Project Report on Critical study on the

principle of Polluter Pays Principle and its

application in India

Submitted to: Submitted by:

Dr. Sabina Salim Aditi Singh Rana
Associate Professor B.A. LLB.
UILS, Panjab University Section A
Chandigarh 120/18

1
Acknowledgement

I would like to express my sincere gratitude to Dr. Sabina Salim ma’am for providing me
not only motivation but also valuable guidance to complete the project report on “A
critical study on the principle of Polluter Pays Principle and its application in India” on
time. I got ample opportunity to do research, which enriched and broadened my
knowledge and understanding of this area. I am sincerely indebted to them.
Secondly, I would like to thank my parents, friends and UILS library, which provided all
the required data and always inspired me, in return of which helped me in finishing my
project on time.

THANKS AGAIN TO ALL WHO HELPED ME.

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Table of Contents

Sr. Contents Page

no. no.
1 Introduction 5

2 History of PPP 7

3 India and its implementation of PPP 9

4 The National Green Tribunal 12

5 Drawbacks of PPP in India 13

6 Conclusion 16

3
Table of cases

Sr. Case Law Citation Page

no. no.
1 M.C Mehta v. Union of India 1987 SCR (1) 819. 5

2 Vellore Citizens Welfare Forum v. AIR 1996 SC 2715. 5

Union of India and Ors.,
3 Indian Council for Environment-Legal (1996) 5 SCC 281. 5
Action v. Union of India (UOI) and
Ors.
4 Addl. Distt. Magistrate Jabalpur v. 1976 AIR 1207, 1976 SCR 11
Shivakant Shukla 172
5 The Gramophone Company’s case 1984 AIR 667, 1984 SCR (2) 11
664
6 Indian Council for Enviro-Legal 1996 AIR 1446, 1996 SCC (3) 12
Action v. Union of India 212.
7 Hindustan Coca Cola Beverages Pvt ---- 14
Ltd v. West Bengal Pollution Control
Board
8 Enviro-Legal Action v. Union of India 1996 AIR 1446, 1996 SCC (3) 16
212
9 Krishan Kant Singh v. National Ganga (1991) 1 SCC 598 18
River Basin Authority

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Introduction
An environmental policy has been created which requires the polluter to bear the costs and
responsibilities of the pollution and the externalities that are proximate in cause of it. This
is the Polluter Pays Principle (PPP). In a purely free market one only faces their private
costs; however, due to the externalities created there is an additional cost which is the
environmental cost. Thus, the PPP is the idea of paying the total social cost of the act rather
than only paying the private cost. It is a method of internalizing the externality. The two
broad rationales behind the implementation of the PPP in the environmental jurisprudence
includes firstly, a penalty or fine to act as a discouragement and deterrent and secondly, to
form compensation for the communities who have suffered damage due to pollution.

Following the Stockholm Declaration of 1972, India has developed a wide range of laws
for the protection of the environment such as The Water (Prevention and Control of
Pollution) Act, 1974, The Air (Prevention and Control of Pollution) Act, 1981, The
Environment (Protection) Act, 1986 and The Forest (Conservation) Act, 1980. In this
light, it is pertinent to note that the PPP plays an important role in both national as well as
international environmental policies.1 Furthermore, it has been crucial in the judgements
delivered by the Indian Courts, especially by the National Green Tribunal (NGT) thereby
becoming an integral part of the environmental jurisprudence of India.2

The principle evolved from the rule of ‘absolute liability’ which was laid down in the case
of M.C. Mehta v. Union of India,3 where the Court had directed the polluters to pay a
pollution fine which would be used to restore the living conditions and local environment
of the affected place. This further evolved in the case of Indian Council for Environment-
Legal Action v. Union of India (UOI) and Ors,4 where the court included the liability,
compensation to the victims, arising out of the environmental degradation within the
absolute liability for harm caused to the environment. The PPP was impliedly incorporated

1
Margaret Rosso Grossman, Agriculture and the Polluter Pays Principle, Electronic Journal of
Comparative Law, Vol,11.3 (December 2007).
2
Vellore Citizens Welfare Forum v. Union of India and Ors., AIR 1996 SC 2715.
3
1987 SCR (1) 819.
4
Indian Council for Environment-Legal Action v. Union of India (UOI) and Ors, (1996) 5 SCC 281.

