PENALTY, DAMAGE ASSESSMENT AND ENVIRONMENTAL COMPENSATION-THE INDIAN CONTEXT
(Transcript of Presentation)
By Dr. Yashpal Singh
Chairman, The Wealthy Waste School India
Former Director Environment, Govt. of U.P.
It is an honour to be here with you. Madam has been kind to present me as an Expert, which I am not. These are areas where I have been working for some time. I do not know if my presentation matches the tenor of the two wonderful presentations already made in this forum today. It is different. I would want to talk on regulation in this session on ‘Sustainability’.
I feel that Technology is very important but compliance and governance are a little more important. All of us know when we see our rivers polluted as to what is lacking. It is not that we do not have technology to achieve standards but we lack the will to achieve these standards. We have people here today in the audience, we have friends from the industry and we have got students also. The purpose today is to sensitise you on the environmental compensation and penalty regime so that you could understand it better and when it comes to you, you can at least analyse. I will present to you both your rights and responsibilities. India has a very robust regulatory mechanism but as I told you, we lack governance. The developer’s response is very important. What happens is that when you get an environmental clearance with 100 conditions or when you get a consent of the Pollution Control Board, you treat it as a piece of paper and put it in the drawer and you just leave it there and next year when the ‘Consent’ is about to expire, you call your consultant and tell him, “Look here this is my consent which is going to expire, now get it renewed”. So, the consultant starts work on it. This is what is bad. What is required is that the moment you get your ‘Consent’ or ‘Environmental Clearance’, you divide the conditions into groups and for example you have 05 managers or 10 managers apart from your environmental managers, give each Manager a set of conditions which he has to take care as a part of his duty for the coming year.
Earlier when I joined the Pollution Control Board, somewhere round 1979, the Pollution Control Costs were an externality. Whenever we wanted to appraise an industrial project for financing, the cost benefit analysis was done basically on the capital cost and operating cost of plant building and machinery. Expenditures on Environment and Pollution Control machinery was nowhere included. Dr. Kamyotra also joined the Board by that time. I think in those initial days when we used to tell people that, I cannot grant you consent because you do not have an effluent treatment plant, they would say, Sir, give us some time. They did not know of their responsibility that they have to provide for an Effluent treatment plant. So, then we introduced, what you call, the concept of NOC. This was then, an administrative arrangement. The NOC served to tell you what you have to do for the environment before you commence production and then we linked these NOCs to the licensing and financing mechanism. We told the financing organisation like PICUP, in our state, that whenever you are appraising a project or whenever you are granting a license or a loan, kindly examine if they have a NOC. It is only in 1988, through an amendment in the Water Act 1974, that this NOC was finalized into what you have today, the consent to establish and the consent to operate.
Regulation was important but apart from the regulatory mechanism there were many other voluntary instruments which were being used world over for ensuring better environmental compliance. One was this scheme in Indonesia called ‘PROPER’. They did not have a very huge administrative machinery so they asked all inter departmental officers to come together and went to the industry and based on performance they colour coded the industry into green/orange/red and black. There was no impact. Then suddenly one officer said, look here we are going to make this list public. The moment they said that they are going to make this list public there was a 50% added compliance. This was one instrument. Then way back in the 90’s in our state of Uttar Pradesh, we performed an Environmental Performance rating for the distillery sector. We involved almost 40 distilleries and presented the rating to the industry. Evaluating bench marks, not the standards set by the pollution control board but the best that the good achievers were doing, we found that if the bad achievers try to achieve the level of the good achievers, the sector could improve by about 100 crores of additional wealth generated through resource use optimisation. We told this to the industry that they are wasting wealth and that even if you go according to what one of your brethren has done, what some of your other industries have done, you will create wealth. We told them to just try to emulate the better performers in terms of resource management, water consumption, molasses consumption, power consumption and waste generation. I was very fortunate, the World Bank had appreciated the study, they made a poster out of that study and invited me to Paris. The Conference, at the OECD, was attended by almost 30 countries. I made a presentation. It is on the OECD website. After 05 years of this study, I again took it up in order to assess the gains from this study. Most of the industries had improved their environmental performance and many brought down their resource, power and water consumption per unit of product. This was good. We also did one study with the CII where we rated these industries into Red, Orange and Green based on environmental performance. This aided in compliance.
So now coming to the damage and compensation part. Legislation i.e. the Air Act, the Water Act and the E.P. Acts provide that if you are damaging the environment, you are liable to compensate for the damage. The next point that I am wanting to tell you is very important. The Supreme Court says that the measure of compensation must be correlated to the magnitude and capacity of the enterprise to pay. It should be a deterrent. The enterprise is strictly and absolutely liable to compensate all those who are affected.
