The District government announced agreement yesterday with a new company 90 percent owned by The Washington Post Co. to take away the city's piles of old newspapers for $10 a ton.

The Post Co. said yesterday Capitol Fiber Inc., which is owned by The Post Co. and Canusa Corp., a Maryland-based waste paper processor, has entered a five-year contract with the city to remove, bundle and sell waste newspapers, which the city started collecting last October.

The announcement helps solve a major problem for the city, which started its newspaper recycling program at a time when markets for old newsprint had virtually dried up.

At one point, hundreds of tons of paper were stacked at a covered pit at 3600 Benning Rd. NE, but the District has already arranged to have that hauled away.

The city, which collects approximately 60 tons of paper a day, has recently been paying $35 a ton to get rid of old newspapers. The new agreement represents a savings of approximately $1,500 a day over that cost.

Capitol Fiber is scheduled to begin taking paper from the District in September. The paper will be bundled at its facility in Dundalk, Md., for shipment to recycling plants or other reprocessors.

Newspapers nationally are under increasing political pressure to include more recycled content in their product, and they have in turn pressured newsprint manufacturers to use more of the less expensive recycled paper. But because little capacity exists now to manufacture newsprint from recycled fiber and because the market for newsprint has been shrinking, there is almost no market for old newsprint.

"It's good to hear that a contract is in place," said Stephen D'Esposito, a spokesman for Urban Earth/Citizens Coalition for Recycling. Now, he said, the District should "get moving on mandatory collection, education and enforcement" in order to recycle other materials.

The District government had been criticized by environmental groups for its handling of the city's recycling program. Recycling of newspapers was mandated before the city had a buyer for the old papers. And mandatory recycling of glass bottles and aluminum cans, originally set to begin in April, was delayed in favor of a voluntary program involving 14 drop-off sites set up around the city.

District officials said they expect the city to start curbside collection of bottle and cans by late fall.

"We learned a very good lesson in our first year of recycling ... not to start until a market for the product is available," said Tara Hamilton, a spokeswoman for the D.C. Department of Public Works.

Some environmentalists have argued, however, that waiting for a market will not work and that markets will develop once a supply of recyclable materials emerges. "Our argument was the markets would catch up, that industry will invest," said Jeanne Wirka of the Environmental Defense Fund. "We held out and it's showing itself to be true."

Initially, however, Capitol Fiber anticipates losing money on the city contract. The company hopes to be able to hold its processing costs to $25 a ton, but prices for processed newsprint in the last six months have averaged approximately $5 a ton, according to Margaret J. Fleming, president of Capitol Fiber. Some of that difference will be made up by the $10 fee that will be paid by the District. But under current market conditions, that would still leave the company with a loss of approximately $10 a ton.

"We figure we're going to lose some money in the short term. If the market gets better, we can make some in the long term," said Boisfeuillet Jones Jr., The Post's vice president and general counsel. "We think it will be good for the District and, in the long term, good for us."

"Clearly the whole recycling business is on the verge of becoming something probably fairly significant, but it's going to be a while before it becomes profitable," said newspaper industry analyst John Morton.

If the business becomes profitable for Capitol Fiber, the District also stands to profit. If the price for recycled newsprint hits $40 a ton, and the company turns a profit, the city will get 50 cents for every dollar, said George Jenkins, recycling coordinator for the D.C. Department of Public Works.

Like other newspapers, The Washington Post has opposed legislation proposed in the District, Virginia, and Maryland that would require newspapers to meet standards for the amount of recycled material included in the newsprint it uses.

In a press release, The Post said that it has urged its suppliers to increase the percentage of recycled materials and estimated that by 1994 more than half of the newsprint it buys would include recycled materials, compared to 5 percent today.