VZCZCXYZ0000
RR RUEHWEB

DE RUEHCG #0706/01 3410616
ZNR UUUUU ZZH
R 070616Z DEC 07
FM AMCONSUL CHENNAI
TO RUEHC/SECSTATE WASHDC 1377
INFO RUEHCG/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUCPDOC/USDOC WASHDC

UNCLAS CHENNAI 000706 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG EINV SENV ECON IN
SUBJECT: TURNING TRASH TO TREASURE IN TAMIL NADU 
 
 
¶1. (SBU) Summary:  Rapid urban growth has spawned several challenges 
for the South Indian state of Tamil Nadu, including managing the 
disposal of an increasing amount of solid waste.  A variety of 
projects are on the drawing board or already in practice to convert 
this mountain of waste into something with economic value, from 
fertilizer to electricity.  Yet, none of these projects appear to be 
economically viable at present.  Reform of the regulatory 
environment, however, may allow at least some of these ideas to be 
sustainable, offering potential investment opportunities in the 
process.  End Summary 
 
From waste to fertilizer? 
------------------------- 
 
¶2. (SBU) Tamil Nadu's (TN) urban population increased by nearly 50 
percent from 1991 to 2001 -- more than any other state in India 
during this timeframe -- a trend that continues.  This increase has 
left municipal authorities grappling with a mounting solid waste 
management problem.  TN's Commissioner for Municipal Administration 
told us that not-in-my-backyard (NIMBY) objections from homeowners 
and environmentalists have limited the number of landfill sites that 
authorities can use for disposal and that many of these sites are 
reaching capacity. 
 
¶3. (SBU) Looking for a creative solution, the Commissioner said that 
one possibility was utilizing commercial-scale compost pits to 
convert solid waste into fertilizer.  He also explained that his 
department had invited tenders from private entrepreneurs to 
establish these composting facilities.  He added that the TN 
government, hoping to establish a public-private partnership, would 
provide the land and the solid waste while the contractors would 
establish the necessary facilities and manage the sale of the 
fertilizer. 
 
¶4. (SBU) The private sector, however, tends to view such projects 
skeptically.  The Chief Financial Officer (CFO) of a Hyderabad-based 
company specializing in handling hazardous waste told us that the 
financial viability of the composting scheme was doubtful.  Not only 
would farmers need to be convinced of the quality of the compost, he 
said, they would also need to have some economic incentive to choose 
compost over chemical fertilizer.  The ease-of-use of bagged 
commercial fertilizer and the fact that it already has a functioning 
distribution network, he emphasized, means that composted fertilizer 
-- which is more difficult to use and currently lacks a distribution 
system -- would need to be significantly cheaper than its chemical 
competitor to be economically viable.  He doubted that a composting 
scheme would achieve this. 
 
From waste to electricity? 
-------------------------- 
 
¶5. (U) Another option for waste disposal is to use it as fuel to 
generate electricity.  There are several methods for accomplishing 
this, including burning it directly; compacting it into pellets that 
are then burned; and capturing the methane produced when waste is 
composted, and using that to power a generator. 
 
¶6. (SBU) The CFO of the Indian branch of Covanta Energy, a New 
Jersey-based waste and energy company, told us that all of these 
processes face problems in India.  One key issue with using 
incineration to generate electricity, he said, is that urban trash 
tends to have a low calorific value because it is generally picked 
clean of recyclables and high-calorie waste as it passes through the 
collection system.  Getting enough energy to generate electricity 
effectively, he explained, therefore requires adding fuel like coal, 
which quickly decreases the economic rationale for the project. 
Tamil Nadu's Municipal Commissioner also recognized this problem, 
explaining that this is why he supported composting vice 
incineration. 
 
¶7. (SBU) Covanta's CFO also complained that the Tamil Nadu 
government wants to treat electricity-producing incinerators as 
power plants, rather than as waste-management facilities.  He said 
that these kinds of projects need income from a tipping fee (for 
managing the waste) as well as a competitive fee for the electricity 
produced.  Tamil Nadu, he maintained, is not prepared to view (and 
pay for) this kind of project in this way. 
 