5
in this case as the Court held that under Section 3 and Section 5 of The Environment
(Protection) Act, 1986 the Court had the power to take measures for giving effect to such
a principle. This was incorporated under the 1992 Rio Summit under Principle 16 which
stated that “the polluter should, in principle, bear the cost of pollution.”5

Even though the Polluter Pays Principle has been judicially recognized in India, one does
not seem to find its mention in the existing or upcoming legislations. Despite delivering
landmark judgments within a short span of coming into existence, the Principle has not
been properly implemented in India due to reasons such as absence of appropriate formula
for determining the compensation, the sufficiency of the fines which have been imposed
on the polluters, and the difficulty of identification of a ‘polluter’ in numerous cases. The
Court in the case of Vellore Citizens Welfare Forum v. Union of India and Ors,6held that
the principle is governed under Article 48-A and 51-A(g) of the Constitution of India and
that this concept can be implied into the existing statutes.

Its focus will be on the development of the PPP in India while also trying to understanding
the effectiveness of the principle.

5
Rio Declaration on Environment and Development, UNEP,
http://www.unep.org/documents.multilingual/default.asp?documentid=78&articleid=1163.
6
AIR 1996 SC 2715.

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HISTORY OF THE PPP
The first major reference to the PPP appeared 1972 in the OECD Guiding Principles
Concerning International Economic Aspects of Environmental Policies. The PPP as a
guiding principle across countries became necessary because some countries faced
complaints by national firms about rising costs and a loss of international competitiveness
following a national implementation of the PPP within their borders. The OECD Guiding
Principles define the PPP as an instrument for "... allocating costs of pollution prevention
and control measures".7

The polluter should bear these costs in order to achieve and maintain an "... acceptable state
of environment" which is determined by the public authorities. The OECD Guiding
Principles also state that the PPP should "... not be accompanied by subsidies that would
create significant distortions in international trade and investment." This weak or standard
definition of the PPP neither requires polluters to bear the costs of accidental damages, nor
do they have to pay for residual pollution.8

This Principle was reaffirmed as a fundamental principle for the Member States during the
1974 OECD Council Recommendation on the Implementation of the Polluter-Pays
Principle. The OECD initiative was the result of demands on governments and other
institutions to introduce policies and mechanisms for the protection of the environment and
the public from the threats posed by pollution in a modern industrialized society. The
principle was subsequently endorsed in 1973 when the European Community (EC) adopted
a program of action on the environment.

Subsequently, an EC Council Recommendation (1975) provided that Member states should

apply the PPP. It further provided that natural or legal persons must pay the price of such
measures that are necessary to reduce or remove the pollution to meet the standards or
equivalent measures laid down by public authorities. Although the EC Recommendation is
not legally binding, unlike the OECD Recommendation, it encompasses many more issues
with regards to the costs of environmental damage. The EC took another step in 1986 when

7
OECD Legal Instruments, Recommendation of the Council on Guiding Principles concerning
International Economic Aspects of Environmental Policies, Available at
https://legalinstruments.oecd.org/en/instruments/4
8
Available at: webdomino1.oecd.org/horizontal/oecdacts.nsf/.

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it adopted the Single European Act regarding the environment, in which it stated that
preventive action should be taken as a priority to rectify environmental damage at the
source and the polluter shall be liable to bear the cost. This Act is legally enforceable.

The PPP was also adopted in the ASEAN Agreement on Conservation on Nature and
Natural Resources adopted in 1985.Through the lens of international law, the PPP is
enshrined in Principle 16 of the Rio Declaration, which states that ‘the polluter should, in
principle, bear the cost of pollution.’ The United Nations Conference on Environment and
Development, 1992 in Principle 15 incorporates this Principle.The range of costs to be
borne by the polluter has expanded over time. In 1989, the OECD suggested extending the
PPP in order to cover the costs of accident prevention and to internalise the environmental
costs caused by accidents. In 2001, the OECD Joint Working Party on Agriculture and
Environment stated that according to the PPP
"... the polluter should be held responsible for environmental damage caused and bear the
expenses of carrying out pollution prevention measures or paying for damaging the state
of the environment where the consumptive or productive activities causing the
environmental damage are not covered by property rights."9 Only one year later, the
European Community followed the example of the OECD Principles from 1972 by
adopting the first Environment Action Programme (EAP). Since 1987, the PPP has been
part of European Law. It is included in Article 174 of the EU Treaty (1997). Since 1990,
when the International Convention on Oil Pollution Preparedness, Response and Co-
operation was agreed upon by the International Maritime Organization (IMO), the PPP has
been acknowledged as a " ...general principle of international environmental law." In 1992,
the Rio Declaration (UNCED) included the PPP in Principle 16: "National authorities
should endeavour to promote the internalisation of environmental costs and the use of
economic instruments, taking into account the approach that the polluter should, in
principle, bear the cost of pollution with due regard to public interest and without distorting
international trade and investment."10

