Information Asymmetry in the Informal Waste Ecosystem


SELLING IN THE DARK


kabadiwalla connect

MUSINGS ON WASTE (Part 7)

As a general rule the most successful man in life is the man who has the best information.
– Benjamin Disraeli

LEARNING FROM THE EXPERIENCES OF THE AGRICULTURAL SECTOR

What do Indian farmers and rag-pickers have in common? At face level, both groups couldn’t be more different: one’s livelihood is based on producing crops, while the other earns a living by salvaging waste. But interestingly, both operate within sectors that are structured in a very inequitable fashion.

Consider these statistics: according to a report published by the National Sample Survey Organization (NSSO) in 2013, the average monthly income of an agricultural household is INR 6426. Dr Rahul Singh, from the Birla Institute of Management Technology, estimates that Indian rag-pickers earn anything between Rs. 45 to 80 in a day – an average of Rs. 1875 each month. In both sectors, however, the final product accrues much more value at the higher end of the supply chain, and is traded for much higher prices than what farmers and rag-pickers receive.

There are many reasons attributed to the unequal distribution of profits, especially at the lower end of the supply chain; one important factor is the unequal access to crucial information relating to the market.

In technical terms, this is referred to as ‘information asymmetry’ – a market economy which has ‘imperfect information’ between all the players. Information asymmetry can be defined as a situation where some party in a transaction benefits from having preferential access to information, leading to power imbalances in transactions.

Information asymmetry can exist across different industries and verticals. In India, it is particularly prevalent in the agriculture sector. A recent report describes the disconnect that exists between the industry’s multiple activities – including planning production, growing, harvesting, packing and transport, among others – which can lead to increased transaction costs, market friction and a situation in which particular stakeholders wield more power than others.

SELLING IN THE DARK | COMMONALITIES BETWEEN THE WASTE AND AGRICULTURAL MARKETS

In the agricultural sector, this asymmetry manifests itself in a variety of ways. In terms of structure, the industry comprises of farmers who produce crops, traders and middlemen who aggregate, wholesalers who bid for the produce aggregated by the traders, and eventually, consumers. Buying and selling of produce takes place at specified neighborhood markets, or ‘mandis’ and these are largely dominated by traders.

In general, farmers at the bottom of the supply chain are completely dependent on these traders to push their wares to consumers. They are particularly disadvantaged because of fewer opportunities of what is called ‘spatial arbitrage’; since they are not mobile, they cannot collect cumulative information on current prices and patterns of demand across different markets. This is an expensive operation that is far beyond their capability and as a result, they are unable to make decisions that would maximise their profits

This situation is clearly illustrated in the survey conducted by the NSSO. According to this data, farming households are relatively unaware of government procurement options for crops and crop insurance schemes. They are also far removed from new technologies and guidance from state-run research institutes.

On the other hand, large traders have the capacity to collect this information from different markets, which gives them better bargaining power over the farmers. It also gives them an understanding of how to hike the prices of produce, significantly increasing their mark-up. Besides this, large traders have the advantage of temporal arbitrage; that is, those who have the capital to store large quantities of produce for longer periods of time can also affect market prices in specific localities by doing so. The end result is fairly straightforward: while consumers pay competitive prices for produce, farmers receive only a fraction of the income.

Interestingly, Kabadiwalla Connect’s primary research has shown similar cases of information asymmetry in the waste space. Much like the structuring of the agricultural sector, the informal waste space includes a variety of buyers and sellers along a complicated chain. At the bottom-most level are mobile rag-pickers, who source waste manually from street dumps, landfills and homes. Waste is then passed on to itinerant buyers (who have the added benefit of a vehicle) and stationary scrap-dealers of varying capacities and scales. Finally, waste is routed to recyclers who upcycle it to a product of a much higher value.

