Report No. 38292-IN India Strengthening Institutions for Sustainable Growth Country Environmental Analysis December 22, 2006 South Asia Environment and Social Development Unit South Asia Region Document of the World Bank NITHE National Institute ofTrammg of Highway Engineers NO, Nitrogen oxides NPV Net present value NTPC NationalThermal Power Corporation OECD Organization for Economic Cooperation and Development PCB Pollution Control Board PIL Public interest litigation PowerGrid Powergrid Corporation of India Limited PPP Purchasing Power Parity PROPER Program for PollutionControl, Evaluation, and Rating PWD Public Works Department R&M Renovation & Modernization RSPM Respirable suspendedparticulate matter RTIA Right to InformationAct SCC Supreme Court Cases SMEs Small and mediumenterprises SPCB State Pollution Control Board SPM Suspendedparticulatematter SSI Small-scale mdustries TA Technical assistance T&D Transmission &.distribution TRI Toxlcs ReleaseInventory UNDP UmtedNations Development Program UNEP UnitedNations Environment Program USEPA United States Environment ProtectionAgency UTPCC Union Territory PollutionControl Committee VFG Vital Few Goals voc Volatile organic compounds CURRENCYEQUIVALENTS Exchange rate of the IndianRupees for US$1.OO Fiscalyear Annual average rate (Rs) 2000-0 1 45.6844 2001-02 47.6919 2002-03 48.3953 2003-04 45.9516 2004-05 44.93 15 FISCALYEAR April 1-March31 ExecutiveSummary ............................................................................................................................ Contents i The Challenge: Rapid Growth inExtremely Diverse Natural. Economic and Social Envlronment................................................................................................................................... i ii FacilitatingNational Dialogue and Public Participation............................................................. The Study ...................................................................................................................................... 111 ... Expanding the Toollut to Enable Environmental Complianceby Diverse Sources..................... iv vi Workmg Across Sectors for Common Public Good.................................................................... Aligning Sectoral Incentives withEnvironmental Prionties....................................................... Strengthening the Capacity o f Environmental Agencies to Meet GrowingDemands.................vii ix The Way Forward ......................................................................................................................... x I KeepingUpWithEnvironmentalChallengesofRapidGrowth . India's Growth Story..................................................................................................................... ............................................ 1 Environmental Implicatlons: Risks............................................................................................... 1 2 Environmental Implications: Opportunities .................................................................................. Environmental Implications: The Need for More Effective Action ............................................. 7 9 The Study .................................................................................................................................... 12 I1 BuildingNationalConsensusthroughEffectiveDialogueandPublicParticipation . ..........16 The Challenge: Multiple Stakeholderswith OpposingViews .................................................... 16 The Alternative: Confrontation and Public Interest Litigation ................................................... 18 The Way Forward: From Stand-Off to Constructive Dialogue................................................... MalungPublic ParticipationWork ............................................................................................. 20 27 I11 EnablingComplianceintheRegulatoryEnvironment . ......................................................... 31 Buildingon a Sound Foundation................................................................................................ 31 Aligningthe Regulatory Frameworkwith Environmental Pressures.......................................... 33 Strengthening Toollut to Promote Compliance........................................................................... 39 Matching Regulatory Capacity with Regulatory Mandates ina GrowingEconomy..................47 IV Aligning SectoralPoliciesandIncentives . ................................................................................ 55 Envlronment as a Dnver inPower Sector Development ............................................................ 60 The Role o f Industrial Policy and Institutions ............................................................................ 55 BuildingHighways inan Environmentally SustainableWay..................................................... 72 Addressing Cross-sectoral Challenges........................................................................................ 78 V Towards a Sustainable GrowthFramework . .......................................................................... 80 Annex 1 Summary o f Study Recommendations . .............................................................................. 84 Glossary of Terms 89 References ......................................................................................................................................... ............................................................................................................................. 92 Tables Table S.l Key Proposed Actions and Role of Different Stakeholders........................................ xi Table 1.1 Major Polluting Industries ............................................................................................ 3 Table 2.1 Summary o f SelectedPublic Interest Litigation and Court Directives....................... 19 Table 2.2 Instruments of Public Participation............................................................................. Table 3.1 Summary of Area-Based Environmental Mgt. & Planning Approaches inIndia.......24 36 Table 3.2 Companson o f SPCBs or Every 100Polluting Unitsinthe States. India. 2003.........49 Figures Figure 1.1 A Decadeof India's Economic GrowthinPerspective ................................................ 1 Figure 1.2 ForcedHydro. Nuclear. and Gas Scenario (Fuel MixYear Wise) ............................... 5 Figure 1.3 Environmental Sustainability Indexand Income.......................................................... 8 Figure 1.4 Linkages BetweenEconomic Activity. EnvironmentalOutcomes. and Institutions....8 Figure 1.5 Biochemical OxygenDemand (BOD). Major Rivers. 2004 ....................................... 10 Figure 1.6 Respirable SuspendedParticulate Matter. Residential Areas. 2004 ........................... 10 Figure 1.7 Economic Performance andUrban Air PollutioninIndia's States............................. 11 Figure 1.8 India SPM-10 Trends. Largest and Other Cities. 1995-2004...................................... 12 Figure2.1 Key Stakeholdersof EnvironmentManagement inIndia........................................... 17 Figure3.1 Importance of Small andMediumScale Enterprises inIndia..................................... 33 Figure3.2 Status of Compliance across StatesinIndia. 2003 ..................................................... 53 Figure4.1 Installed Capacity of Power Generation by Source (Percentage). 2005 ..................... Figure5.1 FromaVicious Circle o fConfrontation to a Virtual Circle of Sustainability ...........61 80 Figure5.2 InstitutionalTriangle ofEnvironmentalManagement................................................ 81 Boxes Box 1.1 The SingrauliRegion: Legacyo fUnsustainable Economic Development...................4 Box 1.2 Key EnvironmentalIssues inthe Power Sector............................................................ 5 Box 1.3 Environmental Impactsinthe Highways Sector........................................................... 6 Box 1.4 Case Studies of Implementation Experience............................................................... 14 Box 2.1 Conflict over DevelopmentProjects inIndia: Examples Collectedby Sector Reviews....................................................................................................................... 18 Box 2.2 Government's Responseto Growing Public Confrontation:Thailand ....................... 20 Box 2.3 A Frameworkfor Public Participationinthe Phillipines............................................ 21 Box 2.4 Listeningto Communitieswith Site Specific Knowledge.......................................... 21 Box 2.5 Notification for the Re-Engineeringo fthe EL4Process inIndia............................... 23 Box 2.6 Examples of Citizen Involvement inMonitoring and Oversight ................................ 25 Box 2.7 The Impact ofthe Rightto InformationonEnvironmentalPerformance inthe U S...26 Box 3.1 KeyEnvironmentalLegislationsinIndia ................................................................... 32 Box 3.2 Setting Feasible Emissions Standardsinthe Country-specific Context -LessonsfromIndia'sCoalPowerPlantsStory ...................................................... 38 Box 3.3 Cooperative Approach to SMEs -A GoodPractice Example from Kolkata ...........40 Box 3.4 Use o fAdministrative Enforcement Authorities as a Credible Deterrent ...................42 Box 3.5 PromotingEnvironmental Management Systems....................................................... Economic Instruments for Pollution Control: Potentialfor India............................... 44 Box 3.6 45 Box 3.7 Proposed Capacity BuildingAction Plan for the Onssa Pollution Control Board .....46 Expandingthe Toolkit -the Power of Public Disclosure ........................................... Box 3.8 Box 4.1 Key Reasonsfor Better Environmental Management inNarodaIndustrialEstate .....52 56 Box 4.2 "Greening Supply Chain" Initiatives .......................................................................... 59 Box 4.3 EnergyandEnvironmental Challenges: A Global Perspective ................................ 60 Box 4.4 A PlannedTransition to Cleaner Electricity Generation is Complicated by Severe Shortages ofPower .................................................................................... 63 Box 4.5 PowerGrid-Corporate Leadership in Sustainability ................................................. Box 4.6 Brazil-China-India EnergyEfficiency Assessment: Recommendations for India......64 68 Box 4.7 InternalizingEnvironment and Social Processes inRoadProjects............................. 73 Box 4.8 Enwonmental Interventioninthe National RoadTransport Policy .......................... 73 Box 4.9 InstitutionalMechanisms to Promote Comprehensive Integration of Environmental ImpactsinHighways Development-InternationalGood Practice .75 Box 4.10 Integrating Environment Management Measures inConstruction Codes and Technical Specifications ............................................................................................ 77 ACKNOWLEDGEMENTS This report i s the product o f a collaborative effort between the World Bank, and several ministries and agencies o f the Government o f India under the overall leadership o f the Ministry o f Environment and Forests (MoEF). Special gratitude i s extended to Dr. P. Ghosh, Secretary; Mr.S. Behura, Additional Secretary; Mr.S. Mittal, Joint Secretary, MoEF; Dr.V. Rajagopalan, Chairman; and Dr. B. Sengupta, Member Secretary, Central Pollution Control Board, for support and guidance throughout the study. Contributions by numerous participants o f several meetings and workshops held at various stages o f the study are gratefully aclmowledged. The World Bank team was led by Kseniya Lvovsky, Lead EnvironmentalEconomist, and included Sonia Chand Sandhu, Sr. Environmental Specialist; Jane Nishida, Sr. Environment Institutions Specialist; Sanjay Snvastava, Sr. Environmental Specialist; Richard Damania, Sr. Environmental Economist; Genevieve Maria Dutta, Program Assistant; and Vinod Ghosh, ProgramAssistant. Nisha Maria Peris, DunuRoy, Suphachol Suphachalasai, Gaurav Joshi, and Gediz Kaya (consultants) contributed to the study at various stages. Professor Dilip Biswas (India) was an advisor and made a significant contribution to the report. Vani Kurup provided editorial assistance. Background sector assessments and reports were provided by a team o f consultants from the Louis Berger Group, including S. Mazumder, Team Coordinator and Director, South & Central Asia; Professor A. K Moitra, Environmental Regulation and Policy; K.P.Nyati, IndustrySector Environmental Management, J. N. Sinha, Power Sector Environmental Management; and K. Sundra Rajan, Highways Sector Environment Management. Peer revlewers were Aziz Bouzaher and Ernest0 Sanchez-Triana o f the World Bank. Helpful comments and contributions were received from World Bank staff and consultants representing several sectors, including Alok Bansal, David Hanrahan, Mudassar Imran, Sunil Khosla, Jeremy Levin, Judith Plummer, Tapas Paul, Ruma Tavorath, Alan Townsend, S. Vaideeswaran, Piers Vickers and Neha Vyas. Jeffrey Rack, Acting Sector Director, South Asia Environment and Social Development Department; Michael Carter, Country Director for India; and Fayez Omar, Senior Manager, India program, guided the overall effort. Finanicial assistance was provided by the Trust Fund for Environmentally and Socially Sustainable Development o f the Government o f Finland and the Government o fNorway. Executive Summary 1. For over a decade, from the early 199Os, India has experienced one o f the fastest economic growth rates in the world, averaging over 6 percent and reaching 7-8 percent per year since 2003. While the country still continues to face the tremendous challenge o f reducing poverty for 354 million (representing27 percent o f the world's poor) o f its over one billion population, robust economic growth has already allowed millions to emerge from poverty creating a sizable middle class o f 300 million people. This growth has been a dramatic driver in the nature and scale o f impact on the country's environment and natural resources. The Challenge: Rapid Growth in Extremely Diverse Natural,Economic and Social Environment 2. Given the high population density, vulnerable ecology, extreme climate and a significant share o f the economy heavily dependent on the natural resource base, environmental sustainability might well be the next greatest challenge along India's development path, adding to the list o f priority needs, such as reducing disparity, eliminating poverty and promoting social cohesion. Mirroring the country's size and diversity, environmental risks and problems are wide-ranging. India's dual features o f a low income economy and a middle income economy are reflected in the environmental damage estimates. The damages are still dominated by "poverty-related" risks, such as lack o f sanitation and indoor air pollution in rural areas. However, the share o f "growth-related" risks manifested by the deteriorating urban environment, industrial waste and chemical pollution is increasing. As the country finds itself into the second decade o f strong economic performance, making and further planning massive investments in infrastructure, urban development, and industrialization, the issues o f managing the environmental impacts associated with this rapid growth are capturing public attention. 3. To deal with these impacts, India has developed a comprehensive set o f environmental laws and institutions, including a very activejudiciary. Despite a strong policy and institutional framework and some successes, environmental degradation has not been arrested on a large scale. The country-wise average compliance ratio for monitored industries (falling far short o f all polluting sources) i s only 50 percent. Furthermore, the trends in environmental quality indicators are mixed; for example, urban air quality (measured as suspendedparticular matter o f less than 10microns) has beenimproving inthe largest cities, such as Delhi and Mumbai, where significant efforts have been made to control multiple pollution sources, while it i s deteriorating inmany other cities. 4. The immense unfinished agenda underpins the deepening dissatisfaction with the state o f environmental affairs by a growing and increasingly vocal "green" constituency, resembling, in some ways, a historical pattern o f 1960s in industrialized countries. A rising public demand for better environmental quality, often driven by the influential urban middle class and backed by the judiciary (as in the famous case o f cracking on Delhi's air pollution), i s being increasingly matched by voluntary environmental performance obligations from India's large-scale corporate sector and industry asserting a prominent role inthe globalmarket. India: StrengthemngInstitutions for Sustainable Growth 11 5. This demand, however, is yet to be matched by the regulatory capacity of environmental agencies. While the capacity o f the Ministry o f Environment and Forests (MoEF), the Central Pollution Control Board (CPCB) and the State Pollution Control Boards (SPCBs) has improved over time, keeping up with the challenges o frapid growth has proved difficult. Many would argue that thejudiciary filled the vacuum left by the lack o f regulatory oversight. India's enormous economic and social diversity needs to be better appreciated in this context. There are significant segments of population that have other more pressing priorities. Thus, political commitment to environmental improvement still varies by State and constituency, particularly when measured up against multiple competing needs. This has a bearing on the status and capacity o fboth the State and national environmental agencies. And besides a large-scale sector, there are numerous smaller scale industries (the backbone o f India's growth and employment), which are often unable to adopt modern technologies that would be required for compliance with environmental laws. The understanding o f the environmental impacts, their origins, consequences and cost-effective mitigation strategies, while evolving gradually, i s still incomplete, particularly with respect to cross-sectoral and cumulative impacts. The understanding and perceptions significantly differ across stakeholder groups. All o f this fbrther complicates the formulation and delivery o f an effective regulatory response that would benefit from a broad-based support. The Study 6. The objective o f this Country Environmental Analysis was to help strengthen the environmental policy implementation framework, to meet the challenges o f a rapidly growing and extraordinarily diverse economy in India. Inparticular, the study aimed at assisting with the implementation o f the new National Environment Policy (NEP 2006), which was released in draft for public consultation at the time this study was initiated. The scope of work was developed through extensive consultations with the MoEF, the main study counterpart, and multipleother stakeholders to focus on priority issues not covered by and complementary to recent or on-going work. Given that a review o f the Environmental Impact Assessment (EM) process was commissioned by the MoEF earlier and was nearing its completion at the time this analysis was about to start, this study focused on identifylng and proposing ways to address major gaps in the existing institutional arrangements, as well as regulations and incentives for post-EM environmental compliance andpei$ormance. 7. Inview ofthe focus onthe growth-environment nexus, the studycoveredthree select sectors -industry,power (including three distinct sub-sectors: coal-based power generation, hydro power generation, and transmission), and highways -that are among the key drivers o f growth. Together, these sectors represent a wide range o f environmental impacts, sources and regulatory issues that allows drawing conclusions o f broad relevance. The analytical framework usedby this study was a combination o f sector-wide reviews, based on secondary data o f issues, policies, regulations and institutions, with several case studies o f implementation experiences. Ranging across seven Indian States, the project-level case studies helped to gain a deeper understanding o f barriers, as well as contributors, to better environmental compliance and performance in the real-life situation. The case studies involved primary data collection and consultations with local stakeholders. Selective reviews o f international experience in environmental management were also conducted. The findings from all reviews and case studies have been integrated to leverage support for corrective actions buildingon a growing numbero f good practices inIndia and internationally. India: Strengthening Institutions for Sustainable Growth ... 111 8. A central feature throughout this study has been the extensive consultations and dialogue with various concerned sectors and players. Roundtable discussions, meetings, brainstorming events and workshops took place in December 2004, April 2005 (launch workshop), June 2005, August 2005, December 2005 (multi-sectoral consultation workshop on early findings) and July-August 2006 (consultation on the draft final report). A major public (non-governmental organization; NGO) consultation worksfiop was held in July 2006, followed by meetings with government representatives o f all the sectors involved (environment, industry, power, and highways). In addition, several consultations were held by study consultants during summer 2005 with local stakeholders at the project sites selected as case studies. The draft report was also posted on the Internet for broader public review and feedback duringJune-July 2006. 9. A highlyconsultative process was particularlyimportantbecause, from the onset, the main added value o f this exercise was not as much in producing new knowledge or a new analytical result, as in helping to develop a commonly shared vision on the way forward, reconciling different perspectives by diverse stakeholders. The importance o f this approach was further reinforced by a conclusion from the study that the lack o f effective dialogue among opposing stakeholders i s becoming a binding constraint to further progress, so much desiredby the very same stakeholders. 10. The key findings and recommendations o f the study are grouped under five themes: (i)facilitating national dialogue and public participation; (ii) expanding the regulatory toolkit to enable environmental compliance; (iii)strengthening the capacity o f environmental agencies to meet the growing demands, (iv) aligning sectoral incentives with environmental priorities; and (v) working across sectors. Facilitating National Dialogue and Public Participation 11. While the impetus for change and more effective action i s building up and being recognized, albeit to a varying degree, at all levels and by all players, there i s a serious breakdown in public trust and constructive dialogue with respect to addressing a very complex and non-trivial set o f issues. Increasing confrontation and suspense make the much needed environmental management reforms difficult to agree upon and implement, further exacerbating environmental problems. There i s an urgent need to start working towards developing a commonly shared vision on the way forward, involving all principal stakeholders and reconciling diverse perspectives. 12. Managing expectations from the public and decision-makers regarding the public participation process i s important. Successful public participation does notjust happen. One o f the key recommendations i s to carefully plan and execute a long term national program for supportingpublic participationin environmental management aimed at educating and building capacity o f all stakeholders involved. The first step could be to develop detailed guidelines, as well as provide training, on public participation for both State-level environmental authorities and sectoral agencies (adjusted to sector's specifics). Significant attention should be given to building civil society capacity at the community level to help communities understand the environmental issues and linkages to sector activities, and thus effectively gamer participation in public forums. Overall, the program should be designed and targeted according to the diversity o f India's stakeholders (with some o fnon-government stakeholders being more educated than the regulator). India: Strengthening Institutions for Sustainable Growth iv 13. While it i s very important to increase the effectiveness o f the more traditional forms o f public participation, such as public hearing, the program should also promote innovative and more interactive approaches that can increase the level o f public awareness, involvement, and ownership o f environmental problems and solutions. One such example, already piloted in India, i s the citizen involvement in environmental monitoring and enforcement, which should be further supported. 14. Furthermore, the passage of the Right of Information Act (RTIA) provides a valuable opportunity for developers and regulators to improve public relations, which they cannot afford to miss or under-utilize. It i s important to widely disseminate policy guidelines on the type o f informationthe public has access to. The Information and FacilitationCounter (IFC) launchedby the MoEF inDecember 2005 is an excellent initiative to make information easily available. This should be extended by making special efforts and arrangements to effectively reach out to the entire country, including remote locations. 15. Effective environmental enforcement requires informed consensus on environmental management objectives and policies that are based on a good understanding o f the shared roles and responsibilities of all players, including the regulator, the regulated community (developers and polluters) and the affected community (general public). This fimdamental notion o f shared responsibility i s currently challenged in India by the general perception among the public, project proponents, and development authorities alike that environmental i l l s are the sole responsibility o f environmental agencies failing to effectively implement and enforce the laws. As India's economy continues to accelerate, the performance o f the environmental regulator will come under increased scrutiny and pressure. The study shows, however, that unless an increasing public demand for better performance by the environmental regulatory agencies i s matched by adequate support to these agencies, conditioned on institutional reforms to increase efficiency, transparency and accountability, it would be naive to expect substantial progress and unfair to solely blame the regulator for the lack o f it. Expanding the Regulatory Toolkit to Enable Environmental CompliancebyDiverse Sources 16. The analysis revealed that much remains to be done to strengthen the regulatory, enforcement, and incentive mechanisms at the disposal of environmental agencies. The main focus on large point sources in applying environmental regulations does not match the scale and diversity o f the India's economy, with its multiplepollution sources, dominated by small-scale industrial units or often being outside the industrial sector. Nor i s it responsive to changing pressures resulting from the country's accelerated growth, such as unwieldy urbanization and regional development that are overstretching both public infrastructure and the carrying capacity o f the natural environment; massive expansion in highways and transmission lines; or private investment in power generation using imported coal with different properties than those the current regulation is designedto control. At the same time, as highlighted in the NEP 2006, enforcement efforts are undermined by the lack o f credible deterrents: the two key sanctions currently available to the regulator -filing a criminal case against a violating company or issuing an order to shut it down - are either too time consuming to pursue or too extremeto be routinely used. India: StrengtheningInstitutions for Sustainable Growth V 17. In sum, the toolkit the regulators use to facilitate compliance needs to be considerably expanded and strengthened to adequately deal with a very diverse regulated community. This would require new regulatory programs and approaches for different categories of priority sources, particularly targeting activities other than large point sourcesthat cause significant cumulative environmental impacts. Specifically, there i s a need for regulatory programs targeting: (i)numerous small and medium enterprises (SMEs), estimatedby the MoEF to account for 70 percent o f the total industrialpollution load; (ii) the growing municipal sources o f pollution; (iii) multiple industrial, municipal and transport sources contributing to environmental degradation in a particular area or ecosystem; and (iv) linear projects with complex direct and indirect (induced) impacts, such as the highways projects. The new regulatory programs should be designed to (i) deliver a credible threat o f enforcement, using, where needed, innovative methods and mechanisms tailored to a targeted group o f sources; and (ii) make a greater use o f suitable economic incentives, particularly for small-scale businesses with higher abatement costs. Some actions are already being taken but a bolder and more systematic effort i s needed. 18. The study recommends wider dissemination o f and learning from recent successful examples in India and elsewhere o f effective packages for clusters of SMEs that combine focused enforcement effort with extensive outreach and compliance assistance in the form o f knowledge, capacity building, and financial aid, such as a matching grant or soft loan, to help with the cost o f adopting a cleaner technology. The emerging lessons could be used for initiating a national program for SME clusters that would guide the design and implementation of suitable packages at the local (municipality) level tailored to the specific local circumstances. The programcould also provide matching grants for compliance assistance, expanding the current initiative by the MoEF that supports the construction o f common effluent treatment plants (CETP) for SME clusters to other pollution control and prevention measures identified as priority by the respective local program. When applicable, it would be also useful to facilitate, as part o fthisprogram, accessto carbon finance (as inthe case o f energy efficiency/clean fuel switching measures) or other concessional global environmental financing instruments. 19. To deal with multiple sources o f pollution within a particular area, it would be important to build on lessons from considerable past experience in India and internationally for designing more effective area-based pollution management programs, particularly for new priorities, such as urban air quality action plans or hazardous waste management. Making this approach more effective for India would likely require linking it with the decentralization process and local government agenda, strengthening the authority o f municipalities and regional development authorities, and enabling them to facilitate integration o f multiple sectoral strategies and stakeholders. 20. Better recognizing the vast diversity of regulated sources in applying national discharge standards i s another important area o f refining regulatory approaches towards ensuring a greater level o f compliance. The process o f setting source standards should better recognize significant differences in the ability to adopt pollution control and cleaner process technologies requiredfor meeting these standards, between large and small units and between new and old facilities (particularly old public utilities, such as power plants). There i s a need to strengthen and clearly define the methodology for an economic impact assessment o f the proposed environmental standards and regulations, drawing on best international practices. This assessmentwould provide a scientific basis for differentiating the requirements between India: Strengthening Institutions for Sustainable Growth vi different categories o f sources, as well as allowing a phased implementation schedule, adjusted to different sources and locations, which i s feasible for meeting the new requirements. At the same time, regulations should be backed by credible enforcement sanctions for failure to meet new standards by the established deadline as well as provide practical incentives to facilitate compliance with the new standards ahead o f schedule (an approach often usedby the EuropeanUnioncountries). 21. One o f the top priorities i s to strengthen the current system o f punishment for environmental violations that i s too difficult for routine implementation in the situation o f widespread non-compliance. It would be important to promptly evaluate, refine and expand the recently introduced bank guarantee system in select States (an application o f the environmental performance bond instrument), as a condition o f renewing an environmental license ("Consent to Operate") for violators. There i s also a need for exploring other innovative schemes to strengthen enforcement deterrents, as environmental bonds are not appropriate for all circumstances, building on the NEP (2006) that calls for "a judicious mix o fcivil and criminalprocesses and sanctions" (MoEF, 2006, page 17). 22. Inaddition to the above priorities, there is a double benefit to regulatory agencies from recognizing and encouraging good environmental performance and voluntary initiatives by the industry. The Charter on Corporate Responsibility for Environmental Protection sets a good example o f a collaborative process to expand upon through some regulatory incentives, such as extending the duration o f CTO or/and reducing the frequency o f inspections for industries that demonstrated a good record o f past performance, obtained I S 0 14001 certification, or introduced environmental auditing or sustainability reporting. This provides an additional (even if small) incentive for other industries to follow and to innovate further. It also allows SPCBs to focus their scarce resources on serial offenders and other priorities. There i s a significant and under-realized scope for providing such support, usinggoodpractice examples o fa handful o f SPCBs. 23. Public disclosure of environmental information and citizen participation in monitoring have the power to motivate better compliance by holding the industry and government agencies accountable for their performance and decisions. It i s important to continue supporting citizen-monitoring efforts that CPCB/SPCBs have initiated bypromoting public-private partnerships for compliance monitoring and establishing public notification procedures for sharing relevant data. Strengthening the Capacity of Environmental Agencies to Meet Growing Demands 24. Matching the capacity of the regulator with the multiple and expanding regulatory mandates in a rapidly growing economy is a major challenge. There are significant capacity constraints o f State environmental agencies to meet their existing mandates, as well as the need for introducing new regulatory programs and tools and improving the effectiveness o f existing ones. Furthermore, the pressures for processing consents to establish and operate (CTEs and CTOs), as well as for conducting inspection visits, are increasing for most SPCBs due to continued rapid growth, adoption o f shorter timelines for approving new investments, and a larger number o f units to monitor. In addition, public interest litigation (PIL) and other court cases against SPCBs are on the rise in many States, which - albeit a positive sign o f civil activism - i s further eroding the capacity o f India: Strengthening Institutions for Sustainable Growth vii SPCBs to inspect and enforce as its already limited staff resources are re-allocated to dealing with those cases. Notwithstanding that the volume and complexity o f workload i s growing disproportionately to the staff, skills and resources, State governments often exacerbate the situation by indiscriminate hiringfreezes. 25. The study recommends that the MoEF and CPCB consider, usingrecent examples o f several SPCBs, requesting and guiding all SPCBs to develop a medium term capacity strengthening action plan to meet the current and projected workload, including the requirements o f the RTIA and the recent increases in court cases. These plans should first explore the possible efficiency gains through: (i) rationalizing processes (e.g. linkingconsent duration and inspection strategy to environmental risks and performance o f a facility); (ii) upgrading technology (e.g. full computerization o f application processing, greater use o f continuous environmental monitoring when possible); (iii) decentralizing responsibilities to regional offices, along with staff, resources and equipment; outsourcing certain non-core functions; (iv) training to upgrade skills, etc. It would conclude with a staffing plan including a possible need for additional positions to meet the core needs, upon exhausting all options for improvements in processes and efficiency. The plan could then be used for negotiations with State governments over additional staff positions, subject to making a strong and verifiable case. 26. Furthermore, a system o f oversight between the center and States needs to be strengthened to ascertain greater accountability for the level of performance by State environmental agencies, which varies greatly across states. The MoEF and CPCB could consider introducing a performance-based program o f support to SPCBs, which would be rewarded for exceeding the agreed performance targets, in addition to the "needs-based" technical assistance to SPCBs with particularly low capacity (e.g. in new andor poorer States). Improving efficiency and accountability o f the forests departments in providing the forestry clearance and performingcompensatory afforestation i s another priority action area. Aligning Sectoral Incentives with EnvironmentalPriorities 27. Inaddition to the critical roles o fthe environmental regulator and the civil society, there i s also a fundamental need for sectoral agencies to facilitate better environmental compliance and performance o f individual projects, more sustainable development o f the sector as a whole and a greater cross-sectoral coordination, particularly at the planning stage. Case studies and sector reviews show that environmental monitoring and enforcement o f specific sources can do very little to improve the situation on the ground if environmental factors are not considered at the time o f location decisions, spatial planning, project design, and technology selection. Sectoral agencies and local governments are typically betterpositionedto influence these choices than the environmental regulator. 28. The industry sector agencies can significantly influence environmental outcomes by: (i)integrating environmental objectives in the State Industrial Policy, already done by several, though not all, States; (ii)linking industrial promotion incentives (such as tax holidays and soft loans) to environmental risks and performance, for example conditioning incentives on securing an environmental performance bond by industries with hazardous processes; (iii) coordinating with SPCBs and municipalities for better planning and zoning that integrate environmental considerations, including the need for common environmental infrastructure; (iv) organizing programs to raise awareness o fbusiness opportunities linked to India: Strengthening Institutions for Sustainable Growth viii good environmental management, using increasing examples within India; (v) promoting partnerships between larger industries and smaller suppliers, such as "green supply chain" initiatives; and (vi) facilitating environmental knowledge sharing and training by business associations, particularly in "emerging" States with massive new development investments (e.g. Chhattisgarh, Jharkhand, and Orissa). 