The solid wastes of Asian cities are typically comprised of 70-85% organics, dirt and dust and composting has long been considered an interesting option to reduce the amounts of waste to be transported and disposed of in landfills. In the past many large-scale compost plants that have been set up in developing countries based on western technologies, have failed and were abandoned for several reasons.

This paper discusses some results of a research on the technical and financial performance of several composting programmes that are integrated into waste management at project sites in the Philippines, India and Nepal. The research included different scales of composting programmes and aimed at analysing the performance of these programmes. Technical aspects (i.e. process of composting, quality of compost), the type of management, the marketing strategies used and their financial performance (i.e. financial feasibility and marketing) were studied in detail. Institutional aspects (i.e. government policies and regulations, stakeholder cooperation) and environmental health aspects were also looked into. Data on the total raw material input, the amount of compost produced as well as other products from each site is given in the table below.

Success factors as well as existing problems and constraints were analysed. When comparing total annual sales with total annual costs (excluding hidden costs), the three medium-scale programmes from the five studied are feasible in a strictly financial sense. The small-scale programmes lack the necessary technical and financial expertise to achieve a similar performance level.

2. INTRODUCTION

Because the solid wastes of Asian cities are typically comprised of 70-85% organics, dirt and dust (Furedy, 1989b), composting has long been considered an interesting option to reduce the amounts of waste to be transported and disposed of in landfills. Furthermore, composting makes use of natural resources (i.e. the organic materials in wastes) that would otherwise be wasted.

However, composting is not without problems. In the past many large-scale compost plants have been set up in developing countries based on western technologies. Many of these plants failed and were abandoned for several reasons (Furedy, 1989a; Lardinois et al., 1993):

• the technology applied was often too complicated and not adapted to local circumstances
• financial and marketing aspects were usually ignored resulting in high operational costs
• management and technical expertise was often not sufficiently available
• the institutional environments (such as the legal and policy framework or economic circumstances) in which compost plants operate in western countries, were completely different from the ones in developing countries (and naturally, the institutional environment was not transferred along with the technology).

The research included different scales of composting programmes and aimed at analysing the performance of these programmes. Technical aspects (i.e. process of composting, quality of compost) and financial-economic aspects (i.e. financial feasibility and marketing) were studied in detail. Institutional aspects (i.e. government policies and regulations, stakeholder cooperation) and environmental health aspects were also looked into. Success factors as well as existing problems and constraints were analysed.

 Field studies were carried out in several towns in Argentina, Damietta and Cairo (Egypt), Bangalore (India), Bhaktapur (Nepal) and Sta. Maria (the Philippines). 

This paper deals only with some of the technical and financial aspects of the composting programmes studied in Asia. Other findings will be reported in a separate paper.

3. RESEARCH METHODOLOGY

The field studies were carried out by local researchers, usually a team consisting of a technical and a financial expert. WASTE provided detailed guidelines on the type of information to be collected as well as guidance during the research. Each field study lasted approximately two months and consisted of an analysis of the records and documents of the program, interviews with key persons and institutions, observation during working hours and SWOP (Strengths, Weaknesses, Obstacles, Potentials)-analysis.

The objective of the financial analysis was to determine the feasibility statement by calculating the actual costs, the hidden costs and the revenues obtained. Actual costs are defined as those costs that have actually been paid by the compost plant as a compensation for an input in the production process. Cost of production is calculated by totalling various cost components including costs for labour, materials, bought-in-services, rent, investment and financing costs. Sources for revenue were identified as sales of compost, sales of recyclables as by-products of the composting process, consultancy fees and waste fees paid by households. The concept of hidden costs has been introduced in order to better understand the operation and development of the compost programs, making it possible to determine the real expense of operating them. Hidden costs are related to inputs for which no expenditure has been made by the compost plant. Examples are unpaid labour, grants and free use of land or buildings. 

Since the same (financial) research methodology was used, the five composting programmes can be compared on a number of parameters. Nevertheless, the costs and prices mentioned should be used with caution. Firstly, because the composting programmes studied differ enormously in scale and scope, organisation and management, which makes a sec comparison difficult. Secondly, because it was not easy to obtain financial figures as this kind of information is usually not shared. In the case of AWARE, official company records on cost, expenditures and other financial matters were not made available to the research team. Hence, the figures resulting from the financial study of AWARE are based on estimates, which were verified through interviews with key informants. With respect to the cases of Nepal and India, the information obtained on the processing costs is quite reliable given the detailed description of the cost components of the composting process. Thirdly, since records were not always kept, data on compost production and sales had to be estimated, which may have resulted in underestimation in the case of Nepal.

4. RESULTS AND DISCUSSION

The composting programmes analysed differ very much in institutional organization, objectives, the scale at which they operate, consequently the technology and composting techniques used, financial performance and marketing strategy. In Sta. Maria (the Philippines) and in Bhaktapur (Nepal) one system was included in the research, while in Bangalore (India) three programmes (neighbourhood, municipal and private) were studied. 
 

