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  • Managing Pollution

    PIL as Indirect Market-Based

    Tool

    Environmental public interest litigation and the resultant judicial activism in India during the late 1980s and 1990s have played the role of indirect market-based instruments of pollution management. While a purely judicial approach to environmental management is neither effective nor efficient, PIL has played a significant role in defining India's pollution management system.

    Aparna Sawhney


    Economic development

    is sustainable as long as the true environmental costs of all inputs and

    products are reflected in the market price. When markets and government

    policies fail to factor in the true price of the ecosystem, the communitycan

    induce the government/industry to take action and correct for adverse

    effects in the system.Thus a community can potentially play a significant

    role in the environmental management of an economy, besides the government

    (regulator) and the industry. In environmentally conscious societies,

    governments adopt stricter environmental policies when political support

    is determined by the environmental sensitivity of its policies (based

    on the voting communities' priorities). Communities can also induce industry

    to change its behaviour and produce environmentally friendly products

    in the market (through cooperative or coercive action) and thereby drive

    the market to incorporate the true environmental costs of the system.

    Thus community participation in environmental management has gained importance

    across the globe in order to make economic growth more ecologically sensitive.

    In theory, the optimal level of environmental quality can be achieved

    through different regimes, and three such regimes are popularly considered

    in the literature. First, following Coase, property-rights of environmental

    resources can be defined and the economic agents can decide the desired

    level of pollution (given the true costs and benefits from pollution)

    through mutual negotiations. As long as the number of players is small

    and transaction costs negligible, the optimal equilibrium will be achieved.1 

    Second, under a command and control (CAC) approach, the regulator can

    enforce the environmental standards based on the optimal level of pollution

    (where the social marginal cost equals social marginal benefit of pollution).

    As long as these standards are enforced, the social optimum can be achieved.

    Third, the regulator can adopt economic or market-based instruments

    (MBIs) to abate pollution, and these cover instruments that harness

    self-interest of economic agents for environmental goals. MBIs include

    price-related instruments like pollution taxes and permits, as well

    as indirect economic instruments like law of liability for damages,

    and environmental information disclosure systems [Paulus 1995]. The

    use of economic instruments triggers the industry into innovating with

    cheaper ways to cut down on pollution and encourages firm action that

    projects a more environmentally friendly image in the market (through

    the information disclosure system).

    In most countries across the globe, CAC measures including standards

    on emissions and effluents from different polluting sources (whether

    stationary point sources like firms or mobile point sources like vehicles)

    define the pollution abatement regime. In developed countries, the CAC

    regime is largely complemented by economic instruments: for example,

    the US has by far the most extensive use of tradable pollution permits

    in the world, and in Europe pollution taxes are more in vogue. Even

    developing countries have utilised economic incentives to induce pollution

    reduction in industry. Coasian type of bargaining to control industrial

    pollution has been documented in Asian countries, including Japan and

    Indonesia, between local inhabitants and plant management [O'Connor

    1995, Pargal and Wheeler 1996, Hettige et al 1996]. According to a World

    Bank study, in India, however, community pressures (in terms of proxy

    measures of better-educated and higher income communities) do not seem

    to induce lower pollution [Pargal et al 1997], but communities do seem

    to have a significant effect on the level of inspections.2 

    This paper illustrates that community pressure in India has played

    a significant role, quite distinct from those documented in other Asian

    countries like Indonesia, through the environmental public interest

    litigation system and judicial activism. The Indian citizen's constitutional

    right to a clean, healthy life and the liability of pollution damage

    on polluters have encouraged community action through environmental

    public interest litigation (PIL), and subsequently judicial activism.

    The rise of environmental PIL and judicial activism in the last 15 years

    has encouraged development of new and stricter environmental legislation,

    and also created incentive for the industrial polluters to increase

    abatement (as a result of both new regulations and threat of community

    action). The establishment of the law of liability of environmental

    damages (polluter-pays principle) endorsed by these cases has led to

    indirect market pressure on polluting agents in India especially during

    the 1990s. This in turn has helped in the growth of an environment market

    (including pollution abatement equipment as well as environmental consulting

    services) in the country, which has begun attracting foreign investors.

