Environment Protection
Role of Regulatory System in India
Within the framework of the Environmental Protection Act, 1986, that consolidated the provisions of the Water Act of 1974 and the Air Act of 1981, India established pollution control boards to prevent, control and abate environmental pollution. This paper examines the functioning of PCBs, in particular the Central Pollution Control Board and Andhra Pradesh Pollution Control Board to see if they have been able to prevent environmental externalities in the process of economic development. It finds that the agencies have been unable to improve environmental quality effectively because of an increase in their responsibilities, absence of deterrence mechanisms and inadequate human and financial resources.
P M PRASAD
I Introduction
E
The state plays a major role both in the formulation as well as the enforcement of laws. According to Ogus (1994), there are four different degrees of state intervention: (1) regulation of information, (2) standards, (3) licensing, and (4) price controls. Licensing is the highest degree of state intervention because the firm has to take prior approval from the regulatory agency to market the product. However, state intervention also involves: administrative costs, compliance costs, and indirect costs.Regulatory agencies, under certain circumstances, also erect barriers2 which in turn impose costs on citizens.
This is an ex ante approach, where parties pay a fine after violating regulatory standards, sometimes, even before harm has occurred. Standards are defined by the state, which also plays a major role in the enforcement of laws. On the other hand, liability is an ex post approach, where parties pay damages after the harm has occurred. Under this approach, courts set the due level of care based on the nature and the facts of the case, if harm occurs. The theory of liability versus regulation reveals that both the systems have their advantages3 and disadvantages4 in providing incentives to the tortfeasor to take precautionary measures to reduce the risk of harm. Neither, however, protects citizens perfectly. Therefore, an optimal mix of regulatory and liability systems is required to internalise the externalities. They are substitutable5 as well as complementary.6
It should be noted that in the case of joint use of liability and regulation, the regulatory system sets minimum standards.
In addition, it adopts the probabilistic method to test the established standards. It is uncertain whether a tortfeasor can be found violating standards under this approach. Similarly, the court system may be unable to provide an incentive to the tortfeasor to reduce the risk of harm because no case has been filed against him. Under these circumstances, a minimum regulatory standard may perhaps reduce the severity of the risk of harm. Once, the regulatory agency formulates the optimal standards then the courts shall resolve the conflicts between the ex ante and ex post approaches. Thus, the optimalmix of liability and regulation should provide incentives to the parties to take precautionary measures to reduce the risk of harm [Prasad 2004:257].
This paper tries to focus on the critical evaluation of the functioning of the PCBs in terms of the prevention of environmental degradation in India. The paper is organised as follows: Section II lays out the environmental protection system in India, Section III deals with regulatory system in India, Section IV focuses on suggestions, and Section V provides a summary and conclusion.
II Environmental Protection System in India
Environmental Laws
The Indian Constitution provides for power sharing between the federal and state governments. Parliament has the power to legislate for the whole country, while the state legislatures are empowered to make laws only for their respective territorial jurisdictions. Under Article 246 of the Constitution the subject areas of legislation are divided between the union and the states into three lists: union, state, and concurrent list. Central law prevails over a state law in the concurrent list, however, state law prevails if it has received presidential assent. The Constitution also provides that the centre may enact laws on the state list, after receiving consent from the respective states.After the 1972 UN Conference on Environment and Human Development at Stockholm, the Indian government amended the Indian Constitution and adopted Articles 48A, Article 51A(g), and Article 253.7 On the basis of these articles, the Indian Parliament enacted the Prevention and Control of Pollution Act, 1981 (Air Act), and the Environmental Protection Act of 1986. An outline of the environmental legislation(s) in India is given below: The Water Act of 1974 (Amendment, 1988): This is the first law passed in India whose objective was to ensure that domestic and industrial pollutants are not discharged into rivers and lakes without adequate treatment. The reason is that such a discharge renders the water unsuitable as a source of drinking water, for irrigation and support for marine life.
In order to achieve its objective, PCBs at the central and state levels were created to establish and enforce standards for factories discharging pollutants into bodies of water. The state boards are empowered to issue consent for establishment (CFE) whenever a firm wants to establish a new factory and also issue consent for operation (CFO) for existing factories. They were also given the authority to close factories or, in the case of disconnecting power and water supply, issue directions to the concerned departments for enforcement of board standards. The Air Act of 1981 (Amendment, 1987): The objective of the Air Act of 1981 was to control and reduce air pollution. The working of this act and the enforcement mechanisms are similar to that of the Water Act. What was novel is that the act also called for the abatement of noise pollution. The Environmental Protection Act, 1986 (EP Act): The objective of the EP Act is to protect and improve the environment in the country. It is an umbrella legislation that consolidated the provisions of the Air and the Water Act. It was environmental disasters that prodded the Indian government into passing comprehensive environmental legislation, including rules relating to storing, handling and use of hazardous waste.
The EP Act empowered the Indian government to make necessary rules and regulations to fulfil its objectives. It is under this act and its rules that the government takes all necessary steps such as the formulation of national environmental standards, prescription of procedures for managing hazardous substances, regulation of industrial locations, establishment of safeguards for preventing accidents, and collection and dissemination of information regarding environmental pollution. It also empowered the government to set up parallel regulatory agencies to protect parts of the environment and to delegate its powers to such an agency. For example, the government could set up an agency to protect coastal resources.
The EP Act provided for civil and criminal penalties for the violation of its pollution standards. For example, it imposes a penalty for non-compliance of standards with a fine up to Rs 1,00,000 or imprisonment up to five years or both. The Public Liability Insurance Act, (1991): The focus of this act was to provide for the payment of immediate compensation to the victims of industrial accidents. Environmental Protection Rules, (1986): The rules of 1986 empower the formulation of standards for emission of environmental pollutants. In general the rules were formulated by the government of India for working and conduct of business under the Environment (Protection) Act, 1986. The formulated rules are: the Hazardous Waste (Management and Handling) Rules of 1989, the Public Insurance Act of 1991 (Amendment, 1992), and Biomedical Waste (Management and Handling) Rules of 1998, etc.
The established environmental rules and regulations are enforced by the concerned administrative authorities. In addition, they act upon the direction of the courts and PCBs. Thus, both the ex post and ex ante approaches are playing an active role in the improvement of environmental quality in the country. The PCBs, in particular, try to prevent environmental degradation through formulation of standards, issuance of consent for establishment and operation and closure orders to rogue industries.
