Show us the strategy!

The demonetization snafu and upcoming state elections will mean that Union Budget 2017/18 will have a predominant electoral flavour, with a focus on employment, jobs and direct poverty reduction programmes. The Finance Minister should take this opportunity to emphasize that poverty is multi-dimensional and goes beyond income. It is perpetuated significantly by the lack of environmental services- clean air, clean water, sanitation and waste management – through a deprivation in what Amartya Sen calls, the capability to live a healthy and good life.

Take the case of municipal solid waste (MSW). Of the estimated 62 million tonnes of MSW generated annually in urban areas, over 80% is disposed of indiscriminately at dump yards and scientific disposal is virtually non-existent. The World Health Organization (WHO) observes that 22 types of diseases can be prevented or controlled in India by improving the MSW management. The High-Powered Expert Committee (HPEC) for Urban Infrastructure Services had estimated that about 275, 000 crores would need to be spent annually to meet the capital and O&M needs for solid waste management in urban areas. As against this, the aggregate annual revenue of Urban Local Bodies from all sources is below 100,000 crores as per estimates of a study done for the XIV Finance Commission. Waste management is a local body subject, yet it is evident that urban local bodies will not be able to deliver on their own. A ready indicator of this capacity constraint is the persistent lack of reliable revenue and expenditure accounts of local bodies. The situation are improved little even two and a half decades after the 1993 Constitutional Amendments which made way for the third tier of government in India, and despite successive Finance Commissions flagging this as a a major impediment in any realistic assessment of resources required by local bodies for carrying out their core functions. The central budget must set aside resources to tackle the growing mounds of waste that dot our urban landscape. However, the current approach of uncoordinated support through multiple Ministries- agriculture, finance, urban development, new and renewable energy, environment and climate change must be discontinued. Instead, the Central Government must provide the leadership of a well thought out strategy that addresses fundamental issues such as the capacities and resources of municipal bodies, the availability of technologies that are suitable for Indian municipal waste and the incentive structures in the supply chain of activities in MSW management. The strategy must also effectively leverage the resources of the private sector and the users of municipal services.


The need for a larger strategy is evident also in India’s ambitious renewable energy programme, which aims to contribute to universal clean energy access and energy security, while ensuring minimum growth in carbon emissions. The programme is laudable, yet the target of achieving 175 GW of renewable generation capacity, cannot be realistically achieved without giving an impetus to indigenous manufacturing in the solar power segment in India. At present, India has a cumulative solar cell and module capacity of about 5.5 GW annually which is less than one-third of the annual requirement of about 18 GW capacity addition to be achieved in next 5 years. The main problems for the Indian module manufacturers in India is the cost of finance i.e. 12-15% which is more than double the cost in US and China. Secondly, India does not have local ecosystem of quality raw material suppliers, which leads to longer lead time for importing raw material (45 to 90 days). It results in requirement of heavy investment in working capital. The cost competitiveness for Indian manufacturer is further reduced as imported finished modules are duty free however the import of glass and some other raw material for module manufacturing attracts import duty. Finally, Indian manufacturers purchase raw material in Dollars and sell the finished product in Rupees, taking on an additional risk of currency fluctuation. Unless the entire ecosystem of indigenous production is systematically addressed, our renewable energy targets, and the full potential of their linkages with the rest of the economy, are unlikely to be realized.

The Finance Minister needs to send out a strong message on the saliency of environmental concerns for the development agenda and to commit resources for awareness building towards this. He also needs to ensure that the incentives and resources of the central Government are used tactically as part of an integrated and long term strategy, which is executed in a coordinated manner across ministries and states.

(This article is authored by Divya Datt, Fellow at TERI and Abhinav Jain, Research Associate at TERI)