 4.1 Short description of the composting programmes studied

In 1994 the Waste Processing and Recycling Plant in Sta. Maria was started as a joint effort of the municipality, AWARE (Assorted Waste Administration and Recycling Enterprise) and the Sta. Maria Economic Foundation (Lapid et al., 1996). The main motivator of the programme was the closure of the dump site in the neighbouring town, which forced the municipality to look for alternative options for waste removal. To avoid NIMBY (not in my backyard) effects, it was decided to build the compost plant at the new dump site. 

The Bhaktapur Compost Plant (BCP) was established in 1978 as part of the Bhaktapur Development Project, which was implemented with the assistance of GTZ (German Technical Cooperation) from 1976 to 1984 (Tuladhar et al., 1997). The compost plant was handed over to the Bhaktapur Municipality in 1981. However, compost production was stopped in 1984, as the municipality did not have sufficient incentive to continue. The plant restarted in 1989 with occasional assistance from the German funded Solid Waste Management and Resource Mobilisation Centre (SWMRMC).

In the seventies the Government of India gave subsidies to start 24 compost plants in the major cities and around 1975 ten plants were started (Shah et al., 1997). Due to technical problems and financial losses all of them were closed down, except the Karnataka Compost Development Corporation (KCDC) in Bangalore. Several technical changes were made, which facilitated its continuation. KCDC was set up by the Karnataka Government, but it is managed as an autonomous body.

Terra-Firma Bio-Technologies Limited is one of the first private enterprises in India which produces compost from urban waste by applying a vermi-composting technology on a medium scale (Shah et al., 1997). It was motivated by opportunities caused by liberalization in India, decreasing subsidies for chemical fertilizers and the garbage problem in Bangalore. Commercial production was started in 1994 after several years of experimentation with the composting process and the cultivation of earth worms.

The third experience studied in Bangalore is the composting programme developed by the Center for Environment Education (Shah et al., 1997). CEE is a national non-governmental organization and one of its offices is located in Bangalore. In November 1992 CEE started the `Environmentally Sound and Productive Use of City Garbage= project with financial assistance from NORAD (Norwegian Agency for Development Cooperation). Several projects involving source separation, door-to-door collection and (vermi)composting were set up in different neighbourhoods in Bangalore. One of these neighbourhoods, Rajajinagar, was chosen as a case study for the research. Table 1 lists some basic information about the composting programmes studied.

Table 1. Location, capacity and start of the composting programmes studied

The composting programmes are managed by different entities: the municipality (BCP), a semi-government institution (KCDC), a private enterprise (AWARE and TF) or a non-governmental organization (CEE). However, in most of the cases cooperation with other stakeholders (government bodies, private sector, non-governmental organizations (NGOs) and community-based organizations (CBOs)) is an essential element of the composting programme. Table 2 presents a summary of the main links and forms of cooperation (excluding marketing) that have been established. It is interesting to note that the number and type of linkages established differ greatly. AWARE and KCDC have mainly links with (municipal, state and national) government bodies. TF works closely with its sister company Blue Crystal Agro and CEE has established links with a CBO and the Swabhimana platform (a platform of government, NGO and CBO representatives active in solid waste management at city level).
 

4.2 Technical aspects
 

 Table 3. Composting process applied

The total annual costs including waste collection, composting (i.e. processing) and marketing costs of the compost programs studied are listed in Table 4. Both the actual and hidden costs are shown. As becomes clear from this table, particularly the cases of KCDC and BCP show a large share of hidden cost when compared to their actual cost. The share for KCDC finds its roots in hidden investment costs (see also Table 6) as well as the opportunity cost involved in the owning of land. The case of BCP shows a large share of hidden costs, which mainly consist of waste collection costs (see also Table 5). 
From the same table can be seen that all programmes, with the exception of AWARE, have a production level which is (well) below their maximum capacity. In that perspective, it could be argued that because the composting programmes are not using their full capacity, the cost price per ton of compost is too high. By expanding compost production, the total sales will increase correspondingly assuming that all compost produced is sold. As a consequence, the financial performance could be upgraded to the extent of the maximum production capacity.

The actual total cost prices of the different composting programmes fall in the range between US$ 12.82 (KCDC) and US$ 1,514.25 (CEE), whereas the actual processing costs vary between US$ 11.56 (KCDC) and US$ 817.76 (CEE) as can be seen in Table 5. The disproportional high cost price per ton of compost for both total and processing cost in the latter case can be explained by an extremely low production of compost. Together with a seemingly small investment in assets, this results in a high cost price per ton of compost.

 As for the case of Nepal, its simple operating procedures and low operation and maintenance cost result in low total cost per ton of compost despite an inefficient use of the production capacity. The lack of sophisticated equipment, together with inexpensive labour, keeps the operating cost low and reduces chances of process failure. As the actual cost of production strictly concentrates on the cost of operation of the BCP facility and excludes costs associated with waste collection, the actual cost price for compost processing equals the actual cost price for the whole programme, as is shown in the same table. 