29. In the power sector, there is significant synergy between the three core drivers shaping future development o f the sector. These are: (i) meeting a growing demand for electricity at affordable cost; (ii) ensuring long-term security o f primary energy supply through an appropriate mix o f sources; and (iii) minimizing the environmental impacts -at the local, regional and global level. Nevertheless, there are a number of areas where further alignment of sectoral policies and programs with environmental considerations i s required. These include: (i)a more focused effort to promote the uptake o f energy efficiency and conservation measures on the ground; (ii) enhancing energy efficiency and environmental considerations in coal-based generation, including the construction o f new plants and the Renovation & Modernization(R&M)program for old coal fired power plants; (iii) strengthening incentives for ash management and use o f better quality coal; and (iv) creating a stable regulatory environment for renewable energy generation at the State level. It would be also useful to include environmental indicators o f sector performance in the Ministryo fPower (MOP)onlinedatabase andannualreports. 30. Furthermore, the recent introduction o f the Net Present Value (NPV) for diverted forest land has illustrated that environmental regulation can significantly influence the cost and tariff structure o f power generation and transmission projects, and skew the market o f power generation in favor o f certain primary energy sources and technology choices over others. The impact o f the NPV payment that has been particularly felt by new hydro power projects highlighted the need for a comprehensive and consistent methodological framework for estimating and accoung for all relevant externalities. This would help assess the full economic costs and benefits o f alternative power sector technology choices at the project and system level, and devise regulatory and/or financial incentives to be provided to investors in generation that would faciliate optimal technology and/or energy source choices. 31. In the rapidly expanding highways sector the key recommended sector specific actions are: (i) strengthenmechanisms, at bothpolicy and implementation level, to take better account o f the indirect, induced cross-sectoral and cross-boundary impacts, based on best practices available in India and internationally; (ii)provide technical guidance on key environmental management aspects through sectoral Guidelines;(iii) integrate environmental management measures in the updated construction codes and technical specifications for highways and road projects; and (iv) develop a manual for translating provisions o f the Environmental Management Plans (EMP) into contract clauses to improve the implementation o f EMP and environmental performance o f contractors. 32. The environmental agenda provides additional opportunities to support the development of a modern and efficient sector. This i s particularly evident in the power sector but applies to other sectors as well. Around the world, national environmental requirements have often steered technological innovation, energy conservation, management improvements, better planning, and superior design that, in the longer term, become beneficial for sector-wise and economy-wide performance. As concerns about global India: Strengthening Institutions for Sustainable Growth ix environmental issues, such as climate change or toxic chemicals, have led (and continue to lead) to the development o f international concessional financing mechanisms, along with efforts related to knowledge, technical assistance and technology transfer, these instruments can and should be more effectively used by India to reinforce and advance sector development objectives and national environmental priorities. For example, India represents one o f the largest potential markets for carbon-reducing investments under the Clean Development Mechanism (CDM). Following a meeting o f G-8 countries in summer 2005, the Investment Framework for Clean Energy and Development i s being developed to accelerate investments that can meet the growing energy demands in an environmentally sustainable manner. It i s important for government agencies and private sector players in Indiato become an active and informed participant o f this process, highlightingthe need for a country-specific strategic assessmentof "low carbon" economic growth options. Working Across Sectorsfor CommonPublic Good 33. There are also important common needs highlighted by all stakeholders o f environmental management. Summarized below, these could be good entry points for working together and buildingconstructive partnerships. Improving Access to Information, Knowledge and Training 34. There i s a general consensus that all institutions -representing environmental, sectoral, and civil society stakeholders - can play a key role in strengthening the knowledge base and technical capacity that are important inminimizing the environmental impacts o f development. Much o f the information i s already being provided by various institutions, and it i s important to focus hture efforts on: (i) disseminating it more evenly across the country; (ii) providing high and comparable quality sector-specific training across States and organizations; and (iii) developing targeted, well-designed and well-delivered programs for community learning. Strengthening Cross-sectoral Coordination 35. The lack o f effective mechanisms for inter-agency coordination i s too often at the root o f environmental management problems, including difficulties with compliance and enforcement, as well as failures o f common environmental infrastructure. It i s thus critical, for both sectoral and environmental authorities, to evaluate, share and promote national best practice examples o f State-level policies and institutional mechanisms, as well as relevant international experience that enable early and meaningful participation o f environmental agencies in the planning and design o f infrastructure and industrial development projects. Examples from sector reviews include the Environment and Social Management Framework for the highways sector by the Government o f Gujarat; and the efforts o f the Government o f Andhra Pradesh to integrate environmental considerations into industrial development planning. The Charter on Corporate Responsibility for Environmental Protection drawn up jointly by the industry and MoEFKPCB i s another good example o f a collaborative action to follow. India: StrengthemngInstitutions for Sustainable Growth X Empowering Local Governments 36. New priorities and programs, such as urban air quality action plans, programs for SME clusters, or other area-wise pollution management programs, will require even greater cross-sectoral cooperation and integration within a particular municipality or other spatial zones. Municipal or other appropriate local governments appear to be best positioned to have the right incentives to ensure the coordination needed. It would be thus important to provide them with sufficient authority and capacity to forge such coordination. Devolving more powers to and building capacity of local governments, set in motion by the 73rd and 74th Constitutional amendments, would be necessary for developing and implementing environmental management programs aimed at measurable improvements o f environmental quality in the areas o f their jurisdiction, with the participation o f all concerned sectors, as well as citizens. The Way Forward 37. The emerging environmental agenda i s of immense proportion. The needed institutional changes and large-scale improvements on the ground will require national commitment and consensus on a program o f actions spanning over the long-term. Many o f the measures would involve further examination, design, as well as consultations with the public, other government agencies, and the regulated community. It will also require that environmental agencies, sectoral institutions, and the general public patiently work together to progress towards the objectives set out inthe NEP. 38. An enormous agenda is not new for India, which has on numerous occasions risen to meet such challenges. Encouragingly, many steps and initiatives setting the right direction have been recently taken by various players, including the environmental regulator. It would be important to move quickly towards reaching a broad agreement with all major stakeholders on the priority actions, starting with the identifiedlist (Table S.l), and develop a medium- to long-term program of implementing the agreed actions supported by necessary resources, monitorable targets, and clear accountability mechanisms. India: Strengthening Institutions for Sustainable Growth xi Table S, :Key proposed actions and the roles of different stakeholders IssueIArea RecommendedActions EnvironmentAgencies RegulatedSectors CivilSociety Promotepublic Develop a national program, Develop sectoral guidelines Collaborate on participation including: and training on public developing effectwe 0 Programs for raising consultation programs for public community knowledge and consultation and capacity Disseminationo f examples community Guidelinesandtraining to when public participation knowledge SPCBs onpublic improved project performance consultation Share local 0 Programs to involve knowledge with citlzens inmonitoringand envlronmental enforcement agencies and sectors Improve access to Publicize the Informationand Develop networks o f regional Proactively use the information, Facilitabon Center and create centers within appropriate Right to Information knowledgeand its offices inother locations existing institutions to provide Act to obtam local training high quality traimng and environment data Develop and regularly update knowledge across the country public on-line environmental Dissemnate relevant data base Develop sectoral guidelines information to andor sharebest practices to affected communities Develop guidelines to overcome specific knowledge facilitate the use o f the Right gaps to InformationAct Set feasible standards Review best international Provide necessary economic Provide an for a diverse practice procedures for information, collaborate on the mdependentreview regulatedcommunity setting/differentiating source analysis and facilitate o f the proposed standards and develop consultation with the regulated standards guidelines for India community Introduce an enhanced Develop, incollaborationwith methodology for an economic MoEF/CPCB a consistent impact assessmento f new framework for integrating regulations externalities inthe regulatory regime for the power sector Introduce new Develop well-packaged Provide tramng and capacity Participate in regulatoryprograms regulatory programs for SMEs building to SMEs on development o f local to address growing clusters that integrate targeted compliance and related SME and area-based pollutionsources enforcement with compliance business opportunities environmental assistance programs Promote greening supply Develop "new generation" chain and industry mentoring Allow community area-basedpollution mitiatives monitoring o f SMEs management programs dealing and other sources o f with multiple sources that Collaborate on development pollutioninthe area focus on ambient quality an area-basedprogram outcomes Strengthen Adopt a planto improve Promote self-monitoring Develop public and monitoringand effectiveness o f momtoring, disclosure "green enforcement mcluding greater use o f CEM Offer sector rewards for good rating" and schemes technology and self environmental compliance and Parkipate incitlzen monitoringdata performance monitoring programs India: Strengthemng Institutions for Sustainable Growth xii Penodically update sectoral Provide information and Collaborate m guidelines for monitonng, add technical assistance on public-private new sectors o f growing impact compliance partnershlps to such as highways improve awareness and compliance Evaluate, refine and expand and strengthen the pilot bank guarantee system Improve cross- Empower local government to Share andpromote best Organize early sectoral coordination oversee localhegional practice examples o f mvolving involvement o f civil environmental programs that environmental authonties in society groups m require cross-sectoral regional zoning andproject zoning andplanning coordinahon planning/citing/design activities, and oversight o f local Expandprogram o f environmental developing environmental programs zoning atlas for mdustrial and urban areas Promote good Develop a set o fregulatory Industry: Integrate Public greenrating environmental mcentives to support voluntary envlronmental objectives in and disclosure performance by imtiatives, usmg existing good the State Industrial Policy and programs sectors practices linkpromotionincentives to envvonmental performance Citizenmonitoring Collaborate on developing and awareness raising incenhve packages for energy Power: Provide mcentives for programs efficiency and clean coal better ashmanagement and enhanced R&M o f coal plants; Coordinate the development o f include environment a strategic framework for performance indicators in using global environmental MOPdatabaseand annual financing instruments reports Highways: Integrate environmental management measuresincodes and specifications through a systemo fperiodic revision; develop a manual for incorporating EMPs in contract documents Strengthen regulator Develophmplement medium- Provide mputshggestions for Participate in capacity and term capacity strengthening improving effectiveness and developing capacity oversight of its action plans to meet growing efficiency o fprocesses upgrading action plan performance mandates o f SPCBs Provide independent Review andrecommend verification o f measuresto improve the regulator forestry clearance process performance Strengthen an oversight program for SPCBs, including performance-based incentives I.KeepingUpWithEnvironmentalChallengesofRapid Growth India's Growth Story 1.1 Indian economy i s one o f the fastest growing in the world with a consistent average growth of about 6 percent over the past decade (Figure 1.1). Since 2003, growth reached 7-8 percent per year, and the country aspires to achieve and sustain an average annual growth rate o f 8 percent or higher, much needed for eliminating poverty among 354 million o f its population, representing27 percent o f the world poor'. Figure1.1: A Decadeof India's Economic GrowthinPerspective Average Growth Growth Trend 1994-2004, (Percent) (Percent) 8 .............................................................................................................................. / 1 7 ........................A .............................................................................................................................................. India ........................... ......................................... ............................................. ......................................... 1994 1996 1998 2000 2002 2004 Year Benchmark India SouthAsla Source: WorldBank(2006~) Note: Benchmark countries: Average annual growth rates are computed for those countries that had similar level of per capita income to India in 1994.South Asian countries include Bangladesh, Pakistan, Nepal, Sri Lanka, and Bhutan 1.2 While poverty, disparity and challenges remain, robust economic growth has already allowed millions o f people to emerge from poverty. The national poverty ratio has halved from 36 to 18 percent in less than ten years, from 1994 to 2002 (National Institute o f Rural Development (NIRD), 2003). Estimates suggest that about 300 million o f the approximately one billionpopulation hasjoined the middle class2inIndia. * UnitedNationsEnvironmentProgram ' Definedas those living on less than one US dollar per day (purchasingpowerparity). (UNEP) definesmiddle class as those earninginexcessofUS$7,000 per India: Strengthening Institubons for Sustainable Growth 2 EnvironmentalImplications: Risks 1.3 Rapid economic growth and the resulting changes in consumption patterns are drastically changing the nature and scale o f impact on the country's environment and natural resources, thus testing the carrying capacity o f the natural ecosystems upon which much o f the country's economic growth depends. 1.4 Growth o f India's economy i s led by robust performance o f the industrial sector. Impressive growth inmanufacturing (7 percent average over the past 10 years) i s a reflection o f growth trends (Reserve Bank o f India, 2005) including electronics and information technology, textiles, pharmaceuticals, and basic chemicals. These industries, belong to the "red category" o f major polluting processes designated by the Central Pollution Control Board (CPCB), and have significant environmental consequences interms o f water effluents and/or air emissions and hazardous wastes (Table 1.1). The economic boom has also led to an increase in investments and activities in the construction, mining, and iron and steel sectors. This, inturn, i s causing a significant increase inbrick making units, sponge iron plants and steel re-rolling mills that use highlypollutingprocesses. 1.5 The result i s a visibly deteriorating environmental quality in many industrial townships, bringingback memories o f earlier industrializations in the 1960s and 1970s (Box 1.1) and highlighting the importance o f stepping up efforts to manage the externalities o f accelerated growth. The Government o f Orissa, for example, i s expecting over 600 percent increase in the installed capacity o f iron ore-based industries in the hture3, and has recently banned the location o f new sponge iron industriesin six areas o f the State due to concerns over growing air pollution andpublic complaints. 1.6 A frequent (and valid) argument from the industrial community is that new investments in large industrial projects bring modem and clean technologies, and big companies, particularly those with global market outreach, increasingly adhere to sound management practices. In reality, the impact o f industrial growth is more nuanced and complex. An estimated 70 percent o f the total industrial pollution load i s attributed to small and medium enterprises (SMEs) many o f which, especially small-scale units, continue to use obsolete technologies with no or primitivepollution control method^.^ With about 40 percent o f the total value o f industrial production and over 4.5 million units5across the country, the SME is a major engine for growth, employment and poverty reduction, raising a dilemma of balancing economic and environmental objectives. Furthermore, even with advanced technologies minimizing the impact o f individual units, the cumulative impact o f growth at such a scale and o f such diversity, involving a mix o f large and small industries from multiple sectors and inducing unwieldy urban development as well as outpacing the capacity o f supporting infrastructure, i s (and should be) a matter o f concern. Data from the Departmentof Steels and Mines, Government of Orissa Source: Ministryof Environment and Forests (MoEF) Website, http://www.envfor.nic.in/ As per 31dAll India Census o f small scale industries, there are around 4.4 millionunits employing 24.9 millionpersons India: Strengthening Institutions for Sustamable Growth 3 Industry Key EnvironmentalAspects Aluminum Disposal o f red mud, bauxite tailings and other hazardous waste, dust emssions and lugh energy consumption. Caustic Water polluhon due to disposal o f brine mud, mercury and chlonne; chlorine emssions. Cement Fugitive dust emissions from material handling and air emssions from stack; energy consumption. Copper Sulphur dioxide and dust emissions; water pollution from electrolytic bath and other processes; disposal o f slag from smelter. Distillery Water pollution due to highly organic effluent from spent wash; soil contamination. Dyesand dyes Water pollution due to toxic azo-dyes, highly organic colored and phenolic intermediates substances. Fertilizer Water pollution due to heavy metal, ammoma and fluoride bearing effluent, ammonia emission. fluoride bearing dust and hazardous material. Iron and steel Water pollution from cyanide, fluoride and heavy metal beanng effluent, dust emssion from sintering, pelletization, pig ironplants; slag and dust disposal. Leather Water pollution, particularly from hexavalent chromum and salt lndischarge. Pesbcide Air pollution due to particulate and volatile organic compounds; effluent containing pesticides residues. Petrochemcals Water pollution due to phenol and benzene containing effluent; fugitive emissions o f toxic and carclnogemc and volatile organic compounds (VOC); hazardous material disposal. Pharmaceuticals Water polluhon due to organic residues beanng effluent; VOC and particulate emissions; hazardous waste containing process sludge and spent catalyst. Pulp andpaper Water pollution from lugh organic and inorgamc substance and chlonnated compounds in black liquor; highly malodorous emissions o f reduced sulfur compounds and VOC. Refinery Water pollution from effluent contaming organic and inorganic material, oil and solvent; air emission o f particulate matters, sulfur dioxide, "benzene, toluene, and xylene", VOC. Sugar Water pollution due to h g h biological oxygen demand (BOD) and chemcal oxygen demand (COD) effluent and spillage o f molasses; air pollution due to combustions o fbagasse, coal, etc. Thermal power Air emssion from combustion, coal handling, water pollution due to discharge plants o f boiler blow down, overflow from ash pond; land contamination due fly ash disaosal Dractices. Zinc Au pollution due to fugitive zinc dust, water pollution containing residues, disposal o f solid andhazardous waste. India: Strengthemng Institutions for Sustainable Growth 4 Box 1.1:The SingrauliRegion: Legacy of UnsustainableEconomicDevelopment Located about 1000 km southeast o f Delhi, the Singrauli region was, until the early 1960s, a relatively isolated m a l and economically under-developed region. Today Singrauli's landscape is dominated by massive open-cast coal mnes (producing 50 million tons pa and with enough reserves to triple the region's current production), six thermal power stations with operatmg capacity o f 7,800 MW, installed hydro power capacity o f 400 MW, a significant number o f large public and private energy-dependent heavy mdustnes (including cement, alummum (150,000 tons per annum), caustic soda (33,000 tons per annum), and a number o f other small and medium ancillaries), power transmission towers, belching smokestacks, quarries, and a number o f crowded, congested and polluted urban centers ("Boom Town Effect"). The region i s a remarkable example o f what almost half a century o f induced development without adequate social and environmental safeguards can produce: a muchneeded economic productivity and corresponding severe social depravationhagmentation and environmental degradation. On the socio-economic side, the region's development has brought disruption to the traditional way o f life (including impact on indigenous forest-based people), several waves o f displacement (300,000 people by some accounts, due m a n l y to the formation o f the Gobind Ballabh Pant Sagar lake), unfulfilledpromses o f equitable and permanent resettlement (some families have been relocated several times), lack o f adequate infrastructure and public amenities, as well as lack o f economic opportunities. Air and water pollution are o f great concern, especially the presence o f mercury in the food chain and other chemicals and heavy metals mwater resources. In 1991, the Government o f India (GoI) designated the region as a cntically polluted zone, for whch a comprehensive remedial Action Plan has to be develop and implemented. Environmental management plans were designed for each o f the local industries, with a significant level o f monitoring and oversights from environment and local authonties. An apex Committee was set up headedby a Chaman, Special Area Development Authority (SADA), for regular review o f progress. Recent evaluation shows that the situation has improved to some extent with respect to compliance with the Action Plan recommendations. The Committee further recommended better monitonng o f air and water quality mthe long term that includes undertaking an assessment o f the carrymg capacity o f the region, adopting cleaner coal technologies, and environmental capacity building. (Source: Bose and Leitmann, 1996) 1.7 To achieve and sustain the targeted 8-10 percent rate of economic growth, India has to invest massively to expand and upgrade its overstretched infrastructure, particularlypower supply and roads, which are currently regarded as major bottlenecks to growth by investors (World Bank, 2004~). 1.8 The capacity deficit in the power sector i s already resulting in severe power shortages as peak load shortages reach 12 percent (Ministry o f Power (MOP), 2005). According to the 2001 census, over 50 percent o f households lacked access to basic lighting (Registrar General and Census Commissioner, 2001). Furthermore, the per capita electricity consumption in2003 was still relatively low at 435 kWh, against 1,400 kWh in China, 2,400 kWh world average and 13,000 kWh in the USA (EA, 2005). Considering that the Government o f India (GoI) aims at universal access to electricity by 2012 and the need to improve power supply to industrial and urban consumers, sizeable additions to generation, transmission and distribution (T&D) capacity are urgently required, along with efficiency improvements, demand-side management, and reduction o f substantial losses in the T&D networks. To fill the significant demand-supply gap, India plans to nearly double its current installed capacity (115,500 MW as o f January 31, 2005) by 2012 through pubic and private power generation companies (MOP2005). I t i s expected that about 30,000 MW will be added duringthe TenthPlan (MOP, 2005). India: Strengthening Institutions for Sustainable Growth 5 1.9 This scale o f development cannot happen without significant environmental implications. The power sector i s associated with a host o f environmental externalities, manifested at different spatial levels - local, regional and global (Box 1.2). The key environmental concern for India i s linked to heavy reliance on coal, which accounts for about 60 percent o f power generation. While special efforts are made by Go1to increase the share o f hydro and other alternative energy sources, coal i s likely to remain the dominant fuel for many years (Figure 1.2) given India's vast indigenous coal resources. Box 1.2: Key EnvironmentalIssuesinthe Power Sector Coal-based thermal power has significant envlronmental effects due to gaseous emissions, particulate matter, fly ash and bottom ash, and water effluents. The impact is fiuther exacerbated bythe high ash content ofIndia's coal and aging facilities lacking modernpollutioncontrol; One o f the most serious effects of coal power stations is land requirement for ash disposal and percolation of hazardous elements into ground water through ash disposal in ash ponds. Due to enormous quantity o f ash content in India's coal, approximately 1 acre per MW o f installed thermal capacity i s required for ash disposal. If t h ~ strend continues, by the year 2014-2015, 1000 square kmo f land, equal to the size of the Honk Kong area, or 1square meter per person, should be required for ash disposal only; Coal-based generation i s also the man contributor to India's carbon dioxide emissions, linkedto changes inglobal climate; Hydropower projects, while having no ax emissions or ash, might put stress on ecological systems by accelerating soil erosion and changing water flows, and lead to resettlement of populations with the resulting change inlanduse pattern; and Transmission projects can disrupt sensitive ecological areas on the way and alter land use patterns. Figure 1.2: ForcedHydro, Nuclear, and Gas Scenario (Fuel Mix Year Wise) 1800 Source: PlanningComrmssion (2005a) India: Strengthening Institutions for Sustainable Growth 6 1.10 Major investments are required in the roads and highways sector to support India's continued economic growth, improve connectivity, and assist with reducing poverty. The density o f India's road network relative to its land area i s 768 km/l,OOO square km, which i s similar to the United States o f America (USA; 657), and far higher than China (141) or Brazil (203). However, the road density relative to the population i s only 2.53 km/1,000 people, higher than China (1.08) and lower than Brazil (10.28), UnitedKingdom (UK; 6.33), or USA (22.68). Inaddition, although roads carry almost 85 percent o f the country's passenger traffic and about 65 percent o f its freight, most highways in India are narrow, congested and have poor surface quality. Therefore, Go1 i s implementing a multi-phase program, with an allocation o f US$ 13.5 million (Rs. 59,490 crores) in the Tenth Plan period (2002-2007) for the central sector roads. A major part o f this allocation i s for improvement and capacity augmentation o f 65,569 km o f national highways. Similarly, the States are expanding and upgrading State highways (comprising 16 percent o f the total State roads network while carrying about 40 percent o f the total traffic), which often are main bottlenecks to the economic development agenda o f States. These massive construction programs are transforming India's landscape, and the scale o f environmental impacts i s yet to be appreciated (Box 1.3). Box 1.3: EnvironmentalImpacts inthe HighwaysSector The range o f applicable environment issues and impacts i s most often accentuated and should be prioritized in the context of their geographical location. Key direct impacts include: soil degradation, i.e. loss o f top soil and reduction m the productive capacity o f soil covered by road; water resources modifications and drainage related issues leading to changes in surface and ground water flows and water quality degradation; air quality changes due to air pollution caused by construchon equipment and traffic related emssions; noise pollution due to increase in vehicles and construction and maintenance activity. Biodiversity may be directly impacted due to habitat loss, fragmentation, alterahon, and restriction inanimal migration paths. Cultural heritage, w h c h has a hgh social value, i s impacted by the potential damage to sites and the remains o f archaeological, hstorical, and religious structures. Furthermore, there are multiple linkages throughout the entre process o f accelerated highway construction activities that may lead to significant indirect impacts, often affecting larger geographical areas. The examples o f such impacts due to forward linkages include the degradation o f surface water quality by the erosion o f land cleared as a result o f a new road; increased deforestahon o f an area; increase in poaching in eco-sensitive zones during the construction works; changes in land use and settlement patterns due to migrations from rural areas, as a result o f improved transportahon facilities and better access, leading to growth o f urban and sem-urban townships that are unplanned with fragmented mfrastructure facilities. Road safety continues to be a major concern, especially for the poor groups who suffer from transport-related accidents because they use vulnerable modes such as walking and non-motorized transport. The main impacts from backward linkages related to mining and quarrying. For example, airborne silica generated from stone crushers i s found to increase morbidity and mortality from silicosis. Dust from these operations affects local communities often located inclose proximity to such facilities. (Source: information collected by the study) 1.11 Mirroring the country's size and diversity, the environmental risks and problems are wide-ranging. India's dual features o f a low and middle income economy are reflected inthe environmental damage estimates. These damages are still dominated by "poverty-related" risks, such as lack o f sanitation and indoor air pollution inrural areas. The share o f "growth- related" risks manifested by the deteriorating urban environment, industrial waste, and chemical pollution i s however increasing (Hughes and others 2001; Lvovsky 2001). In the second decade o f strong economic performance, India i s making and planning hture massive India: Strengthening Institutions for Sustainable Growth 7 investments ininfrastructure, urban development, and industrialization. Not surprisingly, the issues o fmanaging the environmental impacts associated with rapid growth are coming to the forefront o fpublic attention6. EnvironmentalImplications: Opportunities 1.12 Importantly, economic growth also brings in resources, technologies, policies, capacity, andpublic demand for improved environmental performance and quality. 1.13 One o f the most comprehensive measures o f a country's environmental performance i s the Environmental Sustainability Index (ESI), which i s a composite o f 21 indicators that cover five broad categories o f environmental pre~sure.~Cross-country data reveal a strong positive relationship between the ESI and per capita gross domestic product (GDP), measured at purchasing power parity (PPP) exchange rate, shown by Figure 1.38. India appears to have a considerably better ESI score than China or Pakistan; nevertheless, and as all large South Asian countries, it has a lower ESI score than its level o f income forecasts (indicated by its positionthat falls below the regression line). 1.14 Cross-country analysis also shows that that there i s a positive relationship between the rise inper capita income and national enforcement o f environmental regulations -even at relatively low-income levels (Dasgupta and others 2001). A critical mediation role of environmental policies and institutions, which mature with growth in the growth- environmental outcomes relationship, i s illustratedby the diagram below (Figure 1.4). 1.15 India has a strong environment policy, legislative framework and well-established institutions at the national and State level. The Constitution o f India, through Articles 48(a) and 51(a)(g), has articulated the responsibilities o f the central government and citizens for ensuring protection and improvement o f the environment, and Article 21includes the right to live ina pollution free environment. The institutional capacity o fregulatory agencies, such as the Central and State Pollution Control Boards (CPCB/SPCB), has improved over time and there are documented successes in addressing certain problems (some o f which will be illustrated inthis report). Among the many recent initiatives o f the MoEF and CPCB are the establishment o f a task force to oversee the implementation o f environmental action plans for 17 categories o f the highly polluting sectors; developing, the Chapter on Corporate Responsibility for Environment Protection jointly with the industry; and conducting an 6 This has been a message from extensive discussions and consultations during the study when representatives o f all three sectors unanimously conveyed that "the environment" for making investments and doing business today i s very different from that 1&15 years ago, on account o f much larger sensitivities over environmental and social issues. ESI is a collaborative venture o f the Yale Center o f Environmental Law and Policy and CIESIN at Columbia University. The subcomponents measure performance in the following areas: (i) environmental systems, (ii) reducing environmental stresses, (iii) reducing human vulnerability to environmental stresses, (iv) societal and institutional capacity to respond to environmental challenges, (v) global stewardship (Esty and others 2005). As with any other aggregate index, the ESI is not without its shortcomings. Given the lack o f information in many countries, the ranlungs are an approximation o f sustainability, based on an aggregation o f a wide array o f indicators. A major weakness o f the ESI i s that it gives equal weight to all its *sub-components and so assumes that environmental stresses are uniform intheir impact across countries. The regression o f ESI (Esty and others 2005) on per capita GDP (World Bank, 2006c) i s controlled for population density, pnmary school enrolment rate (World Bank, 2 0 0 6 ~ )civil liberty and political rights ~ index (www.freedomhoitse.org), and democracy index (Jaggers and Marshall, 2000). The regression includes 128 countries/observations, andonly some of the countries are selectedfor presentationhere. ESI Scare Pakistan 0 China *3 Environmentalquality outcomes at different geographical levels *:* Environmental performance of individual units and sectors 111 India: StrengtheningInstitutions for Sustainable Growth 9 1.16 Importantly, over the past years there has been an increase in public demand for better environmental quality from the growing and increasingly assertive urban middle class, as demonstrated by drastic measures to improve air quality in Delhi, which now has the largest compressed natural gas-driven public bus fleet' in the world. All over the world, starting with industrialized countries in 1960s, it i s this broad-based constituencyfor change, created by both the environmental impacts o f unmanaged growth and economic well-being brought by growth, which has transformed environmental management from an obscure science into a backbone o f modern government structures. This public demand i s being increasingly matched by voluntary environmental performance obligations and initiatives from the large-scale Indianindustryasserting a prominent role inthe global market. EnvironmentalImplications: The Needfor MoreEffective Action 1.17 Despite an enabling legislation and progress ininstitutional development, keepingup with the environmental challenges ofrapid urban growth, industrialization, and infrastructure development (including provision o f adequate environmental infrastructure to booming urban areas) has proved difficult. This i s evident from the persistent high levels o f environmental pollution in excess o f national ambient standards (Figures 1.5 and 1.6). In2003, o f the nearly 3,000 ambient water quality observations, the levels o fprevalent organic pollution, measured as biochemical oxygen demand (BOD), exceeded water quality criteria for Class A water bodies in over 1,000 cases. The country-wide ambient air quality monitoring carried out by CPCB at 201 monitoring stations revealed that National Ambient Air Quality Standards (NAAQS) for respirable suspended particulate matter (RSPM), the main air pollutant of public health concern, were violated at most o f the monitoring stations (MoEF, 2005). The estimated annual economic cost o f damage to public health from increased air pollution, based on RSPM measurements for 50 cities with the total population o f 110 million, reached US$3 billion(Rs.15,000 crores) in20041°. ' For more information on the D e h case, see Greenspan and others 2004; World Bank 2005; and Narain and Greenspan 2004. lo Estimates based on the conventional benefit-transfer methods. For details, see Lvovsky and others 2000; World Bank, 2005. India: Strengthening Institutions for Sustainable Growth 10 Figure 1.5: Biochemical Oxygen Demand (BOD), Major Rivers, 2004 Yarmna, Yamna, Godavari, Ganga,at Yamna, Ganga, at Ganga, at Tapi, at at Delhi at Agra at kshik Kanpur at Patna Howrah Bhusawal Allahabad Figure 1.6: Respirable Suspended Particulate Matter, Residential Areas, 2004 200 I I h *) E 180 \ Y 160 .