THE INFORMAL WASTE ECOSYSTEM | LACK OF INFORMATION HITS THE BOTTOM OF THE SUPPLY CHAIN HARDER

Predictably, it’s the rag-pickers and itinerant buyers who are most disadvantaged because of the lack of information. While they source and salvage waste, they do not have the knowledge or ability to add value to it in any way. On the other hand, scrap-dealers (especially those at the higher end of the chain), are much better equipped to do so. They purchase waste at extraordinarily low prices from rag-pickers and then align their management process to better meet industry demands. As you travel up the waste chain, they sort waste into increasingly specialized categories and aggregate it to the extent that will make them maximum profit. They also know to transport waste to geographies where demand is highest.

The knowledge of these dynamics is what allows scrap-dealers and wholesalers to push up their revenue while simultaneously paying their suppliers a bare minimum. What results is that players at the base level of the supply chain are highly underpaid – in countries like Nicaragua for example, waste-pickers earn between $1.50 to $2 per day, while in Mexico, the average is around $7 a day. In his paper ‘Waste Picker Cooperatives in Developing Countries’, Martin Medina writes about how waste-pickers in Colombian, Indian and Mexican cities receive only 5 percent of what the recycling industry eventually pays for waste they supply.

LEARNING FROM OUR PRIMARY RESEARCH

One of the scrap-dealers whom we interviewed is based in MMDA Colony. Most of his competitors work out of rented or makeshift locations and purchase several categories of waste in small quantities. However, he has utilized his financial capability and knowledge to build a more successful enterprise. He invested in a 2400 square foot yard to aggregate material, and chose to specialize in only one category: paper. Rather than source his material from several stakeholders, he worked out contracts with a few printing presses in the city. These presses not only produce vast amounts of waste paper, ensuring a steady supply, but also shred it before handing it over to him, cutting down on the processing procedures he has to implement in his yard. Once the paper is brought to his yard, his staff sort it into super-specialized categories and bale it to save space. The scrap paper is aggregated until it can be sold for the highest price. His monthly revenue is over INR 1,00,000 – several times what an average kabadiwalla would make.

On the other hand, another scrap-dealer whom we spoke to in Kotturpuram had a very different model. He deals with 13 categories of waste, running the gamut from plastic and paper to metals like copper and aluminium. His suppliers are varied and operate in an ad hoc manner, and he has no understanding of the volume game, neglecting to aggregate his waste before selling it. He makes less than INR 10,000 every month.

TECHNOLOGY INTERVENTIONS | OPPORTUNITIES AND CAVEATS

There have been various attempts at tackling the information asymmetry in the agricultural sector. An interesting model sought to make market information available on a mobile platform, since cellphones are easily accessible in rural parts of the country. However, there are a few factors that limit the efficiency of these systems. For instance, many farmers are unable to bear the cost of using an online or mobile platform, which means that the service has to be free in order to have a wide reach; but on the flipside, services that are not economically self-sustaining also tend to lose support in the long run. Moreover, these systems are not always created and implemented with a good enough understanding of the needs of the farmers.

There doesn’t seem to have been any highly successful technological interventions tackling information asymmetry in the waste space. However, governments that have lent support to informal waste networks by regularising their functioning have, to an extent, managed to facilitate the free flow of information. In Brazil, for instance, the informal waste sector has been provided with institutional support and organised into unions and cooperatives, making it easier for rag-pickers and scrap-dealers to access information collectively. In India, while there are instances of self-organisation within the informal waste sector, we still have a long way to go until there is no exploitation within the ecosystem.


– Written by Siddharth Hande and Kavya Balaraman: Kabadiwalla Connect is a Chennai-based project that aims at reducing waste sent to urban landfills by leveraging the potential of the informal sector. Our partners include Gubbi Labs and the Indo-German Centre for Sustainability, IIT-Madras. Read the post on their blog.


Sources

‘Waste Picker Cooperatives in Developing Countries’ – Martin Medina
‘Role of AMIS in Resolving Information Asymmetries in Agricultural Markets: Guidelines for AMIS Design’ – Laxmi Gunupudi and Rahul De, Indian Institute of Management, Bangalore
‘Socio-Economic Issues in Waste Management By Informal Sector in India’ – Dr Rahul Singh, Birla Institute of Management Technology


Historical Perspectives on the Informal Waste Sector


kabadiwalla

MUSINGS ON WASTE (Part 1)

Ever year, 42 million tons of waste is generated in India, which is the same as the amount of wheat Australia produces annually

Like most countries that are growing quickly and witnessing rapid urbanization, India is beginning to face serious concerns regarding the disposal of its waste. Until now, most urban local governments have adopted an approach to waste management that is neither sustainable nor particularly responsible – identifying landfill sites, filling them with mixed waste for periods that can stretch over decades, and eventually moving on to a new location.