A similar reasoning holds for the situation of AWARE. Whilst its hidden processing cost deviate from the total hidden cost, the actual total cost is equivalent to the actual processing cost. As in the case of BCP, the total hidden costs include the collection cost of (source separated) waste. 
 

Table 6 shows the labour and investment costs (actual and hidden) of compost processing. Due to the large differences of the compost programmes, the relative labour and capital intensity cannot be compared with each other. The figures can be interpreted however, for each composting programme separately. A distinguishable detail in Table 6, is the seemingly capital intensity of the CEE composting process, which is due to the extremely low compost production as indicated earlier. CEE being an exception, the other programmes can all be denoted as labour intensive with AWARE and BCP having the highest labour intensities.

The data shown in Table 7 immediately draw the attention to the enormous divergence of the sales prices per ton of compost, which range from US$ 3.7 for old compost in the case of BCP to US$ 394.7 for black gold B quality compost of TF. The sales price is highly influenced by the quality of the compost produced, the marketing strategy applied and the type of buyer addressed to.

TF is the only program which earns its total revenue from its sales. It offers a wide variety of compost products at different prices that have been designed to suit different crop requirements. As a consequence of this broad number of compost brands, TF interacts in different market segments even outside India. Shouldered by a clear and profound marketing strategy, the composting programme has a fair amount of total sales which, correspondingly, is its reason of existence.

On the other hand, BCP and CEE obtain total sales which are almost negligible. Due to inefficiencies in operation and management, the total production of compost of BCP remains at a quarter of its outer production limit. The low quantity of compost sold together with the low sales price per ton of compost explain the small amount of total sales. For CEE the marginal sales are the result of the extreme low compost production. The total revenue for both cases arises largely from the payment of waste fees by households.

5. CONCLUSIONS

When the actual total costs in Table 4 are compared with the corresponding total sales and total revenues of Table 7, conclusions can be drawn about the financial feasibility of each of the composting programmes. When taking the total sales, three from the five programmes studied (i.e. AWARE, KCDC and TF) are feasible in a strictly financial sense. When the hidden total costs are taken into account, the case of TF still turns out to be profitable. Yet for the case of KCDC, although in Aactual@ terms feasible, it floats to a large extent on financially non-quantified inputs, which are its main reason of existence.

 Comparing the actual total costs with the total revenues, four from the five programs studied (including BCP) are feasible. BCP, however, is financed largely by the revenues obtained from the waste fees and when including the waste collection costs as captured in the hidden costs (see Table 4), the programme is not feasible from a financial perspective.

The extremely low compost production of CEE (less than 1.5 tons per year) does not allow to draw conclusions on the technical and financial performance of similar schemes with a more reasonable production. One may conclude that the small-scale programs of CEE and BCP lack the necessary technical and financial expertise, which are part of the key for success of particularly TF. This makes it more difficult for these programmes to produce a good quality compost and to achieve a good price for the product.

Additionally, the use of mixed municipal waste influences largely the quality of the compost. The low quality of the compost is one of the major problems KCDC is facing.

Most composting programmes (except AWARE) operate below their maximum production capacity. This provides opportunities to lower unit costs. The more efficiently they perform in using their production capacity, the higher will be the total sales and thus, the overall financial performance.

ACKNOWLEDGEMENTS

This research is part of the Urban Waste Expertise Programme (UWEP), which is a 6-year research and dissemination programme (1995 - 2001) commissioned to WASTE Advisers on Urban Environment and Development by the Netherlands Development Assistance (NEDA - the former DGIS).

The authors would like to thank Lex Hemelaar for his assistance in developing the methodology used for the financial analysis. The authors are grateful to the local researchers: Danilo Lapid (CAPS), Christopher Ancheta and Theresa Villareal from the Philippines, Esha Shah and Kasturba Sambaraju from India, and Bushan Tuladhar and Anish Bania from Nepal.

LIST OF REFERENCES

Furedy C. (1989a). Appropriate technology for urban wastes in Asia: avoiding past mistakes. Biocycle, June, pp. 56-59.
Furedy C. (1989b). Solid waste management: exploring non-conventional options in Asian cities. Paper of the Workshop on Planning for Sustainable Urban Development: Cities and Natural Resource Systems in Developing Countries, Cardiff, UK.
Lapid G.L., Ancheta C.C. and Villareal T.J. (1996). Composting in the Philippines. UWEP Case-study report. WASTE, Gouda, the Netherlands.
Lardinois I. and van de Klundert, A. (1993). Organic waste; options for small-scale resource recovery. Urban Solid Waste Series 1. WASTE/TOOL, Gouda/Amsterdam, the Netherlands. 
Shah E., and Sambaraju K. (1997). Technical and economic analysis of composting enterprises in Bangalore, India. UWEP Case-study report (unpublished). WASTE, Gouda, the Netherlands. 
Tuladhar B., and Bania A. (1997). Technical and economic analysis of Bhaktapur Compost Plant, Nepal. UWEP Case-study report. WASTE, Gouda, the Netherlands.