Environmental Technologies Industries

Environmental Technologies Industries

Market Plans

India Environmental Export Market Plan

Chapter 3 - Legal and Regulatory Framework

Environmental Management Institutional Structure

The Indian Constitution states the nation’s commitment to environmental protection (Article 48 A of the Directive Principles of State Policy provides that “the State shall endeavor to protect and improve the environment and to safeguard the forests and wildlife of the country”).

In recent years, this constitutional provision has been affected by the Policy Statement on Abatement of Pollution (1992); the National Conservation Strategy and Policy on Environment and Development (1992); and the National Environmental Action Program (1993). Table 3.1 lists key environmental legislation since 1990.

Table 3.1 - Key Indian Environmental Legislation Since 1990

*Year*	*Environmental Legislation*
1991	The Public Liability Insurance Act
1991	The Public Liability Insurance Rules
1992	Environmental Protection Rules - “Environmental Statement”
1993	Environmental Protection Rules- “Environmental Standards”
1994	Environmental Protection Rules - “Environmental Clearance”
1995	The National Environment Tribunal Act
1995	The Environment Protection Rules - “Environmental Standards”
1997	Prohibition on the Handling of Azodyes
1997	Amendments in the Environment Protection Rules, 1994 - ”Public Hearing”
1997	The Environment Protection Rules - Coal Beneficiation
1998	The National Environmental Appellate Authority Act
1998	The Bio-Medical Waste Management and Handling Rules

These legislative policy declarations established a fairly comprehensive institutional structure at the central and state levels. In 1985, the Indian government established a full-fledged Ministry of Environment and Forests (MOEF), earlier known as Department of Environment) to be the nodal agency for policy formulation, planning, promotion, and coordination of environmental programs. Over the years, the MOEF has played a prominent role in integrating environmental concerns into the country’s economic development plans. The ministry has four key divisions: Environment, Forests and Wildlife, National River Conservation Directorate, and National Afforestation and Eco-Development Board.

Other relevant ministries support the MOEF and its affiliates in implementing environmental programs. For example, the Central Pollution Control Board (CPCB), a statutory authority at the central level and attached to the MOEF, was constituted in 1974 to implement provisions of the Water Prevention and Control of Pollution Act of 1974.

At the state and union territory level, Departments of Environment and Forests are the agencies tasked with planning and implementing environmental programs. Most of the states have State Pollution Control Boards (SPCBs). These boards were originally established to implement the Water Act of 1974 at the state level. Now they are mandated to enforce and monitor pollution control programs. The SPCBs, under the supervision of the MOEF and the CPCB, are the key authorities for enforcing environmental legislation in the country. Historically, there have been several national/bilateral/multilateral efforts to strengthen the scientific and technical expertise of the environmental monitoring, analysis, and administrative capabilities of pollution control boards.

Figure 3.1 shows the institutional structure and interrelationships for environmental management in India.

Figure 3.1 - Institutional Framework for India's Environmental Management

Central Government		State Government
–		–
Ministry of Environment and Forests		State Departments of Environment
– –		– –
Central Pollution Control Board	ų	State Pollution Control Boards
–		–
Regional Offices		Regional Offices

Environmental Legislation for Industry and Business

Since promulgation of the Water Prevention and Control of Pollution Act (the Water Act) of 1974, there has been a proliferation of environmental regulations to address growing environmental problems. The legislation is quite comprehensive and addresses a wide range of environmental protection and industrial pollution control issues. In terms of coverage, barring remediation and biodiversity (the MOEF is in the process of formulating draft biodiversity rules), all environmental issues (water, air, land pollution, forests and coastal zone management, etc.) are covered by India’s environmental legislative regime. This regime enforces pollution control laws mainly through the command and control approach as opposed to pollution prevention and adoption of voluntary compliance programs. Key provisions of India’s environmental legislation are explained below.