    Environmental Management Regime

    In India, the pollution control regime is almost purely of the CAC

    nature, supplemented by economic incentives, for example, subsidies

    on catalytic converters/compressed natural gas for vehicles; benefits

    for industrial pollution control equipment; and fines and/or imprisonment

    for violation of environmental norms. The domestic environmental legislation

    is well-developed and industrial pollution norms spell out effluent

    standards by source. Yet, despite the existence of elaborate pollution

    standards in India, the problem in controlling pollution arises from

    the poor enforcing of standards. Attention has been focused on initial

    compliance (installation of abatement equipment) rather than continuous

    compliance of actual effluent concentration (and ensuring that the installed

    equipment is actually operating). In effect, pollution would not reduce

    after installation because pollution equipment is not running. It is

    possible for a firm to be compliant by installing abatement equipment

    but not operating it! Thus Pargal et al (1997) found that plant level

    pollution is unaffected by formal inspections by state PCBs in India,

    since firms probably activate the equipment only when inspections are

    scheduled.

    Also, since plant-specific standards are in terms of the concentration

    of effluent and not volume, concentration compliance can be achieved

    by diluting the pollutant discharge while pollution load increases!

    Ambient and source standards are set independently, unrelated in terms

    of the volume of pollution generation; thus it is possible for

    environmental quality to deteriorate despite a high degree of compliance

    among individual polluters. The fines and penalties for non-compliance

    are low in India, and the penalty structure is insensitive to the degree

    of default, since the same penalty is charged for violation of environmental

    standards irrespective of the size of violation (whether small or large)

    or the pattern of offence (occasional or repeated violations).

    The problem in achieving the optimum arises from the difficulty of

    enforcing these environmental standards.3  Monitoring by

    the pollution control boards (PCBs) is poor and the lack of comprehensive

    data/information on polluting activities of industries exacerbates the

    problem (since, by law, the PCB has the entire burden of proof of any

    offence by an industrial unit). The PCBs often tolerate non-complying

    units due to the work overload at the boards, lack of staff, budget,

    equipment and facilities. About 65 per cent of the members in 17 state

    PCBs were found to be technically incompetent to do a job that required

    high technical skill (Down to Earth, July 31, 2001). Since the

    boards are expected to generate funds through consent fees, and other

    charges, lack of proper monitoring and implementation in turn translates

    into inadequate fund generation. Even when cases are filed by the PCBs

    against erring firms, they remain pending for years in the lower courts.

    In the 1990s, the environmental regulation for Indian industry began

    to focus on environmental management procedures, incorporating compulsory

    environmental impact assessment and audit. Environmental audit (under

    Environmental Protection Rule 14) became effective in 1993, and in 1994,

    environmental clearance was made mandatory for industrial activities.

    In 1994, environmental impact assessment (EIA) was made mandatory for

    29 categories (increased to 30 in the year 2000) of developmental activities

    including industrial projects, thermal power plants, mining projects,

    river valley hydroelectric schemes and infrastructure projects [MoEF

    2001]. EIA is designed as a management tool to ensure that development

    options are environmentally sound and sustainable.

    The merits of using economic instruments like industrial pollution

    taxes were recognised in the 1992 policy statement on pollution abatement

    of the ministry of environment and forests and the implementation of

    market-based instruments in India are in the pipeline.4 

    The government also issued the national conservation strategy and policy

    statement on environment and development in 1992 that recognised the

    role of non-government organisations (NGOs), industries and the public

    to preserve resources and protect the environment while ensuring developmental

    activities. Indeed, during the past 15 years, the lack of enforcement

    of environmental norms and the rapid rise in pollution levels has prompted

    public interest environmental litigation and the rise of judicial activism

    in India's environmental management.

    Coupled with the increase in public interest litigation, the role

    of the Indian community in pollution control has increased through public

    hearings on environmental impact assessment procedures for economic

    activities. Since 1997, development activities including industrial

    projects, thermal power plants, mining projects, river valley hydroelectric

    schemes and infrastructure projects (30 categories in all) have mandatory

    public hearings in order to assess the environmental impact completely

    before being granted clearance by the state. However, the SSIs were

    exempt from a public hearing under a draft notification issued 2001.

    The current trend of the active participation of Indian citizens in

    pollution control management will continue to grow. Moreover, this trend perfectly

    matches with the 1992 national environmental strategy and policy statement,

    which recognised the important role of the public and non-governmental

    organisations in protecting the environment while pursuing economic

    development.