The problem, though, is that leachate and toxins from untreated waste can affect a particular region for years, which is why municipal corporations are now finding it more and more difficult to appropriate areas to convert into landfills. In Bangalore, for instance, the residents of a village called Mavallipura, adjoining one of the city’s primary landfills, resisted efforts to continue disposing of waste in their backyard in 2012; the result was tens of thousands of tons of untreated waste, deposited on the streets of the city. Chennai, on the other hand, is currently routing its waste to two peripheral landfills – both of which will be reaching the end of their lifespan by the end of the year. As of now, no replacement area has been found.

Ironically, urban authorities do not need to face the challenge of sustainable waste management on their own. Most Indian cities have a robust industry of waste ‘experts’ – collectors, transporters and even recyclers – who make a livelihood out of waste, albeit under the radar. Most households sell old newspapers and cardboard to their neighbourhood kabadiwallas, but these men are merely the tip of the iceberg; in fact, the informal waste sector includes not just grassroot-level waste collectors, but series of middlemen who aggregate, sort and transport waste to the appropriate recycling facility – thus keeping it out of the landfill.

The Waste Chain

From a historical perspective, informal waste economies – at least as they are recognized today – began to develop around the 19th century. This was mainly in Europe and largely a by-product of urbanization and industrialization. As urban centres began to form and expand, the quantity of waste generated by them shot up as well. Simultaneously, the spread of the industrial revolution led to an increased demand for raw material, which proved to be infinitely cheaper when sourced from waste. As a result, an informal sector that began to identify items of value within waste streams, and then source, aggregate, process and eventually recycle them, began to form.

Spatially speaking, informal waste industries have organically formed in developing countries. While the first scavenging sectors sprung up in Europe, waste management systems in these countries were soon formalised and steered by local governing bodies, removing any room for unorganised private entities to continue making a living off waste.

However, the reverse has been true for countries such as India, Brazil, Serbia and Cambodia. These countries have witnessed rapid urbanisation, which directly translates to a huge increase in waste generation. They also experience large-scale migration of unskilled, untrained labour towards cities, most of which have no option but to turn to informal occupations such as waste-picking. Moreover, as countries develop more, their urban centres tend to produce a higher proportion of dry waste (paper, plastic, metal and the like), which have huge markets as raw material for the manufacturing sector.

On the other hand, their local governance mechanisms have not yet developed to the point of completely taking over the workspace of informal players. In India, for example, municipal corporations have the infrastructure and capacity to collect an average of only 70 percent of municipal solid waste, and even less to actually process it. This creates the ideal working conditions for a parallel shadow economy to operate.

Very few attempts have been made to actually map out and quantify the informal waste industries in different countries. Largely, this is because it’s extremely difficult – most waste-pickers and small-scale processors work under the radar and prefer to keep it that way, so as to avoid any form of harassment from city authorities. The sector itself is also a fairly disorganised one, with a huge overlap between activities, scale and hierarchy, making it tough to actually categorise its layers. However, there are exceptions to the rule. The Brazilian government, for instance, has formally recognized waste-picking as an occupation and included it as a category in their official census. This has also allowed it to introduce various schemes to better incorporate these entities into formal waste management mechanisms.

In doing so, Brazil has tapped into a potential answer to waste management concerns that most developing countries can learn from: the informal sector has huge capacity for keeping waste out of landfills. As a community, these players have a lot more collective experience in dealing with waste profitably (and as a consequence, responsibly) than most local governments. They have organised themselves into a form of hierarchy based on scale, with lower-rung rag-pickers accessing waste from dumpsites, landfills and formal collection cycles, and higher-level middleman aggregating and segregating waste streams according to market demand. Scrap-dealers at the highest end of the waste chain deal with hundreds of tons of a particular waste category on a daily basis, supplying in bulk to manufacturers looking for cheaper sources of raw material.