III Regulatory System in India
The PCBs are a two-tier system, i e, the Central Pollution Control Board (CPCB) at the central level and the State Pollution Control Boards (SPCBs) at the state level.
Water boards were established under the provisions of the Water Act of 19748 in order to prevent water pollution. The boards later received the additional responsibility to control air pollution under the provisions of the Air Act of 1981. The water boards were then renamed as PCBs under the provisions of the Environmental Protection Act of 1986. The responsibilities of PCBs increased with the adoption of environmental protection rules in the context of prevention of water pollution, supervision of hazardous wastes, implementation of court directions, etc.
Central Pollution Control Board (CPCB)
The CPCB was first established in September 1974 under the provisions of the Water Act to promote cleanliness of streams and wells in India. It got additional responsibilities in terms of prevention and controlling of air pollution under the provisions of the Air Act. In its structure the CPCB consists of 12 members9 and six zonal offices.10 Functional and structural aspects of CPCB:The CPCB as a nodal agency tries to promote cleanliness of surface and groundwater; prevent, control and abate air pollution; advise the central government in the matters of prevention of water and air pollution; coordinate activities of states and settle disputes; direct and provide assistance to state boards in prevention of water and air pollution; formulate minimum national standards; recognise laboratories for the analysis of samples; submit expert reports based on the directions of the court; and to promote research, training and dissemination of information about the prevention of water and air pollution.
Activities of CPCB
(a) Standard Formulations
The CPCB formulates pollution standards for industries under the provisions of the Water and the Air Acts. These standards are called “the minimum national standards” (MINAS) for liquid effluents and air emissions. They are approved and notified by the Ministry of Environment and Forests.11 As a matter of fact, the SPCBs are empowered to impose stringent standards which could be over and above the MINAS. The development of MINAS by CPCB, during 1990-91 to 1998-99, can be presented with the help of the table.
The table reveals that the board has developed 84 MINAS during 1990-91 to 1998-99. It has developed 37 and 31 categories of industrial effluent and emission standards respectively. This is in addition to ambient air, ambient noise, automobile and fuels quality specifications for petrol and diesel.
Figure 1: Human Capital, Central Pollution Control Board
Percentage(s) 70 60 50 40 30 20 10 0 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 Year(s) Technical and Scientific 56 44 60 40 61 39 62 38 63 37 60 40 50 50 56 44 58 42 Administration
Source: Compiled from the Annual Reports, CPCB.
(b) Effluent Treatment Plants (ETPs)
The CPCB promotes common effluent treatment plants (CETPs) in clusters of small-scale industries (SSIs) because they may have financial constraints, lack space, and installation of small effluent treatment plants at their respective units may not be viable. In addition to this, the CPCB monitors the working of the established CETPs.
(c) Eco-labelling
Rapid industrialisation and urbanisation change production and consumption patterns and may generate negative externalities. In such a situation, the activities of regulatory agencies alone are inadequate to internalise the externalities. Thus, there is a need for a proactive and promotional role by manufacturers and consumers to prevent environmental pollution. The eco-mark scheme signals to consumers that the product is eco-friendly. It also provides incentives to the manufacturers to adopt green technology to produce eco-friendly products.
The scheme on eco-labelling, which is voluntary in nature, launched by the government of India in 1991 to encourage consumers to use environmentally friendly goods, and to achieve sustainable development. The technical committee, with the help of product specific subcommittees, finalises the guidelines of eco-mark for various product categories. The Ministry of Environment and Forests then notifies them in the gazette. In fact, the guidelines encompass the extraction of raw material for manufacturing of a product to the disposal of the used product by the consumer. The eco-mark label is awarded to consumer goods that satisfy the specified environmental criteria and quality requirements of Indian standards. Since 1991 the eco-mark criteria has been finalised and notified for 16 product categories.12
(d) Hazardous Waste Management
The waste generated by households, hospitals, industries and their improper disposal creates health hazardous. The Hazardous Waste Rules, 1989 under the EP Act and the EP Rules direct that hazardous waste disposal sites have to be designed and managed in such a way that no harmful substances reach the biosphere and hydrosphere in an unacceptable quantity.13 The board has
Figure 2: Financial Structure of Central Pollution Control Board
Payments
Receipts
Revenue expenditure Project rev expenditure Deposits Opening balance Grants from government Other deposits 45 43 90 41 81
80
40 38
77 3737
80 3672 35 35
68 3434 34 70 31
66 33
58
30
60 27
Percentage(s)
26
26
25 25
Percentage(s)
25
46
50 22
21
20
19
37 20 1840 34
32
31
15 1313 1329
30
23
19
19 1918 19
10 8
20
14
14
11
9
6
10 5
4
0 0
1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 Year(s)
Source: Compiled from Annual Reports, CPCB.
Figure 3: Environmental Hot-Spots of Andhra Pradesh
Factors
5
0 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 Year(s)
in the year 1996-97. Figure 1 explains the status of human capital of CPCB during 1990-91 to 1998-99.
Usually, the CPCB requires more scientific and technical personnel than administrative personnel to deal with its functions. This is one indication that the board’s inability to fulfil its objectives. Moreover, the head of the CPCB is a civil service employee.
(g) Income and Expenditure
The MoEF provides grants to CPCB to meet day-to-day expenses. In addition to this CPCB raises financial resources by carrying out various projects. On the other hand, the board spends
The government of India gave powers to the CPCB to Hazardous wastes Groundwater pollution Solid wastes River stretches GW net draft excess of 30 per cent Salt water intrusion Source: Annual Report, APPCB, 1998-99, p 2. its money through revenue and project expenditures, and also keeps some of its revenue in bank deposits too. Its financial structure can be explained with the help of Figure 2.
Figure 2 shows that the grant from the MoEF over the years, that is from 1990-91 to 1998-99, has been reduced from 80 per cent to 30 per cent of total receipts. In fact, the resources generated by carrying out projects went up to 50 per cent of total receipts. In case of payments, the CPCB has reduced its revenue expenditure as well as revenue product expenditure. However, it is keeping its resources in the form of bank deposits, which varies from 20 to 40 per cent of total payments, except for two years, i e, during 1994-95 and 1995-96.