9
The Encyclopaedia of Earth, Polluter Pays Principle, Available at
www.eoearth.org/article/Polluter_pays_principle.
10
Jan Stenis, The Polluter-Pays Principle and its Environmental Consequences for Industrial Waste
Management, Environment, Development and Sustainability, Vol. 4 Issue 4, 2002, Available at
www.springerlink.com/index/MN1GK731450477U5.pdf.

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INDIA AND ITS IMPLEMENTATION OF THE
POLLUTER PAYS PRINCIPLE (PPP)

STATUTORY PROVISIONS

Article 48A and 51A of the Constitution of India comprises of the constitutional mandate
to protect and improve the environment.

Article 48A: Protection and improvement of environment and safeguarding of forests and
wild life. - The State shall endeavour to protect and improve the environment and to
safeguard the forests and wild life of the country.

Article 51A(g): To protect and improve the natural environment including forests, lakes,
rivers and wild life, and to have compassion for living creatures.

There are several enactments that protect the deal with the subject matter i.e. The Water
(Prevention and Control of Pollution) Act, 1974, The Air (Prevention and Control of
Pollution) Act, 1981 and the Environment Protection Act 1986.

These Acts prohibit the disposal of polluting matters in their respective bodies.

The Water Act provides for the constitution of the Central Pollution Control Board and the
State Pollution Control Boards by various State Governments and the restriction on
discharging effluents without obtaining the consent from the Board. Prosecution and
penalties have been provided which include sentence of imprisonment.

The Air Act also provides for the Central Pollution Control Board and the State Pollution
Control Boards to perform the powers and functions under this Act as well. The Boards
aim to improve the quality of the air and to prevent, control and abate air pollution in the
country.

The Public Liability Insurance Act,1991 entails a mandatory duty of all the industries to
get an insurance which is collected under the ‘Environment Relief Fund’ which shall be
made payable to the victims, by way of relief, of industrial accidents or disasters. This relief
will not be a bar to file a case for compensation separation.

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Similarly, The National Environmental Tribunal Act, 1995provides for compensation to
victims on the ground of any damage to the environment with such an amount being
remitted to the authority specified under Section 7-A (3) of the Public Liability Insurance
Act, 1991 for being credited to the Environmental Relief Fund.

Looking at the above mentioned constitutional and statutory provisions the polluter pays
principle has become a part of the environmental law of the country.

Even if it is not so the PPP has become a part of Customary International Law. As such
there should be no difficulty in accepting it as a part of the domestic law of the country. It
is an accepted proposition that if Customary International Law is not contrary to the
Municipal Law then it is deemed to be incorporated in to the domestic law and shall be
followed by the Courts of Law. To support this reference can be taken from Justice H.R.
Khanna's opinion in Addl. Distt. Magistrate Jabalpur v. Shivakant Shukla,11 or the Jolly
George Varghese's case,12 or the Gramophone Company's case.13

THE SUPREME COURT

The PPP has been incorporated as part of Indian Environmental Law regime through the
various judgements by the Indian judiciary. The PPP originally an international
environmental law principle has been an integral part of the decisions made by the National
Green Tribunal of India in the past decade. However, in the previous decades this principle
was still present in the cases heard before the High Courts and Supreme Courts. Through a
special kind of writ petition called ‘Public Interest Litigation (PIL)’ cases were filed before
the High Courts and Supreme Court dealing with matters of environmental pollution,
maintenance of heritage and culture, forest, wildlife and other matters of public importance.