¶8. (SBU) Another problem with incineration is that some 
environmental groups oppose it on environmental grounds.  A lawyer 
for one such group told us that incineration was simply 
"inappropriate" for the environment.  He also said that India's 
legal system makes it relatively easy to file public interest 
litigation to stop such projects.  Covanta's CFO told us that this 
kind of uninformed, instinctive "environmentalism" tends to overlook 
the fact that some 40 percent of the capital cost of a modern 
waste-to-energy facility is devoted to technology that mitigates 
environmental impact of burning waste.  This technology, he 
asserted, means that modern incineration techniques should not be 
confused with the noxious fume-belching machines of earlier 
generations. 
 
Biomethanation holds potential, maybe 
------------------------------------- 
 
9 (U) The environmental lawyer told us that one waste-to-energy 
technique he supports is biomethanation.  This is a process that 
turns waste to a gas that can be used for running generators.  We 
visited one such 250-KW facility in Chennai, located adjacent to one 
of Asia's largest fruit and vegetable markets.  The facility's Chief 
Executive Officer (CEO) explained that it is the first project of 
its kind in India, and said that the project, which began operating 
in 2005, was built mainly to demonstrate the concept.  The plant, 
which relies mainly on Austrian- and German-manufactured equipment, 
receives vegetable waste from the market, slices it into small 
pieces, and composts it, capturing the methane produced in the 
composting process.  Any solid materials left over after the 
methanation process are suitable for use as fertilizer, the CEO 
said. 
 
More fruit, please 
------------------ 
 
¶10. (SBU) While stressing that the facility was a success as a 
demonstration for the concept, the CEO lamented that the 
state-sponsored project is not financially viable under current 
conditions, for two main reasons.  The first is that the facility 
receives mainly fibrous vegetable waste, like leaves, which produce 
little methane when decaying.  Items that produce more methane, like 
old fruit and potatoes, tend to be picked out and fed to animals 
before the waste reaches the biomethanation facility, he said.  (The 
load of waste we saw contained mainly lettuce, with a few pumpkins.) 
 Because of the low quality of the waste, he explained, the 30 tons 
of vegetable matter delivered per day is only enough to operate the 
generator for approximately 13 hours daily, instead of the 20 hours 
it can operate at full capacity.  This translates to an average 
daily production of about 150 KW, or about 100 KW short of the 
facility's 250-KW capacity.  The facility itself, he said, consumes 
a full 40 percent of this electricity to process the incoming 
waste. 
 
¶11. (SBU) This productivity shortfall leads to a second reason for 
the project's inability to turn a profit:  electricity costs. 
Processing the daily intake of vegetable matter takes longer than 
the 13 hours per day that the generator can run on the methane 
produced, so not only is the facility underproductive, it actually 
has to import electricity when the generator is not operating. 
Adding to this cruel irony, the facility pays nearly twice as much 
for the electricity it imports as it gets when it sells its 
electricity to the grid. 
 
Comment 
------- 
 
¶12. (SBU) Theoretically, modern waste management and alternative 
energy projects in South India hold promise for potential U.S. 
investors, particular in mid-sized cities, some of which do not have 
modern waste management systems in place.  In practice, however, 
investors would need to plot their strategies very carefully.  For 
waste-to-energy projects, they will need to be able to utilize lower 
quality waste than similar projects use in Western countries.  They 
will also want to ensure that they will be able to get both the 
quantity and quality of waste required, which may be more difficult 
than one might expect.  Composting projects may become more 
sustainable if India had a developed market for organic foods, as 
suppliers would then demand organic fertilizer.  In short, waste 
management may offer opportunities for investors in India, but 
investors need to be prepared to work in a market and a regulatory 
environment largely unfamiliar with these kinds of projects. 
 
HOPPER