The CPCB being a regulatory agency is more prone to regulatory capture. In addition, uncertainty prevails over its resource generation. This may be one of the reasons why the CPCB wishes to keep some of its money in the form of bank deposits.
recognise environmental laboratories and analysts as government analysts.14 Since its inception up to February 2001, the CPCB has recognised 44 laboratories in the country. In addition, the World Bank project on industrial pollution control strengthened laboratories of the PCBs.15
(f) Human Capital
CPCB manpower stood at 373 by the end of March 1999. Administration has the maximum number of personnel (218) as compared to the technical and scientific personnel (155) except
Andhra Pradesh Pollution Control Board (APPCB)
The state PCBs are constituted under Section 4 of the Water Act, 1974 and its functions are prescribed in Section 17 of the act.16 In the state of Andhra Pradesh the activities of prevention and control of water pollution began with the creation of the Andhra Pradesh state board in 1976 in compliance of the Water Act. The board also has additional responsibilities such as collection of water cess, and prevention of air pollution.17 Moreover, the enactment of the EP Act, 1986 augmented the activities of PCBs to include prevention, control, and abatement of environmental
Figure 4: Consent Issued by APPCB Figure 5: Complaints Received and Closure Orders1631 Issued by APPCB
1570
300
1474
1600 1400
1046
250
1132
200
| 125 18 | CR | CO 145 51 | 156 47 | 34 272 | 252 | 36 |
|
|
|
|
Number(s)
1000 894
Number(s)
150
712
800
533
600
100
427 424
393 395
364 365
345 337
239
50
94
1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 Year(s)
Source: Compiled from Annual Reports, APPCB.
pollution in their respective states. The APPCB consists of nine members,18 five zonal19 and 17 regional20 offices. The members have to meet at least once in every three months in order to deal with the requirements of the APPCB.21 The APPCB is a twotier system. The first tier consists of the chairman, member secretary and other members (not exceeding 15). All are nominated by the state government of Andhra Pradesh. The second one consists of appointed regular staff who run the day to day activities of the board. Functional and structural aspects of APPCB: The main functions of the APPCB are: maintaining and restoring the wholesomeness of water; prevention and control of air pollution, formulation of standards in consultation with CPCB; advising the state government in the location of industry and prevention of environmental pollution; issuing consents for establishment, and operation to industries; collecting water cess; establishing waste disposal management system; controlling the improper use of consents; recognising laboratories for standardisation and environmental quality control; and promoting research, training and dissemination of information in the interests of citizens.
The APPCB is empowered to collect samples22 from industry and issue closure orders23 in case of non-compliance of environmental standards.24 The Water and Air Acts set out an elaborate set of powers on inspection, regulation and punishment relating to the violation of standards set by boards. The APPCB has earmarked the environmentally sensitive areas (hot-spots) in the state. They have been marked in Figure3. Their focus is to prevent further degradation of the environment at these hot-spots.
First, one can expect that the PCBs would try to reduce the number of hot-spots. Second, if that is not possible the PCBs would at least try to limit the expansion of the hot-spots over the years.
Activities of APPCB
(a) CFE and CFO
The industries must get consent for establishment at the time of setting up the new plant. Similarly, the existing industries have to get consent for operation25 in order to continue their activities. Industries have to pay a fee to obtain the APPCB’s consents.26
The APPCB grants consent to establish a new plant and may grant it subject to conditions27 that are open for public scrutiny.
0
1995-96 1996-97 1997-98 1998-99 1999-2000
Year(s)
Source: Compiled from Annual Reports, APPCB.
The consent is reviewed once in every two years and a condition for renewal is the fulfilment of the previous year’s consent conditions. In the case of issuing consent for operations, there are three categories of industries red,28 orange29 and green.30 The red category industries are highly polluting, green industries are least polluting and orange category of industries fall in between the red and the green. The APPCB has to record the reasons for refusal of consent in writing and issue notices to industrialists that are denied the consent. The issuance of consent for operation under the Air and Water Acts seem to be much more time consuming than the issuance of consent for establishment.
The consents issued by the board during 1991-92 to 1999- 2000 can be explained with the help of the following diagram. Figure 4 indicates that in the case of the APPCB, consent issued for establishment and for operation accounted for 25 and 75 per cent, respectively, of the total number (12,375) issued.
(b) Water Cess
The member secretary of the APPCB is empowered to assess and collect water cess31 on behalf of the GoI under the provisions of Water Cess Act.32 The cess is to be levied for the quantity of the water consumed by specified industries33 and local authorities.34 The industries as well local authorities can get a rebate of up to 25 per cent of the cess payable if they follow certain procedures and standards laid by the GoI under the EP Act (1986). The APPCB charges interest for late payment, and also imposes penalty for non-payment under Sections 10 and 11 of the Water Cess Act respectively. It can take legal action against industries and local authorities for evasion of cess, failure to furnish returns, and false returns under Section 14 of the act as well.
Table: Development of Standards, CPCB
| Year(s) | Developed | Developing | Initiation | Total |
|---|---|---|---|---|
| 1990-91 | 1 1 | 1 1 | 8 | 3 0 |
| 1991-92 | 9 | 8 | 8 | 2 5 |
| 1992-93 | 1 2 | 1 0 | 1 7 | 3 9 |
| 1993-94 | 3 | 1 1 | 1 1 | 2 5 |
| 1994-95 | 7 | 1 1 | 1 0 | 2 8 |
| 1995-96 | 1 7 | 1 0 | 8 | 3 5 |
| 1996-97 | 8 | 5 | 5 | 1 8 |
| 1997-98 | 6 | 6 | 6 | 1 8 |
| 1998-99 | 1 1 | 2 | 2 | 1 5 |
Source: Compiled from Annual Reports, CPCB.
The number of industries and local authorities covered under water cess increased from 398 in 1990-91 to 919 in 1999-2000. However, the board is unable to bridge the gap between 24 15 61 25 15 60 25 15 60 23 14 63 23 14 63 27 13 59 27 13 59 30 16 53 31 16 53 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 Year(s) Technical Scientific Administration 20 10 0 Figure 6: Receipts and Payments of APPCB
Receipts Payments Opening balance State (Grants) Projects Sales and allowance Administrative expense
70 64
Water Cess Consent Fee 70 Projects Deposits Closing balance 61 60
60 52 48
Percentage(s)
50
Percentage(s)
44
42 40 37
50
Percentage(s)
40
31
30
30
2423 18 1820 171716 16
20
12 12
14 13
10
11 999 810 7 7 666
10
533
1 0
0 Year(s)
1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97
1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 Year(s)
Source: Compiled from Annual Reports, APPCB.