The development of PIL in India brought forth the interpretation of the right to life to also
include the right to a healthy environment. With this international environmental law
principles were included within judicial decisions. In the year 1986 the Supreme Court of
India inexplicitly applied the PPP in the case of M.C. Mehta v. Union of India. The
significance of the judgement lies in the Court’s formulation of a principle which measures

11
1976 AIR 1207, 1976 SCR 172.
12
AIR 1980 SC 470.
13
1984 AIR 667, 1984 SCR (2) 664.

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the liability of the industry engaging in ‘hazardous or inherently dangerous activities.’ Such
measure must be correlated to the magnitude and capacity of the enterprise. The Court came
up with an innovative remedy for the Oleum Gas Leak which was the indirect recognition
and application of the PPP.

The PPP was first explicitly applied in the case of Indian Council for Enviro-Legal
Action v. Union of India,14 where the Court declared that the polluter is liable to pay the
cost of the individual sufferers as well as the cost for the damaged environment and the
cost for reversing it back.In this case, there was a discharge of toxic sludge into the open
compound which flowed through a canal across an entire area causing the river water and
underground water to get contaminated affecting the nearby village of Bicchari. The Court
while delivering its judgement kept in mid the simpleness and practicality of the principle
while also looking at the widespread havoc that had been created by hazardous and
inherently dangerous activities. This Principle aims to hold such persons or institutions
liable for activities. The aim of the Court was to compensate the victims for the losses
caused by the pollution and also restore the environment to its earlier state. Such a
judgement is seen to have been part of a process of ‘sustainable development’.

The Supreme Court in the case of Vellore Citizens Welfare Forum v. Union of India,
reiterated and declared in unequivocal terms that both the precautionary principle and the
polluter pays principle are part of the Indian Environmental Jurisprudence. These principles
are accepted as part of our law of the land under Article 21, 48-A and 51-A(g) of the
Constitution of India as part of our duty to protect and improve the environment and also
protection of life and personal liberty.

This principle has been reiterated in several cases. In the case of M.C. Mehta v. Union of
India, the Supreme Court reiterated and re-emphasized the PPP.In this case the Court
ordered the industries that had contributed to the yellowing and decaying of the Taj Mahal
to shift away from there failing to do which would entail the unconditional close downs of
the said industries. The Court even recognized the workers of the said industries as victims
and ordered economic security of them and also entitlement of certain rights and benefits
from the erring industries.

14
1996 AIR 1446, 1996 SCC (3) 212.

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12
THE NATIONAL GREEN TRIBUNAL
A pursuant development was that of the establishment of the National Green Tribunal
(NGT) under the NGT Act, 2010. Under Section 16 of the NGT Act, it has the jurisdiction
over all civil cases with a substantial question relating to the environment. Therefore, the
NGT has jurisdiction over cases that pertain to the Air Act, 1981, the Water Act, 1974, the
Forest Act, 1927, the Environment Protection Act, the Biological Diversity Act, 2002 and
the Public Liability Insurance Act, 1991.

Section 20 of the NGT Act deals with the PPP. It states that “the Tribunal shall, while
passing any order or decision or award, apply the principles of sustainable development,
the precautionary principle and the polluter pays principle.”

In the case of Hindustan Coca Cola Beverages Pvt Ltd v. West Bengal Pollution
Control Board,15 a stringent application of the PPP was seen against one of the biggest
bottling and beverage company in India where the NGT held that a “polluting industry”
must bear the costs for abatement of the pollution and they were “bound to compensate”.
The NGT held that the costs of damage and reparation are to be given to the West Bengal
Pollution Control Board and that the WBPCB would carry out the restoration of the
environment. The NGT has in several judgements dealt with this Principle and its
implementation in India.16

The NGT in a case regarding water pollution in the river Yamuna ordered every household
to pay a minimum environment compensation amount of INR 100, with the charge to be
directly proportional to the water bill or the property tax paid by the household. This distorts
the PPP as it has the citizens bear the burden of restoring the environment with no clear
link between the “payer” and the pollution. This case diluted the difference between a tax
and the PPP making it problematic.17