The National Green Tribunal in case no. 593 of 2017 has said that the CPCB may take penal action for failure, if any against those accountable for setting up and maintaining STP’s, CETP’s and E.T.P.’s. CPCB may also assess and recover compensation for damage to the environment Now, this judgement is very important. It introduces two concepts; one is penalty for noncompliance. I do not have an effluent treatment plant or am not operating or maintaining one properly, that will invite penalty. The second component of this order is that the CPCB may also assess and recover compensation for damage to the environment. Unfortunately, today this line is very thin. CPCB and all other regulators are imposing compensation even for the first component. If I am going on a scooter and I hit a bicycle and I damage the wheel then the compensation is replacement of wheel. If I damage both wheels then the compensation would include replacing both wheels. Now crores of rupees are being imposed as compensation without any assessment of damage. We have to be very careful because there is no limit to which the Boards or the NGT can go on imposing penalty. Absolutely no limit.
The Boards are imposing penalty. My perception is that the CPCB and the State Boards are not authorised to impose penalty. Why? Fines are provided in the Water and Air Acts and the E.P.Act but it says that the cognizance of an offence has to be taken by a court of law so the Central and State Pollution Control Boards or the Government where prescribed can go to the court and file a complaint that Pollution is being caused and that we want you to impose a fine of 5 crores of rupees. The court will then impose the Penalty. An officer of the Pollution Control Board, without issuing you a proper notice or without following the prescribed procedures just cannot say that I went to your industry on such and such date, your BOD was 35 therefore a penalty of 5 crores is being imposed. You cannot do that. This is very important for you. When a notice for compensation comes to you kindly ensure if these things have been followed or not.
There have been recent changes. They have come up with a Jan Vishwas Act of 2023. I hope you are aware of it. This Jan Vishwas Act has amended the Air Act in terms of Penalty and compensation. Here also, they say that penalty has to be levied by an adjudicating officer to be created at the Government Level. So, Board will not impose the Penalty, the adjudicating officer will impose the penalty. Unfortunately Act also speaks of Penalty. It does not speak of compensation. Compensation is an additionality under the E.P.Act. Powers U/s 5 of EP Act to CPCB are only for violation of standards and not for process interventions. S.O. mentions violations of the notified general emission and effluent standards under the E.P. Rules 1986 and other standards. Now these provisions are also being utilised for imposition of penalties which should not be. There is of course a need for a show cause notice before such directions are issued. I have already tried to highlight that Penal Action is for failure in setting up and maintaining E.T.P.’s and the second type of compensation is to assess damage and recover compensation. The NGT Act makes a specific provision for penalty. Under Section 26 it says that if you are not complying with provisions then you are liable to be penalised in financial terms. NGT can also impose compensation under section 15 and 17. It says that compensation is for damage and penalty is for noncompliance. This has to be very clear to us because often we get an order for environmental compensation for something that falls in the category of penalty. Then there is one very important thing that has to be noted and that is if pollution is through multiple sources each polluter should not be awarded similar penalty irrespective of their pollution loads. The NGT Act says that if the pollution is being caused by multiple sources, then the damage has to be assessed and apportioned and the compensation should be concomitant to the damage I am causing. This is not being done. The Hindon is being polluted. There are 300 odd industries. Everyone is imposed a similar compensation of 5 crores of Rupees. For what? Where is this money going and whose money. It is not my money. I am an industry, the penalty which I pay is not my money. It is public money, the shareholders money or the consumers money. So, anyway, this has to be noted. Whenever you get a notice for penalty or compensation you just try to analyse whether it is fit or not. Otherwise, there are appeals, there are appellate authorities tell them that you are not responsible for all of the pollution but for only that pollution which can be attributed to your pollution loads.
Environmental compensation has also been covered under the standard operating procedures for violation committees, if you are aware of it. Environmental clearance is a prior environmental clearance taken prior to setting up notified development activities. Now what has happened is that the Ministry has come up with a notification which says that if you have not taken an environmental clearance, we will regularise it post facto. The violation notification has also both things. It has penalty and it has compensation. Penalty is calculated as a percentage of cost incurred and total turnover. For compensation, the violation committee says that you have to get an E.I.A. done, prepare a damage assessment report, prepare a remediation plan with costs, get the plan approved by the SEAC and submit a bank guarantee equivalent to the remediation plan before grant of the environmental clearance and do the remediation in the prescribed time frame. This is fair enough.
