Karnataka govt ignores red flags, clears Rs 39,437 crore garbage deal for Bengaluru

Bengaluru: Ignoring stern warnings from its own Finance department over inflated costs, steep annual escalations and a long-term lock-in period with a single concessionaire, the Siddaramaiah-led government has cleared two mega solid waste management contracts, costing a whopping Rs 39,437 crore, for Bengaluru.

The approval means that Delhi MSW Solutions Ltd, which is a sister concern of Hyderabad-based Ramky Group, will take up processing and disposal of the city’s 5,200 tonnes of waste, for the next 30 years, single-handedly. 

Internal government notes, accessed by DH, show that the Finance department had raised a total of four strong objections to the proposal when the Urban Development department had placed it before the state Cabinet last week. The Finance department went on to suggest the formation of an expert committee to examine the proposal.  

Despite these observations, the Cabinet proceeded with the approval.

The inflated cost of the contract even before the work could begin is among the primary objections flagged by the department. 

In the north package covering Yelahanka, Dasarahalli, East and West zones, the Urban Development department had estimated the contract to cost Rs 17,982.90 crore.

But, the bidder has quoted Rs 21,444 crore, which is an increase of nearly Rs 3,461 crore over the original estimate.

Similarly, in the south package covering RR Nagar, Mahadevapura, South and Bommanahalli zones, the original estimate stood at Rs 15,065 crore.

The final project cost, based on the price quoted by the bidder, stands at Rs 17,993.33 crore, which is approximately Rs 2,928 crore higher than the original estimate.

Together, the cost escalation over the initial estimates itself amounts to nearly Rs 6,389 crore.

Secondly, the Finance department flagged the annual escalation clause of 5% built into the agreements for the next 30 years.

“With 5% compounding, at the end of 30 years the base rate would have become almost four-and-a-half times greater than the present rate,” the department warned, effectively projecting a 430% increase in rates over the concession period.

The Finance department cautioned that the contracts would create a “vendor lock-in” situation, especially because both packages had been awarded to the same concessionaire, giving one private player control over a major portion of Bengaluru’s waste management ecosystem for three decades.

The department also questioned the necessity of such a long concession period when the government itself was providing land for the facilities and the private investments involved were not exceptionally high.

It recommended reducing the contract duration from
30 years to 10 years and limiting the annual escalation to 2.5%.

For its part, the Urban Development department defended the proposal citing Bengaluru’s worsening waste crisis.

According to the department, the city generates around 5,200 tonnes of waste daily but only about 1,800 tonnes is scientifically processed, with the remaining waste ending up in landfills. It argued that the project would not impose any financial burden on the government and it will entirely be borne by the five corporations.

Not convinced, the Finance department advised the government to constitute an expert committee headed by the Additional Chief Secretary, along with external experts and officials, to independently examine the proposal before Cabinet approval.

Sources in the government however noted that the Cabinet cleared the proposal last Thursday but Chief Minister Siddaramaiah has not signed the proceedings yet.