Figure 7: Human Capital of APPCB
70 60 50 40 30
before taking any decision on closure of industry. The APPCB, however, is not empowered to impose fines on non-compliant industries. It has to either issue directions (such as closure, prohibition and stoppage of water and electricity services) or file a case in the court against these industries and wait for the court verdict. Interestingly, some of the rogue industries tried to exploit the courts in order to continue their polluting activities. For example, Jayant Vitamins continued in its pollution activities for 20 years by using the system of appeals.37 Thus, there is a need for empowering the PCBs to impose fines on rogue industries. This may perhaps provide incentives to industries to take precautionary measures to reduce the risk of harm.
(d) Income and Expenditure
The state governments of the concerned PCBs provide them grants to meet their day-to-day expenses. In addition to this, the APPCB raises its financial resources through collection of consent fee, water cess, projects, etc. The APPCB incurs expenditures on salaries and allowances, administrative expenses, and puts
assessment and collection of the cess. This may be because only about eight to 10 out of 112 municipalities/municipal corporations pay cess regularly and promptly.35 It clearly indicates that the board is lenient towards local authorities in terms of collection of water cess.
(c) Closure Orders
The MoEF has identified 17 categories of highly polluting industries under the provisions of the Water and Air Acts. The APPCB established a task force in August 1995 to monitor the problematic polluting industries and provide a forum for public grievances. The actions of the task force36 can be explained with the help of Figure 5.
It shows that the task force, from 1995-96 to 1999-2000, received 950 complaints and issued 186 closure orders. It initiates legal hearings, with complainants and technical experts, some money into bank deposits. The receipts and payments of the board can be presented with the help of Figure 6. It reveals that the financial sources and the payments of APPCB,38 viz, grant from state government, reduced from 17 per cent to 1 per cent of total receipts over 1990-91 to 1996-97. In fact, most of its resources were raised by charging consent fees.
In case of payments, salaries and allowances accounted for less than 15 per cent of the total except during the period of 1993-95. The unspent money of the APPCB (closing balance), over the years, has gone down from 70 per cent to 24 per cent of the total. In addition, the board is keeping some of its resources in the form of bank deposits, which accounts for 48 per cent of total payments. Once we treat the closing balance and bank deposits of the board as unspent money, the available money for wider activities of the board accounts for lesser than 50 per cent of its total payments. Usually, the received money is not sufficient to carry out the board’s obligations. The graph reveals that the board is neither utilising its available resources effectively and efficiently nor applying them to prevent environmental degradation. One reason could be the prevalence of uncertainty over resource generation. There is a need for policy measures to strengthen the PCBs resource base.
(e) Hazardous Waste Management
According to the MoEF “around five million tonnes of hazardous waste is generated in India every year”. It is largely concentrated in four states: Andhra Pradesh, Gujarat, Maharashtra and Tamil Nadu. The Hazardous Waste Management Cell has been established39 along with the Cleaner Production Cell by the APPCB with financial assistance of the Australian government.40The purpose is to identify, quantify and characterise hazardous waste producing industries. The Cleaner Production Cell also advises and provides technical and financial assistance to industries to minimise waste by adopting cleaner production options. The cell tries to create awareness among industrialists by releasing information bulletins41 about the advantages of waste minimisation and adaptation of cleaner technology. The cell provides incentives, such as the issuing of three-year consent for operations concessions in water cess payment, etc, to industries that are practising cleaner production. As per the rules, the APPCB identified 596 industries as hazardous waste generating ones and issued authorisation for 535 industries for onsite collection and safe storage. The cell should perhaps foresee the consequences of disposal of municipal solid waste, which includes household trash and hazardous hospital waste. A majority of cities and towns in our country dispose the waste without segregation, which leads to long-term ecological effects.
(f) Laboratory Testing
In 1977, the APPCB established central and regional42 laboratories to undertake analysis of all polluting parameters.43 Laboratory equipment is added through government grants and projects. The central lab of the APPCB, from 1991-92 to 1999-2000, has carried out 44 per cent and 56 per cent of the total 41,448 sample analyses of water and air, respectively.
(g) APPCB and Human Capital
The status of the human capital of APPCB can be explained with the help of Figure 7. It indicates that the board’s manpower stood at 258 by the end of March 2000. The administration, technical and scientific personnel accounted for 53, 31 and 16 per cent respectively of the total staff. The ratio of technical persons to the number of polluted (red and orange categories) industries stood at 1:100. We can infer from these statistics that the APPCB has very restricted activities.
(h) Legal Cell
The APPCB has established a legal cell to provide expert advice on technical environmental issues, within the scope of the enacted environmental legislation(s), to courts. It files affidavits in courts through its standing councils. In addition, the cell acts as a catalyst between the board and industry. It also looks into the cases bought against the board by industries and the public.
Views of PCB Officials
We prepared questionnaires for the board officials in order to obtain their opinion on the functioning of PCBs. These questionnaires were prepared after a review of the environmental PIL cases from the Supreme Court of India and Andhra Pradesh High Court; environmental legislation that they enacted; and material collected from the CPCB and APPCB. Six officials were interviewed to get their opinion about the functioning of the regulatory system in the country. We asked their opinion on the following issues: Dissemination of information: Although the board provides expert opinion to the courts about the state of affairs of environmental pollution, some of the officials conceded that their expert reports may hide factual information about the polluting industry. The PCBs also do not provide citizens information about the activities of polluters. For instance, disclosure of information about the industries may create panic amongst the public. In addition, they argue that the disclosure of information about the negative externalities of the polluters may be exploited by rival/competitive industries. However, dissemination of information about polluters is the bedrock function of the PCBs. Citizens can exercise their rights and campaign against the polluting industries. Issuance of consent: Officials were of the opinion that in the case of the issuance of consents, such as CFE and CFO, standards were applied uniformly irrespective of the nature of the industries (i e, public or private) involved. Implementation of standards: The schedule of implementation of standards varies amongst the industries. For example, thermal power, integrated iron and steel, oil refineries, and mines may require larger investments and longer time to install pollution abatement machinery.