Incorporating parallel economies into our formal mechanisms is far from an easy task; it involves policy-level decisions and some forceful execution to actually leverage the potential of the informal sector. On the other hand, given the kind of waste crisis that Indian cities are facing, this doesn’t seem to be an option we can ignore.


– Written by Kavya Balaraman & Illustrated by Satwik Gade. Kabadiwalla Connect is a Chennai-based project that aims at reducing waste sent to urban landfills by leveraging the potential of the informal sector. Our partners include Gubbi Labs and the Indo-German Centre for Sustainability, IIT-Madras. Read the post on their blog.


Sources

‘Municipal Solid Waste Management in Indian Cities – A Review’ – Mufeed Sharholy, Kafeel Ahmad, Gauhar Mahmood and RC Trivedi

‘Waste Picker Cooperatives in Developing Countries’ – Martin Medina

‘The World’s Scavengers’ – Martin Medina

‘Statistics on Waste Pickers in Brazil’ – WIEGO 

Koodankulam Update: Hot water spillage injures six workers at the nuclear power plant

14 May, 2014. 2.00 p.m. Shopkeepers from Anjugramam, a village about 15 km from Koodankulam nuclear complex, reported seeing at least 6 ambulances rushing by at around 1.15 p.m. Anjugramam lies near a fork in the road, where one fork leads to Kanyakumari town and the other to Nagercoil. Another Idinthakarai resident, Mildred, who was at Myladi (25 km from Koodankulam) reported seeing 3 ambulances rush by at around 1.45 p.m. Myladi is en route Nagercoil. Nagercoil and Kanyakumari are two major towns within 30 km of the nuclear plant, with large hospitals. Predictably, the nuclear establishment denied the occurrence of any accident first. Later they admitted to a minor incident and are reported to have said that the injured were taken to the hospital in the NPCIL township, where they were well enough to walk on their own. Sources from inside the plant report that at least three of the injured were contract workers and the other three were NPCIL staff. Reports also suggest that the accident happened in or around the boiler section of Unit 1, which reportedly attained criticality mid-year last year.
After initially flashing news about the incident, the media is now reportedly playing NPCIL’s statements denying and downplaying the incident. If NPCIL’s past record is anything to go by, truth will be a while in coming. Dr. APJ Abdul Kalam was unavailable for comment.
This accident comes less than a week after the Honourable Supreme Court ruled that it was satisfied with the safety features installed at the plant.

Conversation with NPCIL, Koodankulam Station Director R.S. Sundar on his mobile phone 9443350706 at around 3.40 p.m, on 14 May 2014

NJ (me): Hello Sir. This is Nityanand. I’m a freelance writer. I’m calling to find out if the workers admitted at Krishna Kumar Hospital in Nagercoil are from your plant.
RSS: Who are you? First tell me who you are.
NJ: My name is Nityanand Jayaraman and I’m a freelance journalist from Chennai, currently speaking from Coonoor.
RSS: I don’t speak to freelance journalists, only normal journalists.
NJ: Sir, I am a normal journalist. There are a lot of rumours doing the rounds. I merely wanted to confirm that there was an incident at Koodankulam.
RSS: What did you say your name was?
NJ: Nityanand Jayaraman.
RSS: I don’t know you. Who do you write for?
NJ: I’m a freelancer sir. I write opinion pieces and have published in Yahoo, The Hindu, Tehelka and have written extensively about Koodankulam.
RSS: I only speak to journalists I know.
NJ: Obviously, you can’t know all the journalists. How can I get a confirmation then?
RSS: You go speak to someone else. Speak to Corporate Communications.
NJ: You seem very angry with the media sir. Any problem?
RSS: No problem. There is nothing. i don’t know you. That’s all.
NJ: But you are not likely to know many of the international media either. How can you speak to them then?
RSS: I cannot speak to international media. I cannot speak to you.
NJ: I am not from the international media. I am a Chennai based freelancer. I just wanted a simple confirmation sir. Did any incident take place at Koodankulam today?
RSS: You come on the land line.
NJ: Can you give me the land line number sir?
RSS: You speak to Corporate Communications.
NJ: Can you give me their number sir?
RSS: No. I don’t have it. You call on the land line.
NJ: Can I have the number sir?
[Hands it over to assistant]
Assistant: Take down sir. 259718.
NJ: Area code sir?
Assistant: 04637
NJ: Who should I speak to sir?
Assistant: You just call that number?
NJ: Who should I ask for?
Assistant: Speak to the person who picks up the phone.
[Hangs up]

