Environmental Technologies Industries
||Environmental Technologies Industries
|India Environmental Export Market Plan|
|Chapter 2 - Environmental Technologies Market Overview|
This chapter presents the definition of the environmental market, including market segments, market size estimates, key market drivers, and trends that affect these drivers, used for purposes of this study.
The environmental industry is defined as the overall revenue generation associated with environmental assessment, compliance with environmental regulations, pollution control, management of hazardous chemicals and wastes, environmental monitoring and analysis activities, and overall environmental performance improvements.
The market estimates presented in this report represent market potential and market size. Market potential is the total size of the capital investment required to meet the total demand in the identified segment, while market size is the potential revenues that can be generated through sales to the public and private sectors in identified segments.
Drivers and Trends
Environmental Legislation and Enforcement
Environmental legislation and enforcement principally drive the environmental industry all over the world. During the past three decades, India has developed an elaborate environmental policy framework and enforcement infrastructure. India’s legislative framework and the continually improved level of enforcement by the regulatory agencies in recent years are the main drivers of the demand for environmental goods and services.
At a policy level, India’s Ministry of Environment and Forests (MOEF) has focused on several specific measures to combat pollution. In its Policy Statement on Abatement of Pollution, the Indian government listed four priorities: (1) Focus on heavily polluted areas and river stretches; (2) integrate environmental concerns into the economic development process and promotion of pollution prevention at the source; (3) recognize the “polluter pays” principle; and (4) develop the best available technical solutions. Key initiatives related to the growth of the market are highlighted below:
- The Central Pollution Control Board (CPCB) identified 17 categories of highly polluting industry sectors for priority action.
- An exercise was initiated to identify the locations of maximum industrial concentration in the country and to characterize the environmental quality at these locations. These locations, which are all over the country, have been labeled problem areas. They represent potential locations for marketing environmental equipment and services. Table 2.1 lists these problem areas.
Table 2.1 - Industrial Pollution Problem Areas in India
Source: Central Pollution Control Board.
|Location of Industry Cluster/Problem Area||State/Union Territories|
|Durgapur ||West Bengal|
|Howrah ||West Bengal|
|Kala-Amb ||Himachal Pradesh|
|Manali ||Tamil Nadu|
|Najafgarh Drain Basin ||Delhi|
|North Arcot||Tamil Nadu|
|Parwanoo ||Himachal Pradesh|
|Patancheru-Bollaram ||Andhra Pradesh|
|Visakhapatnam ||Andhra Pradesh|
To tackle pollution problems associated with the small-scale sector, common effluent treatment plant programs were promoted at concentrated small-scale industry locations. A total of 86 common effluent treatment plan programs were identified, involving a total project cost of $54 million. About 20 common effluent treatment plants were operational by the end of 1998.
The commissioning of common hazardous waste treatment and storage facilities, on the other hand, has been limited to identification of suitable sites. For example, according to the MOEF, only two scientifically designed and engineered common landfills were operational in the state of Gujarat in 1998. The MOEF, however, has taken the following steps in tackling pollution problems:
- It declared 19 principal river stretches as grossly polluted that are now covered under the National River Action Plan (NRAP) - a comprehensive river pollution abatement program in India.
- It launched programs to promote awareness of pollution prevention and waste minimization. The introduction of mandatory submission of Environmental Statements by polluting industries under the Environment Protection Act of 1986 was a landmark regulatory initiative that pushed industry toward proactive environmental management approaches.
- It made environmental clearances necessary for new projects and expansion of existing projects in 29 industries. In 1996, the practice of mandatory public hearings as part of the process of granting environmental clearances was adopted.
Public and Judicial Influences
Improved public awareness and judicial interventions have played an important role in stimulating all sectors of India’s environmental technologies market. The fact that India has more than 2,000 recognized environmental non-governmental organizations (NGOs) and advocacy groups today clearly indicates the growth of environmental awareness among the general public. This growing awareness about the ill effects of environmental pollution has motivated the public to demand environmentally responsible behavior from industry and has increased expectations about the accountability of enforcement bodies. Another discernible trend is that the public will file legal suits against industry and government to force effective enforcement of the law.
Those trends have produced numerous judicial interventions in the past three to four years. For example, the courts have ordered the closure or shifting of a large number of water-polluting facilities that have inadequate or no wastewater treatment systems. In most cases, the courts have based their actions on the fundamental rights of citizens as set forth in Article 21 of the Indian Constitution: the right to drink potable water and breathe fresh air. It is interesting that 1,500 out of 10,000 firms in New Delhi that were issued notices of non-compliance have been asked either to close down or relocate. Nearly 60 tanneries in Tamil Nadu, more than 150 dye and dye intermediate units in Gujarat, and 100 iron foundries around the Taj Mahal (India’s most famous monument) were issued directions for closure, shifting, process modifications, or fuel change.