According to officials, monitoring industry is a complex issue for the PCBs. A majority of industries do not comply with the conditions because they are not economically viable.44 Further, even industries that pretend to be complying do not. For example, industries establish the effluent treatment plant but do not run it; they operate it only at the time of the PCB team’s visit. Courts are also impotent in stopping the pollution and, at times, provide incentives to the industries to pollute more.45 As a result a majority of the officials favour the introduction of fines against rogue industries.
Officials also felt that the decentralised regulatory system should curb pollution but the involvement of politicians and lack of honesty among PCB personnel leads to a breakdown. In addition, they face pressure from interest groups, threats, inadequate job security and have a lack of trained personnel, expertise, financial resources, sincerity, incentives and infrastructure facilities.
Moreover, they felt that the standards formulated by the PCBs were not scientifically and economically viable. That is the reason why most of the industries violate standards. As a result, a majority of the officials of PCBs stressed the need for the establishment of separate environmental protection courts equipped with technical and scientific prowess. According to them this will also result in a timely disposal of cases, monitoring, implementation of orders, etc. Suggestions by officials: Officials were against the establishment of parallel regulatory agencies, such as shore area regulatory authorities,46 but favoured competition among PCBs in order to achieve sustainable development in the country. They made the following suggestions:
Critical Evaluation of PCBs in Light of Theory of Regulation
Enforcement of environmental standards: PCB personnel monitor compliance of environmental standards by industries by issuing showcause notices, legal counselling and closure orders. They empowered to collect samples in and around the industry premises and test them to determine whether the effluents/emissions are according to the standards or not. In a majority of the cases they take action against polluting industries based on complaints received from citizens. PCBs do not have any consent for establishment/operation manual to carry out minimum sample tests and ensure that the industries strictly follow the relevant standards. They are handicapped in terms of enforcement of standards and providing deterrent incentives to violating firms because they are not empowered to use punitive measures. However, PCBs may blacklist the polluting firms. Moreover, PCBs have a greater number of administrative personnel than scientific and technical personnel. A conclusion that can be drawn is that the PCBs are handicapped in terms of carrying out their functions in preventing pollution in the country.
The theory of liability versus regulation reveals that compliance with standards does not protect the polluting industry from liability in the event of harm. At the same time, non-compliance does not automatically lead to liability. It should be noted that even after obtaining the requisite consent victims can go to court. Under these circumstances, the industrial activities that are hazardous and irreversible in nature will have to be monitored to achieve compliance of specified standards. PCBs and resource mobilisation: PCBs over the years have been woefully under-funded. They raise their own resources to meet even daily expenditure. The SPCBs, in particular, raise income through the consent fees, no objection certificates, and water cess that are paid by industrialists and local authorities. For example, in the year 1999-2000, the APPCB raised Rs 10.6 crore (out of the total receipts of Rs 10.9 crore) through consent fees, NOC and water cess.
These circumstances increase the possibility that PCBs may issue consent subject to conditions that favour the industries rather than protect the environment in the country. Thus, selfreliance of PCBs comes at a great cost and reduces its effectiveness. This is an issue that needs to be addressed because the board has been unable to reduce the degradation of the environment in the state of Andhra Pradesh for the last three decades. Informational difficulty: It is difficult to get information from a regulatory agency. In the case of PCBs even the information that they are required to disseminate is not made available to the public, often in the name of confidentiality, secrecy or preventing panic. Information programmes such as labelling and reporting requirements may help foster (market-oriented) solutions to environmental problems. The PCBs need to publish the information on firms’ use, storage and release of hazardous chemicals.
In fact, dissemination of this type of information to the public may bring awareness, and also ease the task of PCBs in monitoring the activities of polluting industries. Public scrutiny can provide incentives to firms to alter their behaviour.
Information is power and the consequence of asymmetric information further aggravates environmental pollution in the country. Moreover, information disclosure provides an opportunity to the public to carry out their statutory duty under Article 51A (g) of the Constitution.47 Hence, the PCBs should disclose information rather than restrict their activities to conducting awareness programmes among the general public. Influence of interest groups on PCB activity: The theory of regulation predicts that interest groups always cast a shadow on regulatory activities because they are easy to capture. Given the increasing levels of environmental pollution the PCBs are not free from the influence of interest groups. Further, there is indirect evidence about the validity of the theoretical arguments about capture theory. For instance, since PCBs mobilise their own resources, consent is issued with conditions that are favourable to interest groups. Otherwise, it would not have been possible for PCBs to mobilise 95 per cent of their resources through consent fee, NOC and water cess in 1999-2000.
Moreover, the lack of job security amongst PCB employees provides an opportunity to interest groups. Monetary bribes are theoretically possible, although they are not common because of their illegality. It is, however, personal relationships that provide incentives to government officials to treat their industry partners kindly. The industry also exercises power by obtaining transfers of key elected officials who have influence over the agency.48 Jurisdiction of the PCBs: Overlapping jurisdictions often creates problems with the enforcement of environmental law. For example, a regulator’s jurisdiction is on the territory (state boundary); but there are other parallel agencies such as shore area regulatory authority, traffic authority, licensor for small-scale industries, etc, that leads to delay and confusion as the agencies debate their respective jurisdiction.49 Expert role of PCBs: Although the PCBs are playing an important role in providing expert opinion to the liability system, its work is often shoddy and has drawn strictures from the Supreme Court. For example in the context of Jayant Vitamins, the Supreme Court was not satisfied with the pollution report submitted by the MPPCB.50 Similarly, the CPCB submitted its expert report to the Supreme Court of India by visiting the polluting industries on a day on which they were closed,51 and during peak monsoon period when the effluent discharge is diluted by rainwater.52
PCBs and issuance of consents: The study reveals that industries play a tactical role while obtaining consent from the PCBs. The industries initially apply for consent to produce less polluted goods but actually produce highly polluted goods under the same consent.53 PCBs and issuance of closure orders: Industries continue in their pollution activities even after receiving closure orders from the concerned PCB by simply changing the name of the polluting unit. For example, in the B Sadanandam vs Government of AP and Others, WP No 17148/1999 in the HC of AP:
The residents of Allwyn Colony (126 out of 2,000 members) approached the HC of AP against the activities of the Hyderabad Ossein (animal bones crushing and storage unit) in residential zone. The court issued closure orders in the year 1997 against the industry. The Trans Gel Industry, however, has taken over the Hyderabad Ossein and requested the APPCB to revoke the closure orders. The APPCB, after hearing complainants view (14 out of 126 members) issued temporary revocation of closure order subject to certain conditions. The court in its order stated that the APPCB revocation of closure of the industry ends on January 30, 2000. It directed the APPCB to make periodical inspection and take appropriate action against the industry in case of default.