    The increase in judicial activism thus has become a significant threat

    to polluting units in the country. While formal enforcement remains

    weak in India, the constitutional right of the polluted agents has become

    an important instrument of pollution control. Two polluting sectors

    have been under scrutiny of the judiciary in the past decade: the industrial

    and the transport sector, from which pollution loads have been increasing.

    Since judicial activism has been the most significant through the Supreme

    Court (SC) rulings, this paper considers some of the most significant

    SC case rulings impacting environmental management in the transport

    and industrial sectors in India.

    Environmental Property Rights

    Degradation of living conditions has prompted Indian society to seek

    remedy through civil action. A good environment is a constitutional

    right of the Indian citizen under the Right to Life (Article 21), and

    the protection of the environment is a fundamental duty of each citizen

    (Article 51A). These provisions have been used especially by the Supreme

    Court in dealing with environmental cases, and considering environmental,

    ecological, air, water pollution,as amounting to violation of Article 21.

    This interpretation of the fundamental right to life entitles citizens

    to invoke the writ jurisdiction of the Supreme Court and high courts.

    There has been a clear movement towards public interest litigation to

    reduce pollution in India, some of which have had far-reaching consequences.

    This seemingly pseudo-Coasian approach in India has brought industries

    and industrial estates to court in lieu of the negotiating table between

    polluters and victims of the Coase model, implemented with reasonable

    success in Indonesia [O'Connor 1995, World Bank 2000].

    Apart from the Indian Constitution, environmental legislation also

    has provisions for polluter prosecution. Under section 16 of the Environment

    Protection Act 1986 (EPA), a company is punishable for an offence. The

    'cognisance of offence' clause of the EPA (section 19), Air Act (amended

    1987) and Water Act (amended 1988) allows any citizen to prosecute a

    polluting firm, provided a notice of at least 60 days is given to the

    polluter. Citizens have a right to information on polluters from pollution

    control boards for the purpose of prosecution (section 43 of Air Act,

    amended 1987, and section 49 of Water Act, amended 1988). To grant compensation

    for environmental damages, the courts have used provisions under the

    Public Liability Insurance Act (1991) and Factories Act (1995).5 

    Several of the public litigation cases have resulted in polluting

    units been closed down or relocated away from residential areas, and

    more importantly, ushering in new regulations (in the road transport

    sector) during the last decade. Increasingly, the polluter pays principle

    has been evoked by the court, and damages to restore the environment

    imposed on polluting units. In a recent ruling in March 2002, the Supreme

    Court clarified:

    Pollution as a civil wrong… a tort committed against the community

    as a whole. A person, therefore, guilty of causing pollution has to

    pay damages (compensation) for restoration of the environment and ecology.

    He has also to pay damages to those who have suffered loss on account

    of the act of the offender. The powers of this Court under Article 32

    are not restricted and it can award damages in a PIL or a writ petition

    as has been held in a series of decisions. In addition to damages aforesaid,

    the person guilty of causing pollution can also be held liable to pay

    exemplary damages so that it may act as a deterrent for others not to

    cause pollution in any manner.

    (Ruling dated March 15, 2002, in Beas River Case of Mehta vs Kamal

    Nath WP182/1996, reproduced in Legal and Scientific Resources for

    Asia).

    The increase in environmental public interest litigation and judicial

    activism (prompted by individuals as well as by NGOs) during the past

    15 years began to be perceived as a significant threat by polluting

    units across the country. The establishment of the law of liability

    has created a deterrent effect on pollution by creating an incentive

    for polluters to limit the risk of environmental damages. Thus, while

    formal enforcement remains weak in India,the constitutional right of

    the victims of pollution has become an important instrument of pollution

    control.In particular, the civil action has helped to focus the regulator's

    attention on an important pollutian sector like road transport (which

    is a major source of urban air pollution) and an usher in new environmental

    regulations.

    Prior to 1990, India had no environmental standards for vehicles.

    The new rules for cleaner vehicles on city roads largely followed from

    Supreme Court rulings in public interest litigation to reduce urban

    air pollution. The original petition was filed in 1985 (M C Mehta vs

    Union of India WP 13029/1985), and a spurt of rulings followed in the

    1990s. Some of the most significant rulings of the Supreme Court in

    vehicular pollution cases during 1990 through 2001, resulted in mandatory

    measures to reduce pollution in city road transport. Table

    1 lists some of the major SC rulings on vehicular pollution.