The emergence of a strong middle class with a greater level of environmental awareness, along with judicial interventions is expected to continue to produce pressure on government and industry for environmental improvements and demonstration of better results.
Since the onset of economic liberalization in 1991, Indian industry has been forced to learn the art of managing transition. It has sought and adopted innovative and proven management solutions to address environmental problems. Industrial firms that have been successful in accomplishing the latter have touted their success as part of their marketing strategy. In a globalized market where customers are becoming increasingly environmentally conscious, these firms have a decided advantage over the competition.
The receptivity of Indian industry to ISO 14001 (the environmental management systems standard of the International Standards Organization) is an indication of this gradual change in attitudes. By August 1999, about 175 industrial units reported that they were ISO 14001 certified. “Total regulatory compliance” is a key prerequisite for obtaining ISO 14001 certification, which also pushes industrial units to install appropriate types of end-of-the-pipe solutions. Growing acceptance of ISO 14001 also is likely to generate increased demand for energy/environmentally efficient process control equipment, especially for pollution prevention/waste minimization in potentially polluting industries.
Indian economic reforms have resulted in significant increases in the level of foreign direct investment in the country, both in the manufacturing and service sectors. Foreign direct investment increased from $0.13 billion in 1991 to $3.56 billion in 1997-1998. Foreign direct investment declined to $2.4 billion in 1998-1999 because of a slowing of the world economy. The level of foreign direct investment has consistently grown in the environmentally sensitive manufacturing sector, which has resulted in increased demand for environmental technologies, products, and services. India’s new government has made a commitment to raise the level of foreign direct investment to $10 billion per year, which should produce even greater demand for environmental technologies, products, and services.
Like other developing economies, India needs massive capital to build its environmental infrastructure, particularly in the municipal sector (water supply and treatment, sewerage collection and treatment, and solid waste management). According to estimates of the Expert Group on Commercialization of Infrastructure Projects, 1996, the total requirement for urban infrastructure (including power, roads, water supply, and sanitation) covering backlogged and new investments over the next 10 years is $65 billion. The required additional investment for water supply, sewerage, and solid waste management for urban services for the period 1991 to 2000, as estimated by the National Institute of Urban Affairs, is presented in Table 2.2.
Table 2.2 - Required Investment for Urban Infrastructure Services (at 1995 prices, billions)
1. The low estimates refer to lower per capita investment norms and low urban population projections, while high estimates refer to high per capita investment norms and high urban population projections.
Source: National Institute of Urban Affairs.
Several new initiatives have been started in India to augment resources for urban infrastructure. The following highlights some of these initiatives, which are expected to help in the rapid development of municipal services related to the urban infrastructure market (water and wastewater treatment and solid waste management):
- The central government is providing more autonomy to municipal and local governments through the Constitution (74th Amendment of 1992). Private sector participation in financing and operating core urban infrastructure is being actively encouraged. Also, India’s new government is expected to initiate fiscal reforms to increase the flow of finances to urban infrastructure.
- Several state governments, particularly Tamil Nadu and Maharastra, are in the process of establishing municipal development funds for investment in urban infrastructure.
- Several municipal corporations are raising capital through bond issues to meet urban infrastructure financing needs. Infrastructure Leasing and Financial Services recently raised through the bond market $250 million for the Ahmedabad Municipal Corporation and $425 million for a Tirupur industrial area wastewater management project. The Jalgaon, Nasik, Aurangabad, and Solapur municipalities are reported to have firmed up plans to access about $100 million through municipal bonds. Also, most of these municipalities are receiving credit ratings as a prelude to issuing municipal bonds. This increased access to capital markets by municipalities is likely to produce greater flows of funds to urban environmental infrastructure projects.
- Increasingly, infrastructure financing institutions are developing urban infrastructure projects on the principles of commercialization, public-private partnerships, and full cost-recovery pricing.
Increasing environmental consciousness around the world is causing Indian industry to make adjustments to meet international standards. India’s major export markets are demanding that it comply with international environmental guidelines. Some of the industries affected by environmental legislation and customer requirements include textiles and clothing, leather manufacturers, packaging materials, and agricultural products. Globalization is forcing many Indian companies that desire to become international players to adopt internationally accepted environmental technologies and management practices. These trends favor and encourage expenditures in the environmental sector.
Estimated Market Size and Emerging Trends
In India, the environmental industry has its roots in public health engineering. The CPCB and the State Pollution Control Board (SPCB) were both initiated in 1974 under the Water Prevention and Control of Pollution Act, which primarily focused on public health concerns. The environmental industry received formal recognition, however, in 1985 when the MOEF was constituted at the federal level in response to the Bhopal gas leak disaster of 1984.