-5140 C s 120 100 6C 80 ;60 S 3 40 3 2 E 20 0 Source: CPCB website, httt,:iiwww.cucb.nic,in/ 1.18 Empirical evidence from India on the impact o f growth on environmental quality outcomes, based on a limited analysis across States, shows that the country i s still recording an upwardtrendinthe levels of major air pollutants -suspended particulate matter less than 10microns (SPM-IO) and nitrogenoxides @Ox) -inurban areas (Figure 1.7)." It mustbe l1state-levelpanelregressionanalysiswascamedoutbetween1991and2001.Airqualitylevelsareaveragesforall A monitored cities in a state, combining measurement in both industrial and residential areas (source: httu:i/www.cpcb.nic.in). State GDP data are obtained from www.indiastat.com. The analysis controls for institutional India: Strengthening Institutions for Sustamable Growth 11 stressed that this finding i s subject to caveats and cannot be generalized for other environmental quality/pollution indicators, an analysis o f which was not done because o f the lack o f suitable data. Figure1.7: EconomicPerformanceandUrbanAir PollutioninIndia's States Annual Mean SPMIO (ug/m3) -With ---- Delhi Without Delhi Delhi(1991) Delhi (2001), 30 Q0 0 0 OO 0 r Per capita Income(Rs) Source: Analysis undertaken by the study 1.19 Importantly, there i s also an indication (albeit not yet sufficient to change the overall trend) o f a decrease in SPM-10 pollution in Delhi, evident from Figure 1.8 and recorded by other studies12. Air quality data and trends highlight an emerging phenomenon o f conflicting trends for different categories o f cities, similar to that experienced by many other countries, and reflecting the complex forces behind the impact o f growth on environmental action and outcome. Figure 1.9 reveals opposite trends among SPM-10 levels for a group o f largest cities and a group o f smaller cities over the past ten years (1995-2004).13 While the levels o f air pollution decreased in the former group, they have been increasing for the latter group. Currently, the average SPM-IO exposure level inthe group o f smaller cities i s slightly higher than that for the larger cities group. This i s a result o f greater attention and effort given to (Kochhar and others 2006) and demographic factors (World Bank, 2006~).Regressionswithout Delhi, which couldbe consideredan outlier, andwith Delhi showed similar qualitativeresults, illustratedon the Figure.Dropping some other higher income-higher air pollution cities did not change qualitative results either. To control for possible effect of winter heating in northern cities, same regressions were run for average SPM-10 levels dunng the months of April- November only and yelded similar qualitative results. Regressions for NOx also showed similar qualitative results. However, SO2 levels, which are very low, do not show astatisticallysignificantrelationshipwith an income. l2 forexample,WorldBank(2005)foradetailedanalysisofairqualitytrendsinfivemajorIndiacities. See, 13 Largest cities are Delhi, Mumbai, Calcutta, Ahmedabad, and Hyderabad. Other cities are Bhopal, Nagpur, Jaipur, Kanpur, Jalandhar, Indore, Fandabad, Surat, and Vishakhapatnam. CPCB data on annual average SPM-10 concentrations for these cities is used to calculate population-weighted average exposure for each group. (Source: CPCBwebsite, http:llwww.cpcb.nic.in). SPkllO, Largest ates SFhill0, Other Cities The Study India: Strengthemng Institutions for Sustainable Growth 13 o f NEP priorities, significant attention was paid to developing, jointly with multi-sectoral government counterparts and by way of a broad-based consultative process, actionable and commonly shared recommendations to influence sectoral and cross-sectoral decision making towards more environmentally sustainable development practices. 1.23 .Giventhe size anddiversity ofIndia's economy andgeographyandthe resulting multiplicity o f environment development pressure points, the study approach was to exercise strategic selectivity. The scope o f work developed through extensive consultations with MoEF (the main counterpart) and multiple other stakeholders allowed to focus on priority issues, not covered by, and complementary to, recent or on-going work (for example, a review o f the environmental assessment (EA) process that the MoEF previously commissioned and which was nearing its completion at the time this study was about to start). It also allowed drawing o f wide-ranging conclusions relevant to a variety of stakeholders despite the limited breadth and depth o f the analysis that was possible within a reasonable timeframe. 1.24 The study specifically focused on the following issues: 0 Promoting greater accountability, transparency, and public participation in environmental management 0 Strengthening monitoring and enforcement o fpolicies and regulations 0 Addressingcapacity needs o f environmental institutions 0 Improving institutional incentives for integrating sectoral and environmental priorities. 1.25 The assessment covered the three select sectors that are among the key drivers o f growth: industry, power (including three distinct sub-sectors: coal-based power generation, hydro power generation, and transmission), and highways. Together, these sectors represent a variety o f environmental issues, such as water and air pollution, and hazardous wastes, as well as impacts on water flows, land and vulnerable ecosystems. They also represent diverse sources o f environmental impact -largepoint sources (power plants, large industry), small areas-based sources (small-scale industry), and linear sources (transmission lines, highways -requiringdifferentregulatoryandenforcementapproaches.Thesesectorsanticipate substantial scale-up o f future investments from both private and public sources. The analytical framework used by this study was a combination o f sector-wide reviews, based on secondary data o f issues, policies, regulations and institutions, with several case studies o f implementation experiences and specific projects in the selected sectors (Box 1.4 for case studies description). The case studies covering seven States o f India, aimed at gaining a deeper understanding o f the obstacles (as well as contributors) to better environmental compliance and performance on the ground. The case studies involved primary data collection and consultations with local stakeholders. Selective reviews o f international experience inenvironmental management were also conducted. The findings from all reviews and case studies were integrated to leverage support for corrective actions building on a growing number o f good practices inIndia and internationally. India: Strengthening Institutions for Sustainable Growth 14 Box 1.4: Case Studies ofImplementationExperience Industrial Sector The two case studies are: Naroda Industnal Estate in Gujarat (established in 1964 near Ahmadabad by the Gujarat Industrial Development as the first industrial estate inthe state); and Patancheru Industrial Estate inAndhra Pradesh (established inthe year 1975 inMedak district o f Andhra Pradeshabout 15 kmfrom Hyderabad) These two are representative o f the nature o f challenges in environmental management, types and capacities o f industrial sector and factors responsible for varying degree of environmental management. While Naroda represents an industnal area that has predomnance o f small and medium scale chemcal industries, Patancheru symbolizes an area that has a m x e d type o f industnes many o fwhich are inthe chemcal or pharmaceutical sector. Power Sector The three case studies covered three power sub-sectors and included: Dadri Coal Power Plant in Uttar Pradesh o f the National Thermal Power Corporation (NTPC). It is in commercial operation since 1995, and was the first NTPC plant inthe country usingbeneficiated coal; Koldam Hydro Power Project in Himachal Pradesh, also by NTPC. Construction started in 2001 and is expected to be completed by 2008-09. Located on river Satluj, this run-off river project i s a good example o fthe new generation o f hydro-power projects inIndia; and Dhauliganga-Bareily 400 KV D C transmssion line crossing Uttar Pradesh and Uttaranchal, commmioned by the PowerGnd Corporation o f India Limted (PowerGnd) and the National Hydro Power Corporation (NHPC). This is an example o f the transmssion project completed (over the period 2000-2005) in some o f the most difficult and demanding social and environmental conditions (passing through different ecological areas -mountains, valleys, forests, rivers and wildlife sanctuary, as well as multiple villages and towns). Highways Sector The two case studies selected were: Western Transport Corndor project (NH-4) in the state o f Karnataku, 259 km, funded by Asian Development Bank (ADB); and Jaipur-Kishangarh part o fNH-8 inRajasthan, 93 km, implemented on BuildOperate Transfer basis. These two road sections are part o f the prestigious National Highway Development Project (NHDP) proposed to augment the major traffic corndors (North-South and East-West) and the projects are being implemented by the National Highway Authonty o f India (NHAI). The issues however, are similar and can be applied to State Highway Projects where the implementing agency i s the state Public Works Department. (Source: Data collected during the study) ConsultativeProcess 1.26 A central feature throughout this country environmental analysis was the extensive consultations and dialogue with the concerned sectors and players. Roundtable discussions, meetings, brainstorming events and workshops took place in December 2004, April 2005 (launch workshop), June 2005, August 2005, December 2005 (multi-sectoral consultation workshop on early findings) and July-August 2006 (consultation on the draft final report). A major public (non-governmental organization; NGO) consultation workshop was held inJuly 2006, followed by meetings with government representatives o f all the sectors involved (environment, industry, power, and highways). In addition, several consultations were held by study consultants duringthe summer of 2005 with local stakeholders at the project sites selected as case studies. The draft report was also posted on the Internet for broader public review and feedback duringJune-July 2006. India: Strengthening Institutions for Sustainable Growth 15 1.27 The consultative process has been particularly important because from the onset the main added value o f this exercise was in reconciling different perspectives and helping to develop a commonly shared vision by all principal stakeholders on the way forward. As articulated in the following chapter, the lack o f trust and constructive dialogue among opposing stakeholders i s becoming a key constraint to environmental management reforms. This study was guidedbythe related"process-oriented" outcomes set at the beginningo fthe process, namely: 0 A deepened understanding shared by various stakeholders o f institutional development needs for improved good environmental management, performance and compliance; 0 An agreement on the actions to be taken by all concerned stakeholders to improve environmental outcomes; and 0 A better informed and accelerated process o f change and regulatory reforms towards a more effective regulation and improvedperformance. Road Map to the Report 1.28 This report i s a synthesis o f all backgroundreviews and studies. This introductory chapter is followed by three chapters presenting, respectively, the main findings and recommendations under the three "pillars" o f successful environmental management which emerged as a priority for India. These are: consensus building through effective multi-stakeholder dialogue and public participation (Chapter 2); facilitating compliance through a balanced combination of a credible threat, encouragement and knowledge (Chapter 3), and aligning sectoral incentives with national environmental objectives (Chapter 4). A summary o f key messages and conclusions, with implications for various stakeholders, i s given inChapter 5. 11.BuildingNationalConsensusthrough EffectiveDialogue and PublicParticipation 2.1 Environmental management i s influenced by, and has impacts on, a great variety o f institutional stakeholders, as shown in Figure 2.1. The individual action o f each o f these stakeholders has consequences for other stakeholders, and their relationships for environmental management are intrinsically inter-connected. Economists would call this relationship a significant asymmetry between the benefits and costs, as the (private) benefits from usingan environmental resource are often captured by one group (e.g. an industryusing assimilative capacity o f a river or an air-shed) while the (social) costs are borne by the others (e.g. nearby community exposed to the pollution). This asymmetry i s the fundamental cause o f potential conflict between multiple Stakeholders, necessitating both government interventions to correct for market failure and create an effective dialogue for developing an appropriate set o f interventions (i.e. a set o f environmental policies and regulatory mechanisms) which will be broadly accepted, widely honored, and thus sufficiently enforced. A history o f environmental management worldwide shows that effective environmental enforcement requires informed consensus on environmental management objectives and policies that i s based on a good understanding of the shared roles and responsibilities o f all players, including the regulator, the regulated community (developers and polluters) and the affected community (general public). The Challenge:MultipleStakeholderswith OpposingViews 2.2 Currently, several factors undermine the effectiveness o f multi-stakeholder dialogue over environmental issues in India and the ability o f all stakeholders to move forward towards a more sustainable mode o f development. The problems o f multi-stakeholder dialogue arise from societal assumptions that different stakeholders have o f each other based on experience and perceptions. 2.3 On one end o f the spectrum o f societal assumptions, some believe that involving the public will merely lead to inefficiencies in the decision making process and not add substantially to the quality o f decisions that need to be made; that the opposition voiced by NGOs is uncompromising and merely reflects a "Not In My Back Yard" (NIMBY) syndrome; and that some NGOs do not represent the real interests o f the affected community -whoareoftenlargelyilliterateanduninformed-andmerelypromotetheirownagenda. Some also believe that governments are meant to represent the "public interest" and therefore should be entrusted with the inherent authority to decide what i s inthe public interest. 2.4 On the opposite end, there is a public distrustand an assumption that the government i s always under the influence o f developers and therefore any decision that the government makes i s automatically suspect. Regulatory agencies are often criticized for spendingmost o f its attention on addressing the concerns o f the developers and investors and giving little attention to concerns o f the affected community. Rather than trylng to understand the possible impacts o f a proposed development on the affected communities, more time i s spent inidentifylngregulatory obstacles that are viewed as impeding construction of the proposed project. r - Envirotrniental poIic), Regulationsattd Enforcement I1 India: Strengthemng Institutions for Sustainable Growth 18 growth inboth industrialized and developing counties alike (see Box 2.1 for some examples from India). This i s o f particular concern to the growth agenda in India due to its high population density, enormous needs for new investments, and the mounting environmental activism. TheAlternative: ConfrontationandPublicInterest Litigation 2.6 There are numerous examples o f environmental or land use related disputes over various development projects in India that have led to a dramatic confrontation between the communities and the developers, eventually inflicting the heavy cost on both sides and highlightingthe needfor a differentapproach. (See Box 2.1). Box 2.1: Conflict over Development Projects in India: Examples Collected by Sector Reviews A highway project in Karnataka. The Western Transport Corridor bisected the village community o f Aimangala inKamataka. Dueto the lack o fprior consultation with the community, the need o f villagers for a pedestrian underpass to provide safe crossmg was not considered. The local people resorted to public confrontation, including laying siege to engineers and consultants, to demand an underpass to connect both sides o f the village. At this stage, however, the redesign would have meant significant additional costs, hme and demolition o f work already done; and was thus declined. The consequence was an unsafe and accident prone road, which could have been avoided if there had been early consultation with the community during the design o fthe project. Ths lesson demonstrated the value o f public consultation and has been taken up by National Highways Authority o f India (NHAI) in more recent projects. (Source: Informationcollected d u g study consultations). An industrial facility in Kerala. In the Birla Enterprise case of the early 1980s, citizens in Kerala raised concerns over pollution in the Chaliyar River fiom the Gwalior Rayon manufacturing mill. The state government called a meeting between the community, factory management, and Kerala state pollution control board and several agreements for improved environmental management at the factory were reached. Despite ths, after several years no action was taken by the factory and citizens were forced to launch a prolonged protest against the factory and government to compel the implementation o f the earlier agreement. This citlzen's action led to the government forming a comrmttee to study the pollution caused by the factory and recommend corrective solutions. The factory management eventually decided to close down the pollutmg plant. (Source: Centrefor Science and Environment, 1982; 2005) 2.7 More recently, citizens have also been increasingly resorting to public interest litigation to resolve environmental disputes. In 1985, the Doon Valley case marked a watershed event in the establishment o f public interest litigation in India. Claining the government's inability to control the environmental destruction from quarrying, citizens in Uttar Pradesh turned to public interest litigation to protect their rights and the environment. In a landmark decision, the Supreme Court ordered the closure of 53 o f the 60 limestone quarries in Doon Valley because the facilities had adversely affected local water springs and the health o fnearby resident^.'^ 2.8 With this decision, the Supreme Court established the important legal precedent o f the "right to a healthy environment" and createda new avenue for addressing environmental 14 httv:ilwww.unu.eduiunu~ressiunu~booksi80a03ei8OA03EOn.htm India: Strengthening Institutions for Sustainable Growth 19 concerns through public interest litigation and the courts. Inmost countries, the courts have been viewed as a last resort in resolving environmental conflicts. In India, however, it has often become the first resort because o fthe perceived inabilities or lack o fpolitical will o fthe regulatory agencies to enforce environmental laws and regulations. This has resulted in an increasing number of court directives that have established new environmental policies and implementationrequirements for both the public and private sectors (Table 2.1). Table 2.1 Summary of Selc LedPublic Interest Litigations and Court Directives Case Court Directive Ratlam Municipality v/s The mumcipality was directed to construct toilets and remove Varbchand -AIR 1980 SC 1622 filthfrom anopen drainirrespectiveoffinancial constraints. M.C. Mehta v/s Union o f India & The authorities were directed to stop the operation o f tanneries Others -AIR 1988 SC 1037 causing pollution innver Ganga. M.C. Mehta v/s Umon o f India & The Court held that the enterprise engaged 111hazardous or Others -AIR 1987 SC 1086 dangerous activity owes an absolute duty to the community to ensure that harm is avoided to anyone on account o f hazardous nature o f activity undertaken by such enterprise. M.C. Mehta v/s Umon o f India & Dlrected the Government to constitute an authority for Others- 1997 (11) SCC 312 regulatlng and control o f ground water management. M.C. Mehtav/s KamalNath- Relying on Public Trust Doctrine, the Court ordered that it 1997(1) SCC 388 extends to natural resources such as rivers, forests, etc.; directed for recovery o f damages who caused damage to the environment. Vellore Citizens Welfare Forum Directed the polluter to pay the cost for remediation o f the v/s Union o f India - 1996(5) SCC damaged environment as part o f the process o f sustainable 647 development, polluter pays principle and precaubonary principle. S. Jagannath V/s Umon o f India - Directed shrimp culture mdustryto close its activities inview o f AIR 1997 SC 811 the ecologically fragile coastal area and adverse effect on the envlronment because o f its activities. Rural Litigation & Entitlement Dlrected the rmmng industry to stop the mining activities in the Kendra v/s State o f Uttar Pradesh- forest area o fDoonValley. AIR 1987 SC 359 B.L.Wadhera v/s Umonof India- Dlrected the municipality of Delhi to remove garbage from AIR 1996 SC 2969 vanous parts inthe city o f Delhl. M.C. Mehta v/s Uniono f India & Dlrected the authorities for closure/shifting/relocation o f Others 1997(11) SCC 327 hazardous and noxious industries outside the territory o f Delhi which were operating inviolation o fthe Master Plan. M.C. Mehta v/s Umon o f India & Dlrected the mdustries to stop construction activity within 1 km Others 1997(3) SCC 715 from the lakes for the preservation o f tourism and upheld the concept o f sustainable development and precautionary principle. M.C. Mehta v/s Union o f India & Observed to set up separate envlronment courts to deal with Others 1986(2) SCC 176 environmental disputes. (Source:the Supreme Court of Indiawe ite, htt~~://supremecourtofindia.nic.in) 2.9 While the judiciary i s an essential institutional player in environmental management, it is also widely and increasingly recognized that the Executive Branch agencies must urgently find new ways to reduce public conflicts and improve the dialogue among multiple stakeholders over environmental issues. Box 2.2 provides one usehl example o f such an action by an environmental ministry. India: StrengthemngInstitutions for Sustamable Growth 20 Box 2.2: Government's Responseto GrowingPublic Confrontation: Thailand Thailand's rapid industnalization and urbanization has led to significant environmental challenges and community opposition. As a result, environmental conflicts have been front-page news in Thailand. Infrastructure projects were frequently delayed due to disputes between project developers and communities who were not consulted inthe early stage o f the development process. In2002, the State o f the Environment Report developed by Ministry o f Natural Resources and Environment (MoNRE) concluded, "Lack of participationfrom local community and all stakeholders in the early stage o f the mega development projects has led to conflicts and protests that have not been settled yet." Consequently, a Cabinet Resolution was issued in Thailand mandating that all Thai agencies establish dispute resolution programs. Beginning 111 2002, MoNRE, the Thai courts, and civil society leaders worked to develop an environmental dispute prevention and resolution policy. As a f r s t step, MoNRE conducted stakeholder consultations to identify the major challenges, priority issues, and traming needs inimplementing this policy. Based on these consultations, MoNRE piloted a training program for a core group o f mediators, mcluding government officials, civil society leaders, judges, and police officers. In addition, an Environmental Dispute Prevention and Resolution Center was established as a center o f excellence to support skills development among governmental and civil society leaders, expand the roster o f capable mediators, and foster greater cooperation between the government and civil society. Since 1992, MoNRE has expanded the dispute resolution traming program, established formal mediator qualificabons, and begun creating a network o f local mediators 111 the regions capable o f handling actual disputes. Source: US-Asia Environmental Partnership, http://www.usuep.orn/ncconi~lishme~its/tliailanct./itni The Way Forward:FromStand-Offto ConstructiveDialogue 2.10 One of the priority challenges (and possibly the top priority) facing India today with respect to environmental management i s to break the vicious circle o f distrust and accusations o f blame among opposing stakeholders. Fortunately, good practice examples from India and elsewhere and the three sector reviewsprovide encouraging examples of how to successfullypromote and harnesspublic participation. 2.11 Large corporations in India have responded to the situation by adopting corporate environmental and social policies and working with the communities. For example, the case studies o f the Koldam Hydropower Plant by the National Thermal Power Corporation (NTPC) and the transmission line by PowerGrid showed that significant attention was given to meaningful community consultations. In the Koldam project, a Village Development Advisory Committee was created and Public Information Centers were established in three locations to enhance public involvement and communication between the community and NTPC. The constitution o f Village Development Advisory Committees and Public Information Centers are being adopted in all NTPC projects, resulting in more intensive interactions with community representatives and affected people. There are emerging "good practice" example o f community consultation in State roadprojects. Thechallenge is to scale up goodpractices and social corporate responsibility initiatives, still practiced by afew, to a widely held social norm. India: StrengtheningInstitutions for Sustainable Growth 21 The Benefitsof PublicParticipation 2.12 The Public Trust Doctrine is one o f the foundations on which democratic societies were built and it rests on the principle that certain resources such as air, water, and forests are o f such great importance to society as a whole that the government i s entrusted with protecting these resources for the enjoyment o f everyone. Effective public participation increases the credibility o f government institutions responsible for executing the public trust by ensuring an open and inclusive decision-making process. When civil society and other stakeholders feel they have an understanding and voice in the decision-making process, public confidence in the fairness o f the decision increases. Conversely, lack o f meaningful public participation creates perceptions o f undue influence or corruption that project proponents or industry may have over the regulatory system and regulators. Effectively involving the public in the decision-making process helps to promote the accountability o f government agencies and ensure that they are acting in the public interest. Participatory democracy also requires the involvement o f all levels o f government and society, including formal and informal institutions. There are a growing number o f examples from developing countries reflecting the recognition o f the value o f strengthening the instruments and institutions for multi-stakeholder consultation and public participation in environmental management (Box 2.3). Box 2.3: A Frameworkfor PublicParticipationinthe Phillipines A s part o f its envlronmental management strategy, the Laguna Lake Development Authority (LLDA) m the Philippines recognized that a broad based, multi-sector, multi-stakeholder approach was necessary to protect and restore the environment. The LLDA orgamed River Basin Councils for each o f the river systems flowmg into the lake and involved local governments, fishermen, farmers, industry, NGOs, schools, churches, and other community stakeholders inthe governance structure. The f i v e r Basin Councils established a volunteer army for clean up activities, developed public awareness and educational campaigns, organized traming programs for local governments, and shared best practices with other communities. Source: LLDA website, htto://WWw.Ilda.gov.uh/ 2.13 Public participation i s also beneficial in informing and improving the environmental and policy choices made, because communities are often important repositories for knowledge o f the local conditions and historical trends underlying environmental problems such as groundwater contamination or soil erosion. Local stakeholders can provide site specific knowledge and identify potential solutions that project proponents or environmental managers may have overlooked in the early stages. This was highlighted by stakeholder consultations at project sites, particularly the power sector case studies, and i s further illustrated inBox 2.4. Box 2.4: Listeningto Communitieswith Site SpecificKnowledge The case o f Chipko Andolan in Uttar Pradesh showed how a constructive and action oriented movement by the villagers prevented the destruction o f a nearby community forest. Because o f the concerns and protests raised by women from the village, an expert committee was established to evaluate the potential environmental impacts from the proposed felling o f trees by developers. The c o m t t e e concurred with the women and recommended that, due to the hghly sensitive nature o f the watershed, felling o f trees be banned to allow for regeneration o f the forest. (Source: CSE, 1982) India: Strengthening Insbtutions for Sustainable Growth 22 2.14 The importance o f public participation in the Environmental Impact Assessment (EM) process is probably most widely recognized, for several reasons. First, public involvement in the EIA process provides an opportunity for the community to identify and understand the economic, environmental, and social impacts o f a proposed project. Second, public participation can help identify potential adverse impacts -indirect, cumulative, and long term impacts -and potential mitigation alternatives that might otherwise not have been considered. Third, it increases public awareness o f the project and identifies opportunities for community ownership such as citizen monitoring o f the project. Public participation cannot totally eliminate conflict over a proposedproject. However, it can reduce conflict by bringing all the public concerns and suggestions to the surface. Finally, public participation can foster a more effective integration o f economic, social and environmental concerns regarding infrastructure development. When the public i s allowed to receive information about a proposed project, provide input, and most importantly, feel that their input i s taken seriously, public participation can yieldbetter decisions and longterm results. OvercomingDifficultiesof PublicParticipation 2.15 When the public is not given an appropriate venue to be heard, it will create its own venue to protest using PIL or other showing o f discontent. The highways sector review highlights the case o f Golden Quadrilateral where citizens blocked the highway to demand underpasses, overpasses, and cattle crossing^.'^ Furthermore, instruments o f public participation should be meaningful, and not perceived as a mere formality. 2.16 Unfortunately, public hearings which are the most common form o f public participation and the main instrument currently used in India are oftenperceived byNGOs as a staged event that appears to involve citizens when in reality the decision has already been made by those in power. On the other hand, project proponents frequently perceive public hearings as an unavoidable evil where NGOs and civil society voice unfounded fears for the purpose o f delaying or stopping a project. Regulatory agencies are caught in the middle, trylng to balance the concerns o f both the public and project proponent inhearings that are either not well attended or highly contentious. Acting upon the limited effectiveness o f the current public hearing process and following an extensive public review and debate, the MoEF issueda new EIA NotiJication on 14* September 2006 (Box 2.5). 2.17 An important factor that influences effective public participation is the ability o f citizens to engage in the public participation process. Making the project proponent or development agency responsible for providing the details o f a proposed project in the local language during the public hearing so that participants can understand the information provided i s necessary and already being practiced in India. It i s sometimes not enough. Citizens, particularly from remote rural areas or tribal communities, may have difficulty in understanding the ramifications o f a proposed project, because they lack the information or do not have the technical knowledge to appreciate the scientific and technical information presented. They may not understand the costs and benefits o f the management options or how those options could affect their own interests over time. Or, they may not be able to call upon the same sophisticated planning tools or economic analyses that others may use to put forward a convincing case. For example, when considering the expansion o f a highway, some l5 Information collected during study consultations India: Strengthening Institutions for Sustainable Growth 23 residents may have misgivings about the potential environmental impacts, but this may pale in comparison to the potential services that the road could bringto the community and the State's larger economy. Box 2.5: Notificationfor the Re-Engineering of the EIA ProcessinIndia The new EIA Notification, issued in September 2006, requires public consultation for all Category A and Category B1 projects, with some exception (such as project activities m mdustrial estates or parks, expansion o f roads and highways, building projects and category B 2 projects). The public consultation comprises o f two components -the public hearing at the site for ascertaining concerns o f local affected people; and written response from other concerned persons having a plausible stake inthe environmental aspects o f the project or activities. A summary of the EIA report will be made available on the website and the draft EIA report may be made available to persons who request it withm 60 days. The public consultation will be conducted by the SPCB or UnionTerritorial Pollution Control C o m t t e e (UTPCC) wthm 60 days o f a request by the applicant. If the SPCB or UTPCC fails to conduct the public heanng within the prescribed time period, the Expert Appraisal Committee (EAC) or SEAC will appomt another public agency to conduct the hearing. After completion o f the public consultahon, the applicant i s required to address all the material environmental concerns expressed m the public consultation and make appropriate changes in the draft EIA and Environmental Management Plan. Procedures for conduct o f public consultation are prescribed in Appendix to the Notification. It is noteworthy, that `public hearing" has been replaced wth "public consultation" in the new notification, perhaps reflecting a paradigm shift in the expected outcome of the process. The public hearing process as part o f EIA was presented as an opportunity for potentially affected communities to flag thelr concerns. Inthe new Notification, `>public consultation" aims to force project proponents to proactively seek the views o f affected communities at various stages o f project development and integrate these concerns in the design. The other major change is the timing o f getting views o f affected parties, which i s a prerequisite for the fmal EIA document and not as an annexure to EIA document after it i s completed, as is usually done. A number o f other process changes aim to address the alleged lacunae inthe current system o f public hearing. It would be useful to establish a good evaluation mechanism to collect credible data on whether the new procedures once implemented will be able to improve the effectiveness o fpublic consultation . Source: EIA Notification 14September 2006, Ministry of Environment and Forests, New Delhi 2.18 Another difficulty i s that not all affected stakeholders are equally well-positioned to express their views. For example, inmany projects, tribal communities who may be the most impacted by a proposed project are not involved either from their inability or lack o f willingness to attend a public hearing. Barriers o f distance, language, literacy, and connectivity -all the factors o f particular relevance to India due to the remoteness o f many habitations, multiple languages, and significant illiterate population -can also prevent full participation. There i s also a growing trend among developers to distinguishbetween public stakeholders which include affected communities and NGOs, and to limit the consultatiodpublic hearing process to the affected community only. While these two groups o fpublic stakeholders are not necessarily the same, and some NGOs may have other interests than those o f the communities, many affected local communities have relied on NGOs to assist them with technical information and public advocacy skills they do not possess. Therefore, in ensuring the effectiveness and sustainability o f the public consultation process inthe long-term, the focus should be onbuildingcapacity o fcommunity institutions to better understand and participate in the decision-making process rather than on limiting access to consultation forums. India: Strenethenine Institutions for Sustainable Growth 24 Innovations in stakeholder involvement and public participation, tried by many countries, help to enhance the effectiveness o f the more traditional methods, such as public hearing and public comment period. These innovations include application o f community-based management approaches, conducting trainings to build civil society capacity, holding public hearings in a more interactive manner, and increasing access through technology enhancements. The main instruments o f public participation are summarized in Table 2.2 and, while the public hearing process i s the most commonly used, examples o f each type o f participation, at least on a pilot basis, can be found in India. For example, the Village Development Advisory Committees are a key instrument used by the NTPC to actively involve the public incommunity development activities. Table 2.2: Instrumentsof PublicParticipation Document Community members and other stakeholders increase thelr capacity to participate by Review reviewing backgroundmaterials presentedina language and at a technical level they can understand. Having access to documents and reports also mcreases the accountability of decision-makers and the perceived legitimacy o f the decision-making process. Informational Informational meetings provide basic mformationto the public about proposed projects, Meetings such as where or when a road or power plant will be build and its potential benefits and impacts. Informal meetings when conducted, early on inthe process can help