emphasis
on meeting the needs of private sector plaers and
diverted attention from broadening access and
meetingtheneedsofthepoor(2006:34).The
poor suffer additionall when private contractors
demonstrate a preference for serving higher
income residents while neglecting low-income
neighborhoods.BroekemaandObirih-Opareh
observed:Privatisationhasdenitelyhelpedto
improve service standards at cit level, both in
terms of volumes of waste collected and spatial
coverage.However,thismustbeattributedlargely
to the fact that the (local) authorities have decidedto increase expenditure in the sector in response
tomountingpoliticalandsocialpressures.Atthe
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same time, the involvement of the private sector
has done little to improve service standards in
deprivedresidentialareas(2003:849).
Contracts Tend to Create Monopolies
Studies have found that, over time, competition
dwindles as contractors cultivate political favor,acquire or merge with competitors, and develop
competitive advantages because of inside
knowledge.(Crooks1993)Prohibitivebarriersto
entr discourage competitors from challenging
establishedcontractors.Astudyofsocial
service privatisation in New york found, The
privatisation of social services in man areas in
New york State has transferred public monopol
power and authorit to private monopolists, with
few increases in performance and accountabilit
(VanSlyke2003:307-308).
As seen in the examples cited earlier, privatisation
often creates monopolistic markets in which prices
aredictatedbyasinglerm.Sclarobserved:
Once a contract is put in place, buers often
ndthecostsofchangingsupplierssufciently
daunting that the exercise the option in onl the
mostextremecircumstances.Sellers,fortheirpart,
ndthatmergersandacquisitionsthatsqueezeout
excess capacit and push up price margins become
increasingl attractive as the contract market
settlesintoplace.Resultantforcesonbothsides
of the market thus conspire to create situations of
oligopolyandmonopoly.Thisisafarcryfromthe
imagined ideal of competitive market governance
pitchedbyprivatisationadvocates(2000:92).
According to Sclar: The assumption that the
marketiscompetitiveisincorrect....Mostpublic
contracting takes place in markets that range
from no competition (monopol) to minimal
competition(oligopoly)....Often,theveryact
of creating a public-contracting process sets
anticompetitiveforcesinmotion.Whatbegins
as apparent competition quickl transforms itself
b the second or third round of contracting into
monopol or, more tpicall, oligopol (2000:69-
70).
Sclar provides an example of the attrition of
competition: Westchester, New york, privatised
itsentirebusservicein1975.Initially,sixteen
companies operated the routes with none of them
carring more than a third of the passengers
inthecounty.Withinadecade,thenumberof
competitorshadbeenreducedbyhalf.By1997,
the largest operator controlled 97 percent of the
operation(2000:88).ThisledSclartoconclude:
The probabilit that an particular market willeither sustain competition or trend toward it, as the
standardmarketmodelassumes,isunlikely....
Onl in a highl constrained set of conditions is it
possibletosustaincompetitivecontracting.When
competitive contracting cannot be sustained,
neither can the automatic case for the intrinsic
political and economic superiorit of privatisation
be compared with direct government service
provision(2000:10-12).
Contracts Are Renegotiated Soon after Being
Awarded
According to the theor of privatisation, contracts
arebindingagreementsmadewithrmsselected
onthebasisofthetermsoftheirbids.Yet,in
practice, contracts are often renegotiated soon
afterbeingawarded.BaylissandKesslerreport:
There is extensive evidence that concession
contracts change, regardless of the initial
biddingprocess.Governmentsoftenlackthe
bargaining power and negotiating experience
todealeffectivelywithsuchcontracts.Because
of ambiguit, contested information about asset
conditions, or unrealistic baseline assumptions
(e.g.aboutdemandorefciencygains),
contracts are frequentl renegotiated, tpicall to
theadvantageoftheprovider.Oncearmwins
a contract, it can use its control over information
and analsis, as well as the improbabilit that
government will cancel the concession, to lobb
formajorchanges....Thepointisthatcontracts
established through a bidding process are ver
likel to be renegotiated after the contractor
winsthebidding.Ofmorethan1,000private
concession contracts awarded in Latin America
during the 1980s, for example, over 60 percent
hadtoberenegotiatedwithinthreeyears.[Guasch 2000] In the water and sanitation sector,
74 percent of all contracts in Latin America
have been renegotiated over the last 20 ears,
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the majorit of which were initiated b private
operators[Guasch2004]....evidencefrom
Latin America indicates that renegotiation takes
placeafteranaverageofjust2.2yearsfrom
the start of the contract [Estache, Guasch and
Trujillo2003].(BaylissandKessler2006:15-16
cite Guasch 2000, Guasch 2004 and Estache,
Guasch and Trujillo 2003)
Collusion
Collusion is conspirac among contractors to set
prices at a level other than prices would be if the
contractorssetpricescompetitively.Judgingfrom
reportsinthemedia,collusioniscommon.In
New york Cit, waste collection from commercial
establishments is contracted out to private waste
managementrms.10 Sclar reports, According
tooneestimate,the$1.5billiontrashbillpaid
b New york Cit businesses for private trash
collection is about $500 million higher than it
should be (Sclar 2000:49 cites Crains New York
Business1995).