15
Principal Bench, Appeal No. 10 of 2011
16
Vanashakti&Anr. v. MPCB andOrs.,(Application No. 37 of 2013 (WZ)); M/s. NGT (SZ) Bar
Association v. The ChiefSecretary, Govt. of Tamil Nadu and Ors. (Application No. 41 of 2015 (SZ));
PermaNandKhanta v. State of HimachalPradesh (CWP1480/2010); Vardhaman Kaushik and Ors. v.
Union of Indiaand Ors. (Principal Bench, Application No. 21/2014); Sandip Kayasthav. Alandi
Municipality and Ors. (Application No. 62 of 2015); Ashok Kajale and Ors v. Godavari BioRefineriesand
Ors. (Application No. 68 of 2014).
17
Jain, A (2015). NGT bills Delhi householdsfora cleaner Yamuna. The Hindu (May 8, 2015)

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DRAWBACKS OF THE PPP IN INDIA
The PPP can be inconsistent with the principle of inter-generational equity. This principle
implies that as a species, humans must share the environment with past, present and future
members of the species, while also being beneficiaries, entitled to its use in the present.18
The Supreme Court in the case of Enviro-Legal Action v. Union of India,19 held that the
Parliament had enacted laws against pollution such as the Environment Protection Act,
1986 in order to “protect and preserve the environment and save it for the future
generations.” The NGT is bound by the Supreme Court’s inclusion of this principle of inter-
generational equity. However, an inconsistency between this principle and the PPP is
possible. Reducing environmental damage, harm to human health and loss of biodiversity,
almost all of which are irreparable and cannot be restored to their originalstate, leads to a
compromise on the principle of intergenerational equity. By awarding
monetarycompensation at the present, we do not account for the costs of degradation which
are imposed on futuregenerations, and whether monetary damages can sufficiently restore
the damage at all. In the absence of strong enforcement mechanisms complementing
environmental legislation, the PPP is capable merely of reducing the award to an
operationalcost within the revenue model of most polluting industries.

A problematic feature of the PPP in India is the frequency with which it is applied against
the government bodies. When municipal authorities or boards or Ministries are complicit
in acts of pollution, either by omission or commission of pollution, the damages that they
pay under the ambit of thePPP are essentially costs that are born by the Exchequer, and
therefore funded by taxes paid by citizens. When citizens receive these awards, if theyare
being paid by the State, then they are in essence, compensating themselves, subverting the
entire purposeof the principle. Therefore, it is necessary for the NGT to increasingly impose
personal liability on errant officers of the government who have contributedto acts of
pollution, instead of deriving this amount from the State coffers.

18
Malik, T. (2015). The Evolution of the Concept of Inter-Generational Equity under the Indian
Environmental Jurisprudence. International Journal of Multidisciplinary Research and Development,
2(10), 184–187.
19
(1996 (5) SCC 281)

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Another drawback, particularly in developing countries, is that the PPP has emerged in a
form which is focused more on compensating victims of environmental tragedy than
restoration of the ecology. Since these incidents involve an urgent need for monetary
compensation, the principle is used to ensure compensation to victims. Typically, in the
wake of an environmental mishap, the urgency of the circumstances driving the government
authorities to provide compensation to the affected parties for actions of private parties; the
State then acts in subrogation against the polluters recovering costs through different means
like withdrawing permits required for operation of the polluter. This transformation of
direct liability into indirect liability results in a situation where fiscal revenues restrict the
budget of the local governments. Yet, in an attempt to avoid litigation and adverse awards
the authorities become more efficient in regulation and the prevention of environmental
pollution in the first place.20

Although the PPP has helped to mitigate the damage being caused to the environment to
some extent, the provision remains an inadequate remedy as ambiguity persists regarding
clear identification of the actual polluter. In legal terminology, a 'polluter' is someone who
directly or indirectly damages the environment or who creates conditions relating to such
damage. Clearly, this definition is so broad as to be unsupportive in many situations. The
polluter may a part of the "production chain" and it is difficult to impose the liability on
such polluter when the courts consider the parameters of extent and contribution of causing
pollution.

Moreover, under this principle, the amount of compensation to be charged for the
restoration of the damage caused to the environment remains to be inadequate in
comparison to the loss actually caused. More effective and unambiguous provisions with
regards to the implementation of the PPP would prove to be beneficial. All of these
problems make it difficult to implement the PPP as a guideline for environmental policy in
developing countries.

The NGT has worked remarkably in the past decade to penalize the polluters under the
PPP. Nevertheless, there persists several ambiguities and inadequacies around the PPP that

20
Faure, M. G. and Raja, A. V. (2010). Effectiveness of Environmental Public Interest Litigation in India:
Determining the Key Variables. Fordham International Law Review, 21, 239–293.