     

    Table

    1: Major Supreme Court Rulings on Vehicular Pollution, 1990-2001


    Case

    (Year of Ruling)

    Court

    Ruling


    Seriousness

    of issues (1990)

    Rise

    in vehicles (petrol and diesel) main cause of pollution. Registration

    of defective vehicles to be suspended effective 1991.

    Need

    for strategic action (1991)

    Delhi

    Transport Corporation identified as one of the notorious polluters

    in the city (plying thousands of polluting buses). Campaign to increase

    pollution awareness among all automobile owners. Committee on vehicular

    pollution in Delhi to be constituted by 1991.

    Lead

    phase out of all

    Lead-free

    petrol to be sold in all outlets of the four cities of Delhi, Mumbai,

    vehicles

    (1994)

    Kolkata

    and Chennai, and catalytic converters for petrol-driven cars made

    available by April 1995. Order to supply low-lead petrol (maximum

    lead content of 0.15g/l) in the entire country by December 1996.

    Government

    vehicles (1996)

    All

    official government cars to be fitted with catalytic converters

    or a CNG kit by August 1996.

    Ban

    on old commercial/

    All

    commercial and transport vehicles more than 15 years old (totalling

    transport vehicles (1998) 15,511) not permitted to ply in the National

    Capital Region of Delhi after December 1998.

    Buses

    to use natural

    gas

    (2001)

    Commercial

    vehicles in Delhi should convert to single fuel mode of CNG, effective

    April 2001.

    Phasing

    out of diesel

    Diesel

    buses in Delhi be phased out at a rate of 800 diesel buses per buses

    (2002) month starting from May 1, 2002, till all the diesel buses

    are replaced. Fine of Rs 500 per bus per day imposed on diesel bus

    owners operating beyond January 31, 2002. Fine to increase to Rs,

    1,000/ day after 30 days of operation of the buses with effect from

    May 6, 2002. Director of the Delhi Transport to collect the fine

    and deposit at the SC by the 10th day of every


    Source:

    Compiled from legal cases listed in Legal and Scientific Resources

    for Asia.

     

    In 1990-91, pollution generated by vehicles and the need for action

    was recognised by the Supreme Court. During the mid-1990s, leaded petrol

    was phased out first in the five metro cities of Delhi, Mumbai, Kolkata,

    Chennai and Bangalore, and then in the rest of India. In 1999, the older

    commercial fleet was also phased out in Delhi, and in 2001, conversion

    to single fuel mode of natural compressed gas was ordered in the city.

    While the latter measures have been implemented in Delhi, which gained

    notoriety as being the most polluted Indian city in the early 1990s

    (and the fourth most polluted city in the world), these measures are

    bound to spread to other cities in the country.

    Thus in effect, environmental standards for vehicles were introduced

    in India in 1990, and subsequent notifications made them more stringent

    in 1992, 1996 and 2000. Euro-I norms were implemented in 2000 throughout

    the country for all categories of vehicles. Bharat Stage-II norms, comparable

    to Euro-II, for vehicles were implemented in a phased manner starting

    with the National Capital Region (including Delhi) in 2000, and extended

    to other cities like Mumbai, Kolkata and Chennai in 2001.

    Another noteworthy aspect of the Supreme Court rulings on vehicular

    pollution is that the health costs of vehicular exhaust have been explicitly

    recognised. In a recent ruling in May 2002 on vehicular pollution, the

    SC noted that the adverse health effect statistics, especially the sharp

    hike in respiratory diseases among children, indicate that the effect

    of 'continuing air pollution' is more "devastating than what was caused

    by the Bhopal gas tragedy". The ruling quoted research that has indicated

    that cancer potency of diesel vehicles is more than two times that of

    petrol vehicles in India. For example, the carcinogenic effect of particulate

    matter from one new diesel car is equivalent to 24 petrol cars and 84

    new CNG cars on the road (Parivesh, September 2001, p 34). The SC ruled

    that diesel buses in Delhi be phased out at a rate of 800 diesel buses

    per month starting from May 1, 2002, till all diesel buses are replaced.