Now the SEIAA’s, the State Environmental Impact Assessment Authorities have also started imposing penalty and compensation. Why. No one has given them any authority. The Chairman, SEIAA has powers under section 5 of the E.P. Act 1986 but that authority is just to review the compliance of the E.C. granted by it and then either to modify or cancel that E.C. They cannot impose penalty. They are imposing penalties and compensation under the violation clause although they are just recommending authorities for penalties and compensation.
The Central Pollution Control Board in compliance to the directions of the NGT has come up with guidelines for calculating penalty and compensation. They have identified 06 scenarios for calculating penalty and compensation. The first 03 scenarios relate to violation of consent conditions, not complying with directions issued and intentional avoidance of data submission. The 04th to 06th scenarios are accidental discharges resulting in damage, intentional discharges resulting in damage and injection of untreated/partially treated effluents into ground waters. For the first 03 scenarios the CPCB has evolved a formula where EC=PIxNxRxSxLF. PI is the pollution index based on the category of industry (Red=80, Orange=60 and Green= 30), N is the number of days of default, R is an arbitrary rate, S is the size and LF a location factor. I do not agree with this. PI has been taken as the average of the Pollution Index for that category. Why are you calculating penalty at a PI for 80 for an industry which may have an actual PI of 90 in the CPCB classification or why are you calculating a PI of 60 for an orange category when 60 is a figure allocated for Red Category in the CPCB Classification. To my opinion the PI for calculating Penalty should be the same as the PI attributed to the Industry in the CPCB classification. Then, why are you charging me on the potential to pollute and not on my actual pollution load as per the effluent analysis. You should charge me according to what I am discharging. If I am discharging a BOD of 500 and Sir is discharging a BOD of 6000 and both are distilleries, why the same rate. He is damaging more. They are also using an arbitrary factor of 500. Who gave you the idea of 500. Why not 750, why not 1000. When I joined the Pollution Control Board in 1979 my first Member Secretary told me that if a child does not cry the mother does not give milk. He told me the first day that whenever you want something or have something to say come to me. Do not keep sitting. This is what I would want you to do also. Speak up to injustice. Go into appeals if you are aggrieved. As per these CPCB guidelines the minimum compensation is 5000 rupees per day with a provision to be enhanced by 2 times on first repetition, 4 times for second and 08 time on further repetitions. So, be compliant, careful and cautious and file appeals if aggrieved.
For the balance 03 scenarios as observed by the CBCB in its guidelines and which relate to compensation to damage the CCPB has suggested that they will have to evolve fresh guidelines and involve external agencies. Unfortunately, all assessments of Penalty and compensation are being done against the formula evolved by the CPCB.
In 2017, the MoEF and CC has come up with penalty provisions for violation cases in relation to the E.I.A. notification of 2006 which introduces a mechanism for assessing damage and drawing up remediation plans.
The CPCB has now also come up with a good set of guidelines for damage assessment. Environment damage cost has been stated to include cost of assessments, cost of restoration and compensation for direct and indirect damages caused to human, properly, flora, fauna including ecosystem functions.
Afte having assessed damage we have to identify the best achievable remediation and restoration methods and the costs based on this and get the plans approved by respective Pollution Control Boards or the Pollution Control Committees. The guidelines have prescribed models for assessment of Air Pollution impacts, methods for estimating costs due to mortality and morbidity, estimating cost of life and health through value of statistical life and disability adjusted life year estimation. The guidelines also suggest the use of direct cost transfers methods for impacts on biodiversity, crops and property. Here, the results from a reference site are transferred to the site under assessment and values are adjusted considering exchange rates and inflation. For example, the damage cost due to effect of NOx on Flora has been estimated as U.S. dollars 28.67 per tonne in 2011 the same can be calculated for India in 2022 based on exchange rate and inflation rates.
In terms of surface waters there may be conservative substances which do not degrade in water or there may be non-conservative substances which decay in water. The guidelines also provide for methods for quantification of discharge of conservative and non-conservative substances in river and for estimating toxic pollutants.
The CPCB guidelines provide with methodologies to estimate cost to human health damage, costs to damage to fisheries, for example if the people are not able to fish in a river stretch which was earlier giving them 10 lakhs of rupees per month then those 10 lakh rupees times the number of months the fishing could not be done could be regarded as damage. The guidelines also provide with methods to assess damage to recreational function, damage to environmental property and damage to ground water. In the absence of soil quality regulations and standards quantification of soil contamination is not provided in the guidelines.
Thank you for this opportunity and your patience.