Does the compliance with PCB standards exempt the polluter from the liability?: The compliance of PCB standards does not protect the polluter from liability in the event of harm. At the same time, non-compliance of PCB standards by the polluter does not automatically lead to liability. However, the PCBs may prevent the polluter from establishing his units and operating existing units under the provisions of the CFE and CFO, respectively.
The PCBs formulate only minimum national standards and the courts justify that irrespective of compliance of the standards the polluter is liable for the harm occurred. In other words, the polluter who complies with the MINAS may not be exempt from the liability in the event of harm. For instance, under the provisions of public interest litigation the citizens of India are approaching the liability system to seek remedial measures against rogue industries.
IV Suggestions for Improving the Functioning of PCBs
Financial Assistance
PCBs require resources for the formulation and monitoring of standards, conducting exhibitions and awareness programmes on the availability of state of the art green technology and measures of abatement of pollution. We find that the governments have drastically reduced their contributions to PCBs. For instance, the Andhra Pradesh state government provides only 1 per cent of the total receipts of the APPCB. In addition, mobilisation of resources through water cess is inadequate because the local authorities do not pay their dues and the board is unable to do much to recover them. Moreover, the PCBs cannot rely on NGOs and foreign country funding because they are specific and temporary in nature. They, therefore, rely on fees gathered from the issuance of consent. There is, however, variability in revenue obtained from consent because it depends upon the establishment of new industries and also the existence of old industries. We also find that PCBs are depositing their funds with financial institutions to obtain interest income rather than investing in research and development because of the uncertainty of revenue.
As a result we have a unique situation. On the one hand, as an ex ante system, the PCBs should adopt stringent measures against polluting industries to prevent environmental degradation. On the other hand, since they raise their own revenues, PCBs may be required to compromise in the use of stringent measures. Thus, there is a need for providing financial assistance directly from the ministry of finance.
Dissemination of Information
Information asymmetry is the root cause for the breakdown of markets. We find that the PCBs are reluctant to disclose information to the public about the activities of polluting units.
Information disclosure by the PCBs largely reveals their achievements in abating pollution. These claims can, however, be challenged since there is clear evidence of environmental degradation.
Disclosure of the activities of polluting industries provides incentives to manufacture environmental friendly products and comply with environmental standards. Disclosure enables the public to participate in the preservation of ecology in the country. The Right to Information Act will enable the public to obtain the necessary information if the PCBs are unwilling to part with it.
Punitive Measures
Fines imposed on those violating environmental standards generate efficient deterrence. The PCBs, however, are not empowered to impose fines and their activities are restricted to the issuance of consents and monitoring compliance by the industries. In the event that industries violate the consent condition PCBs need to follow the principles of natural justice in order to carry out action against the industries, including approaching the judiciary. Once under the purview of the judiciary the industries can happily be in business till the decision of the court and implementation of its order. It is therefore wise to grant PCBs the power to impose fines, including punitive damages to prevent environmental degradation ex ante.
Adopting Sample Testing Manual
The effectiveness and efficiency of the functioning of PCBs depends upon the monitoring of its established environmental standards. This function is directly dependent on the periodic collection of samples and testing by the PCBs in its laboratories. We find that the collection of samples by PCBs is dependent on whether there is a complaint and the regulators are not performing their duty of voluntarily collecting samples. Moreover, the PCBs do not have a minimum sample testing manual under the provisions of the Consent for Establishment and Operation. Failure to test provides incentives to polluting industries to not comply with environmental standards. The PCBs therefore needed to adopt the minimum sample testing manual to enforce their standards.
Organisational and Structural Changes
The regulatory responsibility of PCBs is increasing because of the severity and increase in environmental pollution. In the decentralised model, with the CPCB acting as a nodal agency under the MoEF, the CPCB collects information and provides it to the SPCBs. The role of the SPCBs is restricted to their respective state jurisdictions. One of the justifications for establishing of SPCBs is that these institutions facilitate greater participation by the people in local affairs, promote better planning and implementation of development and environmental programmes and responsiveness to the needs of the people. However, the PCBs have been unable to internalise the externalities in an effective and efficient manner. There is, therefore, a need to establish a separate independent statutory agency to prevent and reduce pollution in the country.
V Summary and Conclusion
This study is focused on the evaluation of the functioning of the PCBs to determine whether the regulatory system is effective in preventing environmental pollution in India. Since the market and liability systems are unable to provide incentives to the polluter to reduce pollution, there is a need for the regulatory system to prevent, control, and abate environmental pollution in the country. The PCBs were established under the provisions of the Water, Air and EP Acts in order to fulfil the objectives of formulating environmental standards, monitoring them, issuing consents for establishment and operation of industries, and advising the courts and the government on scientific and technicalities of environmental issues.
Our study is based on primary and secondary data. The insights obtained from the data were used to prepare questionnaires that were then submitted to the officials of PCBs to get their opinion on the functioning of the institution. We have critically analysed the data and opinions of the PCB officials in the light of the theory of the regulatory system to determine the role of an ex ante system in abatement of pollution in the country.
The study reveals that the role of the board is of great importance in preventing, controlling, and abating environmental pollution in the country. The decentralised system PCBs, however, are ineffective in ensuring internalisation of environmental concerns in the process of economic development. This is mainly because the responsibilities are manifold, human resources, particularly, technical and scientific staff are inadequate, the resource base is uncertain, there are influences of interest group, jurisdictional problems exist, punitive measures are absent, minimum sampling tests manuals are lacking, there is no effective and efficient working culture, and information about the activities of hazardous industries is not disclosed.