    Enforcing Pollution Control

    As in other countries, the community in India has also served as the

    informal regulator given that monitoring (and hence probability of formal

    detection of pollution violation) is low. In particular, in India public

    interest environmental litigation has served as a proxy for formal implementation

    of pollution regulation during the past 15 years (beginning in mid-1980s),

    since enforcement of the CAC environmental measures has been poor. The

    industrial environmental legislation in India has focused on the installation

    of pollution abatement equipment in the industry (initial compliance)

    and effluent standards, not the flow of effluents over time. Thus it

    is possible for a firm to be compliant by installing abatement equipment,

    but not operating it! Also, since plant-specific standards are in terms

    of the concentration of effluent and not volume, concentration compliance

    can be achieved by diluting the pollutant discharge while pollution

    load increases!6 

    Second, only medium and large-scale industrial units are included

    in the regulation purview of the pollution control boards (PCBs). Small-scale

    industries (SSIs), which are significant polluters (but difficult to

    monitor) are excluded by the authorities.7  According to

    one estimate, SSIs in India (more than 3 million) contribute to 65 per

    cent of the total industrial pollution load, and to 40 per cent of industrial

    production (Down to Earth, July 31, 2001). Public interest litigation

    has also targeted the illegal location of SSIs in urban residential

    areas.

    Third, public reaction has come about since effective formal monitoring

    and enforcement by PCBs has been weak (the PCBs have the authority to

    cut off water and electricity or close down non-compliant plants). Yet

    the PCBs often tolerate non-complying units due to the work overload

    at the boards, lack of staff, budget, equipment and facilities.

    Not surprisingly, surrogate environmental enforcement through judicial

    activism became especially prevalent following public interest litigation.

    The high courts (in Delhi, Chennai, Mumbai) as well as the Supreme Court

    have made significant rulings. The filing of public interest environmental

    litigation began systematically in the mid-1980s, and a spurt of court

    rulings were observed in the 1990s. The cases covered effluent pollution

    from industries into air, water and land.

    Table  2 highlights 11 such Supreme Court

    rulings in urban industrial pollution cases. Therulings resulted from

    writ petitions filed by noted Supreme Court advocate, M C Mehta as well

    as NGOs. The Delhi land-use cases were from the original petition in

    1985 (Mehta vs Union of India WP4677/1985). The Bichhri industrial case

    ruling was in response to a writ petition filed by a non-government

    organisation ICELA (WP967/1989, plus other petitions WP94/1990, 824/1993

    and 76/1994). Similarly, the Tamil Nadu tanneries case was filed by

    an NGO, Vellore Citizens' Welfare Forum (WP914/1991). The Kolkata tanneries

    ruling in 1996 is part of a set of rulings against leather tanneries

    resulting from an original writ petition filed in 1985 (Mehta vs Union

    of India WP 3727/1985), under which tanneries in Kanpur were also closed

    down in the 1980s.

     

    Table

    2: Selected Supreme Court Rulings on Polluting Industry, 1992-2002


    Case

    (Ruling Year)

    Court

    Ruling

    Mechanical

    stone crushers in the union territory of Delhi to be closed, Delhi

    stone crushers (June 1992)

    Bichhri

    industrial pollution

    Sealing

    of chemical factories in Bichhri. ministry of environment and

    Forests asked to determine damage costs of toxic sludge in soil

    and water, and recover the cost from the industries to restore

    the environment. A fine of Rs 50,000 on the industry to pay petitioner

    ICELA, to encourage other voluntary bodies to bring in public

    interest litigation.

    Coastal

    Zone Case (April 1996)

    Pollution

    caused by industries in coastal regions (of Maharashtra and Goa)

    to be dealt with by respective high courts. Central government

    suggested to set up state coastal management authorities and also

    a national coastal management authority.

    Delhi

    hazardous industries (July 1996)

    168

    industries asked to relocate from Delhi to any other industrial

    estate in the NCR, and stop functioning in Delhi, effective November

    30, 1996. Employees in these industrial units to be compensated

    for the disruption.

    Tamil

    Nadu tanneries case (August 1996)

    Central

    government asked to constitute an authority to estimate the damage

    cost of pollution based on the precautionary principle and the

    polluter pays principle. Tanneries (about 700) not paying these

    damages are to be closed down. A fine of Rs 10,000 each on the

    tanneries to be paid by October 31, 1996. Fine and damage revenue

    to constitute Environment Protection Fund, and used for compensating

    people and rectifying the environment. Effluent treatment plants

    to be set up by November 30, 1996.

