44479
PROJECT INFORMATION DOCUMENT (PID)
CONCEPT STAGE
Project Name
Region
Sector
Project ID
Borrower(s)
Implementing Agency
Environment Category
Safeguard Classification
Date PID Prepared
Date of Appraisal
Authorization
Estimated Date of ERPA
Signature
Lahore Composting
South Asia
SASDU
P106652
NA
Lahore Compost Ltd.
[] A [X ] B [ ] C [ ] FI [ ] TBD
[]S1 [X ] S2 [ ] S3 [ ] SF [ ] TBD
October 9, 2007,
March 30,2008
April 2008
1. Key development issues and rationale for Bank involvement
Pakistan is the most urbanized country in the South Asian region with 35% of its population
living in the urban areas as compared to the regional average of 29%. The annual urban growth
rate of 3.5% in Pakistan is also well above the regional growth rate of 2.4%. Cities and towns in
Pakistan are not only growing in size and number, they are also gaining influence and impact on
the macro-economy of the country; Pakistan’s largely urban-based manufacturing and services
sectors accounted for 77 percent of GDP in 2003, while contributing to over 90 percent of GDP
growth between 1999 and 2003.
Solid waste is a major environmental and health hazard in the urban areas of Pakistan. As cities’
economies are fast growing, business activity and consumption patterns are driving up solid
waste quantities but primary collection of waste is sporadic and the secondary collection is poor.
For example, despite the fact that solid waste services represent the single largest expenditure
item (as the majority of cities’ staff are employed in solid waste departments), less than 50
percent of the waste generated is collected; and even then it is disposed off at dumpsites or
roadsides since there is not a single sanitary landfill in Pakistan. These failures are highly visible
and further aggravated by the rapid growth of urban waste, an effect of rapid urbanization. The
Government of Punjab has identified SWM among the most critical issues in the short and
medium term and approached donors for assistance in both TA and investments.
There is an immediate need to design a framework and institutional mechanism to collect and
dispose of solid waste in an environmentally and socially satisfactory manner using the most
economical means available. Effective solutions would require not only proper collection and
transport but also reduction of waste disposed off by improving the already ongoing recycling
and reducing final disposal of organic waste by composting.
Rationale for Bank involvement
The city district government Lahore (CDG) has already shown keen interest in reducing the
waste disposed off to the landfill sites by incorporating environmentally beneficial mechanisms
like composting. Evidence to this is the first composting plant in Lahore that has been operating
under BOT agreement between CDG Lahore and the Lahore Compost Ltd (LCL). Plant has been
operating at a limited capacity on pilot basis and has ability for large scale expansion for
composting of municipal, garden, and farm waste. Lahore has abundant supply of organic waste
for large scale composting. About 6000 ton of municipal waste generated daily in Lahore with
estimated over 50 percent organic content. The need for final disposal of MSW could be
reduced substantially through large scale composting thus increasing the life of the landfill.
The expansion of the initial composting project will be fully financed by the Saif Group, the sole
owner of LCL. However, composting is a loss-making business in Pakistan because of a nonexistent market for compost, and substantial investment requirement. The proposed sale of
carbon credits would help make this initial composting business financially sustainable. The
carbon credits would provide a vital temporary support to LCL that it needs to gradually develop
the compost market by sensitizing/educating the farmers and ensuring that the benefits of
compost are well understood and appreciated.
Further, this Carbon Finance project will facilitate greenhouse gas emission reductions and
support the development of the market mechanism for trading Emission Reductions (ERs)
developed in the framework of the Kyoto Protocol. In particular, it will promote the CDM (Clean
Development Mechanism) in Pakistan, which enable developing countries to benefit from the
Kyoto Protocol. The sale of ERs would help Pakistan, a country that has enormous potential, but
yet has little experience in green development through carbon finance.
2. Proposed objective(s)
The overarching development objectives of the proposed Carbon Finance project are to:
 Avoid generation of methane emission from biodegradable wastes; and
 Improve cultivated land by using compost as a natural soil conditioner
The Carbon Finance project will provide additional support for achieving the following
objectives and benefits, namely to reduce carbon emission in a financially sustainable way, to
promote and provide organic conditioner for agriculture; to increase recycling of valuable
materials; to reduce health hazard by overall reduction of waste disposed off in landfills; and
reduce the demand for landfill capacity.
3. Preliminary description
Lahore Compost Private Ltd. (LCL) has received the concession from the City District
Government, Lahore to operate a waste processing and composting plant; a first attempt to
implement composting technology on a large scale in Pakistan. LCL is located within the
premises of the Mehmood Booti landfill, the largest of the three managed landfills in Lahore.
The plant is currently operating with a 300 ton per day (TPD) capacity, but plans to expand to
1,000 TPD by 2009, and may expand further up to 1,500 TPD capacity in the medium term. All
these expansions can be developed within the present premises of LCL.
This carbon offset project aims to purchase ERs generated from the processing of solid waste.