Thus, there is a need to introduce policies on restructuring of existing PCBs, establish competitive environment, empower PCBs to impose a fine against rogue industries, create an incentive mechanism for the personnel, reduce the revenue generation responsibility and provide financial assistance directly for the ministry of finance. Overall, the study emphasises the necessity of improving the functioning of the regulatory system by making necessary changes not only in substance of the law, but also in the working conditions of the PCBs so as to improve the environmental quality in the country.
EPWEmail: pantamuraliprasad@justice.com
Notes
[I thank Jyoti Parikh, chairperson of the Environmental Economic Research Committee (under EMCaB Programme) for project assistance, the members secretaries of both the Central Pollution Control Board and the State Pollution Control Board of Andhra Pradesh for their permission to collect the data from the documents, and Manoj Dalvi and Ramamohan Rao for their efforts in substantially improving the quality of the paper.]
1 See Prasad (2004).
2 For example, if two firms apply for a licence to establish their units and
only one of them gets the licence. So, the other firm which hasn’t obtained
licence has also incurred expenditure on lobbying, leading to a waste
of resources. The result may be an inadvertent limiting of competition
between firms in the adoption of green technology.
3 The liability system is effective in providing incentives to the tortfeasor
to take precautionary measures to reduce the risk of harm by setting the due level of care based on case by case adjudication, generating information from private parties, lower administrative costs, error correction by way of appeals, etc. Similarly, the regulatory system is effective in providing incentives to the tortfeasor to take precautionary measures to reduce risk of harm by the formulation of regulatory standards through scientific knowledge, collection of fines (which is helpful in case of inadequate wealth of tortfeasor), etc.
4 The liability system has limitations with respect to the award of nonpecuniary costs, economic consequences of full, over, and under compensation, rational apathy, establishment of causational links, law’s delay, etc. Similarly, the regulatory system also has limitations such as regulatory capture, adverse effects in the case of formulations of standards for private goods, etc.
5 For example, in the case of chopping down a tree in one’s yard, it is less costly to use liability to force appropriate caution than to construct a myriad of permits and regulations covering tree felling. At the same time, in another example concerning air pollution it is less costly to promulgate well thought-out standard regulations than to let each victim to take the tortfeasor to court [Kolstand et al 1990].
6 For instance, in the case of potential deficiencies of incompatible uses of neighbouring property, where a hospital is situated next to a noisy, dusty cement manufacturing industry, there may be possibilities of minimising externalities by zoning ordinances (which is an ex ante approach) and at the same time exposing the externality generator to nuisance liability (which is an ex post approach). The classic comparison of the efficiency aspects of these alternate methods of minimising this type of externality is given by Ellikson (1973).
7 It (read with entry 13 of the union list) provides power to the centre to make laws implementing India’s international obligations and also any decision made at international conference.
8 Water is a subject in the state list under the Constitution (Entry 17, List II, Seventh Schedule). So the act was enacted by the Parliament after consent resolutions passed by 12 state legislatures under Article 252 (1) of the Constitution.
9 One chairman; five members that are representatives of government; three members from industry, agriculture and trade; two members from PSUs; and a member secretary – all nominated by the central government.
10 They are at Lucknow, Bhopal, Shillong, Kolkata, Vadodara, and Bangalore.
11 Under section 25 of the Environmental Protection Act, 1986, the SPCBs must take into consideration these standards while issuing consent to industries. The SPCBs can make their standards more stringent than the central standards but not less. A World Bank study, however, stated that the MINAS fixed by the CPCB have not left any flexibility for the SPCBs to make them more stringent as MINAS at their current levels require near the maximum effluent reduction levels that is technically achievable.
12 Since 1991, the eco-mark criteria has been finalised and notified for 16 product categories like soaps and detergents, paper, food items, lubricating oils, packaging material/package, architectural paints and powder coating, batteries, electrical/electronic goods, food additives, wood substitutes, cosmetics, aerosol propellants, textiles, plastic products, fire extinguisher, leather.
13 In a study (Inventorisation of Hazardous Waste Generation), the CPCB found that hazardous wastes generation in eight states (Gujarat, J and K, Punjab, Kerala, Andhra Pradesh, Madhya Pradesh, National Capital Region and Orissa) accounted for 19 lakh tpa.
14 Under sections 12 and 13 of the Environmental Protection Act, 1986.
15 This was in order to improve the abilities of PCBs of the heavy industrial states in the country such as Gujarat, Maharashtra, Tamil Nadu and Uttar Pradesh.
16 Sections 25 and 26 of the act provides for refusal or withdrawal of consent by the boards. Section 33 of the act empowers the boards to make an application for directions to the court of a judicial magistrate, where the boards apprehend pollution. Section 33-A (53 of 1988) further empowers the boards to direct the closure of polluted industries by regulation of supply of electricity, water or other sources.
17 Under the Air (Prevention and Control of Pollution) Act, 1981 (Amendment, 1987) – Noise Pollution has been added as air pollution in 2000.
18 Special chief secretary from the department of environment, forests, science and technology, the government of Andhra Pradesh acts as an ex-officio chairman; member secretary of APPCB acts as member convenor; one member each from the departments of municipal administration and urban development, health, medical and family welfare, commissioner
of industries, forests and Andhra Pradesh State Financial Corporation and Andhra Pradesh Industrial Investment Corporation. The office of the member secretary is supported by 13 cells: (1) CFE and CFO cell, (2) cleaner production, (3) legal, (4) bio-medical, (5) action plan monitoring, (6) hazardous management, (7) task foree (HO), (8) information and public, (9) accounts, (10) administration and building,
(11) cess, (12) board laboratory and (13) documentation centre. 19 They are Visakhapatnam, R C Puram, Hyderabad, Vijayawada and Kurnool. 20 They are Rajamundry, Visakhapatnam, Vizianagaram, Medek I and II,
Nalgonda, Nizamabad, Hyderabad, Ramagundam, Ranga Reddy I and II, Warangal, Nellore, Kothagudem, Vijayawada, Tirupati and Kurnool.
21 Chairman of the board may convene a meeting whenever there is urgency and Section 8 and 10 of the Water and Air Acts, respectively.