    Delhi

    illegal industries (October 1996)

    39,000

    illegal industrial units operating in residential areas of Delhi

    Badkhal

    lake and Surajkund (October 1996)

    No

    construction to be allowed within the green belt of Badkhal Lake

    and Surajkund, except a small area for recreational and tourism

    purposes.

    Delhi

    hazardous industries(December 1996)

    Industries

    could not relocate unless they protected the workers and paid

    according to compensation terms of Industrial Dispute Act (1947)

    the workers who refuse to relocate, plus one year’s wages. Industries

    closing down have to pay workers six years’ wages.

    Tanneries

    case: Kolkata (December 1996)

    Tanneries

    in eastern Kolkata ordered to close down and relocate to a new

    complex by September 1997. Pollution fine of Rs 10,000 imposed

    on each tannery (total about 550) to be paid by February 1997,

    for damage to the environment (under Environment Protection Fund).

    Workers unable to relocate t be paid six years’ wages as compensation.

    Delhi

    brick kilns (August 2000)

    Brick

    kilns in the agricultural land to change over to fly ash technology

    Beas

    River (March 2002)

    Damage

    cost based on polluter-pays principle of Rs 10 lakh imposed


    Source:

    Compiled from legal cases listed in Legal and Scientific Resources

    for Asia, and CSE (1999).

     

    The most noteworthy feature of the SC rulings on industrial pollution

    is that the 'polluter pays' principle has been adopted formally and

    the industries have been given the message that the adverseenvironmental

    costs of industrial activities have to be internalised. During the Tamil

    Nadu tannery case in 1996, the precautionary principle and the polluter-pays

    principle were accepted as the law of the land, and stated as essential

    features of sustainable development. Articles 21, 47, 48A and 51A(g)

    of the Constitution of India have also been quoted by the SC as giving

    a clear mandate to the state to protect and improve the environment

    and safeguard the forests and wildlife of the country.

    Moreover, through the rulings, the SC has induced the pollution control

    authority to undertake action like estimating damage cost imposed on

    the economy by polluting industries and recovering it (notably the Bichhri

    case in 1996). Much like inducing vehicular environmental norms in India,

    the SC asked the government to establish coastal management authorities

    (both at the centre and state levels), to develop policies to protect

    India's coastal ecosystem.

    The natural question that follows from the observation of a significant

    number of environmental court cases during the 1990s (and a few post-2000),

    is how important a role public interest litigation has really played

    in the pollution management regime in India.

    First, the instances of court rulings in both vehicular pollution

    and industrial pollution discussed above indicates that important legislation

    was initiated in India, especially in terms of vehicular emission standards

    that did not exist earlier. Thus the community (as represented by individuals

    or NGOs) has helped in bringing about institutional change in terms

    of sectors covered by environmental legislation, besides being informal

    regulators.

    Second, while in India Coase-style negotiations have not taken place,

    as in countries like Indonesia [Pargal and Wheeler 1995], environmental

    cases have brought polluters to court to pay for the damages/social

    costs imposed on society. Indeed, most of the public interest litigations

    have typically been those involving a large number (of polluters and

    pollutees). The pollution cases involved a large number of dispersed

    polluters (SSIs in Delhi, or leather tanneries in Kolkata and Kanpur,

    or mobile polluters like vehicles) as well as large number of victims

    (the urban population), where Coasian negotiations would not have been

    feasible due to high transaction costs.

    Third, the equity issue, which poses a major challenge in any pollution

    control strategy, has been dealt with quite clearly in the SC rulings.

    While recognising the hardship of industrial units going out of business

    an SC ruling against polluting units noted that "it is a price that

    has to be paid for protecting and safeguarding the right of the people

    living in a healthy environment with minimal disturbance of ecological

    balance and without avoidable hazard to them, their cattle, homes and

    agriculture and undue affectation of air water and environment."8 

    This reflects in essence the objective of environmental management programmes,

    that of allocating resources for production and consumption according

    to their true social costs. The "purpose is to achieve important targets

    for environmental quality… Where their adverse redistributional impact

    can be easily addressed, it is surely important to do so, but environmental

    measures should not, in general, be side-tracked on redistributional

    grounds" (emphasis added, Oates 1994:129).