mnimize initial public fears, identify local concerns to be addressed in the design o f the project, and develop trust and communication with local communities. Public Public hearings are meant to provide a formal opportunity for the public to voice thelr Hearings opinions and concerns o n a proposed project, law, or environmental policy. Public hearings are often viewed as ineffective and laclung meaningful public participation. In some countries, government agencies have trained facilitators to preside over public hearings to improve the dialogue between the regulator, project proponent, and the public. Advisory Advisory comrmttees allow for greater participabon o f key stakeholders that i s more in Committees depth, continuous, and policy oriented. There i s a distinction between citizen advisory committees, which consist o f a diverse representation from civil society and expert advisory committees which usually bringtogether scientific or t e c h c a l experts. Citizen advisory comrmttees are intended to serve more as the voice o f the larger public. Public Public mvolvement volunteers are people from the community who are enlisted to assist Involvement an agency in developing and implementing a public involvement program. They can be Volunteers specially trained to speak about the public participation process or proposed project. The volunteers help the agency to better understand the community concerns and improve the public heanng process. Community Through community based environmental management, multiple stakeholders come Based together to develop and share solutions to local environmental problems via consensus- Environment based approaches that integrate environmental, economic and social objectives. Ths Management approach encourages voluntarily and collaborative actions by all stakeholders - the government, citizens, and industry - for solubons that ensure both environmental protection and economic growth. (Source: Information collected during the study) InvolvingCitizensinMonitoringandEnforcement 2.19 A very important public participation tool is involving the public in environmental compliance and enforcement through citizen monitoring. Citizen monitoring can be a very effective mechanism to help support the implementation o f an agency's environmental management responsibilities, particularly in States with limited resources. A process for longer engagement with the public beyond the planning stage o f a development project i s needed to ensure that the public's interests are protected through project implementation and India: StrenethemngInstitutions for Sustainable Growth 25 compliance. Successful examples o f citizen monitoring can be found both in India and internationally (see Box 2.6). Box 2.6: Examplesof CitizenInvolvementinMonitoringand Oversight Under the Green India program, Development Alternatives is working in 78 cities in India on community based monitoring o f PM, SO, and NOx parameters with air quality kits provided to local students and local NGOs. The data from these kits are shared with CPCB which validate the data collected and it i s also used by the cities to develop city level action plans. Similarly, the Banwasi Sewa Ashram citlzen monitoring project, supported by the CPCB, invites polluting industries to discuss mitiatives they have taken for mtigahon and control. (Source: consultations during the study) In the Philippines,the concept o fmulti-partite monitoring has been introduced. Under this approach a monitoring team consishng o f representatives from the Department o f Envlronment and Natural Resources, the project proponent, NGOs, and local community residents may jointly undertake compliance momtoring o f a licensed facility. The Philippmes Department o f Environment and Natural Resources i s creating Regional Community Advisory and Monitoring Committees in each regional office which will involve NGOs and the private sector in all phases o f EIA including compliance monitoring. (Source: International Networkfor Environmental Compliance and Enforcement website, http://wv-w.inece.0r.d) In the United States, citlzen momtoring has been used to help support regulatory agencies in envlronmental management. InBaltimore, Maryland, the U.S. Environmental Protection Agency and the Maryland Department of Environment established a Commumty Environmental Partnership to monitor air quality 111the city. Under thrs partnershp program, the federal, state, and local governments worked side by side with businesses, community leaders, and NGOs to assess air pollution threats from 125 industnal, commercial, and waste facilities inthe city. The members o f the partnership reviewed a Toxic Release Inventory report o n local chemical releases in the area and met with scientific experts. Partnershp members then agreed upon a nsk-based alr pollutant screening approach to identify which chemicals that were being emitted posed the greatest health nsks to the community. Based on these screenings, the partnershp developed nsk based priorities and an action plan to improve air quality m the area. By building the capacity of the community to assess pollutant risk calculations enabled them to better understand the air quality risks and to measure alr quality improvements. (Source: USEPA website, http://www.epu.rov/) 2.20 Citizen monitoring and oversight might also involve reviews or "report cards" of agency or industryperformance to ensure compliance with laws and policies. For this to be truly effective, an enforcing mechanism either from a voluntary agreement between the regulatory, industry and citizens or legal accountability i s necessary to ensure compliance. For example, Local Area Environment Groups that are used by the SPCBs for monitoring purposes were created by the initiative o f the Supreme Court Monitoring Committee on Hazardous Wastes. And o f course, the ultimate form o f citizen monitoring and supervision i s the use o fpublic interest litigation. The Importanceof the Rightto Information 2.21 Public information i s the foundation o f a modem society. To be an effective participant o f the decision making process it i s necessary to know what decision i s being made, why it i s being made, and who i s responsible. Access to environmental information enables the public to make informed personal choices about problems that may affect their well beingand that o ftheir children. Itpromotes improvedenvironmental performance bythe industry and a'better performance o f government institutions by empowering the public to hold the government and industryaccountable for their performance and decisions (Box 2.7). India: StrengthemngInstitutions for Sustainable Growth 26 Box 2.7: TheImpactof the Rightto InformationonEnvironmentalPerformanceinthe UnitedStates The Umted States passed the Emergency Planning and Community Right-to-Know Act (EPCRA) to inform communities and citizens o f chemcal hazards in their communities. Under the Act, businesses are required to report the locations and quantities o f chermcals stored on-site to state and local governments, and to annually collect data on releases and transfers o f certain toxic chemicals and make the data available to the public inthe Toxics Release Inventory (TRI).The U S Congress later passed the Pollution Prevention Act which expanded the scope o f TRI to mclude additional data o n waste management and source reduction activities by industries. The goal o f TRI is to empower citlzens through information to hold companies and governments accountable on how toxic chemicals are managed. The informahon has led companies to improve their chemical management prachces and governments to improve environmental enforcement since the TRI data i s made public and i s used as a I public indicator to measure environmental performance. (Source: USEPA website, http://www.epa.govi) I 2.22 The Right To Information Act (RTIA; 2005) i s the result o f a long fought campaign by civil society organizations in India, dating back to 1984 when the deadly methyl isocyanate gas released from the Union Carbide plant in Bhopal killed approximately 3,800 people and left several thousands with permanent or partial disabilities. The significance and the need for the law cannot be over emphasized. The Right to Information Act will operationalize the fundamental right to information; establish mechanisms to facilitate citizen's access to information; promote transparency and accountability in the government; reduce vulnerabilities for corruption inpublic office; and empower public participation inthe governance o f decisions that will impact public health and environment. The RTIA gives citizens the right to know and shape decisions that affect their own and their children's lives. 2.23 The adoption o f the Act has important far reaching implications for public participation nationwide. While the Indian Constitution does not explicitly provide for right to information, the Supreme Court, through its various judgments, has interpreted this right to be originating from Article 19(l)(a) which states that "all citizens shall have the right to freedom o f speech and expression". Inaddition, nine States o f India had already adopted their own right to information legislation, viz. Assam, Delhi, Goa, Jammu & Kashmir, Karnataka, Maharashtra, Madhya Pradesh, Rajasthan and Tamil Nadu. 2.24 The next task is to ensure its use on a wide scale and effectively, in terms o f clarifymg procedures and ensuring capacity o f public agencies to meet the requirements o f the Act. Iti s important to widely disseminatepolicy guidelines on what type o f information i s covered under the Act. In addition, the procedural guidelines should detail the required specificity for the informationrequested, turn around times for complying with requests, etc. There is also an emerging need to assess the budget implications for government agencies o f complying with the Act andplan additional expenditure inadvance. 2.25 To facilitate the implementation o f the RTIA, the MoEF launched the Information and Facilitation Counter (IFC), in December 2005. The IFC, being run by the Center for Environmental Education, will provide a range o f services and assistance to users, including general information on MoEF; guidance for meeting officials; clearance status o f projects (impact assessment, forest clearance, pollution clearance, industrial clearance, genetic engineering clearance); assistance on application procedures; interface with nominated nodal India: Strengthemng Institutions for Sustainable Growth 27 officers o f various divisions o f MoEF. In the near future, a service for receiving and forwarding applications/queries under the RTIA will also be started, including the provision o f document photocopies for a prescribed fee. 2.26 Ideally, the public should have access to the same environmental information as the decision maker. The four major types o f environmental information for which public access should be providedare: 1) Information about day-to-day environmental quality, such as urban air quality, which helps people decide whether to take certain protective measures to lessen environmental impacts on their health; 2) Information about long term environmental trends, such as the quality o f a watershed, which helps people to better understandthe environmental consequences o funsustainabledevelopment; 3 ) Information about pollution and violations from industrial facilities, which empowers NGOs, communities, investors, and consumers to demand for greater compliance and responsible environmental stewardship; and 4) Information about emergency situations and risks, which enables people to protect themselves during events, such as a natural disaster or chemical explosion at an industrial plant. MakingPublicParticipationWork 2.27 InIndia, as inany democratic society, people holdthe power to shape public opinion and government policy. As the economic situation improves, in India as in any other economy, an increasing number o f people place a greater value on environmental quality and are able to voice their demands more aggressively. Strengthening opportunities for effective public consultation and participatory decision-making can play a critical role in avoiding conflicts between the citizens and developers, thereby improving both the physical environment for hture generations and the business environment for investors. Several important steps can be taken inthis direction. 2.28 Improve Communication and Trust Among Stakeholders. As more countries have incorporated public participation requirements in their EIA process, they have learned that involving the public late inthe design o f the project can cost money and time and breed mistrustfrom the public. Buildingtrust between the government and stakeholders, which i s a crucial component o f any effective public participation process, will require commitment and time. Some communities and NGOs that had an adverse relationship with government agencies in the past still exist. However, trust can be enhanced by: (i) meeting with the community early inthe decision-making process and throughout the project cycle; (ii) clearly responding to community concerns and explaining what actions would be taken to address their concerns; (iii) maintaining a credible presence in the community through the regional offices; (iv) openly sharing relevant information with the community; (v) involving key stakeholders in data gathering and decision making; (vi) linkingwith respected members of the community, such as religious leaders; and (vii) ensuring that channels of communication are always open. 2.29 Maximize the Effectiveness of the RTIA. The RTIA i s a very powerful tool and should be optimally used. It i s important to widely disseminate policy guidelines on what India:StrengtheningInstitutions for Sustainable Growth 28 type o f information the public can have access to, as well as the procedural guidelines regarding requests for information, such as required specificity for information requested, processing or copying fees, turnaround times for complying with requests. Government agencies should also take timely steps to ensure that adequate resources are allocated to effectively handle the requests under the RTIA and should be trained on the legal requirementsandprocedural guidelines. 2.30 Provide Credible and Easily Accessible Information. Public access to information i s a pre-requisite for effective consultation with and engagement o f the public. Given the technological advances, regulatory agencies should ensure that the public has electronic access to EIA documents, documentation o f consultations, environment monitoring data, status reports on pending actions by implementing agencies on clearance conditions and consent management, and submission o f public comments. Credible sources o f information can also helpinresolving conflicts with stakeholders and the public. Often credibility o f data i s questioned and verification o f scientific data by an independent outside source can improve credibility. An Environmental Information System (ENVIS) program by the MoEF and the creation o f the IFC, serving as an independent repository for information and expertise, are important steps towards improving trust in the decision-making process. It i s necessary to quickly develop these steps to ensure easy access to this information across India, and not only in elite locations. This information could be disseminated through kiosks at various locations, such as local college campuses, public schools, libraries, community centers. However, compiling and ensuring access to data will not be sufficient, because the public needs to know what i s being done with the information and agencies should also develop ways to publicly report on the actions taken. The proposed review o f the ENVIS programme i s a timely opportunity to strengthen these and other aspects. 2.31 Develop Public Participation Strategies in the Context of the Specific Development Project and With Sensitivity to the Local Situation. For any development project, all stakeholders need to be identified and a systematic strategy prepared for outreach. The strategy would depend on the impacts identifiedand the sensitivities and social fabric o f the local people so that a balancedconsultation canbe camed out. Ifthe public feels that they are not given a meaningful opportunity to be heard, public hearings can backfire and greater conflicts can arise. It i s also important to distinguish between a public "hearing", which i s a one time event and a "consultation" (the term usedinthe draft new EA notification), which i s a continuous process o f listening and responding to the community concerns. Independent and informal institutions should also be utilized inthe public hearing and public consultation process, but it i s necessary that they interface with government agencies. 2.32 Build Government Agency Capacity for More Effective Public Consultation and Participatory Decision Making. Government staff involved in stakeholder and public participation efforts need special training to sensitize them to the role o f the public, the value and use o f public consultation activities, and how to conduct them properly. The skills and techniques required include: listening and communication, community outreach and partnering, issue identification and management, consensus building, vision building, negotiation and alternative dispute resolution. If training i s not available, agencies should consider employing outside facilitators to help conduct public hearings. Inaddition, agencies should be trained in the policy and procedural guidelines for implementation o f the RTIA, and take actions to build capacity in a timely manner to effectively respond to the requirements o f the Act. Sectoral agencies should develop their own communication strategies or community engagement manuals from which staff could be trained. For India: Strengthening Institutions for Sustamable Growth 29 example, in Australia, the Department o f Roads has developed a simple user friendly community engagement manual that i s used in-house to provide clear direction for road engineers inpublic consultation. 2.33 Broaden the Understanding and Strengthen the Capacity of Local Governments inEnvironmentalDecisionMaking. Devolvingmore environmental responsibilities to local governments i s an important aspect o f the decentralization process initiated in the 73'd and 74th Constitutional Amendments. Local tiers o f government have assumed increasing responsibilities for management o f solid waste, providing clean drinking water, and controlling sources o f urban air pollution. However, the process o f devolution to the lowest levels o f government has not been fully accomplished. It i s critical to further involve local governments, particularly at the village council level, in the environmental decision-making process, especially when it comes to public participation. The relationship between national, State and local levels o f government in the EL4process should also not be overlooked since State and local governments will play an increasingly active role in how the EM i s implemented. The increased emphasis on local control o f environmental problems, however, raises new needs to strengthen the capacity o f local governments to respond and manage these problems. 2.34 Sensitize Sectoral Agencies and Developers to the Need for Meaningful Public Participation. While there are good practice examples o f government agencies, public corporations and private companies taking and working with communities seriously, many are still trylng to bypass it and turn a public consultation, even when required, into a formality. It i s important to facilitate information sharing, using examples o f specific projects, on the benefits o f true public participation to the ultimate outcomes and sustainability o f development projects (and the likely cost o f not taking it seriously), as well as provide practical guidelines and tools for facilitating effective public consultation and participation. 2.35 Build Civil Society Institutions and Capacity to Understand. Capacity building initiatives should target civil society institutions as well as the government. Even if given the opportunity to participate, community stakeholders may lack the capacity to become involved inas meaningful a way as they desire. This was citedas one of the mainbarriers to effective dialogue with the public by both regulators and developers. Greater effort should be made to improve the capacity o f civil society to better understand the issues, including the impacts and benefits o f available alternatives, and effectively engage in public participation forums. This could be achieved through training programs tailored to meet the needs o f civil society organizations andNGOs. 2.36 Exercise a Participatory Action Planning Process. Environmental action planning has proven to be an effective mechanism in providing meaningful public input into the decision-making process and resolving environmental problems, particularly at the local level. The SPCBs or municipal/local government authorities could encourage and facilitate the development of participatoly local environmental action plans in priority geographic areas or priority sectors. The preparation o f the plans should bring together representatives from all stakeholders - State and local government, industry, NGOs, civil society, academic, and scientific organizations. Working together, stakeholders should define clearly articulated environmental goals shared by the community at large, identify performance targets or indicators to be measured over specified time periods, and outline a comprehensive set o f action items including regulatory measures, voluntary initiatives, information India: StrengtheningInstitutions for Sustainable Growth 30 management measures, community initiatives, and educational activities to involve all stakeholders. 2.37 In conclusion, successful public participation must be strategically and carehlly planned and executed as part o f a long term environmental management program o f educating and building capacity o f all stakeholders involved. And, while government officials must still rely on the more traditional forms o f public participation, such as public hearings, introducing innovative and more interactive approaches can increase the level o f public awareness, involvement, and ownership o f environmental problems and solutions. 111.EnablingComplianceinthe RegulatoryEnvironment Buildingona SoundFoundation 3.1 By any benchmark, Indiahas an extensive environmental management systemwith a comprehensive set o f environmental laws (Box 3.l), specific statutory mandates, regulatory instruments, and institutional frameworks to implement and enforce environmental policy objectives. Environmental legislation i s on the national list. However, it involves a shared responsibility between the center and the States, with the central government having responsibility for policy and regulatory formulations and the State governments for ensuring implementation and enforcement o f national policies and laws. At the central level, the Ministry o f Environment and Forests (MoEF) and the Central Pollution Control Board (CPCB) are the nodal agencies responsible for environmental compliance and enforcement. Similarly at the State level, the State government Departments o f Environment and Forest (DoE/DoF) and the State Pollution Control Boards (SPCB) are the designated agencies to performthese functions. 3.2 The main environmental management instruments include: (i)an Environmental Impact Assessment (EN) system to regulate the siting and approval o f large projects that requires the project proponent to prepare an EL4 that i s subject to public hearing near the project site and then i s appraised and decided upon at the central level by the MoEF; (ii) Forestry Clearances that are processed separately by the DoF at both the State and central government levels, and require the project proponent to deposit the compensatory afforestation payment and the net present value (NPV) o f diverted forest landwith the DoF to obtain clearance; and (iii) the Consent to Establish (CTE) and Consent to Operate (CTO), issuedby SPCBs, that regulate the establishment and operation o f facilities at the State level. These vital "command and control" instruments are the principle foundations o f any environmental regulatory system, and are supplemented with economic instruments and other incentives, such as matching grants for the common effluent treatment plants (CETP) or "green awards" introducedbymost SPCBs. 3.3 Another key institutional actor for environmental enforcement in India i s the judiciary that many would argue have filled a vacuum left by the regulatory agencies. Over the past decade, the courts have stepped in and developed a system o f environmental jurisprudence, resulting in significant new policy mandates for both the public and private sectors. The legislation also requires updating to address new environmental risks. 3.4 Despite this strong policy and institutional framework, environmental degradation continues in many areas and public dissatisfaction with the situation grows. Sector reviews and case studies, lessons o f international experience, and extensive consultation with various stakeholders during the course o f this country environmental analysis highlighted three overarching themes (furtherdiscussed inthis chapter), where actions mustbe taken to reverse the current trends: (i)aligning the regulatory framework with environmental pressures; (ii) strengthening the toolkit to promote environmental compliance; and (iii) matchingregulatory capacity with regulatory mandates ina growing economy. India: Strengthenme Institutions for Sustainable Growth 32 Box 3.1: Key Environmental Legislations inIndia -An Illustrative List Policies 1992 Policy Statement on Abatement o f Pollution 1992 National ConservationStrategy andPolicy Statement onEnvironment and Development 1998 National Forest Policy 2002 Wildlife Conservation Strategy 2006 National Environment Policy EnvironmentActs 1927 The IndianForest Act 1972 The IndianWildlife (Protection) Act (amended 1993) 1973 The Water (Prevention and Control o f Pollution) Act (amended 1988) 1977 The Water (Prevention and Control o f Pollution) Cess Act (amended 1992) 1980 The Forest (Conservation) Act (amended 1988) 1981 The Air (Prevention and Control o fPollution) Act (amended 1987) 1986 The Environment (Protection) Act (amended 1992) 1988 The Motor Vehicles Act 1991 The Public LiabilityInsurance Act (amended 1992) 1995 National Environment Tribunal Act 1996 National Envlronment Appellate Authority Act 2002 The Wild Life (Protection) AmendmentAct T 2002 The Biological DiversityAct 2003 The Water (Prevention and Control ofPollution) Cess (Amendment)Act EnvironmentRules 1986 The Environment (Protection) Rules 1989 Hazardous Wastes (Management and Handling) Rules 1990 Forest (Conservation) Rules (amended 1992) 1991 Chemcal Accidents (Emergency Plamng, Preparednessand Response) Rules 1998 The Bio-Medical Waste (Management andHandling) Rules 1999 The RecycledPlastics Manufacture and Usage (Amendment) Rules 2000 The Municipal SolidWastes (Management and Handling) Rules 2000 The Hazardous Wastes (Management and Handling) Amendment Rules 2000 The Ozone Depletlng Substances (Regulation and Control) Rules 2001 The Batteries (Management and Handling) Rules 2002 The Noise Pollution(Regulation and Control) (Amendment) Rules 2003 The RecycledPlastics Manufacture andUsage (Amendment)Rules 2003 Bio-MedicalWaste (Management and Handling) (Amendment)Rules 2003 Forest (Conservation) Rules 2003 Draft Biological Diversity Rules EnvironmentNotifications 1994 Envlronmental Impact Assessment Notification 1994 (amended 2002) 1998 Constitutmg the Taj Trapezium Zone Pollution (Prevention and Control) Authority 1999 FlyAshNotification InternationalAgreements to which Indiais a Signatory 1975 The Convention onInternationalTrade ~fl Endangered Species of flora and fauna (CITES) 1991 The Convention on Wetlands of International Importance (the Ram Sar Convention) 1992 The Framework Convention on Climate Change 1992 The Convention for Conservationo fBiological Resources 1985 The Vienna ConventiodMontrealProtocol on substancesthat deplete the ozone layer 1972 The RIODeclarationonEnvironment and Development andthe Agenda 21 India: StrengthemngInstitutions for Sustainable Growth 33 Aligning the Regulatory Frameworkwith EnvironmentalPressures 3.5 One key conclusion o fthis country environmental analysis is that the current focus in applying environmental regulation does not match the scale and diversity o f India's economy, with its multiple pollution sources, often outside the industrial sector, and i s not responsive to changing priorities resulting from the country's accelerated growth. This necessitates (i)exploring new regulatory programs and approaches, targeting different pollution sources; and (ii) exercising greater flexibility in applying regulatory standards, supportedby sound economic analysis. Expandingthe Scope ofRegulation to Cover Diverse Pollution Sources 3.6 The Importance of Small and Medium ScaleIndustries. Environmental problems, particularly in the "brown" sector, such as industry, energy and infrastructure, and urban development, have received increasedpublic attention with the rapid growth in the country's economy in recent years. The regulatory focus has been on controlling the large and visible polluters, mainly large industries and power plants; but continued monitoring and enforcement o f these large polluters i s required. However, SMEs totaling to more than 4.5 million units, account for about 40 percent o f industrial output in terms o f value and estimated to contribute approximately 70 percent o f the total industrial pollution load16 (Figure 3.1). Figure 3:l: Importance of Small and Medium ScaleEnterprisesinIndia I I W % of industrialpollution Ld YOof totalindustrialoutputs % owned by individual proprietors W % of export share 0 % ofSMEslocatedincities I I 3.7 The pollution generated from small scale industries i s generally higher per unit o f production than that o f the corresponding large units partly because o f the use o f obsolete technologies and poor management practices, and partly because they do not come under the l6 MoEFwebsite, http:ilwww.envfor.nic.in/ Source: India: Strengthening Institutions for Sustainable Growth 34 orbit o f regulatory authorities. In the past, many SMEs, particularly those set up before the start o f deregulation in the 1 9 9 0 ~fell outside the jurisdiction o f either the local industrial ~ authority or the SPCB and continues to be a problem today. The State governments and the SPCBs generally have not paidmuch attention to the pollution generated by these because of: (i)the difficulties inmonitoring these units; (ii)the relatively high costs of pollution abatement for small units compared with large units; and (iii) the possible adverse impact o f enforcing the standards on the output and employment o f these industries, which are, cumulatively, the second largest employer inthe country after agriculture. 3.8 While many SPCBs have relatively good records regarding the performance o f the highlypolluting units inthe large scale sectors, the monitoring and inventory of small-scale units inthe category of highly polluting processes i s very poor and incomplete. Inpart, the lack o f interdepartmentalcoordination between the SPCBs and the field units o f the National Sample Survey Organization (NSSO) and Development Commissioner for Small Scale Industries(DCSSI) may result inthe existence o f some highly polluting units inthe various States, which are not reported to the SPCBs. For example, in Gujarat, a few years ago there were approximately 1,600 large and medium size industries and 17,000 small enterprises, but only about 5,000 CTOs had been issued. In some States not all industries fall under the purviewo f the pollution control laws and consequently there is no recordo fthem at SPCBs. SMEs should give more attention to resources to monitor and control pollution, particularly among SME clusters located indegraded watersheds and airsheds that are in close proximity to (sometimes mixed within) residential areas. 3.9 Growing Importance of Municipal Sources. In addition to expanding the mix o f regulated industriesto include small scale units, it i s also important to recognize that industry i s not always the biggest contributor to pollution in many o f the receiving bodies (such as a river, or air ina large city). Municipal and domestic sources o f pollution often pose a greater risk to public health and the health of an ecosystem, due to the large volume o f untreated sewerage and domestic waste. Hospital waste and air pollution from transport, garbage burning, and even dust from poorly paved roads are other examples o fpollution sources that increasingly compromise the effectiveness o f pollution control and environmental management efforts by large industries. Therefore, it i s important to understand the proportionate impact o f the currently regulated sources on the ambient environmental quality compared to other sources on an area-wide basis, and design regulatory programs that target all major contributors to pollutioninthe area. 3.10 Need for Different Regulatory Programs and Approaches. Expanding the focus on additional sources will definitely necessitate looking at different regulatory programs, processes, and approaches, because both the nature o f pollutiodenvironmental impact and the nature of response/enforcement of these sources will be different compared to industrial point sources. For example, monitoring the large number o f SMEs usingthe same protocol as for large industries units would be time and cost prohibitive for the SPCBs, and threatening to close a city hospital because o f environmental violations would not be a viable enforcement option. Inaddition, different monitoring approaches may need to be considered for public versus private sector entities. For public entities, both generation and regulation o f pollution rests with government agencies, which reduces the effectiveness o f the regulatory program (as evident from experience o f developing/transition economies with significant public sector) when accountability to the public i s limited. Involving citizens in the monitoring o f State and municipal facilities would make the regulation o f public entities more transparent and effective. India: StrengtheningInstitutions for Sustainable Growth 35 3.11 Dealing with SMEs Would Require Special Regulatory Programs that focus on SME clusters in degraded areas and provide a comprehensive package o f credible enforcement efforts (sometimes, following tightened regulations if the area environmental conditions require so) and extensive compliance assistance (discussed inmore detail below). As the first step, an inventory o f operating SMEs in the area should be conducted to determine how many are covered under the consent management system and how many are operating illegally or without environmental oversight. Environmental awareness and technical assistance programs, which are being increasingly provided to SMEs, need to be complemented by simplified monitoring programs suitable for SMEs and financial assistance, all together amounting to an effective package. To make the task feasible, further progress in devolution o f monitoring and enforcement authority to local offices o f SPCB and greater involvement o f the local government and citizens in monitoring and enforcement, with corresponding capacity buildingwould berequired. 3.12 Similarly, different approaches (vis-bvis the focus on monitoring single large units) are needed to address the multitude and diversity o f sources in urban areas and heavily industrialized regions. One way i s to expand on an area based environmental management approach, which has been t i e d in India since 1991 by the CPCB and SPCBs through eight different programs, including action plans for critically polluted areas, programs for environmentally sensitive areas, and city level urban air action plans (Table 3.1). The earliest application o f this approach occurred during a crisis situation in the Singrauli region, depicted inBox 1.1. CPCB and respective SPSBs have also developed and are monitoringthe implementation o f the environmental action plans for the 24 critically pollutedareas. 3.13 An advantage o f the area-based approach is that it allows for a scientifically driven assessment to prioritize among multiple pollution sources, a consensus based stakeholder process to establish environmental and community goals, and the integration of diverse management options to address the cumulative impact on the ecosystem or watedairshed. In practice, the area-based (or integrated) pollution management approach has had mixed success inIndia and its application inother countries also had varied outcomes depending on the objectives and mechanisms for implementation. A review o f India's experience undertaken by this study highlights several lessons: (i) involve a wider range o f stakeholders in such programs, particularly better define the role of affected communities in the monitoring process; (ii) establish adequate performance indicators, linked to environmental quality improvements in the area, and not just to implement certain measures by individual polluters; (iii)strengthen oversight o f implementation and incentives for polluters to complete the actions speedily; and (iv) ensure greater integration o f area-wise sources in the program, includingboth non-point andpoint sources, industryand other sources, etc. 3.14 Some o f the most successful international examples on area-based management include those where an appropriate coordinating "area-based'' authority was established with adequate powers, such as riverhake basin or coastal zone management agency (e.g. Laguna Lake Development Authority in Philippines), or city-level air quality councils (e.g. Mexico). It is important to learn from these lessons, to assess the realistic potential and improve the effectiveness o f this tool within the institutional framework for environmental management inIndia. InIndia, this approachwould bemore effective by linkingwith the decentralization process and local government agenda, strengthening the authority o f municipalities and regional development authorities, and enabling them to facilitate integration of multiple sectoral strategies and stakeholders. India: Strengthening Institutions for Sustainable Growth 36 Table 3.1: Summary of Area-Based EnvironmentalManagement and PlanningApproaches inIndia Action Plans for T h s i s the major area-based program in India. To date, 24 cntically critically pollutedproblem areas have been identified by the Central Pollution Control pollutedproblem Board (CPCB) in consultation with the concerned State Pollution Control Boards areas (SPCBs), for which action plans are invarious stages o f implementation. Programs for The Ministry o f Environment and Forests (MoEF) have issued notifications environmentally prohibiting or restricting location o f industries, mining operations and other sensitive areas development activities with environments impacts in five environmentally sensitive areas. Eco-city Program The Eco-City Program has been initiated by the CPCB for envlronmental improvement in selected small and medium towns. In the first phase, it has been launched infour towns. City level Urban The CPCB has identified 53 non-attainment cities where the air quality exceeds Air Action Plans the prescribed ambient standards. The concerned State governments and SPCBs are required to prepare action plans for air pollution reduction in these cities. Several measures have been undertaken inrecent years inDelhi; and action plans have been submitted for 16 other cities. Areas with Under this program, eight areas o f concern due to the clusters o f polluting mdustrial clusters industries (mostly tanneries and foundries but also drugs and pharmaceutical manufacturing units, and clusters o f coal mimng and coal based power stations) have been subjectedto rigorous monitomg andpollution control imtiatives. Area wise Zoning T o delineate the areas that suitable for industrial siting and for classification o f Atlas for the siting areas indifferent categories based o n thelr existing environmental profiles, the o f mdustries program for preparation o f District-wise Zoning Atlas has been taken up by the CPCB incollaboration withthe SPCBs (withGesellschaft for Technische Zusammenarbeit (GTZ) support). Inthe first phase, 19 districts were taken up for preparation o f the zoning atlas. Area wise A pilot program for assessing area wise assimilative capacity and explonng the assimilative feasibility o f setting locahon specific standards was undertaken by the CPCB in capacity the nver stretch inRajamundri and mthe Vizag air shed area, Andhra Pradesh. assessment Area wise carrymg Studies were undertaken in five selected areas o f the country to assess the area capacity studies wise carrymg capacity over time, to assist with spatial planning and decision making with respect to mdustrial growth and other development activities based o n environmental considerations. Source: review c o r n sionedbythe study 3.15 Challenges of MonitoringEnvironmentalCompliance by Linear Projects. There i s an ongoing and anticipated massive expansion in construction with new highways, roads and transmission lines, often going through ecologically sensitive areas. Many o f the environmental impacts as well as monitoring and enforcement procedures are not clear for these projects inthe current regulation. 