The Karnataka government, led by Chief Minister Siddaramaiah, has approved two major solid waste management contracts worth Rs 39,437 crore for Bengaluru, despite strong objections from the state Finance Department over the high costs and long-term risks involved.
With the approval, Delhi MSW Solutions Ltd, a sister company of the Hyderabad-based Ramky Group, will handle the processing and disposal of around 5,200 tonnes of Bengaluru’s daily waste for the next 30 years. The company has been awarded both the north and south waste management packages of the city, Deccan Herald reported.
Internal government documents, reported by Deccan Herald, show that the Finance Department had raised four major objections before the proposal was placed before the Cabinet last week.
The department had even suggested forming an expert committee to review the project in detail before giving final approval. However, the Cabinet went ahead and cleared the proposal.
One of the main concerns raised by the Finance Department was the sharp increase in project costs compared to the original estimates prepared by the Urban Development Department, the report mentioned.
For the north package, which includes Yelahanka, Dasarahalli, East and West zones, the government had initially estimated the project cost at Rs 17,982.90 crore. However, the winning bidder quoted Rs 21,444 crore, nearly Rs 3,461 crore more than the original estimate.
Similarly, for the south package covering RR Nagar, Mahadevapura, South and Bommanahalli zones, the estimated cost was Rs 15,065 crore. The final approved cost based on the bidder’s quotation has increased to Rs 17,993.33 crore, which is about Rs 2,928 crore higher, as per the report.
Together, the increase in costs for both packages comes to nearly Rs 6,389 crore above the original estimates.
The Finance Department also expressed concern over the annual escalation clause included in the agreement. According to the contract terms, the project cost will increase by 5% every year for the next 30 years.
Another major issue highlighted was the possibility of a “vendor lock-in” situation. Since both contracts have been awarded to the same company, the Finance Department cautioned that one private player would gain control over a large part of Bengaluru’s waste management system for three decades, Deccan Herald reported.
The department also questioned why such a long concession period was necessary when the government itself would provide land for the waste processing facilities and the private investment involved was not unusually high.
As an alternative, the Finance Department recommended reducing the contract period from 30 years to 10 years and lowering the annual escalation rate from 5% to 2.5%.
Defending the proposal, the Urban Development Department said Bengaluru is facing a serious waste management crisis. The city currently generates around 5,200 tonnes of waste every day, but only about 1,800 tonnes is scientifically processed. The remaining waste is dumped in landfills, creating environmental concerns, as per the report.
The department argued that the project is necessary to improve waste processing in the city and claimed that it would not create any financial burden on the state government because the costs would be borne by the city’s five corporations.
Even after these explanations, the Finance Department remained unconvinced and advised the government to appoint an expert committee headed by the Additional Chief Secretary along with outside experts and officials to independently study the proposal.
The Cabinet approved the project last Thursday. However, Chief Minister Siddaramaiah is yet to sign the official proceedings, Deccan Herald reported.