In his landmark stud on the growth and practices
of multinational waste management corporations,
Giants of Garbage, Crooks recounts the collusive
behaviourofwastemanagementrms.Inone
example, a sixteen-month Brookln undercover
investigation in the earl 1970s produced
evidence showing that most of the refuse
collection industr in this New york borough
was dominated b criminals and operated
essentiallyasamonopoly.Fifty-verefuse
haulers were eventuall caught in the net of the
districtattorneyscharges.Collusivepractices
were ielding an estimated $20 million a ear in
overcharges(1993:15-16).
10 Unlike waste collection from residences, which is
performedbypublicsanitationworkers.
Sclar provides the following example of
privatisations impact on contractor behavior and
prices:
Consider what happened when the government
of Fort Lauderdale, Florida, decided to close
its municipal pipe-laing department in the
early1990s.Localofcialsestimatedthatinthe previous ear the had paid about $90 per
linear foot when the infrequentl used outside
contractorsandassumedthatthisgurewas
lessthantheirin-housecost.Aswordquickly
spread through south Florida that all of the pipe-
laing work in Fort Lauderdale was about to be
privatised, contractors readied bids ranging up to
$130perlinearfoot.Meanwhile,cityengineers
prepared a careful, avoidable-cost analsis
in anticipation of the upcoming privatisation
but were surprised to learn that their in-house
cost was actuall between $68 and $73 per
linearfoot.Ataboutthesametime,department
employeeshadapproachedcityofcialsvia
the municipal labor-management conciliation
organization with a credible complaint that
even this estimate was too high because the
workwaspoorlyorganized.Whenthework
was reorganized along lines suggested b the
emploees, in-house costs dropped to $43 per
linearfoot.Whentheoutsidecontractorslearned
that Fort Lauderdale was having second thoughts
about its privatisation decision, the lowered
theirbidstothe$50to$60range.But,bythen
itwastoolate.Thedepartmentremainedpublic
butreorganized.(2000:71)
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EXAMPLES OF PRIVATISED
MSWM IN INDIA: PUDUCHERRy,
BANGALORE AND CHENNAI
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Aside from sporadic articles in the media andinvestigative reports b NGOs, detailedinformation about the terms, practices and impact
ofprivatisedMSWMinIndianlocalitiesisscarce.
The government and major development agencies
appear to be doing little to sstematicall measure,
assessandpublicizeprivatisationsperformance.
PricewaterhouseCoopers(PwC),armappointedb the Asian Development Bank to provide
technical assistance to the JNNURM, has prepared
a brief overview of privatised projects under the
JNNURMfortheMoUD.Thedocument,created
to provide glimpses of projects being undertaken
on Public Private Partnership under JNNURM
(PwC no date), analzes privatised projects strictl
onthebasisofcostsharingandothernancial
parameters.Thedocumentsscantglimpses
fall short of revealing environmental or health
impactsofsuchprojects.Notably,oneofthefew
non-nancialremarksbyPricewaterhouseCoopers
is that MSWM in Puducherr was privatised to
enhancequalityofservice.(PwCn.d.:12)The
document describes Puducherrs solid waste
management project as one of the good initiatives
undertaken b the ULBs to initiate Public Private
Partnerships(PwCn.d.:3).
To gain a fuller and more objective impression of
the performance of privatisation, I reviewed the
public record of privatised MSWM in Puducherr,
BangaloreandChennai.Herearesomeexcerpts
from the reports, beginning with Puducherr
becausePwCendorseditasagoodinitiative.
Puducherry Municipal Services Private
Limited (PMSPL), Puducherry
On 16 Jul 2010, Puducherr awarded a 108-
Crore, 19-ear, solid waste management
concession on build, own, operate, transfer
(BOOT) basis to Kivar Environ Private Limited,
aBangalore-basedrmthathadnoprevious
experiencemanagingsolidwaste.Fortechnical
guidance, Kivar Environ entered into an
agreementwithWasteConnectionsInc.,oneof
thelargestwastemanagementrmsintheUSA.