3.16 The nature o f these linear projects is such that they extend over multiple ecological, social and administrative boundaries givingrise to cross sectoral and cross boundary impacts. The multiple administrative and regulatory jurisdictions add to the management challenge. Furthermore, these projects are mostly implemented by a consortium o f entities, such as different contractors working on different stretches o f the same transport or transmission corridor with varying construction practices. Though supervision and compliance monitoring may be through the same government implementing agency, due to the linear expanse o f these projects, there are separateproject management units along the way resulting invarying managementpractices andpriorities leadingto varying degrees o f compliance. India: Strengthening Institutions for Sustainable Growth 37 3.17 Regulatory monitoring i s mandated by the Air and Water Act and i s to be enforced and monitoredby the SPCBs per standards set by the CPCB. However, there are ambiguities in the application of these Acts. For example, these Acts are mostly applicable to point sources o f pollution, which for highways construction comprises hot mix plants, batching plants or crushers and related noise, and effluent discharge. In the highways sector, projects which have received environmental clearances based upon their initial environmental impact assessment, often receive little attention from regulatory agencies on post-clearance monitoring during operation. As a result impacts, such as soil degradation, water resources modifications, impacts on bio-diversity, wildlife, cultural heritage and other landscape distortions that were addressed through the EA clearance process, are not monitored. One possible approach to address this gap o f post-clearance monitoring, which emerged during consultation with the highways sector, i s to introduce auditing o f implementation practices in highways projects for identifying and promoting good practices. The concept o f social auditing that has beensuccessfully used in India and lessons learned from it could be adapted and applied inthe environmental audit context. 3.18 Inmany instances multiple agencies are involved in related aspects of the projects, such as the regional office o f MoEF for tree felling and compensatory afforestation, SPCBs for regulatory monitoring o f Air and Water Act and conducting public hearings, and the State DOESfor monitoring MoEF and/or State imposed environment clearance conditions. This creates confusion regarding overall responsibility o f project supervision. To improve enforcement o f environmental requirements, the roles and responsibilities o f each agency at the central and State levels with respect to the impacts that are to be monitored should be better defined and/or communicated to the developers. 3.19 Transmission lines do not require an EL4unless significant forest area lands are to be acquired. However, massive construction o f transmission lines i s expected in very sensitive areas to connect to major hydro power sources in the North-East and Himalayas, including sensitive and urban areas in the country that has the potential to affect the livelihood o f people living in the right o f way or affect biodiversity, forests corridors for wildlife, and other sensitive habitats. There are some examples that have involved habitat fragmentation and electrocution o f elephants due to low voltage transmission lines and impacts on local village roads during transmission line stringing. It i s therefore important to develop clear procedures and guidelines for dealing with environmental issues inthe transmission sector. Better Reflecting Source Diversity in Standard Setting 3.20 The regulatory framework in India does not permit any State government or SPCB to lower either ambient environmental quality or discharge standards fixed by the central government in any region. Some argue that these requirements should be rewritten to reflect the regional and local carrying capacities rather than a nation-wide concentration based standard. However, carrying capacity studies undertaken in India (Table 3.1) have concluded that setting area-differentiated ambient standards, based on local carrying capacities, would be too difficult to implement. In almost all countries, the national environmental standards represent the minimal baseline or floor inwhich to protect public health and the environment. States are allowed to adopt more stringent, not less, standards if greater protection o f a regional or local natural resource i s warranted. A way to reconcile these different perspectives and needs i s to strengthedexpand the application o f the land use or zoning concept insetting national standards. India: Strengthening Institutions for Sustainable Growth 38 3.21 Another concern expressed by many industry stakeholders i s that national emission standards and discharge requirements for several industries are higher than what i s possible to achieve considering the type o f production process and technology, as well as the economies o f scale. Addressing this concern i s fundamental to improving compliance performance. 3.22 The current national environmental discharge standards in India are determined mainly on the basis o f industry studies undertakenby technical institutions at the initiative o f the CPCB. These studies assess available abatement technologies and provide tentative estimates o f costs for different levels o f abatement. However, while the CPCB studies look at the availability and costs o f abatement technologies, they do not generally consider the impacts o f these costs on a variety o f sources, including smaller and/or older units, and the implications for the economy as a whole. One particular example from the power sector review i s that concerning old, mostly publicly-owned coal power plants, some o f which have been ingross non-compliance for years (Box 3.2). Box3.2: SettingFeasibleEmissionsStandardsinthe Country-specific Context- LessonsfromIndia's CoalPowerPlants Story Source emission standards for Suspended Particulate Matter (SPM) from coal power plants in India - 150 pcLg/Nm3for generation capacity over 210 MW and 300 pglNm3 for generation capacity under 210 MW - are consistent with international benchmarks. However, seven years after the notification introducing these standards (1998), over one-tlurd o f coal power plants are yet to comply with the national emissions standards (and 27 are yet to comply with the effluent standards). These plants are old, in poor shape and typically owned by cash-strapped state government utilities. Meeting the standards is not possible without a major and expensive Renovation and Modernization (R&M). Government o f India has been implementing the R&M program for about 20 years; however, progress has slowed down in the past years, due to severe power shortages making it impossible to shutdown a plant generating cheap power for renovation. A review o f best international practice suggests that inthis situation the environmental authority may wish to explicitly modify the requirements for certain sources, such as these old plants, based on transparent criteria, andor extend the timeframe for meeting the standards, rather than allow a pro- longed situation o f non-compliance that erodes the credibility o f a regulatory program and creates a "moral hazard" issue. For example, the EuropeanUnion IntegratedPollution Prevention and Control (IPPC) Dlrective for power plants requires that the permit conditions including emission limit values be determined o n the basis o f Best Available Techniques (BAT), which account for economic and t e c h c a l viability o f the plants. The Directive also provides flexibility by allowing licensing authonties, indetermining permit conditions, to take into account: the t e c h c a l characteristics o f the plants, its geographical location, and the local environmental conditions. (Source: htt~://ec.euroua.eulcomm/env~ronment/~~uc/ ) 3.23 It is thus reasonable and practical to build greaterflexibility in the procedurefor setting and applyingsource standards that would account for a diversityo f pollution sources which all have different abilities to respondto the regulatory regime. International experience further shows that those countries where regulatory programs have worked well and compliance i s good adopt new regulations after an economic impact assessment and/or substantive consultations with the affected industries. 3.24 There i s an obvious value in strengtheningthe methodology for an economic impact assessment of the proposed environmental standardshegulations in India, including the impact on different segments o f industries and the labor market. This should draw on best India: Strengthening Institutions for Sustainable Growth 39 practice international experience adjusted to the structure o f the India's economy. Assessment o f available technologies enhanced by sector-wide economic analysis would be a useful instrument for establishing the techno-economic viability o f the prescribed standards. Updated standard setting procedures should also consider differentiating between new and old sources, between larger and smaller units, and allowing a phased implementation schedule that i s sufficient to meet the requirements (which could be adjusted to different sources and locations). At the same time, regulations should be backed by credible enforcement sanctions for failure to meet new standards by the deadline, as well as provide practical incentives to facilitate compliance with new standards ahead o f schedule (an approach often used by the European Union countries), or when local conditions dictate the need for an accelerated compliance schedule inan area. 3.25 These considerations are particularly important as India moves towards expanding the set o f standards and regulations for industrial sources; for example, developing standards for hazardous pollutants emitted by a chemical industry. The diversity o f India's industry needs to be recognized by the standard setting process, to avoid a continuous "moral hazard" from inabilityto enforce and comply. StrengtheningToolkit to PromoteCompliance 3.26 To meet the environmental standardshegulations the regulated community must have the motivation and ability to comply. Inenvironmental management, motivation largely rests on effective enforcement (credible threat o f a proportionate punishment); however, it can and should be also reinforced by incentives and rewards for "good behavior". The latter reduces the enforcement burden o f the regulator and helps achieve the desired outcome (e.g. improved environmental compliance) at a lower cost to society. However, motivation will fall short o f the target ifthe polluter has no knowledge, technology, or financial resources to take the action needed. Thus, an environmental regulator must develop a diverse toolkit, particularly for India's diverse economy, to address the needs and circumstances o f the different players. This section highlights some (not all) possible areas o f expanding the current toolkit that were identified as priorities in the analysis and consultations with stakeholders. PackagingComplianceAssistance to SMEs 3.27 Shifting the focus on reducing pollution from SMEs emerged as a top priority. Lack o f knowledge, access to technology and financial resources are all significant barriers to compliance by SMEs, especially among small-scale industries(SSI). Given these barriers and constraints, compliance assistance schemes are widely used for SMEs. For example, inJapan, the government owned Japan Environment Corporation provides financial support for the relocation o f SMEs as well as low interest loans for purchasing pollution prevention equipment. InTaiwan, under the sponsorship o f the Taiwan Industrial Development Bureau, low interest loans are offered to SMEs to implementwaste minimizationpractices. 3.28 The MoEF, CPCB and SPCBs, in collaboration with industrial associations (such as CII) have programs to provide technical information to SMEs on different environmental technologies and alternative approaches to pollution prevention. The MoEF has also launched a centrally sponsored scheme for enabling the SSIs to set up pollution control equipment for treatment o f effluents. The financial incentives included a central grant up to 25 percent o f the total cost o f the CETP on the condition that a matching grant i s sanctioned and released India: Strengthening Institutions for Sustainable Growth 40 by the State government. The CETP companies are expected to meet the remaining cost by equity contribution by the industries and loans from financial institutions. This initiative has helpedset up more than 90 CETPs, currently operating with varying degree o f performance, for the management o f effluents from clusters o f SSIs. Similarly, under the Credit Linked Capital Subsidy Scheme, the Ministry o f Small Scale Industry i s providing assistance to small scale units for adopting cleaner production technologies and installingpollution control measures with financial support up to Rs. 10 million (US$225,000) with 15 percent subsidy through the Small IndustryDevelopment Bank o f India (SIDBI) and National Bank for Rural Development (NABARD). CPCB has also made an effort to develop pollution prevention guidelines and pilot demonstration projects, focused on SME clusters, with a view to providing lessons and the basis for wider replication. 3.29 The most successful programs for SSIs have involved a multi-pronged approach to compliance which incorporates a completepackage o f targeted regulation, a credible threat o f enforcement, informationdissemination, and technical and financial assistance to comply. 3.30 The West Bengal PCB has adopted such a program for a cluster o f industries in Kolkata, which integrates tightening emission standards and focusing enforcement efforts with technical assistance and financial help (Box 3.3). Similarly, a "packaged" approach o f combiningregulation, enforcement, technical and financial assistance, including support with providing the gas infrastructure, has been applied inAgra, reportedly also with success. Box 3.3: Cooperative Approach for SMEs -A Good Practice Example from Kolkata Small scale industnes were found to contribute 44 percent o f the overall particulate emissions in a central area o f Kolkata. The emissions largely came from the use o f older, energy inefficient coal fired units for the manufacturmg processes, such as small boilers, ceramic lulns, and cast lron foundnes. The West Bengal PCB adopted a stricter particulate emission standard and intensified enforcement efforts targeting units located inthat area. Most o f the umts using small coal fired boilers needed to change to an oil fired boiler (typically using a light oil) to meet the standard. T o facilitate compliance, a fund was created at the WBPCB with the support o f the India-Canada Environment Facility, to assist small scale industries in financing the cost o f measures that would result in meeting the standard. Since a natural gas network is not available ~fl Kolkata, a typical measure was to replace a coal boiler with a more energy efficient and cleaner oil fired boiler. The fund provided a matching grant (50 precent o f capital cost) paid after the conversion was implemented. The WBPCB also involved industrial associations that helped to reach out to the units and provide t e c h c a l advice. A recent assessment o f pollutant emission reduction after the adoption o f new standards and establishment o f the fund showed a reduction o f about 98 percent o f the total particulate matter from the units who had completed the conversion from coal to oil fired units. The WBPCB program has many elements o f best practice, such as using scientific information to set a regulatory priority and creating a targeted regulatory program, complemented by outreach, and technical and financial assistance, and building partnershp with the regulated industry. (Source: http://www.wbwb.pov.id ) .31 The success o f well-packaged programs targeting SMEs and SSIs clusters lends itself for wider replication across India. It i s important to systematically collect, review and disseminate information about such programs, as well as use this information and emerging lessons for initiating a national program for SMEs what would guide the design o f suitable packages where there i s a need, as well as provide matching grants for compliance assistance, building on the CETP initiative by the MoEF. For example, when air pollution is a key concern for a particular SME cluster that needs to be addressed by energy efficiency and/or India: Strengthening Institutions for Sustainable Growth 41 fuel switching measures, simultaneously resulting in reduced carbon dioxide emissions, it would be also useful to facilitate, as part o f this program, access to carbon finance or other concessional global climate change financing instruments. Strengthening Enforcement Deterrents 3.32 Need for Credible Enforcement Deterrents. In any regulatory situation, there will be some facilities that will voluntarily comply, some that will never comply, and a significant number o f others who will only comply ifthey believe there i s a sanction for noncompliance. Without a credible deterrent o f enforcement, violators will not change their behavior and polluting conditions will continue. However, to be a credible deterrent, there must be a good chance that (i) violations will be detected, (ii) the response to the violations will be swift, that and (iii) response will involve an appropriate sanction. Unfortunately, in India each o f the these conditions for a credible deterrent i s lacking. Although the environmental laws and regulations are comprehensive and protective, there are some inherent procedural deficiencies related to the enforcement and prosecution o f environmental violations. Technically, a SPCB has the legal authority to direct a polluting industry to shut down an offending factory, but this sanction i s rarely used. Closure o f a facility i s associated with the loss o fjobs and economic livelihood for the community, and therefore is viewed as a last step enforcement measure. 3.33 The SPCB also has the legal authority to file a criminal case against a violating company. While some SPCBs have filed criminal cases, the courts are frequently too busy with other criminal and civil cases that environmental cases get delayed for a long time before any action i s taken. For example, in accordance with the Water Act, the SPCBs must file a case before the lower court for an action against a polluting unit and the "onus o fproof' i s vested with the Board. Unlike the Public Interest Litigations (PILs) which are filed in the Supreme Courts or High Courts, the lower courts do not seem to have enough time and interest in hearing environment related cases. Thousands o f cases filed by the SPCBs have been pending in State courts for many years. Insome cases where decisions have been taken, the polluting industries have been given the benefit o f doubt because the Boards could not adequatelymeet the "onus o fproof' test. 3.34 There are also cases where the polluters, even after conviction, have escaped penalties through legal maneuvers by highlypaid advocates who plead their cases or because o f corruption. Unlike some other countries where the pollution control authorities are empowered to impose fines depending on the nature and extent o f pollution caused, the SPCBs have to approach the judiciary for this purpose. A recent United States Environment Protection Agency (USEPA) Report on Environmental Compliance and Enforcement inIndia found that "Seeking redress in the courts i s time-consuming and resource-intensive, and further strains scarce government resources. In addition, the (criminal) cases are often unsuccessful, with 977 o f the 7357 cases being dismissed by the courts or ultimately withdrawnbythe Government." (Miller, 2005). 3.35 As a result, regulatory agencies often choose not to pursue sanctions, because the available sanctions are either disproportionate to the environmental infraction or too time- consuming to pursue. Hence, in the absence o f credible deterrence, many polluters continue to discharge illegally knowing that there will be no legal consequences. It has been reported that some industries have not installed effluent treatment plants or air pollution control, India: Strengthening Institutions for Sustamable Growth 42 because they do not believe there is sufficient reason (e.g., deterrent) to comply with environmental standards. 3.36 In some countries, environmental authorities, such as CPCB and SPCBs, have the authority to apply administrative penalty to ensure swifter enforcement actions and reduce the backlog o f court cases. The authorities could also use administrative penalties collected as an additional source o frevenue to support implementation and enforcement o f environmental programs (see Box 3.4 for an example from US). However, using this relatively common instrument has been difficult for India's legal enforcement framework. In this context, a provision in the NEP (2006) that "a judicious mix o f civil and criminal processes and sanctions will be employed in the legal regime o f enforcement, through a review o f the existing legislation" (MoEF, 2006, page 17) i s a very encouraging and much needed development, which could greatly improve the credibility o f the enforcement regime in the mediumto long-term. Box 3.4: Use of AdministrativeEnforcementAuthoritiesas a CredibleDeterrent Inthe United States, the federal and state EPAs can issue an administrative order to resolve a violation without going to the courts for relief. Administrative orders are legally enforceable, provide evidence o f the violation, and afford the violator due process and the opportunity to be heard. Under an adrmnistrative order, the violator will be required to take corrective actions with a prescribed time period, penalties may be assessed, and supplementary enforcement projects may be established. Where appropriate, the USEPA and state EPAs use administrative enforcement as their preferred fiist response for routine enforcement cases because it i s viewed as more expedient than the judicial system. (Source: Miller, 2005) 3.37 Exploring the Use of Alternative Enforcement Deterrents. An alternative approach that can approximate the impact o f an administrative sanction for certain polluters i s the use o f environmental peq-?ormance bonds. A performance bond i s a legal guarantee evidenced ina written document against any loss caused by the issuer's inability or refusal to perform previously agreed commitments and which result in significant impacts to the environment. It i s a (contingent) payment which i s triggered once an agreement i s violated. The firm can either deposit the stated sum in an escrow account with the regulator, or more typically obtain a financial guarantee from a bank or financial institution, which i s paid once the contract conditions are breached. 3.38 Environmental bonds are most useful intwo circumstances: (i) regulators lack where the judicial authority or administrative capacity to impose proportionate and effective sanctions once an infringement has occurred; and (ii) for highly polluting and hazardous industries where firms can evade their environmental responsibilities by liquidating the enterprise. By imposing joint liability between the polluter and the guarantor, the bond lowers incentives to elude regulators through liquidation. 3.39 A common example is from the mining sector (in various countries, including Australia, Papua New Guinea, and United States) where a mine operator agrees to post a performance bond to cover the costs o fre-vegetating and reclaiming the land, which has been the site o f the miningoperation. The bond i s not released until the property i s returned to its pre-mined state and if the site is not re-vegetated as required, the bond i s forfeited to the regulatory agency. The legal and administrative precedent for the use o f environmental bonds was first established in India when the Indian Bureau o f Mines introduced a liability bond India: Strengthening Institutions for Sustainable Growth 43 where the mine proponent looses money or the bond for violating the approved mining closure plans (Rs 15,000ha for small mines and Rs 20,000ha for a major mineralmine). 3.40 Expanding the Bank Guarantee Program Based on Lessons of an Initial Phase. A very encouraging example o f this is the use o f a bank guarantee program, being piloted in some States o f India. Under this program, when a SPCB discovers a violation, it will require the violating company to post a bank guarantee to ensure that the company installs pollution controls according to the agreed upon compliance plan and schedule. Renewal o f CTO i s conditional on such a guarantee. If the violating company fails to meet the compliance agreement and schedule, a portion o f the bank guarantee i s forfeited and given to the SPCB for its discretionary use. The amount o f the forfeiture i s usually decided by the Chairman and Member Secretary o f the SPCB. The West Bengal PCB has two examples o f forfeiture for failure to meet the compliance schedule -a refinery forfeited Rs 500,000) o f a Rs 1million bank guarantee and a steel mill forfeited Rs 500,000 lakh o f its Rs 2 million bank guarantee (Miller,2005). 3.41 This initiative would be very useful to promptly conduct a careful evaluation to draw lessons for further replication. While expanding the use o f the bank guarantee a number o f additional advantages should be considered to strengthen the impact. First, an environmental performance bond gives the regulator flexibility in setting the sanction (payment) for violations. Thus, the "penalty" can be set at a level that i s proportionate to the expected damage from violation. Second, it provides a financial incentive for firms to establish sound environmental credentials. This can be achieved when the price paid for the guarantee increases with the history o f non-compliance. Third, it exposes polluters to further compliance pressures from a new actor, the guarantor, and so lowers the ability to circumvent regulations by colluding with environmental authorities. Fourth, it can be used proactively, rather than retrospectively, by beingrequiredfor the issue for CTE and not only for renewing CTO. This approachwould be particularly appropriate for highrisk, hazardousprocesses. 3.42 As with any other regulatory instrument, environmental bonds are not appropriate in all circumstances. These are unsuitable for small enterprises, particularly in the informal sector that operate on small profit margins and lack access to credit. Conversely, large polluting industries as well as municipal facilities (e.g. hospitals and sewerage treatment plants) are well suited for the use o f environmental bonds. This again reinforces the critical need for a judicious mix of instruments to effectively enforce compliance in the diverse Indian economy, highlightedby the NEP. Augmenting the Use of Innovative Approaches and Incentives for Good Performance 3.43 India's situation o f legal difficulties with applying effective administrative sanctions lends itself to a greater use o f innovative incentives. These instruments have been carefully reviewed by the CPCB and MoEF, with a sound conclusion to move ahead in a phased manner, starting with simple tools (Box 3.5). Once the bank guarantee system has been fully established, further expanding the toolkit by adding suitable economic instrumentswould be useful to consider. The opportunities provided by economic programs and instruments, such as Special Economic Zones or tariffs in external trade, should also be systematically assessed and usedto encourage environmental improvements and investments. India: Strengthening Institutions for Sustainable Growth 44 3.44 Incentives need not be merely financial. ApplyingregulatoyJexibili@ to companies usingpollution prevention, waste minimization, and toxic substance use reduction strategies can also foster greater compliance. 3.45 One approach i s to link consent management to pe$ormance. For example, in Andhra Pradesh and Gujarat many industries in the bulk drug and pharmaceutical sectors frequently change their formulations to stay competitive. They also have good compliance records. However, they do not report this change to the SPCBs as it would require seeking a new CTO. Companies who consistently meet or exceed the standards for compliance should be given the regulatory flexibility to modify their existing CTO if they agreed to certain parameters for improved environmental performance. In addition, the period o f permit renewal for CTOs could be linked to compliance performance, extending the length o f permits for stronger performing companies. This would reduce the burden o f understaffed SPCBs and allow them to focus scarce resources on violators. Box 3.5: EconomicInstrumentsfor Pollution Control:Potentialfor India An mternational workshop on economc instruments for industrialpollution prevention and control was held inDelhi inJune 2001. It brought together Indian and international experience with the application o f economic instruments. The three-day workshop put forward a variety o f tools used around the world, including pollution charges, tradable permits, performance bonds, and taxes on output and inputs, as well as the instruments o f persuasion, such as public disclosures. The stories from countries as different as Chma, Columbia, Indonesia, Philippmes, Thailand, Umted States and Vietnam were bridged with the current experience in India to generate the way forward to expanding the appropriate mix o f instruments for India. Several important messages emerged from the workshop. First, there was a consensus that the existing regulatory system in India needed to be strengthened by a greater use o f incentives. Second, it was noted that for these instruments to work well in practice, sufficient attenhon should be given to the details o f implementation, including the capacity of regulatory institutions, during the design stage. Third, the workshop concludedthat a greater reliance on economic incentives should start with testmg a simple instrument, consistent with India's legal and institutional framework for pollution management. Finally, the workshop recommended inibating the use o f such an instrument on a pilot basis. A recent introduction o f the pilot bank guarantee program, a kind o fperformance bond instrument, for non-compliant industries i s consistent with these recommendations. (Source: Shrivastava, 2001) 3.46 There are a growing number o f voluntary incentives by the industry to demonstrate environmental stewardship to company shareholders, consumers, communities, consumers, and other key stakeholders. Many companies in India and internationally have implemented the Environmental Management Systems (EMS), such as IS0 14001, resulting in both economic and environmental benefits from improvedperformance and production efficiency. T h i s i s compelling many export-oriented firms, such as chemical manufacturing facilities in Gujarat or pharmaceuticals firms in Andhra Pradesh, to adopt voluntary initiatives to demonstrate corporate responsibility as well as sustained environmental performance beyond strict regulatory compliance. For example, the numerous export-oriented industries inNaroda are reportedly taking steps to improve their environmental compliance primarily driven by the export demand from their clients abroad. 3.47 Inmany countries, environmental regulators tend to support voluntary incentives by industry, so as to not create conditions that would discourage innovation as it seems to India: StrengtheningInstitutions for Sustainable Growth 45 sometimes happen in India. There are instances where successful voluntary agreements made between the industry and government to gradually improve environmental performance beyond compliance requirements have later been made mandatory and incorporated into law. One example i s the agreement with the cement industries to improve their emission levels to 50 1g/Nm3from 100 pg/Nm3which is set to become a legal requirement in 2006. Some SPCBs have started requesting an I S 0 14001 certificate from the 17 most polluting categories o f industries before the renewal o f their consents/authorizations. While this has reportedly led to better compliance, industry stakeholders consulted during the study mentioned that turning a voluntary agreement with individual companies into a mandatory requirement for the entire sector can be a disincentive for companies to explore voluntary initiatives in the future. Inthis respect, an approach adopted by the Gujarat PCB to provide incentives to industries implementing EMS, mightbe a good practice example to follow (Box 3.6). Box 3.6: PromotingEnvironmentalManagement Systems The Gujarat PCB has adopted a senes o f incentives to promote industries choosing to design and implement environmental management systems such as I S 0 14001. These incentives include giving prionty envlronmental approvals within a period o f 45 days; extending the water consents from 5 years to 6 years; allowing units with ETP to be eligible for 25 percent fee rebated provided they do not exceed the water limts under their consent and meet the standards under the Water Act. Inaddition, the Gujarat PCB has promoted a series of mdustry specific guidelines for certain sectors such as aluminum, cement, chlor-alkali, pulp and paper under the Charter o f Corporate Responsibility (Source: GPCB website, http://,mcb.gov.in) 3.48 The Naroda industrial estate in Gujarat also usedan environmental auditing approach to improve their knowledge o f resource utilization and generation o f wastes. Under this approach, a facility would conduct a periodic and comprehensive evaluation o f different management measures to achieve compliance including the development o f a formal environmental compliance plan, environmental training programs for all employees; assessment o f risks and costs posed by facility emissions and wastes; and, establishment o f monitoring, recordkeeping, and reporting systems for internal and external audiences. In the United States, some State environmental agencies have sought to encourage environmental auditing by relaxing certain enforcement requirements for companies with proven and effective auditing programs. A similar approach could be adopted by SPCBs for companies with successful environmental auditing programs. Consent periods could be extended or inspection requirements could be lessenedto promote environmental auditing. 3.49 Regulatory incentives can be also linked to the quality o f self monitoring and self reporting data. According to the USEPA Report on Environmental Compliance and Enforcement in India, there i s significant scope for improving the use o f such data. Industries whose data are consistently validated by SPCB monitoring, for example, could be inspected with a lesser frequency than those whose data are not consistent with the inspectionresults. Extendingthe KnowledgeBaseto the RegulatedCommunity 3.50 A lack o f knowledge was cited in the analytical review and case studies as an important reason for continued environmental degradation. There i s a general consensus on the need to strengthen the quality and extent of environmental information that i s made India: Strengthemng Institutions for Sustainable Growth 46 available to all the sectors. Knowledge management involves information on the available technology to prevent, monitor, control, or clean up pollution, and on operation and correct maintenance. 3.51 There i s also a need for a wider dissemination o f basic informationon environmental regulations, which provide clear answers to the following questions: What are the environmental requirements? Why are the environmental measures necessary? Who i s subject to the requirements? When do they apply? How can they get into compliance? and, What are the consequences o fnon-compliance? 