LCL, the sole sponsor of the planned investment, had intended to qualify for CERs from the
beginning. However, in the absence of operational strategy and mechanism from the
Government of Pakistan, no action could be taken to further the case. Therefore, LC expects that
emission reductions arising from the operation of an initial 300 TPD waste processing should be
eligible for carbon finance as of project registration with the CDM Executive Board, on the basis
that it has been operating at a loss due to the absence of a compost market in Pakistan. The
baseline scenario would be to cease operations without carbon revenues. Three phases can be
distinguished in this composting development:
Phase I: Since March 31, 2006 the company has been processing compost from 300 TPD intakes
on pilot basis. Preliminary results suggest that this composting methodology is well suited in
Lahore circumstances, the technology is stable, the final product is high quality compost, and the
amount of waste disposed off is reduced by half.
Phase II: Scaling up composting operations gradually to 750 TPD by September, 2008 and to
1000 TPD by April, 2009. LCL expects to support this capacity expansion through strengthened
revenue streams including the sale of carbon credits.
Phase III: In the final phase the company plans to increase processing capacity to 1,500 TPD.
The final decision in this regard would be taken after the implementation of Phase II.
The present and planned technology is a relatively simple windrow type composting. But, in
absolute terms the capital investment is high including primarily civil structures and equipment
for handling and screening the composting material at different stages. Further, the operation and
maintenance cost including the cost of debt servicing is fairly high as compared to the low
market price of compost. Therefore, additional support is necessary to make the urban waste
based compost plant viable and sustainable.
Phase II expansion of the composting capacity will require both civil works and purchasing
additional equipment. Both local and imported technology will be used for the composting plant.
Specific equipment e.g. turner, screener, sorters have been and will be imported from a reputable
producer of composting machinery. The supply company shall provide warranty and after sales
service to LCL. The non-specific equipment (e.g. loaders, trolleys, trucks) will be purchased
locally; likewise civil works for expanding the compost pad and sheds for covering the
equipment will be constructed locally.
The estimated cost of the above investments is as follows:
Project Cost
Capital Cost initial
Additional investment
in US$ Million
3.108
2.416
Project Component
Civil and Mechanical works and equipment
Civil and Mechanical works and equipment
Total investment
5.524
4. Safeguard policies that might apply
Safeguard Policies Triggered by the Project
Environmental Assessment (OP/BP/GP 4.01)
Natural Habitats (OP/BP 4.04)
Pest Management (OP 4.09)
Cultural Property (OPN 11.03, being revised as OP 4.11)
Involuntary Resettlement (OP/BP 4.12)
Indigenous Peoples (OD 4.20, being revised as OP 4.10)
Forests (OP/BP 4.36)
Safety of Dams (OP/BP 4.37)
Projects in Disputed Areas (OP/BP/GP 7.60)*
Projects on International Waterways (OP/BP/GP 7.50)
Yes
No
[X]
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[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
[X]
[X]
[X]
[X]
[X]
[X]
[X]
[X]
[X]
The environmental and social impacts of composting projects are primarily positive, since
composting substantially reduces the waste dumped, provides jobs for both skilled and unskilled
workers with a better work environment than a landfill; and does not require displacing people.
An initial environmental examination (IEE) and an environmental impact assessment (EIA) have
been prepared and approved by the provincial authorities before opening the Mehmood Booti
landfill. The said concession agreement assigns to LCL a part of the already examined and
approved landfill site territory for operating the composting plant. Although no incremental
negative effects are expected, but rather some positive effects, LCL will undertake an
environmental and social impact assessment in harmony with the Pakistan Environmental
Protection Act 1997 and World Bank’s Safeguard policies. EMP prepared under the project EIA
will be implemented during the project construction/expansion and operation phases to ensure
minimization/reduction of adverse environmental impacts and enhancement of potential
environmental benefits. It is judged that no additional actions are required.
Risk
Insufficient
compost
demand
Mitigation Measure
Rating
for A comprehensive Marketing Plan has been adopted Moderate
to take the compost to the market. LCL has
committed 10% of the sale revenue to implement its
marketing plan.
Lack of availability of LCL is working with local representatives of Menart, Negligible
just-in-time after sales the equipment suppliers, for locally developing the
support on the equipment vendor network
Overall Risk Rating
*
Moderate
By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the
disputed areas
5. Tentative financing
The program shall be financed by Lahore Compost Ltd. through both equity and long term
owners-loan provided by the Saif Group, the sole owner of LCL. The operational cost will be
covered and borrowing will be repaid through sales revenues and future carbon finance
payments.
Source: Saif Group
in US$ Million
Equity
Debt – Long term
2.655
2.869
TOTAL
5.524
6. Contact point
Mihaly Kopanyi
The World Bank
Islamabad Office
20-A Shahra-e-Jamhuriate, G-5/1,
Islamabad, Pakistan
mkopanyi@worldbank.org