15
need to be elucidated upon for better results. Primarily, there are 3 concerns that should be
dealt with urgently:

1. Government bodies—more often than not, government bodies such as

municipalities or ministries are held liable for pollution either in the form of
commission or omission. The problematic part in this aspect arises when these
governmental bodies are levied fines under the PPP. That is because essentially the
damages that they paying are the taxes paid by the citizens. The coffers of the
government are filled with taxpayers’ money. Thus, the whole purpose of punishing
the polluter falls back and creates a burden on the taxpayers’ money. This money
could’ve been used for developmental purposes but rather is being used for paying
damages which could’ve been avoided with proper precaution.

2. Clear identification of polluters—there seems to be ambiguity in the identification

of polluters. In a developing country with a huge population like India the
identification of polluters can be a mammoth task. A polluter could be a chain of
people, a number of industries, or at times even a single person. To keep the Yamuna
River clean an order was passed by the NGT stating that whoever dumps waste in
the river shall be ordered to pay a fine of Rs. 50,000. However, this order could
never be implemented due to the presence of a large number of polluters. A large
number of polluters made polluter identification unmanageable.

3. Compensation—the explicit formula to arrive at the aggregate of compensation

seems to be missing. Even the framework seems to be vague and without any
guidelines, thus giving arbitrary powers to the NGT while deciding the
compensation. A lot of times the compensation concerning the loss that has occurred
was found to be inadequate. For instance, in the case of Krishan Kant Singh v.
National Ganga River Basin Authority,21 while applying the principle of PPP, the
NGT imposed a penalty of Rs. 5 crores on Simbhaoli Sugar Mills and Distillery, a
sugar manufacturing company which was dumping toxic and injurious effluents in
the ganga river. However, a closer look at the annual turnover of the company
would explain how the fine was a really small amount. The damage caused by the
company was in no way proportional to the fine that was charged to them. Thus,
whether the fine was sufficient to create deterrence for the company remains to be
a question.

21
(1991) 1 SCC 598.

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CONCLUSION
Some scholars find the potential in the PPP of ensuring sustainable development both in
the North and South, if applied in appropriate ways. The polluters should pay the costs of
dealing with their pollution reflects the most fundamental principles of economics, justice
and responsibility. Thus, the rich not making adaptation resources available to the poor
avoid remedying a global public bad. It needs to be understood by the major polluters that
for reaching a fair outcome in promised climate finance, the question of fair allocation of
costs must be addressed. Simon Caney reflecting the sentiments of the particularly
vulnerable country citizens argues that a situation in which there are such widespread and
enormously harmful effects on the vulnerable of this world is not acceptable.22 It is hoped
that an efficient and equitable application of the PPP ex ante can redress the compounding
situation. If not, the need for ex-post liability and compensation based on The No-Harm
Principle and state responsibility will arise. This is already evident in the UNFCCC
negotiations under the agenda item of Loss and Damage.

Though the PPP is a legally well recognized principle both internationally and domestically
its recognition is still very weak. The International Courts are not able to apply it easily as
the content of the principle is still not uniform and static, with different interpretations
making the application of it difficult in Courts. Within the Indian context, though the role
of the Supreme Court has been phenomenal in applying this principle, a lack of statutory
laws makes the situation ambiguous and thereby creating a massive loophole. There is a
need to address these concerns by making legal recognition of the principle more concrete,
both internationally and domestically.

22
Caney, Simon. “Cosmopolitan Justice, Responsibility and Climate Change.” Leiden Journal of
International Law 18 (2005): 747–75.

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References
Secondary Sources:

 Jaswal, P.S: Environmental Law, Allahabad Law Agency.

Online Sources:

 https://allindialegalforum.in/2020/05/29/a-critical-analysis-of-the-polluter-pays-
principle-in-india/.
 Rio Declaration on Environment and Development, UNEP,
http://www.unep.org/documents.multilingual/default.asp?documentid=78&articleid=1
163.
 Jan Stenis, The Polluter-Pays Principle and its Environmental Consequences for
Industrial Waste Management, Environment, Development and Sustainability, Vol. 4
Issue 4, 2002, Available at www.springerlink.com/index/MN1GK731450477U5.pdf

18