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India’s new Extended Producers Responsibility Policy — Bane or Boon for Recyclers?

Lack of recyclability of low value plastic waste is the most important reason for accumulation of such waste in our cities. As such, developing waste processing infrastructure, and creating markets for products made out of waste would be the most logical solution for addressing plastic waste. In this regard EPR (Extended Producers Responsibility) policies for ensuring accountability of producers for collection and disposal of the waste generated by their products would be an imperative.

In this light, the recent EPR policy announced by India’s Ministry of Environment, Forest and Climate Change (MOEF) seems to be a good first step in the right direction, at least in improving the collection of waste. However, it falls short of stimulating investments in waste segregation and recycling, which is especially relevant during this pandemic time, both for improved waste disposal/management and for starting/restarting/expanding such businesses.

Problem of Plastic Waste

India generates humongous amount of plastic waste, broadly divided into high value waste including PET bottles, plastic pipes, plastic containers, and low value waste such as shopping bags and multi-layered plastics. Recycling of high value plastics does not require any regulatory support as the market for such plastics is strong and well-functioning. For example, India has one of the highest PET recycling rates at 90%[1] as compared to less than 40% in the USA and Europe.

However, for low value plastics which gets mixed with municipal solid waste, EPR can play a significant role in providing financial resources required across the entire value chain (Figure 1).

Figure 1: Low-value Plastic Value Chain in India

[1] As per PET Packaging Association for Clean Environment (PACE)

Evolution of EPR policy in India

EPR was first introduced in India as part of Plastic Waste Management Rules, 2011, which directed municipal bodies to collect plastic waste with the help of producers. This policy failed to get any significant momentum in the absence of clear guidelines and compliance mechanisms.

Subsequently, in 2016, when plastic waste management rules were revised, EPR policy was reintroduced with more stringent rules: Producers were now set targets for plastic waste collection. However, while this addressed the question of accountability, the waste collection infrastructure took time to build, resulting in limited progress downstream. As a result, over the past four years, only a handful of producers have made efforts to collect their plastic waste.

Figure 2: EPR Policy Evolution in India

Given the lack of progress, the MOEF has now proposed a new EPR policy in June 2020, the draft of which has been put out for public comment. Our analysis of the policy is as under:

First the positives

1. The policy provides flexibility to producers in adopting business models for plastic waste collection: Producers can now set up their own network, take services of Producer Responsibility Organisations (PRO) or contribute to EPR corpus.

2.It reduces compliance burden for producers by replacing the multiple approvals required earlier from Central and State pollution control boards with a single window approval on an online portal.

3. It builds a foundation for efficient measurement of EPR outcomes via development of reliable digital platform on the plastic waste markets and material flow of waste. The platform will also promote collaboration across producers, recyclers and waste processors leading to better waste management.

The not-so-positive: The policy’s over reliance on ULBs to deliver the segregated waste and lack of incentives to attract private investments in this sector.

1.Inadequate supply of facilities and incentives for waste segregation

To create value added recycling products, plastic waste should be clean, and not mixed with municipal solid waste; else, the cost of cleaning collected waste would render it unviable for processing. As such, it should be segregated at source, collected and sorted before it is sent to recyclers. Over the years, urban local bodies (ULBs) have failed in enforcing segregation of waste at source and yet the policy makers are hoping that this time ULBs will be able to do it:

“LBs retain the accountability for contracting of waste collection services/LBs doing it in promoting source segregation by establishing segregated waste collection and deploy vehicles adapted for segregated collection”

The policy may need to address the root cause for lack of source segregation — lack of composting facilities to handle the wet waste generated at source. As such, even if waste was segregated into wet and dry at source, municipalities do not have adequate facilities to treat the wet waste. The policy also needs to incentivise creation of decentralised composting infrastructure and invite participation of private sector in running these facilities.

2. Viability of Material Recycling Facilities

The proposed policy is understating the investment requirements of Material Recycling Facilities (MRF), where dry waste can be sorted to recover plastics that can be recycled further:

The MRF includes a low cost, concrete platform, shed and the necessary rooms and toilets. This needs to be available/created for the management and the operations at the MRF, called as Swachhta Kendra by the city Local Bodies, or by the Manufacturers and PBOs. Proper 3-phase electricity connection and water supply facility provided.”

Financially viable MRFs require large investments in adequate infrastructure (to handle at least 25–50 tonnes per day) and in automation of segregation, for efficient operation. Typically investments would be more than 1 mn USD (INR 7 crore). Therefore, the policy may need to acknowledge the importance of making significant investments towards MRF, which could also help identify and evolve other avenues of funding.

3.Excessive and misplaced regulatory oversight

The policy recommends frequent inspections of recycler operations based on quantity:

“There shall be an independent authority (Certifying Agency) who would certify every quantity of waste recycled / disposed by the recycler. Which type of recycling / disposing would be eligible for funding would be based on the certificate issued by the certifying agency”.

Such regulatory oversight may deter potential recyclers from starting and/or scaling-up their operations. To encourage recyclers, the said policy may need to consider reducing frequency of such inspection and also put the onus on certifying the quality rather than the quantity of products, over time. In addition, as nearly half of the recyclers[1] and their suppliers are in the informal sector due to taxation/compliance issues, complementary measures to reduce the GST burden on recycled products may need to be considered as well.

4.Lack of quality standards

Currently, Indian industry is nascent in developing products from low value plastics include Refuse Derived Fuel (RDF), mixed plastic composites, tiles and oil. That there are no standards for testing the strength and durability and safety of recycled plastic products at all could be one of the reasons for the low growth of this industry. Establishment of and enforcing compliance to such standards would help build consumer trust in recycled plastic products and foster their growth. As such, the policy may need to help develop/establish quality standards for recycled products, and also for regulatory oversight.

5.Fostering innovation

The policy proposes an EPR corpus fund managed by a State-level Advisory Board to fund recyclers, municipalities and state Pollution Control Boards (PCBs). While the Corpus fund is a good first step, the Advisory Board may not well-equipped or resourced to evaluate the business models and innovations of recyclers; also because requirements of recyclers are likely to be more from an operational perspective, as distinct from the managerial/regulatory perspective of ULB and PCBs.

One solution could be to have a part of these funds earmarked for innovation that could then be managed by professional impact funds (such as Aavishkaar, Circulate Capital, Small-Scale Sustainable Infrastructure Development Fund, Capital for Development) who have the necessary expertise as they are anyway investing in plastic waste management ventures. Another could be to have some of these entities represented on the Advisory Board.

Our Verdict

The latest policy makes a serious attempt to increase the collection of plastic waste; however, it does not do enough to address the core issues of inadequate infrastructure for waste segregation and poor financial viability of recycling related business.

If India is to make meaningful progress in eliminating plastic waste, governments at all levels and producers have to make coordinated efforts and complementary investments in waste segregation infrastructure and offer incentives to recyclers to start and scale innovative solutions for handling low value waste.

[1] Report of Plastindia Foundation, 2018

Founder@FineTrain, an advisory firm that assists green businesses in raising capital.

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