Water Prevention and Control of Pollution Act of 1974, Amended in 1988

The Water Act of 1974 is implemented through resolutions passed by state governments. The main provisions of this act aim at prevention and control of water pollution as well as restoration of water quality. The central and state governments have appointed Central and State Pollution Control Boards to enforce this act. The CPCB formulates effluent/emission/water quality/ambient air quality standards, establishes and accredits testing laboratories, provides training, organizes awareness-building campaigns, and compiles pollution-control statistics in the country. The CPCB also advises the central government, coordinates the activities of SPCBs, and provides them with technical assistance. The SPCBs are entrusted with the actual task of enforcing and monitoring programs to prevent pollution and with inspecting factories to ensure that they comply with the provisions of the Water Act. The SPCBs also stipulate company-specific conditions relating to temperature, volume, composition, rate, and point of discharge of emission and effluents in their permits to industries. The SPCBs are empowered to make more stringent the emission and effluent discharge standards prescribed by the MOEF and CPCB if the local situation demands it.

The CPCB establishes emission and effluent discharge standards on the basis of the best available technology and cost-effectiveness. Most often, cost-effectiveness is determined on the basis of a factor defined as the annualized cost of wastewater treatment, considering the best available technology, compared to the average annual receipts of representative industrial units in the concerned industry.

Water Prevention and Control of Pollution Cess Act of 1977

The Water Prevention and Control of Pollution Cess Act of 1977 authorizes the collection of prescribed cess on water consumed by certain categories of industries specified in the schedule appended to the official notification of this act. The assessment thus collected is used to support and augment the financial resources of the CPCB and SPCBs. The growing scarcity of water is compelling the MOEF to enhance the scope of the legislation as well as undertake upward revision to the rates of payable water assessment required by industry for a particular purpose. The enforcement of the new legislation (currently under discussion) will push industries to identify and exploit opportunities for water conservation/waste minimization.

Air Prevention and Control of Pollution Act of 1981, Rules 1982-1983

This legislation requires that all plants having a source of emissions obtain “Consent to Establish” and “Consent to Operate” from the concerned SPCB.

Environment Protection Act of 1986 and Rules 1986/1994

This is the broadest umbrella legislation on environmental issues in India. It provides sweeping powers to the central government for framing the rules in all environmental areas. The MOEF is empowered to set standards for the quality of air, water, soil, and any other area as required under this act. The act and rules require the following:

All industries in 29 specified sectors must obtain prior environmental clearance from the MOEF in the case of a new project or in the case of modernization or expansion.
All industries seeking consent under the Air and Water Pollution Control Act and authorization under the Hazardous Waste Management and Handling Rules must furnish to the appropriate SPCB an annual environmental statement covering the quantities of pollutants discharged, hazardous and solid waste generated, and pollution abatement measures taken.
Top management of industrial units is responsible for environmental protection and liable for prosecution. Moreover, the act provides for stringent punishment and penalties, empowers enforcement agencies to effect closures, and gives rights to private citizens to file suits against polluting firms after 60 days notice to the concerned authority.

Hazardous Wastes Management and Handling Rules of 1989

Authorization has to be obtained from the concerned SPCB prior to handling (collecting, receiving, treating, storing, and disposing of) hazardous wastes. The MOEF has identified 18 categories of wastes as hazardous under the Hazardous Wastes Rules. A company has to ensure proper handling of hazardous wastes and comply with all authorization conditions.

The rules mandate that state governments identify common hazardous wastes treatment, storage, and disposal facilities after conducting comprehensive environmental impact assessments and publishing the inventory of such sites on a periodic basis.

Manufacture, Storage, and Import of Hazardous Chemicals Rules (MSI) of 1989/Amendment Rules of 1994

These rules specify that site clearance has to be obtained from the appropriate authorities for all newly specified industrial activities involving handling of hazardous chemicals. A safety report must also be prepared and submitted to the appropriate authority by all newly specified firms handling identified hazardous chemicals.

In addition, a safety audit must be conducted with the help of an independent expert by all new and existing industries involved in handling identified hazardous chemicals and submitted to the concerned authorities.

The MOEF authored the amendments to these Hazardous Wastes/Chemicals Rules. These amendments are comprehensive in scope and stricter in nature.