It makes one wonder, especially when the person who picks up the phone when I called says cryptically that “All the injured are in conscious condition.” If it is a “small incident” as stated by Mr. R.S. Sundar to NDTV, why all this cloak and dagger. If the plant has a sound disaster/emergency response system, why did they have to drive more than 1 hour on bad roads to Nagercoil to treat the injuries from a “small incident.” Clearly, NPCIL does not have a disaster management plan in place, and its corporate communications itself is a disaster that has to be managed.

Click to read Of small incidents and big disasters, Tehelka.com

Wednesday’s accident did not involve radiation. Burns and broken bones are common workplace injuries. It is precisely the commonplace nature of this incident and how it was handled that expose how the Koodankulam set-up has all the ingredients required to bungle the handling of major emergencies. These ingredients are: poor and non-transparent communication, lack of emergency response infrastructure, non-compliance with operating procedures, lack of quality assurance of equipment and personnel…

Shared by Nityanand Jayaraman, a writer and volunteer with the Chennai Solidarity Group for Koodankulam Struggle.

Dis-connecting People

On 01 May 2014, International Workers’ Day, Nokia India Thozhilalar Sangam released ‘Dis-Connecting People,’ a film documenting the voices of workers, which has remained muted in the battle between the state and the corporation.

Dis-Connecting People (35 mins: 18 Secs)

dvd blurb

For more information contact: Nokia India Thozhilalar Sangam at nokianits@gmail.com/ President -Sarvanan Kumar

shared by sam pc

Monopoly Is Theft | Harper’s Magazine

The Landlord’s Game, 1906. Image courtesy of Thomas E. Forsyth. Special thanks to Forsyth (landlordsgame.info) for his assistance with board images.

Christopher Ketcham while reporting on an annual corporate Monopoly tournament, travels into “the antimonopolist history of the world’s most popular board game.” Do read.

The official history of Monopoly, as told by Hasbro, which owns the brand, states that the board game was invented in 1933 by an unemployed steam-radiator repairman and part-time dog walker from Philadelphia named Charles Darrow.

…At least 1 billion people in 111 countries speaking forty-three languages have played it, with an estimated 6 billion little green houses manufactured to date. Monopoly boards have been created using the streets of almost every major American city; they’ve been branded around financiers (Berkshire Hathaway Monopoly), sports teams (Chicago Bears Monopoly), television shows (The Simpsons Monopoly), automobiles (Corvette Monopoly), and farm equipment (John Deere Monopoly).

…The game’s true origins, however, go unmentioned in the official literature. Three decades before Darrow’s patent, in 1903, a Maryland actress named Lizzie Magie created a proto-Monopoly as a tool for teaching the philosophy of Henry George, a nineteenth-century writer who had popularized the notion that no single person could claim to “own” land.

…Before being monopolized by a single person working in tandem with a corporation, Monopoly had in fact been “invented” by many people—not just Magie and the Raifords but also the unknown player who gave the game its moniker and the unsung Ardenite who had perhaps aided Magie in advancing its rules. The game that today stresses the ruthlessness of the individual and defines victory as the impoverishment of others was the product of communal labor.

 

via Monopoly Is Theft | Christopher Ketcham| 19 October 2012 | Harper’s Magazine

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what is that thing you bought?

These are three excerpts from the Marxists Internet Archive’s Encyclopaedia of Marxism that explore fetishism, and the reign of commodities. We found this to be a necessary appendage to The Story of Stuff at our SCREEN today.

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