3.52 A substantial amount o f information i s already publicly available, and efforts are being made to facilitate and promote knowledge o f modern technologies and practices. The Government o f India has adopted a Policy Statement for Abatement o f Pollution which provides several instruments to prevent pollution, including the adoption o f a Life Cycle Assessment (LCA) for specific sectors to optimize the utilization and conservation o f resources. A National Action Plan for Cleaner Production has also been drawn up to assist in developing and adopting cleaner production techn~logies'~.However, it appears that the information does not reach out evenly across India, puttingthe less industrialized but rapidly industrializing areas at a disadvantage. There i s a need, strongly endorsedby all stakeholders, to create and strengthen the network o f regional environmental management centers, housed with the appropriate existing research and training institutions that would provide knowledge and training o f the highestquality comparable across States. Usingthe Power of PublicInformationandPressureto MotivateCompliance 3.53 It is more likely that industry and project proponents will take corrective action when incidents of non-compliance are brought to the attention o f the caring public. Public disclosure programs, pioneered by the Indonesia's PROPER program (Box 3.7), have proven to be a useful complementary tool in motivating industries to improve their environmental management and performance. In India, several green rating programs that rate the performance of various sectors or area clusters have been undertaken by the Confederation of Indian Industries (CII), Center for Science and Environment (CSE), and other organizations in India. With the adoption o f India's Right to InformationAct, the power ofpublic disclosure is likely to be exercised more often and impose greater accountability on the industry and government for improved envlronmental performance. Box3.7: Expandingthe Toolkit -the Power ofPublicDisclosure The Indonesia Environmental Impact Management Agency established a hlghly successful public disclosure program known as PROPER (Program for Pollution Control, Evaluation, and Rating). The underlying premise o f this program and the key to its success was the concept o f creating incentives for compliance through "honor and shame." PROPER employs a color based rating system to rate the environmental performance o f individuals plants based o n compliance with water, air, and hazardous waste regulahons, EIA requirements, quality o f environmental management systems, resource management and use, and community development and relationship. The program has many benefits and many stakeholders: (i) for companies, it is a benchmarking tool to measure performance and a public relahons tool to promote itself as an envlronmentally friendly company; (ii) for investors and financial institutions, it i s a clearinghouse to evaluate company risks and performance; (iii) for the public, it i s a tool to measure the company's compliance and government's enforcement record; and (iv) for the government, it is a tool to encourage companies beyond compliance and to identify performance weaknesses in key sectors and provinces. Public disclosure programs have recently been introduced inthe Philippines, China, and Vietnam. (Source. Afsah and others 1997;2000) India: Strengthening Institutions for Sustainable Growth 47 3.54 A computerized State and national level information management system would also improve access to relevant compliance information. Ideally, the information management system should include specific information on compliance, such as required permits, compliance status, current and outstanding violations, corrective action plans, compliance schedules, and status o f enforcement actions. The CPCB/SPCBs could use the information in the report to evaluate the performance o f key sectors, analyze areas o f compliance weaknesses, and target priority measures for improved enforcement. 3.55 As discussed in Chapter 2, the public can serve as an effective regulator in alerting government officials to violations and polluting conditions. It i s important to continue supporting citizen monitoring efforts that CPCB/SPCBs have initiated by promoting public- private partnerships for compliance monitoring and establishing public notification procedures for sharing relevant data and analyses o f environmental conditions, including the release o f informationconcerning toxic and hazardous pollutant discharges. 3.56 Ultimately, it must be recognized that voluntary incentives, information disclosure and public participation alone cannot reverse the situation o f widespread non-compliance. Effective regulatory programs and enforcement deterrents remain the foundation on which the culture o f environmental compliance i s built. However, these complementary tools can strengthen this foundation and facilitate compliance at lower enforcement cost so that a more robust and enduringstructure can emerge. MatchingRegulatory Capacity with Regulatory Mandates ina Growing Economy 3.57 Evenifall the recommendationslisted above, such as creating additional compliance incentives and strengthening enforcement deterrents, were adopted, a major barrier to successful implementation would be the capacity o f an environmental regulator to deliver on these initiatives. The regulatory agencies are already under-staffed and under-funded in meeting its existing obligations to implement regulatory mandates o f various national and State laws and directives from the courts. A recent report by the Planning Commission concluded that the SPCBs are currently characterized by a dominant presence o f non- technical staff, differential availability o f staff for monitoring polluting industrialunits, large staff vacancy positions, vast variations in financial positions, and prohibitive spending restrictions imposed by State governments (Planning Commission, 2005b). Not surprisingly, the report found that compliance o f industrial units with the stipulated pollutant standards i s poor. Overall nationwide compliance level i s about 50 percent, while the situation i s better - close on average to 80 percent -for highlypolluting units, which have been the key focus o f SPCBs. 3.58 The poor current capacity assessment by the Planning Commission and the adoption o f more aggressive industrial promotion policies in many States has placed increased pressure on the SPCBs for a quicker turnaround o f CTE and CTO and environmental clearances, notwithstanding that the volume and complexity o f these requests are increasing while SPCBs resources remain unchanged. There is also a need for expanding the scope o f regulation and introducing new regulatory programs and tools, as described above, to arrest continued environmental degradation. 3.59 Unless an increasing public demand for better performance by the environmental regulatory agencies i s matched by adequate support to these agencies, conditioned on India: StrengtheningInstitutions for Sustainable Growth 48 institutional reforms to increase efficiency, transparency and accountability, it would be naive to expect substantial progress and unfair to solely blame the regulator for the lack o f it. This section proposes a number o f key actions which emerged as priority. Making the Processes M o r e Efficient 3.60 Given the staffing constraints that many SPCBs face and the growing demand for services, it i s critical to maximize opportunities for rationalizing processes and upgrading technologies they rely on intheir daily routine. The following areas have been highlightedby this country environmental analysis. 3.6 1 Balancing Consent Management with Compliance and Enforcement Responsibilities. SPCBs are the primary designated agencies to implementand enforce most o f the environmental laws and regulations at the State level. Their responsibilities are vast - establishing pollution control programs for the State; issuing State-specific regulations for air, water, waste, and other environmental media; implementing the consent management system for CTE and CTO; managing the EL4 system; addressing citizen complaints and educating the public on environmental issues; monitoring and ensuring facility compliance; and implementing court directives and developing State action plans. Of these responsibilities, a disproportionate amount o f time i s spent on the consent management system, because rapid industrial growth has led to increased demands for CTEs and CTOs and new infrastructure construction in the highways and power sectors. These increased demands have inturn mounted pressure on the SPCBs to process consents within prescribed deadlines. As a result, less time and emphasis i s spent on monitoringand tracking compliance o f existing facilities and pursuingenforcement actions against polluting facilities. 3.62 This trend inallocating time and effort needs to be reversed and better balanced. As the number o findustrial units and infrastructure investments increase, so do the requirements for monitoring and actual enforcement o f the provisions agreed in CTE/CTO. A way o f rationalizing consent management, already adopted by several SPCBs, i s to link the frequency of renewing CTO to environmental risk and past compliance/performance record o f the facility. For example, consent periods could be extended (and inspection requirements could be lessened as well) for companies with successful environmental auditing and/or self- monitoringprograms. 3.63 Outsourcing of Non-core Technical Functions.Not all regulatory functions need to be retained in-house and some may be performed more efficiently through contractual arrangements with private firms or NGOs. This would serve the dual purpose o f providing needed support to SPCBs in fulfilling its mandate and using India's strong technological advances and technical expertise. For example, some monitoring and laboratory analysis functions could be outsourced to trained technical staff in research institutes or universities. Likewise, certain information management or data collection functions could be outsourced to information technology firms or linked to industrial association networks. In outsourcing regulatory functions, it will be important to establish guidelines that would ensure that the organization has no conflict o f interest with a regulated entity and that quality assurance mechanisms are inplace. 3.64 Capitalizing on Advances in Monitoring Technology. Many SPCBs currently rely on stack testing to monitor the compliance o f the majority o f industrial units. Continuous Emissions Monitoring (CEM) i s an instrumentthat allows the accumulation o f data at a pre- India: Strengthening Institutions for Sustainable Growth 49 determined time and over a longer period than the stack tests. The CEM can reduce the inspection burden on the regulatory agency by requiring the data to be self reported, or even by directly transmitting the reading results on a stack to a computer at the regulatory agency. Currently, online stack monitoring instruments are being provided to a very limited number o f new large sources, such as new NTPC generation plants. Given the difficulties with CPCB/SPCBs staff positions, as well as public concern over possible corruption during on- site inspection, "leap-fiogging" to a greater use o f the C E M technology seems a particularly attractive option in India, and i s currently being promotedby the CPCB. However, switching to CEM on a large scale would be expensive and needs to be phased-in. Inaddition, a strong quality assurance plan, along with the capacity to implement it well, i s needed, which would include calibration checks and adjustments, record-keeping and reporting, and procedures for conducting periodic performance tests. StrengtheningStaffResources andSkills West Bengal I 5.30 I 4.19 I 2.49 59.44 20.99 All Boards I 10.73 I 8.10 I 3.70 45.69 24.46 l8 Source: Chma's State Environmental Protection Administration website, hm:llwww.zhb.nov.cn/enalish/ India: Strengthening Institutions for Sustainable Growth 50 3.66 Many State governments, as part o f the much needed reforms to promote fiscal discipline, have imposed indiscriminate hiring freezes on all government agencies, affecting the ability o f SPCBs to fillvacancies and hire additional staff for the clearance and inspection process. This approach does not take into account that the workload involved in providing environmental clearances and performing compliance inspections i s rapidly increasing due to the booming economy and unprecedented industrial growth in many places. As Table 3.2 shows, the number o f SPCB staff in position per 100 polluting units greatly varies across States, with many SPCBs, particularly in more industrialized States, having alarmingly low ratios for total and technical staff. 3.67 As more States are set to experience rapid industrial growth, especially inpollution- intensive sectors (such as in Orissa), it i s important for central and State environmental agencies to take up the issue with State governments, and agree on the need for justzfzed stafing pZans for SPCBs that would allow for some additional hiring, subject to making a strong case. The case should be made on the basis o f verzfzable evidence o f increased workload (using past trends and near-term projections) and taking into account possible efficiency gains through improvements in processes and technology, discussed above. Ideally, a staffing plan should be an integral part o f a broader capacity and efficiency enhancing plan (described below). 3.68 Upgrading Skills. The willingness to enforce compliance by regulators versus the willingness to ensure compliance by industries i s subject to a well-known information asymmetry, resulting in a possibility for some polluters to misguide regulators based on their greater access and knowledge about the sources, magnitudes, and concentrations o f pollutants. In this context, it i s difficult to overemphasize the importance o f constantly feeding SPCBs with state-of-the-art technical knowledge and equipping with resources for monitoring the polluting units, assessing the environmental data, and proper collection o f evidence to prosecution o f cases. 3.69 Inspectors at CPCB/SPCBs are generally well educated and technically proficient, but their educational background and current training does not necessarily prepare them for the technical and procedural issues regarding compliance and enforcement. Some SPCBs have a basic one week training program for inspectors on general compliance and enforcement, but the number o f training programs designed for specific compliance and enforcement issues i s extremely limited. Even iftraining i s provided, many inspectors do not receive the training because o f travel or time constraints and training resource materials are scarce. There i s also no national guidance on the minimum training and field requirements for an inspector or a centralized repository for training programs and materials (Miller, 2005). 3.70 To address this, the MoEFICPCB would need to develop national guidance on minimum inspector training requirements and develop industry specific inspection manuals to be used by all SPCBs. The CPCB/SPCB should also consider collaborating with local universities to develop regular environmental curriculum and training for SPCBs and local governments. As more functions are delegated to the regional and local offices within the State, providing training at the local level becomes increasingly important. 3.71 Building Legal Capacity of SPCB. The CPCB/SPCBs are the prosecuting authorities inpollution control violations, as well as the target o f an increasing number o f law suites for failure to enforce compliance. This necessitates substantial legal expertise in India: StrengtheningInstitutions for Sustainable Growth 51 developing sound environmental cases for prosecution in the courts and in addressing PILs and the resultingjudicial mandates. While the number o f PILs and judicial mandates has grown over the years, little attention has been paid to buildinglegal capacity and training. In addition, it has been increasingly difficult for SPCBs to prosecute cases, in part due to the lack o f legal knowledge and enforcement resources to collect the necessary evidence to convict polluters. At the same time, the industry often has the resources -both legal and financial -to defend against protracted litigationor to negotiate a favorable settlement. 3.72 Ironically, the increasing number of PILs and court cases often results in further eroding the very capacity of SPCBs to inspect and enforce, as already limited staff resources are re- allocated to dealing with a highprofile law suite. While it i s important that general and technical staff at the SPCBs get trained to better understand and deal with the underlyinglegal concepts for an environmental case, such as the importance of a chain of custody, causation and harm, and procedural due process19,the number of highly qualified legal staff at the CPCB/SPCBs should also be increased or supplemented with contract attorneys. In addition, collaborative arrangements with local law schools should be explored to establish legal intern and law clinic programs that wouldhelpsupport enforcement efforts by CPCB/SPCBs. BetterManagingFinancialResources 3.73 With regard to financial resources management, SPCBs show varied levels o f accomplishment depending on their reliance on government funds or availability o f independent revenue sources, such as water cess. Other main sources o f SPCB revenues are consent fees and other grants (Planning Commission, 2005b). The introduction o f the enhanced water cess rates in 1996 has significantly changed the financial situation for SPCBs giving them additional sources o f revenue for operating activities (and is an example o f a success story in India's pollution management). However, while some SPCBs appear financially self-reliant, others still depend heavily on the State government for their operating expenditure which can potentially erode their independence in decision-making. Building capacity o f SPCBs to raise their own financial resources (e.g. through a timely revision and proper levels o f consent fees, or using a bank compliance guarantee program, in addition to water cess) and better allocate these resources by focusing on priorities, i s an important area for moving forward. Capacity StrengtheningAction Plansfor SPCBs 3.74 To coherently address the challenges and needs outlined above, MoEF/CPCB should request and guide SPCBs in developing a capacity upgrading action plan, following the State o f the Environment reporting exercise, which establishes environmental priorities and trends ina State. These plans coulduse a commontemplate (with a flexibility to adjust to particular circumstances) that might include the following areas: (i) developing and implementing a staffing plan, including specific measures to upgrade skills; (ii) developing and adopting tools for better and faster evaluation o f environmental assessment o f investments; (iii) rationalizing consent management based on environmental risks and re-allocating resources towards a more effective inspection and monitoring; (iv) decentralizing responsibilities to regional offices with the respective capacity upgrade in staff and equipment; (v) undertaking full computerization and Web-based management o f application processing and monitoring; and (vi) introducing greater information disclosure and transparency in decision making, l 9 Procedural due process i s a legal term meaning that procedures for filing a case are followed fairly and according to the law. India: Strengthening Institutions for Sustalnable Growth 52 including preparing to meet the requirements o f the RTIA. An example o f such a plan being developed for the Orissa Pollution Control Board i s given inBox 3.8. BuildingCapacity of ForestDepartmentsto Perform Regulatory Function 3.75 While this analysis has primarily focused on CPCB/SPCBs, similar issues concerning the need to improve the efficiency o f clearance and regulatory functions emerged for the DoF, particularly regarding the granting o f forest clearances and conducting compensatory afforestation. Improving the forestry clearance system, as well as the accountability mechanisms in the compensatory afforestation process, was cited as a key issue for all developers, particularly in the hydropower, transmission and highways sectors. Specific recommendations include: (i)clarifying and rationalizing the complex forest clearance process by developing a handbook on classification and definition o f forest areas and other land categories; (ii) updating the database o f forest lands with forest maps and wildlife data; and (iii)reviewing the responsibilities and processes for compensatory afforestation, including an oversight system. Finally, there i s a need for integrating the NPV payment for diverted forest land with compensatory afforestation within a consistent framework that (i) prevents double-counting o f the cost inflicted on the developer; (ii)sets a reasonable economic value for the payment (see further discussion on the NPV in Chapter 4); and (iii) provides guidance on how to economically restore lost ecological and livelihoodbenefits. Box3.8: ProposedCapacity BuildingActionPlanfor the OrissaPollutionControlBoard The Institutional Capacity Needs Assessment o f Orissa Pollution Control Board has identified the followmg maincapacity needs and actionplan: Consent management: Redesign the consent management system with implementation at regional offices, expand the length o f CTOs and streamline the processing time, prepare an inventory all operating mdustries and mmes. Compliance and enforcement: Incorporate self momtonng, self reporting and record keeping requlrements inCTO, finalize standardized monitoring and sampling protocols, train staff on legal issues and enforcement procedures. Compliance assistance: Insist o n bank guarantees, blacklist non-compliant compames with financial institutions, promote self audits for compliant companies, create a compliance assistance hotline. Public participation: Train staff in communication and outreach slulls, offer technical training to NGOs and civil society, develop public awareness campaigns o n emerging growth sectors, establish a publicly accessible electromc database for EMdocuments, andproject status. Staffing: Develop and agree with the Finance Department a staffing plan including in house training programs and additional staffing needs to conduct the core hnctions in view o f the increasing number o f applications and inspections. (Source: World Bank staff) StrengtheningPerformanceOversight 3.76 While the States have primary responsibilities for implementing and enforcing environmental programs, the national nodal agencies for environmental enforcement - MoEF and CPCB -retain the responsibility to ensure that the national laws and regulations are being enforced by the States. The level o f compliance and enforcement among the states i s very uneven as shown in Figure 3.2. However, a system o f oversight between the central India: Strengthening Institutions for Sustainable Growth 53 and State agencies appears weak and lacking accountability for the level o f performance. Such an oversight function seems to have been assumed by the judiciary. 3.77 To strengthen the existing system o f regular information exchange between the State and central level, the CPCB should establish oversight guidelines for the SPCBs which would detail requirementsand procedures for reporting, informationmanagement, public disclosure, conflict resolution, etc. To ensure the institutional effectiveness and accountability o f regulatory agencies, an agreed set o f compliance and enforcement indicators and targets should also be included. These indicators would measure both outputs (e.g. the number o f facilities inspected and the number o f facilities in compliance), as well as outcomes (e.g. improved ambient water quality, reduced forest cover lost). Most o f this data i s already collected and made publicly available. Importantly, these indicators should be routinely used by CPCB/SPCBs to assess the effectiveness of existing programs and target staff and resources on priority areas; this type o f mechanism i s yet to be established. Given a large variation in SPCB performance, with some States apparently lacking an incentive andor ability to improve, MoEF and CPCBs could also consider introducing a performance-based program o f support to SPCBs, which will reward, for example, for exceeding the agreed targets, in addition to the needs-based technical assistance to SPCBs with particularly low capacity. Figure 3.2: Status of Compliance Across Various States in India, 2003 100% .-m g 90% 80% 70% .- cE 60% 50% J 40% 30% -E 20% --eWaterP - -c. Air poll^ ?iG".- I 0YO -A- -Highly P I I 1 , I , I I Source: PlanningComrmssion (2005b) 3.78 In conclusion, the agenda as outlined above for environmental agencies is o f immense proportions. It necessities a bold set o f actions ranging from updating environmental laws, augmenting regulatory approaches, and refining enforcement strategies, to meet the existing and emerging challenges o f rapid growth. As India's economy continues to accelerate and the demand for new development, roads, and energy increases, the performance o f the environmental regulator will come under increased scrutiny and pressure. The needed institutional changes, however, cannot be achieved overnight (or even over a year), as many o f the measures would involve further examination, design, and consultation with the public, other government agencies, and the regulated community. It is however important to move quickly towards a broad agreement with all major stakeholders on the India: Strengthening Institutions for Sustainable Growth 54 priority actions, based on the identified list, and develop a medium-term program o f implementing the agreed measures, supported by necessary resources, monitorable targets, and clear accountability mechanisms. IV.Aligning Sectoral Policies and Incentives 4.1 Discussions, surveys and media coverage in India show that the environmental regulator - represented by the Ministry o f Environment and Forests (MoEF), State departments o f environment and forests, Central Pollution Control Board (CPCB) and State Pollution Control Boards (SPCBs) -i s most often to be blamed for various environmental problems by both the public and development authorities. Development authorities feel that their role i s to promote projects while that o f SPCBs i s to enforce compliance, and that while they are doing their job, SPCBs are not doing theirs. This attitude i s reinforced by the legal situation where a lawsuit for an environmental violation i s filed against the SPCB for failing to enforce and not directly against a polluter for failing to comply. 4.2 Capable and effective enforcement institutions are critical for environmental improvements, as i s a vocal civil society. However, there are a number o f fundamental ways through which economic development and policies in India (and elsewhere) affect environmental resources, which are beyond the issue o f "compliance" with the given set o f environmental regulations and standards. This i s particularly evident in the power sector. There i s also a fimdamental need, demonstrated by a history o f environmental management worldwide, for sectoral agencies to facilitate better environmental compliance and performance o f individual projects and more sustainable development o f the sector as a whole. 4.3 The present review o f national and international experience in the three selected sectors -industry, power and highways -also shows that sectoral institutions have a major facilitating role to play inmanaging the environmental impacts o f sectoral projects, programs and development plans. While not providing a complete account o f environmental impacts and opportunities linked to sectoral development and performance, this chapter summarizes the key issues highlightedby the three sector reviews. The RoleofIndustrialPolicyandInstitutions 4.4 The important role o f voluntary initiatives and approaches by industry stakeholders i s well recognized and demonstrated by the Charter on Corporate Responsibility for Environmental Protection (CREP) -a product o f collaborative effort between the industry and MoEFKPCB. Also important i s that the level o f attention State institutions (responsible for the development, implementation and oversight o f State industrial policies, such as departments o f industry and industrial development authorities) give to promoting environmentally sound behavior by industries can have a significant influence on the subsequent environmental impacts fi-omnew investments and operating facilities. 4.5 This i s elucidated by the industry sector case studies that revealed a relative difference in overall environmental performance o f the two, in many ways alike, industrial estates in the two States where pollution control boards are similarly active and strong. The analysis showed that the difference i s in part reflected in the level o f environmental awareness and communication between regulators, industrieshndustry associations, and communities, and in part by the important role played by the State Industrial Policy, the Industrial Development Corporation and industrialassociations (Box 4.1). India: Strengthening Institutions for Sustainable Growth 56 Box 4.1: Key Reasons for Relatively Better Environmental Management in Naroda IndustrialEstate (as reportedin focused group discussions) Proactive role was played by the Gujarat Pollution Control Board by creatmg regulatory incentives for industryto improve their environmental performance; Relatively better coordination among partners led to a reasonable level o f performance o f the common effluent treatment plant (CETP), as per the design; A number o f industries in Naroda have benefited from advisory support from Gujarat Cleaner Production Center o n cleaner technologies and production as well as best practices to improve environmentalperformance; The waste exchange program in Naroda improved sharing and access to information o n environmental compliance o f mdividual industries within the industrial estate and reduced the cost o f compliance; Proactive Gujarat Industnal Policy 2003 issued in 2004 catalyzed improved environmental perfonnance through financial incentives and an award for the industry that demonstrates exemplary applicahon o f cleaner productiontechniques inSME; Gujarat Ecological Commission provided a platform for NGOs to undertake scientific analyses and play an advocacy role; Naroda Industnal Association through its work has catalyzed enhanced accountability for each stake holding mstitutions, particularlythe environmental regulators; A number of large and small scale mdustries (more in Naroda and a few 111 Patancheru) improved compliance by adoptmg voluntary envlronmental management system standards based on I S 0 14001; and Several umversities, research organizations, and private investors m Andhra Pradesh and Gujarat, as well as Naroda IndustrialAssociation have demonstrated a successful business model through sharing o f techtllcal information on waste mnirmzation to improve industrial productivity and operation o f CETP and treatment, storage and disposal facility (TSDF). Source: World Bank-CII Stakeholder Consultation workshop, Ahmedabad, July 2005 4.6 Both the Gujarat and Andhra Pradesh case studies also highlight the importance o f and opportunities for industrial institutions, such as Industrial Development Authority (IDA), as well as estate management and business associations, to influence the environmental performance o f individual industriesand estates as a whole. One example i s an initiative by the Naroda Industrial Association to introduce environmental auditing to improve the knowledge o f resource utilization and generation o f waste. Key opportunities, identified by the study, are summarizedbelow. Integrate Environmental Objectives in the State Industrial Policy 4.7 Duringthe past decade Indiahas seenthe most significant reforms inindustrialpolicy being implemented with support from a diverse range o f sector institutions, both at the central and State level, triggering its economic growth. However, integration o f environmental objectives in this process has lagged behind, and the current situation differs in various States. For example, the industrial policy of Gujarat boldly promotes good environmental performance, while some other States emphasize the need for "expeditious clearance o fproposals" for development investments, without emphasizing the importance o f ensuring that new investments should be made in an environmentally sustainable manner. It India: Strengthening Institutions for Sustamable Growth 57 would be important for the Ministry o f Industry to raise awareness o f "good practice" examples o f integrating environmental provisions in the State-level policy, such as those o f Gujarat or Maharashtra, and encourage all rapidly industrializing States to follow this approach. LinkIndustrialPromotionto EnvironmentalPerformance 4.8 To promote and attract investments in the State, IDAs tend to offer attractive concessions and tax holidays to the project proponents inmany cases without considering the environmental sensitivities o f investments or their cumulative effect. This policy has led to a mixedvariety o f industriesbeing attracted to the area affecting ancillary support industries, predominantly SMEs, which have little or no environmental facilities. For example, Gujarat has attracted significant investments for the productiono f dyes, dye intermediates, and textile processing inthe small scale sector, which reportedly has led to significant contamination in the surface and ground waters and land environment. It i s time for India to start integrating environmental considerations in industrial promotion incentives, using, for example, the instrumento f environmental performance bonds, described inChapter 3. Inthis case, IDAs would require certain type o f companies, identifiedjointly with environmental authorities, to secure environmental performance bonds, to receive the concessions or tax holidays, or to obtain a license to set up the plant for particularly polluting processes. A particular opportunity, as well as a significant risk if this opportunity i s neglected, i s provided by the recent process o f setting up Special Economic Zones2' that could potentially house industries, commercial establishments and residential complexes with possible pressure on land and natural resources in these areas. Paying due attention to environmental considerations, opportunities to reduce the pressures through better planning and incentives to clean production inthe process o f establishing these zones and granting licenses will go a long way inharmonizing the growthand sustainability objectives. Coordinatewith Local Government and SPCB for Better Planning, Infrastructure Provision,andZoning 4.9 The two areas selected for the case studies reflected the important role and results o f the planningprocess. The case studies showed that many environmental issues found inthe Patancheru industrial area (Andhra Pradesh), and to some extent inNaroda (Gujarat), related to inadequate planning, provision o f environmental infrastructure and choice o f location o f the polluting industries.That the Naroda industrial estate was better planned and provided with better infrastructure, as compared to the Patencheruindustrial estate, was a key factor in comparative environmental performance. However, for neither area was there evidence that an assessment was undertaken in advance to evaluate whether adequate infrastructure facilities (such as water supply, effluent treatment, hazardous waste management, sewage management) would be sufficient and available to ensure environment management and overall compliance. 2o In2000, the Government o f India replaced the old Export Processing Zone regime by a new scheme o f "Special Economic Zones" (SEZs) with several significant mcentiveshenefits that were not available in the earlier scheme. In 2005, it enacted the SEZ Act and the SEZ Rules were notified in February 2006. (Source: Economic and Political weekly, November, 2006; "Special Economic Zones: Revisiting the Policy Debate'? India: Strengthening Institutions for Sustamable Growth 58 4.10 Traditionally, the planningprocess for the new industriesstarted at the local level and was mostly driven by promoters with very little consideration to the environmental consequences o f making a decision unless the site area had been declared environmentally sensitive. To address this pitfall, the spatial planning programs initiated by the CPCB and SPCBs, including the development o f a zoning atlas, built-in a district-wise environmental assessment guideline for the siting o f industries. The work has been extended to cover 142 districts in different States and union temtories, and i s expected to enable the planner to decide on the suitable areas and zones for new developmental projects. Although the zoning atlas i s considered to be useful by many environmental planners at the State level, the use o f informationfor actual siting o f industries i s still modest and uneven. There i s an evident need to more effectively integrate the environmental zoning program by SPCBs with the State industrial development programs and locational decisions by IDAsusingrecent good practice examples from some States such as Andhra Pradesh where the Andhra Pradesh PCB has managed to start exercising a major role inindustrial zoning. Raise Awareness of Business Opportunities Linked to Good Environmental Management 4.11 Many industries, including SMEs, would volunteer to switch to better and cleaner production processes and technologies, if it also helps them reduce the costs o f inputs, increase the value o f output and increase the overall profit. For example, a cluster o f export- oriented glass industries near Bangalore switched to gas-fueled boilers, resulting in drastic decrease in air emissions and significant reduction o f glass rejection ratio, which compensated well for the cost o f conversion. Another example i s from the textile processing sector in Ludhiana, where a large number o f small units adopted measures, such as changing processing machines, optimizing the washindrinsing operations, and reducing the processing steps. These investments had a short pay back period, which i s very important for SMEs in determining the need for such investments. The measures resulted in cost savings from reduction in the use o f inputs including water, energy, dyestuff and chemicals. The majority o f the measures also had a significant impact on reducing emissions2*. 