Explainer Series: Evolution of the Polluter-Pays Principle (PPP) in the Indian context

Rapid and unprecedented industrial development in the past decades has bought in a myriad of environmental issues to the forefront. Although such industrial advancements have had their fair share of advantages, it is difficult to overlook the environmental damages and the disruption in the “balance of nature” they have caused. Such negative externalities often affect the most vulnerable sections of society, not merely limited to human beings. Economic agents can use a true cost-benefit analysis to determine the optimum and acceptable level of pollution in the economy. All popular regimes assessed seek to achieve an optimal level of environmental quality, a term that includes attributes like air, water, noise pollution, access to open spaces and visual appeal of buildings as well. Three such popular regimes have been assessed across literature:

1. Economic agents can use a true cost-benefit analysis to determine the optimum and acceptable level of pollution in the economy.

2. Involving a command and control (“CAC”) approach that regulates and ensures the optimum pollution level.

3. Lastly, using market-based instruments (“MBI”) to reduce pollution. MBI’s include instruments like pollution taxes, permits, and indirect economic mechanisms like strong civil liability systems and mandatory disclosure systems. Among the most widely accepted MBIs is the Polluter-pays Principle (hereinafter referred to as the Principle or “PPP”).

This article traces back to the development of the principle in the late 90’s and also seeks to provide a holistic understanding of what the Principle, through its application ,seeks to achieve. It also commends and highlights the activist role played by the judiciary in its adaptation and application of the principle in various judgments ever since its import into the Indian context. Finally, it also highlights the inherent restraint of the legislature over the years in the adaptation of the principle in its statutes.

What is the Polluter-Pays Principle (PPP)?

The Principle was introduced by the Organization for Economic Co-operations and Development (OECD) in 1972 as a part of its Guiding Principle concerning International Economic Aspects of Environmental Policies. In 1992, it was enshrined in Principle 16 of the Rio Declaration and recognized by the United Nations Conference on Environment and Development. Polluter-pays Principle is an economic principle of environmental justice that seeks to internalize the public cost of individuals’ private activities. In simple words, a mechanism to make the polluter pay for the environmental harm caused to the public. It is a well-recognized Principle both at domestic and international levels. It is an environmental policy that requires the polluter to bear the cost and responsibilities for the harm done to the environment and to the people because of its activities. It also accounts for the social and environmental cost of reversing the environmental damage caused by the polluter, thereby making an individual polluter socially responsible to their/its surroundings and the environment.

PPP in the Indian Context

In India, the Principle evolved from the rule of ‘absolute liability’ which was laid down in the case of M.C Mehta v Union of India (1987 AIR 1086), wherein the Supreme Court directed the polluter to pay a fine to restore the living conditions of the people in the surrounding areas and also improve the environmental conditions around the industries. Further, the Court observed that the compensation “must be co-related to the magnitude and capacity of the enterprise because such compensation must have a deterrent effect. The larger and prosperous the enterprise, the greater must be the amount payable by it”.

The Supreme Court implicitly incorporated the Principle in the case of the Indian Council for Environmental-legal Action v Union of India and others (1996 AIR 1446), by including the liability and harm caused to the victims as a part of the absolute liability of the polluter. By including PPP within the definition of ‘sustainable development’, the Court observed that the restoration of the damaged environment falls within the definition of sustainable development.

Further, in the case of Vellore- Citizens Welfare Forum v. Union of India and Ors. (1996 AIR 2715), the Supreme Courtheld the Principle to be governed under Articles 48-A and 51-A(g) of the Constitution of India and has implied its applicability to all statutes. Further, only a few statutes in India adhere to the PPP. For instance, the Public Liability Insurance Act, 1991, makes it mandatory for companies beyond a threshold-capital-value to get insurance under the Act. The premium of such insurance will be collected in the ‘Environment Relief Fund’ which will be used to compensate victims of environmental harms and the betterment of the natural environment.

Further, the National Green Tribunal Act, 2010, under Section 20, states that “the Tribunal, while passing any order, or decision or award, will apply the principle of sustainable development, the precautionary principle and the Polluter-pays Principle (PPP).” The NGT, since its establishment, has been instrumental in the disposal of environmental issues. It has, in many instances, reiterated that PPP is an integral part of the domestic legal framework. For instance, in the case of Jan Chetna v. Ministry of Environment and Forest, the NGT re-examined the Principle laid down in the Brundtland report on sustainable development and reiterated that PPP was an integral part of the domestic environment law discourse. It further widened the scope of application in a case related to the Yamuna water pollution in Delhi. The tribunal expanded the Principle to include every household in Delhi and ordered them to pay a minimum fee of 100 rupees as environmental compensation through their water bill or property tax. Thus, the principle has been given its most comprehensive interpretation and has been used to justify environmental compensation and restoration cases.

Environment protection and harm prevention is the need of the hour. In a rapidly changing world with new developments and challenges, industries play a crucial role in accelerating the development process. But, at the same time, development has to be sustainable. The Polluter-pays Principle seeks to be a robust way to ensure environmental justice and protection. The Principle can be used to create a regulatory mechanism to provide quick and adequate compensation to the victims of such pollution and a wholesome mechanism to rejuvenate, regenerate and conserve the natural environment for future generations to come. The judiciary while recognising it in many decisions, has been instrumental in the development of the principle in the Indian context. However, the legislature seems to be exercising restraint in its approach to apply the principle, with only a handful of legislations including the National Green Tribunal Act, 2010, imbibing the principle within its ambit of application. Therefore, the government will have play a major role by framing environmental laws that have rooted in them.

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