    Yet, the scope of the judicial approach to achieve optimal pollution

    equilibrium with property rights defined in favour of the victims is

    limited. In reality even the orders of the Supreme Court have sometimes

    not been implemented! Indeed, a pure judicial approach to pollution

    abatement can never be economically efficient or effective,9

    since judicial procedures can always be used in stalling remedial action.

    For example, following the 1996 Supreme Court closure notice, thousands

    of unregistered illegal industrial units in Delhi (typically small)

    across residential areas should have closed down by 1997.10 

    Yet, even three years after the court order was passed the affected

    industries succeeded in stalling the process by court appeal. Some industries

    (including Birla Textile Mills and Swantantra Bharat Mills) appealed

    that the order violated their fundamental rights based on existing laws,

    like the Delhi Development Act, the Industrial Disputes Act and the

    Minimum Wages Act, on the issue of compensation to displaced industry

    and workers. The industry's writ petition also questioned the authority

    of the Supreme Court to declare surrendered land as green areas (The

    Economic Times, September 12, 1999, p 1). This anecdote highlights

    the inevitable drawback of a judiciary regime of pollution control in

    an economy: namely, that polluting firms can routinely obtain stay orders

    against closure/shifting decisions of the judiciary and stall action

    for years.

    Judicial activism, however, has accomplished something else. It has

    given a clear market signal that the polluting activities of industry

    will not be tolerated, and that the damage costs are far too large to

    be ignored by the community. The endorsement of the polluter-pays principle

    by the court has made the polluter liable for environmental damage from

    pollution. In effect, public interest litigation has acted as what the

    literature terms is an indirect market-based instrument [Eskeland and

    Jimenez 1992] and can be classified as a suasive instrument or

    moral suasion instrument [O'Connor 1995, Sawhney 1997]. Typically suasive

    instruments include environmental education or information that can

    alter the behavioural pattern of polluters, including public disclosure

    of information on polluting activities of industries which creates market

    pressure on manufacturers to adopt environmentally friendly production

    processes or produce greener products. The court rulings by endorsing

    the polluter pays principle have sent a signal to polluters that they

    now have to pay up for the environmental and health damages they impose

    on society.

    As an indirect market-based instrument, judicial activism imparts

    the signal that dumping of wastes into the ecosystem is no longer costless

    for the polluters. In fact, even when implementation of judicial orders

    is stalled in the appeals court by polluters, it entails costs (in terms

    of time, lost income and court fees) on the polluters. Besides monetary

    costs, bigger corporations like to minimise the risk of an environmental

    litigation, which can damage their reputation in the marketplace. To

    ensure positive publicity, increase in judicial activism induces larger

    companies to undertake pollution control measures.

    The fact that public interest litigation and environmental judicial

    activism have had distinct market implication is borne out by the growth

    of the new environment market in India (including market pollution control

    equipment as well as environmental consulting services). Indeed, the

    US department of commerce estimated the current size of the environment

    market in India to be $4 billion, growing at an annual rate of 15 per

    cent, (while Indo-German Chamber of Commerce estimated the market to

    be almost double, at $8 billion). Among the best prospects for foreign

    investment in India in 2002, the US department of commerce ranked the

    sector of pollution control equipment at sixth place (out of 14 investment

    sectors), and environmental judicial activism was considered an important

    factor aiding the growth of the environment market in India. Thus while

    direct market-based instruments for pollution control remain in thepipeline,

    public interest environmental litigation in the past decade has succeeded

    in transmitting indirect market signals to the industry to internalise

    environmental costs and evolve a nascent environment market.

    Address for correspondence:

    aparnas@iimb.ernet.in

    Notes

     1 How much compensation any party pays depends on

    the bargaining power of the two.

     2  The paper however reported that in the sample of 250 Indian plants,

    102 plants indicated that abatement had been undertaken in response

    to complaints from neighboring communities, and 51 plants had done so

    in response to NGO pressure [Pargal et al 1997: 6].

     3 A polluter has an incentive to abide by environmental standards,

    only if the marginal cost of offence is greater than the marginal benefit

    from violation. The marginal cost of offence is determined by the product

    of the probability of detection times the probability of prosecution

    (given detection) times probability of conviction (given prosecution)

    times the fine [Bowers 1997: 66]. As long as the probability of detection

    and conviction remain low in India, the command and control approach

    to pollution control will fail to induce potential polluters to abate.