To execute the work, Kivar Environ and thePuducherr Urban Development Agenc formed
a joint venture named Puducherr Municipal
ServicesPrivateLimited.Thescopeofworkwas
comprehensive: PMSPL was given responsibilit
for street sweeping and drain cleaning; door-to-
door collection of approximatel 146,000 tons of
MSW per ear (400 tons per da); waste transport
and processing; design, construction and operation
ofasanitarylandll;developmentofastateof
the art laborator; monitoring environmental
impactandpostclosuremonitoringofthelandll.Puducherr designated a 25-acre ard adjacent
to the Rajiv Gandhi Government Veterinar
College in Kurumbapet for PMSPL to develop
intoamodernwastedisposalfacility.PMSPLis
reportedl paid Rs 2,300 per ton of waste that the
collect,transportanddispose.
PMSPL initiated work in Januar 2011, deploing
teams who collected waste door-to-door b
pushcart and transferred the waste to plastic
dumpsters.Fromthedumpsters,aeetof14
mechanized compactor trucks transported and then
dumped unsegregated solid waste at the 25-acre
yardinKurumbapet.On22January,theHindu
newspaper reported that the Puducherr Pollution
Control Committee (PPCC) had issued notice to
Puducherr Municipalit for dumping solid and
medical wastes at Kurumbapet in violation of
applicableregulations.AccordingtothePPCC
notice, the activit leads to severe environmental
degradation and is a gross violation of the
Environment (Protection) Act, 1986, Bio-Medical
Waste (Management and Handling) Rules, 1998,
and the Municipal Solid Waste (Management and
Handling)Rules,2000(Nair2011).
On 29 March 2011, theHindu reported that the
PPCC, acting on complaints from facult and
students of Rajiv Gandhi Veterinar College,
issued a show-cause notice to the managing
director of PMSPL, asking wh criminal action
should not be initiated against PMSPL for
continued violation of the MSW Rules (yamunan
2011).
On April 6, PMSPLs dumping operation shifted
from Kurumbapet to Puducherrs older dumpard
in Karuvadikuppam, which has been a site of
protestsbyneighboringresidentsinthepast.AtKaruvadikuppam, PMSPL continued dumping
unsegregated waste at the dumpard, which is
adjacenttoPuducherrysairport.
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Rather than enhancing qualit of service,
privatisation of MSWM in Puducherr made
headlines after igniting public protest b
continuing the same hazardous, illegal disposal
practicesthatpreviouslyexisted.
Ramky Infrastructure Limited (RIL),
Bangalore
In August 2004, Bengaluru Mahanagara
Palike (BMP) awarded a concession to Ramk
InfrastructureLtd.,accordingtowhichRILwould
buildandoperateasanitarylandlltomanage600
tons of MSW per da for 20 ears on a
100-acreparceloflandatMavallipura.Ramkys
Mavallipuralandllbeganreceivingwasteon
29January2007.Pollutionfromthelandll
aggravated nearb residents, particularl after
untreatedleachateoverowedfromaholding
pond and contaminated Mavallipura tank on 6
October2009.Inprotest,theyblockedaccessto
thelandllanddemandedactionbyauthorities.
According to a Bangalore-based NGO,
Environment Support Group (ESG), on 9 October
2009, Bangalore Commissioner Shri Bharat
LalMeena,IAS,respondedtotheprotests.
The commissioner promised comprehensive
clean-up, pollution and cattle surve, and the
digging of fresh borewells [for the residents of
Mavallipura]....Thecommissionerpromisedthat
thelandllwouldconformwithallthestandards
and safeguards per the clearance conditions,
but refused to the demand to the relocation of
thelandll.Healsoconrmedtherehavebeen
serious violations both in the siting as well as the
managementofthelandllandacknowledged
thatthelandllprovidedathreattotheYelahanka
AirForceBase.Severalmonthslater,noneof
the commitments made b the commissioner
havebeenkept.Ramkycontinuestopollutewith
impunity(ESG2010:29).
AfterprotestsagainsttheMavallipuralandll
b local residents in earl October 2009, the
Karnataka State Pollution Control Board (KSPCB)
issued a 7-da show cause notice on the BruhatBengaluru Mahanagara Palike (BBMP) stating:
1. It was informed that around 60-70 truckloads
of average 6-8 tons, which amounts to total of
450-500 tons of solid waste, is coming to the
processingfacility.
2. The platform provided was overloaded and with
heapsofwasteupto20feetofheightwasnoticed.
There was no proper treatment of the entire waste,like segregation, overturning, maturation of the
waste.
