22 April 2015

An economic perspective on environmental jurisprudence in India

Over the past few decades, the Supreme Court of India has taken environmental degradation very seriously. The Supreme Court has proactively incorporated advanced legal principles such as polluter pays, precautionary principles, absolute liability and public trust-doctrine to revive India’s environmental laws. The environmental jurisprudence in India has matured and is ahead of many developed countries.

The National Green Tribunal Act enacted in 2010, deals specifically with environmental litigation in India. The independent National Green Tribunal (NGT) comprising of scientific and judicial experts to exclusively deal with environmental issues is only the third of its kind in the world following Australia and New Zealand.  The NGT provides a techno-legal framework to address the complex science and technology issues in environmental disputes. The NGT’s jurisdiction spans all environmental law violations and can provide various remedies including compensation, injunctive relief and restoration of the ecology.

As a result, public interest litigations have become less complex and more affordable. In less than five years, since its establishment, the NGT has received over 7,000 environmental complaints and has shut down or challenged industries as well as government agencies that are not in compliance with the environmental regulations.

Even though the National Green Tribunal Act is new, protection of environment is deeply rooted in the Indian philosophy. Ancient Indian societies have revered nature and its resources. Water, land, air and animals were treated with utmost respect. In fact, provisions for the environment were stated in Book Two of Kautilya’s Arthashastra with clearly laid out penalties for breaking forest and wildlife laws.

Deforestation and environmental degradation increased with the advent of colonial rule in India and industrial revolution in England. During this period, natural resources were over-used to support the raw material demands of the nascent industries. With the establishment of railway networks, environmental degradation was further intensified to satiate the ever-increasing manufacturing requirements. Special laws, such as the Forest Act of 1894, were enacted to serve the interests of the industrial revolution economy at a severe cost to the environment. These pre-Independence policies and laws continued in independent India and environmental degradation went unchecked due to lack of environmental regulations and poor implementation/enforcement mechanisms.

As the Indian economy opened to the world and globalization took firm root, environmental abuse escalated to alarming levels as India became a pollution haven for the world. In a free market economy, the pursuit of profit segregated economy from ecology, environment becomes merely an unexploited natural abundance.  In India, environmental governance and regulations were relegated to obscure agencies that only increased red tape and served the license raj.

The Bhopal gas tragedy and the oleum gas leak in Delhi underscored the abysmal state of affairs. However, these events also served as catalysts to energize the public and the judiciary to bring environmental issues into sharp focus. The Supreme Court rejected the existing laws as archaic and incongruous with the recent advances in science and technology as well as the aspirations of the society. The Supreme Court equated the right to a healthy environment to the fundamental right to life and took suo motu action to protect and enforce the right.

From an economic perspective, environmental laws since the industrial revolution were framed by the economic requirements or demands of the time. The Forest Act of 1894 enabled indiscriminate deforestation to provide lumber for burgeoning industries and served to boost the bottom line of corporations at the cost of the environment. More recently, environment and social justice aspects are shaping economic policies. For instance, regulators shut down a soft drink major’s bottling plant for failure to obtain clearance to extract groundwater which resulted in depletion of groundwater  for community drinking as well as  for farmers. The closure caused a $25 million loss since the company had already invested in plant expansion that could not become operative.

This is an indicator to businesses that environmental issues have to be an integral part of any business strategy. Costs of regulatory compliance and anticipated benefits will need to be balanced against potential risks of non-compliance given NGT’s suo motu initiatives. The impact of non compliance or inadequate compliance may result in significant financial consequences for any firm.

Environmental compliance has become more significant with the Indian Government’s “Make in India” initiative. As many companies are looking to invest in India, a successful business strategy would have to proactively understand, anticipate and plan for environmental compliance. This will help the companies to not only mitigate potential legal and financial expenses, but also help derive much social mileage as trendsetters in environmental stewardship. While environmental regulations may seem challenging, proper planning and strategy can turn potential losses into pleasant economic gains.

 [The author is a Joint Director, Lakshmikumaran & Sridharan, New Delhi]

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