Environment Protection Rules of 1997 - Coal Beneficiation

These rules require certain categories of coal-based thermal power plants (thermal power plants located beyond 1,000 kilometers from the pithead or located in urban, sensitive, or critically polluted areas) to use beneficiated coal with an ash content not exceeding 34 percent from July 1, 2001. Power plants located at the pithead are not covered under these rules. These rules have opened up significant business opportunities for physical separation or washing of coal technologies to reduce coal’s ash content.

Bio-Medical Waste Management and Handling Rules of 1998

These new rules apply to hospitals, nursing homes, clinics, dispensaries, pathological laboratories, and blood banks that handle biomedical wastes. Generators of biomedical wastes (10 types of biomedical waste are identified) are required to install pollution control/waste disposal facilities meeting specified standards before a prescribed date.

Environment Protection Second Amendment Rules of 1998

These new rules include environmental standards for industries that were previously excluded from environmental legislation, including battery manufacturing; gas/naphtha-based thermal power plants; standards/guidelines for control of noise pollution from stationary diesel generator (DG) sets; temperature limits for the discharge of condenser cooling water from thermal power plants; environmental standards for coal washeries; and emission standards for rayon producing firms.

Public Liability Insurance Act of 1991, Rules of 1991

This act specifies that an industry must provide immediate relief in the case of death or injury to any person or damage to property from an accident occurring while specified hazardous chemicals are being handled. The industry is required to purchase insurance policies to cover the risk.

National Environmental Tribunal Act of 1995

This act requires industry to compensate recipients for environmental damage that occurs during the handling of hazardous chemicals as specified under the Public Liability Act of 1991.

National Environment Appellate Authority Act, 1997

This act provides an opportunity for filing appeals if environmental clearances for industrial projects are rejected initially.

Enforcement Activities and Trends

The following discusses the status of compliance for Indian industries with respect to environmental legislation to inform the reader about environmental business opportunities.

Compliance Status

To address the issue of growing industrial pollution, the MOEF accorded specific emphasis to large and medium-sized polluting industrial units. In 1991, the MOEF announced a specific program to improve the level of regulatory compliance in 17 categories of highly polluting large and medium-sized industries. No criteria were established in the program, however, to differentiate between large and medium-sized polluting firms. Nevertheless, this program’s thrust produced improved compliance in the 17 categories of highly polluting industries. In 1998, out of 1,551 firms, 130 units were identified as non-complying units in which no physical facility existed for pollution control. These non-complying units present promising business opportunities for U.S. companies that manufacture pollution-control equipment because the Indian firms have been allotted specific time limits for installing such equipment and are being monitored regularly by the CPCB.
It is estimated that India has more than 3 million small-scale enterprises (defined as having investment in plant and machinery of less than $0.72 million). About 60 percent of these enterprises are in unorganized sectors, thus making it difficult for regulatory agencies to collect and collate pollution-control and compliancerelated data about them. Surveys conducted by the CPCB and SPCB in different cities/cluster locations indicate that about one-third of small-scale units in the country are polluting. Compliance (obtaining regulatory consents/permits and installing required pollution control systems) by firms in the small-scale sector has increased at a modest pace; between 30 percent and 40 percent of small-scale firms are compliant. This development is mainly due to growing judicial intervention over the past three to four years. However, several constraints limit small-scale firms from adopting sound environmental management practices, including the following:

1. The economic viability of installing pollution control systems. In most cases, the size of the investment (capital as well as recurring) required to meet prescribed effluent or emission standards is high visą-vis the size of production and annual receipts of small-scale units. (Consequently, more emphasis is placed on small-scale enterprises installing physical systems just to demonstrate regulatory compliance as opposed to assessing the appropriateness/suitability of the system and its operational performance.)
2. Limited access to know-how and appropriate technologies. Despite significant efforts by government and industry associations to establish sustainable information linkages with polluting small-scale units, there is a considerable lack of information related to the prevailing environmental needs of the concerned units. The U.S. government is attempting to fill this information gap with programs in the Department of Commerce, U.S. Agency for International Development (USAID), the Environmental Protection Agency (EPA), and others.
3. Shortage of capital and underdeveloped infrastructure for implementing environmental change. Generally, financing programs apply to the installation of new production facilities and not to environmental upgrades. Although the prime lending rate has been coming down consistently, the present minimum level of 13 percent serves as a barrier to the adoption of environmental technologies.
4. Inadequate research and development to meet specific environmental needs of small-scale units.