3. The facilit has compost screening plant of
capacit 150 tons/da which was not working
duringinspection.Around2,000tonscompost
has been stored on the land without impervious
platform,whichalsogeneratingleachate.
4.Thedevelopedlandllisnotmaintained
according to the authorization conditions, and not
maintained soil laer on each laer of waste dump
and not provided the HDPE sheet to the whole
landllsite.
5. Adjacenttothelandllsitearound2,000to
3,000 tons of MSW was dumped on open land
indiscriminatel without segregation, which leads
to generation of lot of leachate and due to rain
waterbundprovidedforlandllareaatnorth-
western side has been breached and the leachate
hasowedintothenaturaldrain,nallyjoinsthe
Mavallipurawatertank.Thishaspollutedthe
water qualit of the village water tank against
whichvillagershavecomplainedtotheBoard.
6. The leachate generated from the platform is
collected in lined storage tank, which was not
managed properl and the tank has not been
providedwithproperpumpandpipelinesystem.
Most of the leachate has been let into the Kacha
unlined pit, and which has joined the storm water
drain and stagnated nearb the entrance gate
whichhasresultedinsmellynuisance.Thesaid
natural valle water looks like dark in colour and
emittingpungentsmellintheentirearea.
7. The conditions of Schedule III and IV of
MSW Rules and authorization orders have beencompletelyviolated.
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8. The annual report in Form II has not been
submittedasperauthorizationconditions.(ESG
2010:30-31)
On 5 March 2011, ESG issued a press release
following the visit on 3 March of BBMP
CommissionerMr.SiddaiahtoRamkyslandll
inMavallipura.Afterinspectingthelandll,thecommissioner reportedl said: The wa Ramk is
runningthelandll,therearenumerousproblems.
The are not treating the leachates; it is running
everywhere.Thereisalsonosegregationofwaste.
A large amount of waste is being received and
simplynotmanagedproperly....Peopleshealth
isbeingadverselyimpacted.Healthypeopleare
alsobeingaffected.Severalarereportingkidney
problems, meningitis, bone disorders, cancers,
etc...Contaminatedwatercouldbeacausative
factor.Howcanpeoplesurviveinsuchapolluted
environment?...Theconditionaroundthe
landllisscary.Ithascreatedavarietyofcomplex
problems.Whatpeoplearecomplainingaboutis
absolutelytobetrusted(ESG2011:1).
Ramkyslandll,whichwassupposedtolastfor
20years,waslledinthreeyearsbecausewaste
was dumped indiscriminatel rather than reccled
andcomposted.
3. Neel Metal Fanalca (NMF), Chennai
In 2007, the Corporation of Chennai (COC)
awarded a 7-ear concession to Neel Metal
FanalcaEnvironmentPvt.Ltd.forcollection,
segregation, transportation and disposal of 1,500
tonsofMSWperdayin66wards.NeelMetal
Fanalca is a 49:51 joint venture between FanalcaSA,Columbia,andNeelMetalProductsLtd.,part
oftheDelhi-based,Rs2,000-crorediversied
JBMgroup.
Neel Metal Fanalca won the concession b
bidding Rs 645 per ton for clearing garbage in Ice
House and Adar zones, and Rs 673 per ton for
KodambakkamandPullianthopezones.Priortoits
agreement with NMF, the COC had been paing
Rs 1,200 per ton of garbage cleared to Chennai
Environmental Services, popularl known as
Onyx.TheagreementwithNMFwentintoeffect
on26August2007.
On 2 August 2010, theHindu reported:
Privatisation of solid waste management in
four zones has onl led to conservanc taking
abackseatintheseareas....Privatisationof
garbage clearance in man suburban areas too
hasnotbeensuccessful.Manymunicipalities
NEEL METAL FANALCA TRANSFERSTATION, KODAMBAKKAM, CHENNAI
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have privatised at least one-third of their wards
astheylackedtherequiredmanpower.Ambattur
municipalit, which roped in the services of Neel
MetalFanalca,hasleviednesonthecompany
for poor waste disposal (Hindu2010a).
On 28 Dec 2010, theHindu (2010b) noted that
although NMFs contract stipulates segregatedcollection of MSW, segregation is not being
practiced.
On 1 Februar 2011, The Madras High Court
ordered Neel Metal Fanalca to terminate its waste
management services on 31 December 2011, prior
to the expiration of NMFs concession agreement
(Hindu2011).
On 30 Januar 2011, the Times of India (TOI)
reported:
The shodd work of the compan [NMF]
hasbeenundersharpcriticismfromdayone.
Following large-scale complaints against the
inefciencyofthecompanyinmanagingthickly
populated wards like K