     4 It should be noted however, that given political and technological

    constraints sometimes CAC measures are better suited than economic instruments

    for certain pollution problems [Hahn and Stavins 1992: 465]. For example,

    when pollution is highly localised, with threshold/non-linear damage

    functions, source-specific standards may be more appropriate. Economic

    instruments are particularly desirable when pollution is uniformly mixed

    over large geographical areas.

     5  The latter has been used to grant compensation to displaced workers

    during closure of polluting industrial units.Another legislation, the

    National Environmental Tribunal Act (1995), introduced strict liability

    and is meant for large-scale accidents and damages involving hazardous

    wastes and chemicals.

     6 Ambient and source standards are set independently, unrelated in

    terms of the volume of pollution generation, thus it is possible for

    environmental quality to deteriorate despite a high degree of compliance

    among individual polluters. The fines and penalties for non-compliance

    are low in India, and the penalty structure is faulty since the same

    penalty is charged for violation of environmental standards irrespective

    of the size of violation (whether small or large) or the pattern of

    offence (occasional or repeated violations).

     7 The SSI sector comprises a vast number of very small enterprises,

    many of which are in the informal sector and may not even be registered.

    For many SSIs even basic data on value added, turnover, employment,

    and capital stock, is not available, let alone abatement expenditure.

    Since these units operate on small profit margins, the cost of non-compliance

    is lower than the cost of compliance (given the regulatory and monitoring

    structure, as well as corruption). There are fiscal incentives available

    for the SSIs which are expected to help these units set up common effluent

    treatment plants and thereby reduce pollution from this sector.

     8 Cited in Delhi Land use: Badkhal lake and Surajkund (1996) from a

    Supreme Court ruling of Rural Litigation and Entitlement Kendra vs State

    of UP (1986, SCC 517 and 1987 SCR614) that can be said to be the harbinger

    of the new trend. In the latter case, the SC ordered the limestone quarries

    in the Mussourie hills to be closed since they were a hazard to the

    environment.

     9 Advocate M C Mehta, the main mover of the Supreme Court rulings admits

    that judicial activism is not the answer, rather it is the only tool

    for citizens when formal enforcement fails. Interview published in Frontline,

    Volume 17, December 9-22, 2001.

    10  The closure orders were to be effective January 1997 for 39,000

    illegal industrial units, and for 513 hazardous units around the city

    if they failed to relocate within the allotted time. Down to Earth

    May 15, 1997, p 28.

    References

    Bowers, John (1997): Sustainability and Environmental

    Economics: An Alternative Text, Addison Wesley Longman Publishers.


    Coase, Ronald (1960): 'The Problem of Social Cost', The Journal of

    Law and Economics, October, reprinted in Dorfman and Dorfman (ed)

    Economics of the Environment (1995): 109-38.

    Eskeland, Gunnar S and Emmanuel Jimenez (1992): 'Policy Instruments

    for Pollution Control in Developing Countries', The World Bank Observer,

    Volume 7, Number 2: 145-69.

    Hahn, Robert W and Robert N Stavins (1992): 'Economic Incentives for

    Environmental Protection: Integrating Theory and Practice', American

    Economic Review, 82(2), May: 464-68.

    Hettige, Huq, Pargal, Wheeler (1996): Determinants of Pollution Abatement

    in Developing Countries, World Bank.

    Pargal, S M Mani, and M Huq (1997): 'Inspections and Emissions in India:

    Puzzling Survey Evidence', Policy Research Division Working Paper 1810,

    World Bank.

    Pargal, S and D Wheeler (1995): 'Informal Regulation of Industrial Pollution

    in Developing Countries: Evidence from Indonesia', Policy Research Division

    Working Paper 1416, World Bank.

    Paulus, Stephan (1995): Market Based Instruments in Environmental

    Policy in Developing Countries, Framework for Policy Planning and

    Institutional Development in Environment, GATE, Germany.

    Sawhney, Aparna (1997): 'A Review of Market Based Instruments for Pollution

    Control: Implications for India', NIPFP working paper No 2, and background

    paper for ministry of environment and forests, 'Taskforce Report to

    Evaluate Market Based Instruments for Industrial Pollution Abatement'.

    World Bank (2000): Greening Industry: New Roles for Communities,

    Markets, and Governments, A World Bank Policy Research Report, Oxford

    University Press.

    Source: http://www.epw.org.in

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