India’s deteriorating environmental quality is very likely to lead to increased pressure on industry in the short term. This pressure will not only facilitate adoption of appropriate pollution control equipment/systems by industry but will also enhance their operational performance.

The following trends are also supporting the continued growth of the environmental technologies market:

Shifting regulatory pressure from mainly large projects and polluters to more small- and medium-scale projects and polluters.
Transition of Indian firms toward better environmental management practices. This trend is due to growing competition, international influences, and increasing acceptance of voluntary approaches such as ISO 14001 (International Environmental Management Systems Standards) to improve regulatory compliance, while sustaining demand in the marketplace. Also, tightening environmental standards and rising costs (electricity, water, and raw materials) is pushing industry to institutionalize pollution prevention and waste minimization approaches. The program of mandatory submission of an environmental statement introduced by the MOEF in 1993–1994 played a key role in building awareness about environmental audits and pollution prevention. Consequently, there are numerous examples today of industrial units that have reaped rich benefits from incorporating environmental management approaches. Notably, the MOEF has undertaken an innovative program to establish 100 “waste minimization circles” within industrial estates/clusters to promote environmental management among small-scale industrial units.
Higher priority given to integrated environmental management approaches. Cost/benefit analysis for environmental improvement investments is leading government and industry to consider the cost of environmental investments required in comparison to the scale of production and other constraints such as land availability. This consideration is likely to lead to higher priority treatment of integrated approaches such as common effluent treatment plants and waste management facilities. These developments should produce strong business opportunities for foreign companies specializing in providing integrated solutions.
Increased public pressure. Although India’s comprehensive environmental regime provides for the integration of environmental management considerations during the planning stages of new investment projects, there is likely to be increased public pressure and accountability by government to carefully scrutinize new investments proposals.

Legal Framework: Market Trends and Influences

The following are highlights of emerging policy and regulatory trends that have direct relevance to the growth of the environmental market and that are of particular significance to foreign companies interested in doing environmental business in India:

In recent years, there has been a clear shift in regulatory approaches toward prescribing mass-based environmental standards (kilograms of pollutants per unit of production), rather than concentration-based standards (milligrams of pollutants per liter). This shift is expected to continue.
There has been a manifold growth in the water tax rate (i.e., a levy on the consumption of water for industrial purposes). Currently, this levy is applicable only to certain industries. The central government is actively considering making it applicable to all water-consuming industries (legislation including this provision is expected to be introduced into Parliament in the near future).
The high cost of water is driving industry to identify and exploit opportunities for pollution prevention, waste minimization, recycling, and using manufacturing technologies that require less water.
There are trends indicating a tightening of present concentration-based environmental discharge standards by enforcing agencies. These trends produce increases in the demand for add-on and end-of-the-pipe treatment technologies.
Industry-specific wastewater generation standards linked to production volume have been developed and enforced (i.e., x cubic meters per unit of output).
The onset of informed debate on the choice and integration of appropriate market-based instruments with the existing command-and-control regulatory regime has provided incentives for cleaner technologies and pollution prevention.
There is a greater emphasis on, and policy support for, integrated solution approaches for small-scale firms (such as promotion of common effluent treatment plants in industrial estates).
There is stricter scrutiny of consent/environmental clearance applications by enforcement authorities to grant permission for establishing and operating industrial units that pollute.
There is a perceptible trend among leading Indian companies to obtain ISO 14001 certification for better corporate visibility and global outlook. By August 1999, about 175 companies in different industries had obtained ISO 14001 certification.
The MOEF is in the process of formulating a comprehensive National Environmental Policy that will define the direction of environmental programs and regulatory initiatives in the country. One of the most significant and revolutionary features of this policy will be the introduction of market-based instruments to supplement the command and control of the environmental regulatory regime.

Although implementation of economic instruments to augment environmental performance in a country like India is a great and complex challenge, a greater degree of consensus is evolving at all levels to make a beginning in this direction.

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