Until the early 1990s, there was minimal enforcement of environmental laws and low levels of environmental awareness. The advent of economic liberalization in 1991, however, sparked increasing judicial interventions and adoption of proactive environmental management practices by industry. Subsequently, the environmental industry grew at an average annual rate of 15 to 20 percent per year until 1995-1996. The industry experienced a slowdown in demand caused by general industrial slackness during Indian fiscal years 1996-1997 and 1997-1998.
Figure 2.1 - Indian Environmental Market by Sector, 1999
Source: EQMS India PVT., Ltd.
For 1997-1998, the size of the Indian environmental technologies market was estimated at $1.49 billion, with an average annual growth rate of 10 percent (data to estimate the market size for 1998-1999 are not yet available). It is believed that average annual growth for the environmental industry declined to less than 10 percent for 1998-1999.
Table 2.3 - Estimated Growth Potential for Select Market Segments
Note: Includes the potential for 23 metro cities (population more than 1 million). Information is based on performance of Indian environmental firms, that is, sales revenue generation based on samples or extrapolation from market data; consultations with environmental technology and services suppliers, industry associations, government organization, economic research institutions, Indian financial and international lending agencies, and trade promotion organizations; review of published/unpublished reports, especially of U.S. organizations; and experts’ analyses.
|Business Segment||Short-Term Potential||Long-Term Potential|
|Water and Wastewater Treatment||Medium1||High1|
|Air Pollution ||High||High|
|Municipal Solid Waste||Medium||Medium|
1. Growth rates of less than 10 percent are low, between 10 and 20 percent are medium, and higher than 20 percent are high.
Source: EQMS India Pvt., Ltd.
The economic recovery trends of Indian fiscal year 1999-2000 predict an average annual growth rate of 15 percent over the next three to four years. If true, this prediction means promising investment opportunities for domestic and foreign companies. Table 2.3 highlights each market segment’s estimated growth in both short and long-term potential for foreign companies, while Figure 2.1 highlights each market segment’s estimated size.
As mentioned previously, the deceleration in demand in the environmental sector over the past three years is due predominantly to a slowdown in economic growth, including industrial production. However, this slowdown should be viewed as short-term market behavior given the following observations:
- Although subdued, demand in the environmental sector over the past three years has still maintained a moderate growth rate. This indicates the ongoing evolution of the sector and its growth potential in India.
- The strong rate of growth in the environmental consulting and services segment in 1997-1998 indicated clearly the growing private sector interest in integrating environmental performance into overall operational strategies. This is a positive indicator of future growth.
- The commitment of the Indian government to improved environmental quality in India is indicated by the increasing level of environmental spending in the past three years despite a slow-growth trend. The present level of environmental spending (by government and industry) is about 0.5 percent of GDP (1997-1998), as opposed to 1 to 3 percent of GDP in developed countries.
- The economic slowdown has not hindered the Indian government from strengthening its policy regime and issuing new legislation. In fact, the Indian government has enacted relatively more legislation in the slowgrowth years (1996–1999). Currently, the government is poised to issue even more environmental legislation, which is indicative of an increased level of commitment by the government to accord higher priority to improved environmental performance. Demand in the environmental goods and services sectors will expand as new environmental rules are implemented. Therefore, the increasing level of domestic and foreign investment in pollution-intensive industrial sectors is expected to boost the demand for environmental technologies and services.
Today, the Indian environmental industry is diversified and has made rapid strides in advancing its technological capabilities in conventional environmental management (water and wastewater treatment, air pollution control, and non-hazardous solid waste management). This was accomplished through indigenous effort and through the formation of strategic partnerships between Indian and foreign manufacturers. The number of foreign joint ventures/collaborations in the environmental sector has increased steadily and now numbers 300 to 350. Consequently, local firms are becoming increasingly strengthened in their ability to provide quality goods and services.
Near- and Medium-Term Environmental Priorities
Over the next three to four years, the public and private sectors will emphasize the following areas for development: energy efficiency; urban water supply and sanitation systems; industrial wastewater treatment (particularly in small-scale industries through integrated solutions); urban air pollution control through stricter emission norms for automobiles; hospital waste management; and afforestation programs.
Solid/hazardous waste management technologies, clean coal technologies, and renewable energy systems are the medium-term priorities. Significant growth rates in these segments are likely to begin only after another three to four years.
Energy efficiency and municipal water supply and wastewater treatment will also continue to receive greater government attention in the medium term (i.e., after three to four years), given the huge backlog of these projects and the high rate of urbanization in India.
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