Environment & Poverty Times

07 2012

Industrial use of freshwater

The use of freshwater resources for industrial purposes is an area where there is ample room for efficiency gains, and where improve- ments are now happening faster than in other regions of the world.

Wastewater management on an industrial estate

By Prabha Panth and Rahul A. Shastri

Industry is under increasing pressure from environmental authorities and the general public to reduce pollution. But pollution con- trol and treatment increases operating costs for companies, many of which are small and operate with narrow profit margins. If businesses refuse to comply, they can face penalties from government agencies. Pollut- ing companies can find themselves with a dilemma – pollute and save on compliance costs but risk paying penalties, or treat pol- lution thereby avoiding penalties but increas- ing short-term expenditure.

However, pollution control does not neces- sarily only impose costs on companies; it can generate savings, which could outweigh the cost of pollution treatment. In this case, com- panies will be able to reduce pollution and the overall stress on the environment, whilst making savings and increasing their profits.

The three broad methods of wastewater management available to companies are: • recovery of wastewater; • recovery and recycling of waste from wastewater; and,

• compliance with water pollution abate- ment measures.

Each of these methods involves costs, but also brings economic benefits. Recovering and recycling wastewater saves costs on freshwater inputs, recovering waste from process streams generates profits or saves on input costs, and complying with water pollution abatement measures enables com- panies to avoid penalties. These methods are not mutually exclusive and a company may use more than one of them.

Wastewater recycling on the Bollaram industrial estate

In 2005-7 we carried out a study at the Bol- laram industrial estate, a heavily polluted, water-scarce industrial estate in the Medak district of Andhra Pradesh, India. Each of these wastewater management methods was examined separately to estimate its eco- nomic impact on the polluting companies.

In water-scarce regions, industrial units recycle their wastewater since they may not have access to freshwater. By recycling waste- water, factories on the estate can increase savings on freshwater – both in physical and monetary terms.

We found that nearly 66 per cent of the estate’s total daily freshwater input was recycled by just 83 of the 135 industrial

units. Total monetary savings through waste- water recycling amounted to US$ 12 680 a day for these 83 units. Net savings came to US$ 12 560 a day or US$ 4 585 000 a year.

Industry location policy

In certain industries such as pharmaceu- ticals or chemicals, released effluents may contain many types of toxic pollutants, which have to be removed before the waste- water can be recycled. This raises the cost of wastewater treatment, and discourages recycling. Our analysis showed that not only did such industries recycle the lowest amount of wastewater (1 per cent in the chemical industry), but they also used the most freshwater on this industrial estate (55 per cent), subsequently released as ef- fluent. We found that cleaner industries, such as metal, stone, steel and engineer- ing, used only nine per cent freshwater, but accounted for more than half (56 per cent) of the recycled water in Bollaram. This was possible thanks to continuous recycling of wastewater in these factories.

These findings are important for industry location policy. Industries that are highly water-intensive and which recycle only a small proportion of their wastewater should not be allowed to locate in water-scarce areas. On the other hand, metal, stone, steel and engineering industries, which have high rates of wastewater recycling, will not put heavy pressure on the environment in terms of freshwater use.

Waste recovery To reduce pollution, companies can recover waste material from effluents. This not only reduces the concentration of pollutants in the wastewater, but also earns profits for the company. Important chemicals and materials can be recovered and either reused or sold as inputs to other industries. The amount earned through selling or reusing the recovered wastes will quickly cover the cost of recovery.

Only 11 of the 135 factories operating in Bollaram attempted to recover and recycle waste from process streams. After extensive surveys of other companies throughout the world producing the same products as in Bollaram, we found that there was still scope to recover and reuse at least 41 more materi- als from the wastewater of 83 more factories at Bollaram. These include chemicals such as caustic soda, organic solvents, salts, acids and calcium chloride.

Profit from recycled materials divided by

the cost of recycling per year was estimated for all 41 materials that could potentially be recycled from the 83 factories. The rate of return for different recycled materials ranged from less than 10 per cent to over 5 000 per cent, with an average return of around 800 per cent a year. The payback period of investing in waste recovery and cleaner production meth- ods ranged from an immediate return on investment to around five years. For several materials, the payback period was less than a year. Figure 1 shows the potential rates of return for recycled waste materials across different industries in Bollaram.

It is clear that there is considerable scope for chemical units to recycle waste. The same is true, though to a lesser degree, for the pharmaceutical and steel units. If all these units recycled materials from their effluents, they would increase their profits and reduce their pollution load.

Pollution deterrents

The third conventional method of waste- water management is pollution abatement, implemented through the government’s command and control policy. There are a number of industrial pollution laws in In- dia. These are enforced at state level by state pollution control boards. Inspections are carried out periodically and non-compliant units are either closed down or their water and power supplies are cut off until they become compliant again. However, reports of high levels of industrial pollution still haunt this region, showing the low level of compliance.

Why do industrial companies continue to pollute in spite of stringent environmental laws and high penalties? Controlling pol- lution means an increase in costs, while not controlling it means that this amount is saved. But there is the chance of being caught and having to pay penalties. Risk- neutral companies will weigh the probability of being detected and the amount they will have to pay for not complying against the cost of immediate compliance. If the former two are high, companies will be wary about non-compliance. If they are low, companies will break environmental laws.

In our study we found that the probability of a violating factory being caught in Andhra Pradesh was just above 40 per cent. Since the chance of being caught was low, companies continued to default on pollution control. We compared the cost of immediate compliance (effluent treatment costs) with the expected cost of penalties.

Figure 1

Figure 2