4.12 While environmental protection i s still viewed by many industries solely as a compliance issue, which needs to be managed to minimize the business risks o f closure or public complaints, there are a growing number o f examples -inIndia and internationally - o f commercial opportunities and gains accompanying improved environmental performance. It is an important task and public duty o f industrial agencies and associations to collect and effectively disseminate information to increase knowledge and awareness o f commercial benefits from better environmental performance among investors and developers. FosterPartnershipsBetweenLarger Industriesand Smaller Suppliers 4.13 It is evident that industrial associations and leaders in environmental performance among industries themselves are much better positioned than the environmental regulator to guide investors and developers to understand and realize business opportunities associated with improved environmental management (such as quality o f products, waste reprocessing, energy efficiency). International experience has shown that SMEs are more likely to accept and adopt compliance measures where industrial associations provide the incentives and where large companies act as environmental mentors. The incentives are particularly strong 21 Informationcollected by the study India: Strengthening Institutions for Sustainable Growth 59 and the chances for success higher when there i s a direct business relationship between a mentor and a small business, such as in Mexico where small suppliers were responsible for mentoring (Box 4.2). Box 4.2: "Greening Supply Chain"Initiatives Supply chain management i s an important factor which links three important concepts - business competitiveness, economic productivity, and environmental management. Greening o f the supply chain is a growing industry concept that advocates the purchaser to use its purchasing power to demand improved environmental performance from the suppliers, which in many cases are SMEs, upstream in the supply chain. It is also implied that the purchaser, usually a large corporation, will play a facilitator's role towards its suppliers and help them in their efforts m adopting more environmental- friendly practices. The intended result i s to create a trickle down effect throughout the supply chain in which the entne supply chain i s motivatedto become "green" or more environmentally friendly. In Mexico, the Guadalajara Environmental Management Pilot was established to assist 20 SMEs to implement I S 0 14001 environmental management systems by l i h g them with larger companies, to which they supplied their products, as a mentor support system. The core o f the project was a series of tramngs and review sessions where the basis o f envlronmental management system elements were introduced and SMEs were shown how to feasibly implement them with the assistance o f their mentors. Half the participatmg SMEs said they would not have participated IIIthe program if they had been invited by the government or university, showing that the motivating factor was commercial ties with their major clients. In India, the National Productivity Council as well as industrial associations and institutes in India have promoted this concept. For example, the IndianInstitute o f Materials Management has established a knowledge bank that promotes best practices on chain supply management. Source: World Bank, 1998b; information from study consultations. Expandthe Role of BusinessAssociationsinKnowledgeSharingandTraining 4.14 Many Indian industries have leveraged the knowledge o f local and international practices (such as local substitutes for raw material or locally reusehecycle some waste byproducts) to implement environmental management programs under the corporate social responsibility charter. The industrial associations, such as the Federation of Indian Chambers o f Commerce (FICCI) and Confederation o f Indian Industries (CII), have developed important initiatives to share best practices, provide compliance assistance and promote voluntary initiatives. For example, the Association o f Chambers o f Commerce and Industry (ASSOCHAM) and FICCI have organized workshops on I S 0 14000, developed courses in internal auditing o f environmental management systems, and provided technical assistance on pollution prevention and waste minimization. Both C I I and FICCI have also developed programs targeting SMEs. 4.15 However, the role o f these and other business associations in promoting good environmental performance as inherent part o f good business practice i s uneven across the States. A worrisome observation i s that the poorer states with weaker government institutions where massive development with potentially significant environmental risks has now picked- up (for example, Chhattisgarh, Jharkhand and Orissa), have less active business associations with few environmentally friendly programs. Hence, many investors and developers inthese States, who are emerging on a massive scale, have limited access to information on environment friendly technologies and management practices and business opportunities associated with their adoption. It i s critical to support and expand the environmental India: Strengthening Institutions for Sustainable Growth 60 programs by the national and State business associations in those "emerging" States that are experiencingmassive development investments. Environment as a Driver inPower Sector Development 4.16 Environmental impacts o f the power sector are wide-ranging, significant and in public spotlight: they are visible locally, whether it i s a smoky stack, an ash pond, or a reservoir displacing a settlement; they cross boundaries o f sovereign countries, as in case o f acid rains; and lately, they have become o f major global concern due to anticipated climate changes largely caused by carbon dioxide emissions from burning fuels (Box 4.3). It i s also widely recognized that these impacts are a function o f policies and institutional performance inbothsectors -power and environment. Box 4.3: Energy andEnvironmentalChallenges:A GlobalPerspective The way that energy and environmental challenges are addressed in the next two decades will, to a large degree, determine sustainable growth, environmental quality, and national security. Climate change presents an additional challenge to economic development in general, and the energy sector in particular. T o reduce the threat o f human-induced climate change will requlre a significant reduction in the emissions o f greenhouse gases globally, o f w h c h carbon dioxide is most significant. While Organization for Economic Cooperahon and Development (OECD) countries will remain the largest per capita ermtters o f Greenhouse Gases (GHGs), the growth o f carbon emissions in the next decades will come primarily from developmg countries. The Inter-governmental Panel for Climate Change (IPCC) estimated that carbon emssions would increase by 2050 relative to 2000, globally by a factor o f 1.6 to 3.5, and in developing countries by a factor o f 2.3 to 5.2 m the absence o f policies to address climate change and a transition to a low-carbon economy. Between 2020 and 2030 developmg country emissions o f carbon will exceed those o f developed countries in aggregate but still lag far behind on a per capita basis. Transformational policies and strategies will be needed to meet national expectations o f secure, safe and clean energy and to deal with the implications o f climate change. The energy sector accounts for about 80 percent o f worlds' greenhouse gas emssions. The widespread commercialization o f energy efficiency technologies i s an effective strategy to both reduce local and regional air pollutants and address climate change without affecting economic growth as well as addressing energy security concerns. Although, energy intensities are declimng due to structural changes, technological effects, and globalization, much remains to be done in transforming energy efficiency markets. Decisions taken today on technologies, particularly m the power sector, and policy will have profound consequences on development paths for 40 to 60 years. Carbon intensive energy lnfiastructure and energy inefficient cities that are being rapidly built and expanded today will perpetuate the pattern for carbon intensive development for decades. Policies and incentives that promote new, cleaner and more efficient technologies and the international aid to help developing countries reduce the cost, access and adopt cleaner technologies on a commercial scale would be critical. (Source: WorldBank, 2006a) 4.17 The main impacts on the environment from the power sector inIndia are defined by: Primary energy source and technology choices for power generation, which heavilyrelies on highash-content coal (Figure 4.1); Sector governance and performance, particularly such indicators as high transmission and distribution (T&D) losses increasing the need for additional generation; erratic supply and outages, forcing users to resort to inferior back-up options; inadequate T&D networks preventing optimum utilization of generation India: Strennthemnn Institutions for Sustainable Growth 62 Reducing T&D losses and theft, the scale o f which i s currently equal to new annual capacity addition. Promoting energy efficiency among end-users o f electricity. Optimizingutilization o fthe existing generation capacity. Providing rural access through distributed generation based on renewable applications. 4.20 Progress in all these areas will be highly beneficial for both sectoral and environmental objectives. A series o f earlier analyses o f the long-term environmental issues inIndia's power sector at the national level and for selected States, conductedby the World Bank (World Bank, 1998a; 2004a; 2004b), demonstrated significant financial and environmental gains for unities from improved T&D performance and demand-side management incentives. This i s consistent with evidence from other such studies undertaken inIndia and elsewhere. 4.21 Key sectoral priorities, as articulated by government documents, such as the ElectricityAct 2003, the Energy Conservation Act (2001), the national Tenth Plan and major MOP programs (Renovation and Modernization (R&M) o f coal power plants, Accelerated Power Reform and Development Program, etc.) appear reasonably consistent with the above environmental objectives. This reinforces the importance o f overcoming a host o f barriers - institutional, regulatory and financial - to proceed with these measures in practice. Paradoxically at first sight, current power shortages already associated with substantial economic, social and environmental costs have emerged as one o f the main bottlenecks for realizing India's plans to cleaner power generation inthe fbture (Box 4.4). 4.22 The three case studies, prepared for this report and involving a hydro power project, a coal fired power plant and a major high voltage transmission line (Box 1.2 in Chapter l), indicated that environmental impacts can be reasonably managed in all these sub-sectors. It mustbe qualifiedthat the case studies included relatively recent projects undertaken by large and financially strong central government corporations - the National Thermal Power Corporation (NTPC), the National Hydro Power Corporation (NHPC) and the Powergrid Corporation -that were able to comply with environmental regulations, as well as exercise a socially responsible approach. India: StrengthemngInstitutions for Sustainable Growth 63 Box 4.4: A Planned Transition to Cleaner Electricity Generationi s Complicated by Severe Shortages ofPower While India i s planning to increase the role o f hydro, nuclear, and clean-coal technology w i t h its energy mx, load shedding has put a premium on getting generation plants on line as quickly as possible. This naturally favors an approach o f focusing o n reliable, conventional coal-fired u t s , as supportedby data below. India's Tenth Plan envisions a shift to hydro power. Within the Ministry o f Power (MOP) planning framework, about one-third o f the planned capacity addition o f 100,000 MW d m g the period 2002- 2012 would be hydro, which would contribute to the shift. About half o f the planned capacity would be thermal (most o f which will be coal-fired), and the balance would be nuclear and non-hydro renewable. The majority o f capacity additions are slated to come from the central sector and majority state-owned firms such as NTPC and NHPC. The balance is expected from state-level generators and the private sector. Inpractice, the NTPC (the central sector thermal generator) has come closest to meeting its planned capacity addition target, and most o f t h s capacity has been coal-fred. Overall, the country i s likely to add about 75 percent o f the planned 41,000 MW envisioned by 2007. This performance will likely leave India considerably short o f both the 100,000 MW target for 2012 and the desired s h f t in the primary source mix towards a less import and coal dependent energy base, addressing energy secunty and environmental concerns. Furthermore, power shortages are among key reasons for under-performance o f India's Renovation and Modernization (R&M) program for coal power plants. One o f the main barriers to R&M today is that many o f the best candidates for R&M are owned by States that desperately depend o n cheap power from these older plants for a significant portion o f ther overall supply and cannot afford a temporary shutdown o f such a plant for R&M. Source: MOP(2005) and Bank Staff 4.23 The Powergrid Corporation has adopted a comprehensive set o f environmental and social policies that may exceed the requirements o f the respective government policies and regulations (Box 4.5). For the Dhauliganga-Barrely transmission line going through ecologically sensitive areas o f Uttar Pradesh and Uttaranchal, a "good practice" effort was made to conduct a preliminary survey for project alignment that would avoid developed areas, human settlements and cultural and historical places. 4.24 The Dadri Thermal Power Plant o f the NTPC, that started commercial operations in 1995, was the first power plant in India using beneficiated coal. In combination with relatively advanced technologies and a good (IS0 14001 certified) management system, the plant was able to meet the regulatory requirements with respect to the environmental impacts. Although clean (beneficiated) coal i s more expensive, financial performance o f the plant i s better than many other coal power facilities. Nevertheless, ash disposal remains a challenge, and the case study highlightedthe need for better technology and incentives for management o f coal ash. Among the recent NTPC initiatives, a proposed plan to set up four ultra mega coal based power plants (of 4,000 MW each) using supercntical technology has the potential to demonstrate improved environmental management fi-ombothnational and global perspectives. 4.25 As mentioned inChapter 2, the Koldamhydropower project (also o fthe NTPC) sets a good practice example o f working with the community. At the same time, the case study and fbrther consultation with the hydropower developers emphasized the need for standard guidelines by the MoEF for environmental flow downstream o f the daddiversion structures India: Strengthening Institutions for Sustainable Growth 64 so that the impact o f change o f flow regime downstream on aquatic flora and fauna could be minimized. Box 4.5: PowerGrid -Corporate Leadershipin Sustainability Powergrid Corporation o f India Ltd.(PowerGrid) i s one o f the largest transmission utilities inthe world playmg a strategic role inthe Indian power sector operating the national gnd. PowerGrid is presently operating about 47,757 circuit km o f transmission lines and 82 sub-stations having transformation capacity o f46,461 MVA. Transmssion projects are generally environmentally clean and non-polluting innature and its impact on environment are restricted to only Right o f Way. PowerGrid, has demonstrated its commitment to achleve the goal o f Sustainable Development through implementation o f a comprehensive "Environmental Social Policy & Procedures" (ESPP) based on the principles o f avoidance, minimizationand mitigation.The implementation of ESPP inall PowerGrid's projects has resulted in significant mamstreaming of environmental sustainability inits operations, particularly through: Reducing deforestation. The data shows that the forest cover, which was about six percent of total 27,000 cucuit kmLine until 1998 has reducedto two percent with proactive and systematic approach in 20,500 circuit kmline constructed during last six years. Greening of PowerGrid sub station sites. PowerGrid has undertaken massive plantations in sub- stations areas and about 2 to 4 acres o f land ulth suitable species o f plants in almost each o f their commissioned sub stations. Provision for rain water harvestingand collection o f even usedwaste water for its conservation and recharging o f ground water inall upcomng buildings and substations. Protecting wild life through design modification: Adoption of an innovative tower design, such as multi-circuit and very tall towers, to protect wildlife and trees in ecologically sensitive (In Tehri transmission line tree felling i s reduced to 14,739 against earlier estimated 90,000 trees in Rajaji National Park due to placing o f 85 m high towers.) areas and providing financial assistance to state government/ institubons for conservation o f flora and fauna. Eliminateduse of poly chlorinated biphenyls.PowerGrid has eliminated the use o f poly chlonnated biphenyls, aknowncarcinogen, inall electrical equipment. PowerGrid has initiated design and implementation o f an integrated management systems, viz. I S 0 14001for Environment Management, 18001 for OccupationalHealth & Safety and I S 0 9001 for Quality management. (Source: PowerGrid website) 4.26 Summing up, there i s some degree o f convergence between sector development plans and environmental objectives. Furthermore, the same reforms in sector governance and incentives that would improve environmental performance are desperately needed for meeting the sector's own performance targets. At the same time, the sector review and case studies highlighta number o f areas where hrther alignment o f sectoral policies and programs with environmental considerations is required and can be done by the sector itself or in coordination with environmental authorities. These are listed below. Develop a Consistent Framework for Integrating Environmental Externalities in Power System PlanningandInvestmentDecisions 4.27 A framework for capturing environmental externalities, related to the power sector, has been evolving in India in response to specific environmental priorities. For example, India's coal has very high ash content and i s very low in sulfur. This resulted in a decision to set source emission standards on ash (measured as SPM), but with no emission standard for India: Strengthening Institutions for Sustainable Growth 65 sulphur dioxide (S02). The emission standard is regulated by prescribing the height o f the stack to ensure good dispersion. While there is no nitrogen oxides (NO,) emission standard for coal-based power plants, NO, emission norms for oil and natural gas-based power plants are more stringent inIndia than inmany other countries. Companies wishing to use forested land had to pay the MoEF for afforestation o f two hectares for every hectare o f forest land lost. Resettlement and rehabilitation components associated with, inter alia, hydro and transmission projects are mandatory items. 4.28 The possible impact of the cumulative regulations on power sector technology choices have not been considered so far, nor i s it expected to be done per initiative o f the environmental authorities preoccupied with building and enforcing a reasonable multi- sectoral regulatory fiamework. These considerations come together in India's power generation planning process, where it remains a strong centrally planned impetus, provided by the Central Electricity Authority (CEA) for new capacity development by central government utilities. For a long time, however, the recognition o fthe role that environmental regulationsmightplay insector development plans was mute. 4.29 The issue o f accounting for environmental externalities and incorporating those costs in the power planning process has come to the fore in India in October 30, 2002, with a Supreme Court ruling on a matter involving forest conservation and requiringthe user agency (except for projects like clinics and schools) to pay the Net Present Value (iVPv) for diverted forested land. The payment was set at Rs 580,000 - Rs 920,000 per hectare and in addition to the compensatory afforestation payment, which, as per latest revision, i s set at about Rs 35,000 per hectare if land is provided by the developer, or up to double that amount if land i s not provided. 4.30 The impact o f the ruling was particularly felt by hydro projects, which are typically located in forest areas and could cause a large loss of forest land due to inundation, as well as land requirement for locating project facilities. The introduction o f N P V was estimated to add 5-7 ercent to the project costs, according to the National Hydro Power Corporation (NHPC) 2 , affecting power tariffs and the viability o f hydro power projects. Several public F utilities petitioned against this order, emphasizing the extraordinary high amount o f payment and double-counting with the payment for compensatory afforestation. Inrecognition o f this controversy, a Committee, headedby Dr.Kanchan Chopra, was set up in September 2005 to review and update the methodology for NPV calculations, as well as recommend whether additional types o f projects should be exempted from paying NPV. The Committee released the report inJune 2006.23 4.31 The introduction o f N P V has illustrated that environmental regulations can, and increasingly will, influence the cost structure for future generation and transmission projects. However, the ultimate impact o f an environmental regulation on future power sector technology choices, in the short and long term, can be established only through a comprehensive and rigorous analysis. It i s therefore critical that power planners are able to perform such an analysis and provide well-substantiated inputsto the MoEF and the Supreme Court on such matters. 22 Based on data for Arunachal and Sikkimprojects 23 Chopra Report on NPV. Source: http://iegindia.org/npvreport.pdf India: StrengtheningInstitutions for Sustainable Growth 66 4.32 Importantly, the impact o f NPV on the cost structure o f power projects highlighted a broader issue -the need for a comprehensive methodology that power planners and others in India could use for estimating all relevant externalities (and the economic costs and benefits) o f alternative power sector technology choices at the project and system level. For example, one o fthe immediate concerns inthe power sector was that the N P V payment could result in an unintended consequence o f an even greater reliance on coal-fired power plants to meet future energy demand, which would ironically be detrimental to the environment. Therefore, a framework for accounting for externalities at the planning stage should make sure that the extent to which externalities are incorporated with the hydro development process i s comparable to that for thermal power projects. (If the extent and rigor o f integrating externalities indifferent types o f power projects are different, the resulting power generation plan will be sub-optimal from both economic and environmental viewpoints.) The development o f such a framework should also address the question o f whether global climate change related externalities should be incorporated as well, and if so how these should be calculated. In the end, only a consistent consideration and integration o f all these issues would lead to a system o f environmental regulations that corrects the market for the development o fnew generation and transmission projects ina socially optimal manner. 4.33 The next issue i s how exactly India's power generation planning and development process should adapt owing to the increased significance o f environmental costs and benefits. The key questions to be considered are whether and how to incorporate identified cost and benefit streams within individual energy projects (implying that revenues to the project are sufficient to cover these costs, and that revenue streams from benefits are also established); which costs and benefits to recognize outside the project structure (and ifso, who absorbs the costs or gains the benefits); and which costs and benefits to leave aside for future consideration; and what incentives, regulatory and/or financial, are to be provided to private investors to ensure optimal technology choices?24 4.34 To illustrate the last point, private developers in India's power generation increasingly use imported coal with higher sulfur content but are able to save on the cost o f SO2 control technology due to the lack o f a source emission standard. Inthe situation when emission norms for NO, for oil and natural gas-based power plants are quite stringent in India (more so than inmany other countries) this situation would give coal-based generation an additional edge over "cleaner" fuel choices. It should be also noted that the average actual SO2 emissions (1,200 mg/m3)from power plants usingIndian coal i s less than the standard in the European Union (1,200-2,100 mg/m3).Thus, setting such a standard inthe future would not affect these plants while it would more effectively regulate pollution from the use o f higher sulfur importedcoal. 4.35 Power sector agencies, notably the MOPand CEA, have a natural advantage and a definite business need for developing capacity to analyze power system development plans and technology choices taking into account the entire range o f environmental externalities. And, it would be beneficial for both the power sector and the environment ifthese agencies and the environmental authorities could work together on the appropriate system o f environmental regulations and incentives, based on a good analysis o f their impacts. An already existing example o f a joint effort by MoEF/CPCB and power generators to build on 24 A World Bank has supported a parallel study to analyze these issues and recommend possible approaches to addressing them. India: StrengtheningInstitutions for Sustainable Growth 67 i s an agreement to a set o f actions to improve environmental management and reduce pollution includinggreenhouse gas emissions under the CREP. IntensifyEffortsto PromoteEnergyEfficiencyandConservation 4.36 The Energy Conservation Act (2001) provides a sound, comprehensive regulatory fkamework which introduces both voluntary and mandatory programs for energy efficiency. However, implementationo f the Act has beenuneven and impeded by a prolongedprocess o f making the Bureau o f EnergyEfficiency, establishedby the Act, filly operational. And while a wide range o f energy efficiency initiatives are underway, energy conservation i s still not a mainstream business concept in a country with perhaps the highest electricity tariffs for industrial users in the world (with unreliable power supply by utilities being, again, one o f the counter factors). There i s a definite need for a focused effort, backed by strong political commitment, to translate the ambitious provisions o f the Act into an actual set o f incentives and results on the ground. 4.37 A major project on assessingbarriers and opportunities for energy efficiency inthree countries - Brazil, China and India - has been undertaken by the joint United Nations Development Program (UNDP)-World Bank Energy Sector Management Assistance Program (ESMAP) in collaboration with UnitedNations Environment Program (UNEP). The keyemerging recommendations o fthis assessmentfor Indiaare summarized inBox 4.6. India: StrengthemngInstitutions for Sustainable Growth 68 Box4.6: TheBrazil-China-India EnergyEfficiency Assessment:Recommendationsfor India Adopt a more strategic approachto promotingenergy efficiency: Against the backdrop o f multiple initiatives and programs, there i s a need to refocus o n generating the best results in terms o f actual energy efficiency gains. This would require a strong strategic review at the national level, involving the central Government, to assess priorities for work on energy efficiency development in the coming years, and to focus sustained, multi-year attention on the implementation o f the policy imtiatives and market-oriented investment mechanisms that can provide the biggest contributions. Such an integrated and strategic review would also be useful for establislung national priorities for support under current and new international clean energy and climate change initiatives. A review might begin at the macro level, assessing energy intensities and potential savings indifferent sectors, and the practical investment areas which could y e l d the biggest benefits. But the most important pomt would be to establish prionties for specific programs to generate the necessary investment. Decide on the importance of Energy Service Companies (ESCOs) and support accordingly: ESCOs as well as energy auditors have made little progress so far. This is partially due to their small size and limted reach, and lack o f credibility and relationslups with other important actors. Support for these two groups whose prime business deals with energy efficiency and who could become important promoters o f energy efficiency investments inIndia could contribute to increasing commercially-based energy efficiency investments. Wlule ESCO development may or may not be considered a prionty, past experience in India and elsewhere shows that India's ESCOs are unlikely to develop significantly without sustained government support, through ESCO market creation initiatives (perhaps through proposedpublic buildingenergy efficiency imtiatives) or other means. Support the promising new energy efficiency lending businessesbeing developed by Indianbanks. The launclung o f dedicated energy efficiency finance schemes by five major banks 111India is a significant acluevement. Several specific areas where follow-up efforts would yield significant returns mclude: Further assistance to the participating banks to refine and standardize loan applications/appraisal procedures, and mnirmze transaction costs. This requires specialized t e c h c a l assistance to each mdividual bank and follow-up training assistance. Additional work o n options to "ring fence" the negative incremental cost stream achieved in energy efficiency projects for partial use as loan secunty also would be beneficial. Intensive support to the local bank branches in marketing and refining their energy efficiency lending schemes. Much work remains to be done indisseminating information about these schemes to energy efficiency project developers and client enterprises. Further efforts are also required to improve capacities and the efficiency o f arrangements for the technical assessment aspects o f the lending schemes. Provide sufficient flexibility to encourage business-driven initiatives. Finally, it i s important to emphasize that wlule government support for energy efficiency i s required, it should not result in the government stifling the activities o f other actors by telling them what type o f energy efficiency schemes to formulate or end-user segments to target. Actors on the ground need to make their own decisions based on their business objectives. (Source: WorldBank, 2006b) StrengthenEnergy Efficiencyand EnvironmentalConsiderationsin UpgradingOld andConstructingNew CoalPowerPlants 4.38 Of the 83 coal plants in India, 31 are yet to comply with the national emissions standards and 27 are yet to comply with the effluent standards. These plants are old, in poor condition and typically owned by cash-strapped State government utilities. The Government o f India's Renovation and Modernization (R&M) program to rehabilitate and upgrade such plants has been implemented for about 20 years, since the Seventh Five-Year Plan. At the India: Strengthening Institutions for Sustamable Growth 69 initial stage, the progress was good; however, over time, R&M requirements have increased rapidly (inpart due to environmental regulations) and the implementation o f R&M schemes has slowed down for several reasons. Of the Tenth Plan (2002-2007) target o f 10,400 MW, less than 20 percent has been completed or undertakenby the end o f 2005. India's nodal technical and planning agency, the CEA, estimates that up to 30,000 MW o f the capacity base i s inurgentneed o frehabilitation now or inthe near future. 4.39 While it i s critical to urgently address a set o f bamers to speeding up the program, it i s also important to use an opportunity, provided by the program, for greater integration o f energy efficiency and environmental considerations. For the past and planned R&M, the primary criterion i s capacity enhancement and life extension while any energy efficiency improvement achieved i s incidental and not a criterion for R&Mproject design. Nor does this major investment program, which will define the performance o f the renovatedplants for the future, attempt to consider and address the likely future trends in environmental regulations, which are beingcontinuously expanded and tightened for the power sectors around the world. 4.40 Undoubtedly, this cannot be achieved without a supportive regulatory environment and financial incentives. Therefore, it i s necessary to work out suitable packages o f financial support, technical assistance and regulatory incentives to eligible utilities that would promote additional enhancements in energy efficiency andor environmental performance. Given the synergy between these enhancements and mitigation o f greenhouse gas emission, this should be a key area o f focus for exploring and utilizing, to the extent possible, opportunities providedby global climate change financing instruments, such as Carbon Finance. 4.41 Building new coal-fired power plants i s another opportunity to adhere to stricter energy efficiency and environment performance standards that address heightened -within India and internationally -environmental concerns about local and global impacts. For this, again, it would be important to develop and pursue a strategy o f maximizing access to concessional funding instruments that are available to cover the incremental cost o f a higher efficiency and cleaner technology. EnableBetterAsh Management 4.42 The Dadri thermal power plant case study highlighted that ash management is a challenge even for a modem facility using beneficiated coal. It i s estimated that approximately one acre per MW o f installed thermal capacity i s required for ash disposal. The CPCB and MoEFhave taken a number o finitiatives to address this, includingpromoting the use o f Pozzolena cement; collection o f dry ash directly from electrostatic precipitator hopper; promoting highconcentration slurry disposal; back filling o f ash in used coal mines; and encouraging the use o f fly ash in road construction and brick industry. Specifically, the FlyAsh Notification (1999) by MoEFpromotes use o f fly ash inthe manufacture o fbuilding materials and construction activity (within a specified radius o f coal or lignite based power plant); and mandates the use o f only washed or beneficiated coal by thermal plants located beyond 1,000 kmfrom the pit head. 4.43 Various thermal generation stations o f the NTPC are taking measures to minimize the land requirements for ash disposal resulting from ash utilization, such as by raisingthe height o f ash dyke using fly ash or giving it to cement manufacturers, wherever possible. The Dadri plant has taken some innovative steps to minimize the land requirement by using only about 480 acres o f land (for 840 acre) for disposal o f fly ash and plans to utilize about 0.1 million tons o f fly ash per annum through a brick makingplant, resultingin savings o f approximately India: StrengtheningInstitutionsfor Sustainable Growth 70 one acre o f land per year. The implementation o f this rule on a wider scale is, however, constrained by the lack o f enforcement mechanisms and incentives for many power plants (particularly those State-owned utilities that acquired large areas o f government land at low cost) to dispose o f fly ash at no charge. On the other hand, an incentive for construction companies to collect ash greatly depends on plant location. Developing specific sectoral guidelines insupport o f this notification and providing special incentives for remotely located power plants to follow those would be an important contribution to minimizing the environmental impacts o f coal-based generation. 4.44 Land requirements for ash disposal and carbon dioxide emissions are likely to be the two main long-term issues for power generation growth in India, continued to be dominated byhighash content coal. These two issues, while sounding very different, are closely linked inIndia: the highash content o f coal available inIndia does not lend itselfto a wide use of very high efficiency technology (such as ultra super-critical and Integrated Gasification Combined Cycle (IGCC) technology), which can help capture carbon emissions, unless there i s a breakthrough in R&D. There are significant financial costs associated with any further option for making Indian coal and power generated from its burningcleaner (across a range o f effects over a life cycle) and being less carbon intensive. This brings to fore the importance o f strategic R&D efforts that would take into account the cost and benefits o f removal o f ash at various stages o f coal production and processing chain, to maximize the full range o fbenefits, includingreduced landrequirements, localpollution effects and carbon emissions. Improvethe Regulatory Environment for Renewable Energy 4.45 India i s the only country with a dedicated Ministry for Non-conversional Energy Sources (MNES) and has a distinguishedrecord o f promoting renewable energy, particularly wind power. The importance o frenewably energy for India's development is emphasized by a growing recognition, as articulated in the draft Renewable Energy Policy (made available for public comment in 2005), that achieving universal electrification would be difficult without a greater use o f distributed generation options using indigenous resources available to remote communities. There i s a need to finalize the Renewable Energy Policy consistent with the country's broader environmental agenda. Another important area o factionis to build capacity o f State-level electricity regulators for setting transparent rules for renewable energy providers, who currently experience significant regulatory uncertainty resulting in a negative impact on the industry. An independent analysis o f the relative "true" economic costs and benefits o f renewable and conventional generation would be u s e h l to support individual State regulators indetermining "fair" prices for renewable energy. Maximize Opportunities Provided by the Environmental Agenda to Support the Developmentof a Modern and Efficient Power Sector 4.46 Increasing attention to environmental impacts o f the power sector, particularly global, can be, and often is, considered as a competing consideration diverting attention from more important sector issues. It does not need to be so. First, the multiple synergies articulated above suggest that the protection o f the environment should be seen as an additional impetus, rather than a constraint to achieving the very objectives the sector has set for itself. Secondly, environmental requirements often act as an important motivation for technological innovation, energy conservation and management improvements that, in the longer-term, become very beneficial for sector performance. Third, the global climate change agenda in India: Strengthening Institutions for Sustainable Growth 71 particular provides an opportunity to seek and use grant-based and other concessional climate change financing instruments, along with knowledge, technical assistance and technology transfer, ina manner that reinforces and advances sector development objectives and national environmental priorities, such as energy efficiency, enhanced R&M o f coal power plants or a greater use o f renewable resources. 4.47 For example, India represents one o f the largest potential markets for low-cost carbon-reducing investments. It i s currently one o f the three largest potential suppliers o f carbon credits to buyersaround the world, under the Clean Development Mechanism (CDM), introducedby the Kyoto Protocol. Most o f these measures/projects also produce benefits that further India's national development and environmental objectives, which the application of global environmental financing instrumentscan help facilitate. 