22 Sections 21 and 26 of the Water and the Air Acts, respectively.
23 Sections 33 (A) and 31 (A) of the Water and the Air Acts, respectively.
24 However, the industries can approach the appellate tribunal and even go up to the apex court in order to get remedial measures against disputed closure orders passed by the board.
25 Sections 25 and 21 of the Water and Air Acts, respectively.
26 The fee is based on the total investment of the industry. However, it excludes working capital and expansion costs of the industry but not depreciation.
27 Conditional clearances may be given to industries. This increases the possibility of fraud. For example, Andhra Pradesh imposed certain environmental conditions for hatcheries and aquaculture projects. One of the conditions was that the production of shrimp shall not exceed six metric tonnes per hectare per crop and only two crops per year are allowed, to maintain pollution levels at a minimum. In reality many industries violated these conditions. For example, in Nellore district, the mega prawn farms have no effluent treatment plants. They discharge effluents and dump the dead and diseased shrimp into the Buckingham canal that supplies drinking water to Chennai city (Indian Council for Enviro-legal Action vs Union of India and others, W P No 664/1993, Supreme Court of India).
28 Every year by reviewing the fulfilment of previous year conditions.
29 Every two years by reviewing the fulfilment of previous year(s) conditions.
30 Every five years by reviewing the fulfilment of previous year(s) conditions.
31 Section 5 of the Water Cess Act of 1977.
32 Water (Prevention and Control of Pollution) Cess Act, 1977 (Amendment, 1991). It was enacted to augment the resources of the PCBs and to conserve water.
33 The major cess paying industries are thermal power plants, pulp and paper, heavy water plants, Vizag steel plant, etc.
34 The APPCB has been regularly assessing about 112 municipalities (Gr I, II, III)/municipal corporations.
35 The municipalities/municipal corporations and thermal power plants were not paid dues of about Rs 4.5 and 22.4 crore, respectively.
36 The primary aim was to attend complaints received from public as well as industries, issue of show cause notices/directions/closure orders to those industries which did not comply with the standards, night patrolling to prevent illegal outlets, and investigating the root cause of pollution and providing preventive measures.
37 Hari Ram Patidar vs Union of India and others (in the SC, W P No 330/ 1995). See Prasad (2004:263).
38 We have reviewed the receipts and payments of APPCB instead of income and expenditure for purposes of the study.
39 Based on the Hazardous Waste (Management and Handling) Rules, 1989 (Amendment, 2000).
40 In 1990, the government of Australia offered assistance (Australian Agency for International Development – Aus AID) to the government of India on environmental matters. The APPCB designed a project on Hyderabad waste management under the assistance and the project started in the year 1996 to promote waste minimisation and cleaner production.
41 So far the cell has issued 10 information bulletins such as waste minimisation in textiles, electroplating industries, chemical industries, bulk drugs and dye intermediate industries, etc.
42 Six regional labs at Ramagundam, Rajamundry, Vijayawada, Visakhapatnam, Tirupati and Warangal.
43 Such as heavy metals, pesticide residues, air pollutants, organising water pollution and industrial waste surveys, establishing water quality standards, maintaining the data, etc.
44 In the case of effluents of drug industries, Patancheru, even after treating the effluents under a common treatment plant, the TDS (BoD and CoD) levels are high and there is a need to find a place for this discharge. The Supreme Court of India asked the CPCB to look into the matter and do the needful. The board estimated a cost of Rs 16 crore (approximately) to resolve the problem of treated effluents of the drug industries of Patancheru.
45 For example, in the K Sai Vijayendra Singh vs Andhra Pradesh State Pollution Control Board (W P No 28363/1997, in the High Court of Andhra Pradesh), the APPCB issued closure orders based on court direction. However, the industry challenged the closure orders of the board by filing a writ petition. The court, in its interim order, dismissed the closure orders, in spite of the board’s affidavit stating that the closure order was in compliance with court direction. After nine months, the court again passed the order against the industry by stating that the industry had not complied with APPCB standards.
46 In a public interest case (Indian Council for Enviro-Legal Action vs Union of India and others) the Supreme Court stated that “considering the fact that the PCBs are not only overworked and have a limited role in effective implementation of the Notification 1991 the GoI should consider setting up State as well as National Coastal Management Authorities under section 3 of the Environmental Protection Act, 1986”.
47 It is a fundamental duty which imposes a responsibility on every citizen “to protect and improve the natural environment including forests, lakes, rivers and wild life, and to have compensation for living creatures”.
48 See Vellore Citizens Welfare Forum vs Union of India and others, WP No 914/1991 in the SC.
49 The Citizens’ Forum vs Government of AP and others (WP No 27917/ 1996, in the HC of AP).
50 The MPPCB in its affidavit (1992) sated that Jayant Vitamins, Ratlam, was the chief source of the pollution and discharge about 600 cm per day of effluents into Kurel river which was a drinking water source for nearby villages and towns. The board initially granted consent for one year in 1975 and did not renew it because of violation of its standards. However, the industry, in its affidavit, stated that the effluents were from the neighbouring industries such as the Ratlam alcohol plant (producing alcohol form molasses), Sajan industry (producing H acid), Stattar drugs (producing trimathoprine, ibuprofen, atenol and isonieazid), Sri Ram chemical industry (producing sodium and sulphide-solid), and diesel shed western railway, Ratlam (repairing diesel engines). The MPPCB filed its affidavit on the Supreme Court of India and in its order (January 20, 1995) stated that it was not satisfied with the report of the MPPCB and directed the CPCB to inspect the industries and file a report. (Hari Ram Patider vs Union of India and others).
51 Tarala V Patel and others vs Government of Pondicherry (WP No 184/ 1996 in the SC).
52 Rurkela Shramik Sangh vs UoI and others (WP No 285/1991 in the SC).
53 Paryavaran Suraksha Sangarsh Samiti vs Union of India and others, WP No 94/1990 in the SC. Chemical industries, such as Hindustan Agro-Chemicals, Silver Chemicals, Rajasthan Multi Fertilisers, Phosphate India and Jyoti Chemicals, in and around Bichhri village (Girwa taluk, Udaipur district) in Rajasthan were polluting the environment. The RPCB, in its affidavit indicated that Hindustan Agro Chemicals had obtained an NOC subject to certain conditions to produce sulphuric acid and alumina sulphate. However, the industry started producing olsum and single super phosphate (SSP).
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