4.48 Furthermore, following a meeting o f G-8 countries in summer 2005, attended by India, the International EnergyAgency (IEA) and the World Bank were requestedto develop, in collaboration with other International Financial Institutions, an "investment framework" for promoting cleaner production and use o f energy. This request recognizes that the magnitude o f financing needs, required for such a shift to cleaner energy on a large scale, i s likely to exceed greatly the resources currently available from existing instruments, such as CDM, Carbon Finance, facilitated by the World Bank, and the Global Environment Facility (GEF). The Investment Framework for Clean Energy and Development, expected to be developed over the next two years with the help o f country-specific consultations and in- depth analyses, i s intended to accelerate investment so that countries, such as India, can meet their energy demands for growth and poverty alleviation in an environmentally sustainable way. It i s therefore important for government agencies and private sector players in India to be an active participant o f this process, influencing its outcome. This also highlights the importance o f a strategic assessment o f options, specific to India, to maximize synergies between lowering the carbon intensity o f the economy, accelerating the rate o f growth, enhancing energy efficiency and supporting the core objectives o fpower sector development. Facilitate Environmentally and Socially Responsible Performance by All Actors in the Sector 4.49 Attitude, attention and initiatives by key government institutions dealing with the power sector at the national and State levels are among the key determinants o f environmental performance by developers and operators o f the facilities. For further improving environmental performance, the following additional specific recommendations are made: Develop sectoral guidelines for establishing transparent and accountable processes and procedures for interaction with the community and taking their views into account on key aspects o f the project affecting their lives, such as acquisition o f land; Facilitate access to and sharing of international and national best practices in key environmental management areas where major technical challenges remain, such as blasting, soil erosion and tunneling for hydro plants, ash control and handling for thermal plants; Encourage a wider adoption of social corporate responsibility policies that would include environmental policies and I S 0 14001certification; and India: Strengthenme Institutions for Sustainable Growth 72 Improve management and disclosure of environmental information related to the sector. Given the range and importance o f environmental issues in the sector, a computerized environmental database and data management system, adapted to sector needs, could be developed and maintained by the MoP/CEA, in collaboration with MoEF/CPCB, as part o f the MOPregular information database. The data would be used for power generation system planning needs, discussed above, and benchmarking and tracking progress on key indicators relevant to sector performance. Some o f the key environmental performance indicators could be also made available online and included in MOP annual reports, which currently omit environmental information. BuildingHighwaysin an Environmentally SustainableWay 4.50 Over the past (approximately ten) years, environment management in the highways sector has been increasingly addressed as an important component o f sector development. Highways design and constructionpractices have provided opportunities for mobility and safety improvements, as well as social and environmental enhancements to address community concerns. The highpriority attached to the sector by the GoI, substantial support to State-wide and national-level efforts by multi-national aid agencies, such as the World Bank and the Asian Development Bank (ADB) with their attention to environment and social considerations, and parallel strengthening of the MoEF's Environmental Assessment (EA) clearance have all further increased awareness and incentive within implementingagencies to address these issues. The value o f integrating the EA process has begun to demonstrate a growing numbero f good practices, such as an example from Gujarat (Box 4.7). 4.51 The current Road Transport Policy gives serious attention to environmental issues and attempts to correlate highways development with wider impacts than just "pollution". It acknowledges the impacts o f multiple contributors beyond narrowly defined roads or highways construction, including energy and land demand, congestion and hazards. As described in Box 4.8, the Policy mentions the induction o f new technology and upgradation o f existing ones to reduce fuel consumption and pollution highlighting a cross-sectoral process. 4.52 Operationalizing the policy provisions remains a significant challenge as the procedures have not been clearly spelt out for either the project proponent or the regulator. Some important factors such as land-use and occupational changes, impoverishment, rehabilitation, water-logging and long-term environmental impacts that might require cross- sectoral and cross-boundary considerations have not been included. The onus to ensure that these are addressed i s on the MoEF through the EA clearance process v i s - h i s the MoRTH's own planning and executionprocesses. 4.53 The mandates o f various policies, including environmental acts, address the above stated issues in limitedways. Most o f the applicable environment regulations, for example, the rules regarding noise, air, coastal zones, environmental impact, use o f fly ash, and plantations, address direct impacts on a sectoral basis. As a result, ambiguities have emerged with respect to the identification and management o f indirect impacts, such as the degradation o f surface water quality by the erosion o f land cleared as a result o f a new road, and particularly induced impacts o f development, such as increased deforestation o f an area stemmingfrom easiedmore profitable transportation o ftimber andproduce to markets. These India: StrengtheningInstitutions for Sustainable Growth 73 impacts are more difficult to measure and over time can lead to irreversible changes affecting larger geographical areas than anticipated. Box 4.7: Internalizing Environment and Social Processes in Road Projects The Gujarat State Highway Project (GSHP) Implementation Experience A s the benefits of implementing the Environmental Management Plan became more visible o n ground, the interest and attention from decision makers, engineers, local leaders and communities towards environment and social management aspects increased. With progress in project implementation, it became increasingly clear that such measures substantially reduce resistance, help in generating support from local authorities and the public during construction, reduce project delays and enhance the over-all benefits o f the project. It was felt that with systematic efforts and minimal resources (most o f which are a part o f the contractual obligations), such measures generate tremendous goodwill, appreciation and support from the communities in general and local leadership inparticular. This can b e achieved through better integration o f the environment and social management practices into planning, design and construction o f civil activities. This realization eventually garnered itself into the `Vision and Achievements Document' o f Roads and Buildings Department, Government o f Gujarat (GoG) published in 2003. T w o separate statements, one o n `environment' (Mother Earth) and the other o n `social' (People Matter) aspects were made a part o f the document titled `Road to the Future' - a reflection o f awareness and commitment o f the GoG in recognizing the importance o f such practices in the developmental works. T o advance this initiative further, the G o G initiated a training program, under which more than 500 engineers have already been trained. Awareness generation and basic training including field exposure has been introduced as a part o f all the training programs conducted by the Staff Training College, Gandhinagar. Environment and social management modules were introduced four years back and will continue to be a part o f the training agenda in all future programs as well. The experience gained from implementing the Gujarat State Highways Project (GSHP) and Gujarat Emergency Earthquake Reconstruction Project (GEERP) i s also being used to develop an Environment and Social Management Framework (Guidelines) for planning, construction and maintenance o f roads in the state. The Roads and Buildings Department has also established a Policy and Planning Unit (PPU) staffed with multi-disciplinary expertise and has confirmed that the Environment Management Unit, created under the GSHP will be a permanent feature in its organizational set-up. The two units will take forward environment and social management inihatives inother projects as well. An Environment Information System (EIS) has also been created under the Gujarat Road Management System (GRMS), which will be used in planning and designing all future road projects in the state. Initial operation o f this system has begun with data collection for a l l state highways in five pilot districts. These efforts are being made to ensure that at least some o f the `good practices' learnt or developed during implementation o f external funded projects are internalized in the longer run and do not become limited achievements in specific projects. (Source: Bank staff and Project Implementation Unit, GSHP) India: Strengthening Institutions for Sustainable Growth 74 Box 4.8: EnvironmentalInterventioninthe NationalRoadTransport Policy The National Road Transport Policy addresses environment considerations inthe following manner: "In the Road Transport Sector, energy planning has a special significance, because transport i s the second largest consumer o f energy. The growtho f transport not only leads to pressure on limted availability o f non-renewable energy but also gives rise to broader envlronmental issues. As the demand for transport services nses, it leads to increased use of scarce land and contributes greatly to atmospheric pollution. Sound pollution and road congestion are other environmental hazards due to transport. It is therefore, necessary that envlronmental concerns should be built mto road infrastructure project planning at the beginning itself, i.e. at the stage o f site selection or alignment finalization. The government is aware o f these concerns and has mandated that all road infrastructure projects requlre envlronmental clearance ' before they are taken up." (Source: M o R T H website, http://morth.nicm) 4.54 Recognizing some o f these ambiguities, the MoEF has issued Gazette notifications and Circulars regarding the highways sector, which have resulted in guidelines and some codes o fpractices by MoRTH. Assessment o freal-life experiences shows, however, that their effectiveness i s often compromised by subjective application, open-ended interpretation, lack o f quality control, and outdatedirregular revisions, as well as lack o f incentives for contractors to translate the EL4 and Environmental Management Plan (EMP) provisions into engineering designs and construction plans. Several recommendations have emerged from the study to address these challenges and shortcomings. Strengthen Mechanisms, at Both Policy and Implementation Levels, for Better Accounting of the Indirect,InducedCross-sectoralandCross-boundary Impacts 4.55 These aspects are particularly significant for linear highways projects that extend over large ecological and administrative boundaries. Many o f these impacts have not been documented or studied in detail in India and information about international practices available with regulatory and monitoring agencies remains sketchy. Therefore, it i s useful to review practical mechanisms adopted by other counties and emerging from best practices in India, for dealing with these issues and develop approaches suitable to India. Some o f the good international practices inthis area are summarized inBox 4.9. India: StrengthemngInstitutions for Sustainable Growth 75 Box 4.9: InstitutionalMechanismsto PromoteComprehensiveIntegrationof EnvironmentalImpactsinHighwaysDevelopment-InternationalGoodPractice United States. The Federal Highway Admnistration (FHWA) i s a major agency o f the Umted States. Department o f Transportation (DOT).FHWA has the broad responsibility to ensure that transportahon system plans, technologies, and innovahons improve safety o f the public and the human and natural environments, and that the decision processes include the full and open participationo f the public. The National Environmental Policv Act (NEPA) of 1969 directs Federal agencies, when planning projects or issuing permits, to conduct envlronmental reviews to consider the potential impacts o n the environment by their proposed actions. Environmental reviews involve an interdisciplinary and interagency process, including inputs from the public, as well as from other agencies, to guarantee that all envlronmental protection (as well as other) issues are addressed. FHWA and its partners have made substantial contributions to the environment and communities, through planning and programs that support wetland banking, habitat restoration, hstoric preservation, air quality improvements, bicycle and pedestrian facilities, context-sensitive solutions, wildlife crossings, public and tribal government involvement, and more. These principles have been operationalized within FHWA through the Vital Few Goals (VFG) that tightly interlink environmental stewardshp and streamlinmg to improve project delivery without compromising environmental protection while addressing the mobility and safety needs o f the public. VFG sets expectations, measures, and methods for advancing an improved and efficient environmental review process. At the systems level this i s accomplished through earlier and better coordination of environmental concerns during the transportation planning process. At the project level, such integration can be enhanced through the application o f context sensitive solutions. Ths challenges all state transportation agencies and Federal Lands Highway (FLH) divisions to reach beyond their normal processes at the systems planning or project level, and to search for solutions that demonstrate an improved compatibility between the natural and `built' environments. Australia. The Department o f M a i n Roads, Australia, through its Environment Policy, commits to managing the road network to optimize environmental outcomes for natural, human and built envlronments. The department uses knowledge o f the actual and potential impacts o f road infrastructure on these environments during planning, design, construction, and mamtenance phases. Continuous improvement m environmental performance is sought by developing and implementing management systems and integrahng environmental processes within general management practices; monitoring, reviewing and reportmg o n environmental performance; providing appropriate environmental resources; delivering envlronmental awareness training; developing and implementing environmental practices which minimize predicted Impacts; consulting with the public and other stakeholders to provide for well-informed decision making. T o achieve this, M a m Roads employs a multi-disciplinary team o f envlronmental scientists, environmental engineers, environmental planners, landscape architects, cultural heritage and re-vegetation officers state wide. These officers are located indistnct, regional, corporate and commercial positions. In addition, recogruing the value o f continuous engagement with stakeholders, and correlating the same with sustamable project designs, the department has developed a specific manual on "Community Engagement" policy, standards, and principles with detailed guidelines for all levels o f staff to implement and achieve these standards. These publications assist with the day-to-day runnmg of the department and provide external stakeholders with information about the department including how to manage environmental requlrements. The department also has an exhaustive Road Planmng and Designmanual which includes environment and social elements. Provide Technical Guidance on Environment Management through Sectoral Guidelines 4.56 A need for good sectoral guidelines on various aspects o f environmental management has emerged very strongly to overcome the "environment knowledge gap" that exists within the sector. Existing guidelines (such as the Indian Roads Congress (IRC): Guideline on India: Strengthening Institutions for Sustainable Growth 76 conducting EA) are limited in coverage and outdated. There i s a need for a more comprehensive set o f guidelines developed on the basis o f sound technical research and implementation experience. The effort could be led by MoRTH, in coordination or through IRC or Center RoadResearchInstitute (CRRI), and with guidance from MoEF. A parallel can be drawn with The American Association o f State Highway and Transportation Officials (AASHTO) in the United States in the context o f promoting technical excellence at the national levelthrough highways associations. 4.57 A list o f issues, identifiedby sector review and consultations, where guidelines will behelpful,includes: Public consultation and community engagement; Healthand safety o fhighway construction workers; Integrating environment management in the project cycle, to better integrate EMP in project designs as well as methodology for assessing cumulative and induced impacts; Spot-checking storage, transportation, and use o f explosives; disposal o f bituminous waste based on studies o f decay and transport characteristics; use o f fly ash and other waste materials inroad construction with appropriate safeguards; Restoration o f borrow areas; environment management measures for bridge and tunnel works; and Protection o f water courses and water bodies, wildlife areas and eco-sensitive regions; relocation and enhancement o f cultural and common properties, in coordination with the Archaeological Survey o f India (ASI). Strengthen Contract Provisions to Improve Environmental Performance of Contractors 4.58 A major part o f the EMPs inhighways projects address construction related impacts and are often o f great importance. The primary responsibility to implement these parts o f EMPs lies with the contractors. EMPs are normally attached with the contract documents. However, most contractors view EMPs as an add-on, and their focus i s in implementingthe main body o f works specified in the contracts, which constitute general and specific conditions o f a contract, conditions o f particular application, Ministry o f Road Transport & Highways (MoRTH) technical specifications, relevant and referred IRC codes and guidelines, and the bill o f quantities. Most o f these conditions, specifications, codes and guidelines do not have adequate provisions for environmental management, do not necessitate proper implementation o f EMPs, and sometimes may conflict with the provisions o f EMPs. 4.59 Thus, there is a substantial scope for including environmental provisions in these specifications, codes and other contract mechanisms that would improve and streamline the implementation o f EMPs and the overall construction process. For example, mainstreaming environmental management measures in the main construction documents and contract management procedureswill mean that the needfor preparing EMPs for typical construction- related impacts will be obliterated. Such impacts would thenbe addressed through the regular management o f contracts, while EMPs could then focus on additional impacts, ifany. India: StrengtheningInstitutions for Sustainable Growth 77 4.60 The following specific actions are recommended: 0 Establish a system o f periodic revision o f old IRC codes, to bring them up to date with technology development inthe sector; 0 Strengthen and integrate environment management measures in the IRC codes and the MoRTH technical specifications using experience with implementingEMPs (Box 4.10); 0 Develop new IRC codes/guidelines in consultation with expert technical institutions to guide preparation o f projects to integrate environmental concerns, so that the conflicts between implementation o f engineering designs and EMPs could be avoided; e Introduce an environment checklist to help ensure that all required environment related items are included inthe Bills o f Quantities; and 0 Develop a specific manual explaining how EMPs would be translated in contract clauses, and integrated in the contract documents. For example, a contract condition could include recovery o fpayments for non performance o f EMP activities. Box 4.10: IntegratingEnvironmentManagementMeasuresinConstruction Codesand Technical Specifications National Rural Roads Development Agency. As part o f the World Bank-supported Rural Roads Project, implementing agencies in four states have begun to utilize envlronment management tools such as Environment and Social Management Framework and Environment Codes o f Practices (ECOPs) since end-2004. For understanding and improved utilization o f these instruments inthe field, during project preparation and implementation, targeted training is being provided to implementing agency staff in all the states. Another separate but encouraging development i s that the latest revision (February 2005) of the Operations Manual for the entire National Rural Roads Programme (Pradhan Mantri Gram Sadak Yojana) includes the salient features o f many o f the ECOPs, most importantly the transect walk. Karnataka Public Works Department. The Departmental Code o f the o f the PWDhas beenrecently augmented to address environmental issues arising out o f construction o f roads, bndges and buildings by responding appropriately during design, construction and operation and maintenance phases. It aims at (i)providing details o f environmental management aspects o f PWD projects; (ii) minimizing adverse envlronmental impacts o f projects by environmental screening and management framework; (iii)encouraging good construction practices; (iv) ensuring compliance with the statutory requirements; and (v) canying out envlronmental monitoring. ~ _ _ _ _ _ _ Access to Training, Knowledge and Capacity Enhancement 4.61 The study identified several priority areas for strengthening the role o f highways sector agencies in building the knowledge base and technical capacity to minimizing the environmental impacts in the sector projects. To carry these out, an increased allocation o f manpower and resources within highways agencies to environmental issues would be necessary. Specific recommendations include the following: Facilitate the development o f the national quality standards for services and products to be delivered inthe highways sector; India: StrengtheningInstitutions for Sustainable Growth 78 Strengthen the documentation and dissemination o f relevant good practices and research findings; Initiate certification and accreditation programs on environment and associated construction management; Strengthencapacity o f existingacademic institutions that specialize inEnvironmental Management Training for the highways sector, such as National Institute for Training o f Highway Engineers (NITHE) and Central Road Research Institute (CRRI), to provide high quality and well rounded environment training o f international standard at low cost; Impart training on environmental management curriculum drafted by NITHE and/or CRRI with inputs from the MoEF on regulatory aspects through local and regional institutions such as the StaffTraining Colleges; Perform periodic audits o f environmental management in projects under implementation focusing on replicating good practices with the help o f academic institutions and/or planning/quality control divisions o f implementing agencies with participation from regulatory agencies, wherever appropriate; and Strengthenand influence highways and civil engineering curriculum on environment management innational technical institutions. Addressing Cross-sectoralChallenges 4.62 All reviews and case studies highlightedthat the lack o f effective mechanisms for inter-agency coordination i s too often at the root o f environmental management problems, including difficulties with compliance and enforcement. While formulating a new environmental regulation, the draft regulation i s sent to other concerned ministries as well as to Planning Commission for comments and inputs. However, more cross-sectoral co- ordination i s needed in implementation and enforcement o f regulations. Majority o f sector experts suggest that improved coordination between sector agencies and environmental authorities early in the planning process could immensely enhance the environmental sustainability o f sector investments as well as make better investments in environmental infrastructure. 4.63 The two case studies in the industry sector particularly highlight the importance o f cross-sectoral coordination during the decision-making process for the siting o f industries, which are typically the responsibility o f State Industrial Development Corporations. When environmental institutions are consulted much later in the process after the planning i s complete (which has happened in most cases so far), only marginal improvement can be made, if any, and most cost-effective opportunities to ensure long term sustainability o f environmental resources in the area get missed. There are also numerous examples from the highways sector o f the critical need for, and significant benefits from, improved collaboration between sectoral and environmental agencies. 4.64 One example that emerged from the two sectors (i.e. power and highways) when cross-sectoral collaboration could enable compliance with environmental regulations relates to fly ash management. To facilitate the implementation o f the Fly Ash Notification by the MoEF (1999), both the power sector and highways authorities could provide some regulatory incentives to dispose o f and collect fly ash respectively, as well as necessary technical India: Strengthening Institutions for Sustainable Growth 79 support. A good practice example i s provided by the Allahabad Bypass Project -a four to six lane expressway, approximately 90 km long. The EMP o f this project includes appropriate mitigation measures for handling ash, developed with the help o f the Fly Ash Cell in NTPC, while contract provisions ensure the use o f ash in its construction. Providing the right set o f incentives, facilitation and oversight, developed jointly by both sectors, to ensure large-scale replication o f such approaches would be necessary. 4.65 It is therefore important for both sectoral and environmental authorities to evaluate, share andpromote national best practice examples o fpolicies and institutionalmechanisms in the planning and design o f infrastructure and industrial projects that enable early and meaninghl participation o f environmental agencies in the project planning cycle. Some o f the good examples are the Environment and Social Management Framework for the Highways Sector in Gujarat and industrial zoning efforts in Andhra Pradesh. It i s also important to increase the level o f consultation and coordination with sectoral agencies in drafting the environmental rules and regulations concerning their sector activities, including specific agreements on their roles and responsibilities in facilitating implementation and enforcement. The Role of LocalGovernments 4.66 New priorities and programs, such as urban air quality actionplans or other area-wise pollution management programs, will require even greater cross-sectoral cooperation and integration. There i s an obvious need for formal institutional mechanisms for such integration; however these cannot be easily created. Consultations during the study conveyed a very strong message from experience that creating new institutions (including various inter- sectoral committees) i s generally not effective and must be avoided. It i s thus important to align the development and implementation o f new area-wise or/and multi-sectoral environmental programs with on-going institutional processes. The decentralization process set inmotion by the 73'd and 74* Constitutional amendments appears the best fit and the best hope for delivering on location (city)-specific area-based environmental management programs. 4.67 On a larger scale o f replication, cross-sectoral integration and coordination for better environmental management, such as o f the scope and depth envisioned by the area-based pollution management approaches (discussed in Chapter 3), would not be possible without a greater empowerment and involvement o f local government bodies, as the 73'd and 74* Constitutional amendments dictate. Several examples from the highways sectors highlighted that the cooperation o f local bodies was necessary for the control o fland use, safe disposal o f waste materials; prevention o f accidents that cause spillage o f chemicals on the road side; community-led road safety; land allotment for social amenities, recreation and location o f ideal sites for bus stands and markets; information boards for locally important features; and equitable utilization o f benefits from the road. Devolving more powers to and building capacity o f local governments for developing and implementing environmental management programs aimed at measurable improvement o f environmental quality in the areas o f their jurisdiction, with the participation o f all concerned sectors as well as citizens, would pave a vital roadinto an environmentally sustainable future. V. Towards a Sustainable Growth FrameworkIncentives 5.1. Given the high population density, vulnerable ecology, extreme climate and a significant share o f the economy heavily dependent on the natural resource base, environmental sustainability might well be the next greatest challenge along India's development path, adding to the list o f priority needs to reduce disparity, eliminate poverty and promote social cohesion. As the country finds itself into the second phase o f robust growth, making and further projecting massive investments in infrastructure, urban development, mining and pollution intensive industry, the issues o f environmental management are comingto the forefront o fpublic a t t e n t i ~ n . ~ ~ 5.2. While pressure for change and more effective action i s building up and being recognized, albeit to varying degrees at all levels and by all players, there i s a serious breakdown in public trust and constructive dialogue with respect to addressing a very complex and non-trivial set o f issues. Increasing confrontation and suspense make the much needed environmental management reforms difficult to agree on and implement, further exacerbating environmental problems and creating a vicious circle. There i s an urgent need to start working towards developing a commonly shared vision on the way forward; involving all principal stakeholders and reconciling different perspectives in a virtual circle (Figure 5.1). Figure 5.1: From a Vicious Circle of Confrontation to a Virtual Circle of Sustainability enwonmental and dialogue quality and stakeholders quality and social dialogue conflict cohesion CurrentSituation Sustainable Future Difficulty to carry Successful necessary environmental environmental management management reforms reforms 5.3. One o f the first and key recommendations i s to carefully plan and execute a long term national program for supporting public participation in environmental management aimed at educating and building capacity o f all stakeholders involved. One specific action area i s to develop detailed guidelines, as well as provide training, for public 25 This has been a message from extensive discussions and consultations dunng the study will all three sectors, whose representativesunanimously conveyedthat "the environment" for making investmentsand doing business today is very different from that 10-15 years ago, on account to much larger sensitivities over environmental and social issues. India: Strengthening Institutions for Sustainable Growth 81 participation for both State-level environmental authorities [Departments o f Environment (DoE)/State Pollution Control Boards (SPCBs)] and sectoral agencies (adjusted to sector's specifics). Furthermore, most serious attention should be givento: (i) building civil society's capacity to understand the environmental issues and linkages to sector activities, to effectively engage in public participation forums; and (ii) promote innovative and more interactive approaches to public participation that increase public ownership o f environmental actions. One such example, already piloted in India, i s the citizen involvement inenvironmentalmonitoringand enforcement, which shouldbe further supported. 5.4. This fundamental notion o f shared ownership of and responsibility for environmental action, illustrated by Figure 5.2, i s currently challenged by the general perception among many stakeholders - the public, project proponents, and development authorities - that the environmental ills are the sole responsibility o f the environmental regulators (represented by the Ministryo fEnvironment an Forests (MoEF), Central Pollution Control Board (CPCB), State DOE,and SPCBs) failing to effectively implement and enforce the laws. The study shows, however, that unless an increasing public demand for better performance by the environmental regulatory agencies i s matched by adequate support to these agencies, conditioned on institutional reforms to increase efficiency, transparency and accountability, it would be nayve to expect substantial progress and unfair to solely blame the regulator for the lack o f it. Figure 5.2: Institutional Triangle of EnvironmentalManagement Environmentalregulators Affected community Regulated community 5.5. There i s a large unfinished agenda to strengthen the regulatory, enforcement and incentive mechanisms available with environmental agencies. The current application o f environmental regulation does not match the scale, diversity and trends o f India's economy. While actions are being taken to fill the gaps, greater effort i s needed. A response to this challenge requires new regulatory programs and approaches targeting different priority sources and combining stronger enforcement mechanisms with greater use of incentives, using innovative methods tailored to a targeted group o f sources and suitable to India. The sources, for which new, special programs are needed include: (i) small and medium enterprises estimated to account for 70 percent o f the total industrial pollution load; India: Strengthening Institutions for Sustainable Growth 82 (ii)municipal sources of pollution; (iii)multiple industrial and municipal sources contributing to environmental degradation in a particular area or ecosystem; and (iv) linear projects with complex direct and indirect (induced) impacts, such as highways projects. There i s also a needto better account for the vast diversity of regulated sources in setting national regulatory standards, supported by enhanced economic analysis o f the impact on the industry, particularly small scale sector and old, but desperately needed, public utilities. Enforcement efforts are undermined by the lack o f credible deterrents, and the toolkit the regulators use to facilitate compliance needs to be considerably expanded and strengthened to adequately deal with a very diverse regulated community. 5.6. Inaddition, there is a double benefit to regulatory agencies from recognizing and encouraging good behavior and voluntary initiatives by the industry to improve environmental performance through some regulatory incentives, such as extending the duration o f CTO for industries that demonstrated good record o f past performance, obtained I S 0 14001 certification, or introduced environmental auditing or sustainability reporting. First, it gives an additional (even if small) incentive for other industries to follow and to innovate further. Secondly, it allows SPCBs to focus their scarce resources on serial offenders and other priorities. There i s a significant, unrealized scope for providing such support, usinggood practice examples o f selected SPCBs. 5.7. Matching capacity of regulatory agencies with the growing demands is a major challenge. The study recommends that the MoEF/CPCB consider requesting and guiding all SPCBs in developing a medium term capacity upgrading action plan to meet the current and projected workload, including the requirements o f the Right to Information Act (RTIA) and the expected level o f court cases. These plans should explore possible efficiency gains through rationalizing processes (e.g. linking consent duration to environmental risks and performance o f a facility), upgrading technology, decentralizing responsibilities to regional offices, outsourcing o f certain functions, etc. It would conclude with a staffing plan, including specific measures to upgrade skills and a well-justified and variable need for additional positions to meet the core needs. The plan could then be used for negotiations with State governments over additional staff positions. 5.8. The system o f oversight needs to be strengthened between the center and States with respect to greater accountability for the level of performance. The MoEF and CPCB can also consider introducing a performance-based program of support to SPCBs, which would reward for exceeding the agreed performance targets, in addition to the "needs-based" technical assistance to SPCBs with particularly low capacity (e.g. new andor poorer States). Improving efficiency and accountability o f the forest departments in providing forestry clearance and performing compensatory afforestation was further cited as a key issue for all developers, particularly inthe hydropower, transmission and highways sectors. 5.9. The study also confirmed the lessons from environmental management experience worldwide highlighting a fundamental need for sectoral agencies to facilitate better environmental compliance and performance o f individual projects, more sustainable development o f the sector as a whole and greater cross-sectoral coordination, particularly at the planning stage. Case studies and sector reviews show that environmental monitoring and enforcement cannot improve the situation on the ground if environmental factors were not considered at the time o f location decisions, spatial planning, project design, and technology choices. Sectoral agencies and local governments are typically better positioned to influence these choices than the environmental regulator. The report identifies specific India: StrengtheningInstitutions for Sustainable Growth 83 recommendations for government authorities ineach sector, summarized inAnnex 1. 5.10. The study also found some important common themes, which were highlighted by all stakeholders o f environmental management and could serve as good entry points towards working together and building a constructive partnership. These action areas include: (i) better access to training, knowledge and capacity enhancement; (ii) maximizing opportunities provided by the RTIA to leverage improved dialogue and environmental performance, and (iii)improving cross-sectoral coordination, particularly involving environmental authorities in the early planning and design stages o f large infrastructure and industrial development projects. 5.11. A review o f issues involved in fostering cross-sectoral coordination and designing area-wise programs to arrest aggregated pollution from industrial clusters and multiple sources in the area, suggest that devolving more powers to and building capacity of local governments set in motion by the 731d and 74* Constitutional amendments, would be necessary. Empowered and capable local government bodies would have a natural incentive (which sector agencies lack) to promote cross-sectoral integration and oversee environmental management programs aimed at measurable improvement o f environmental quality in the areas o f theirjurisdiction, with the participation o f all concerned sectors, as well as citizens. 5.12. An environmental agenda that the country is facing is of immense proportion. The needed institutional changes and improvements on the ground will require commitment to a long-term program o f actions. Many o f the measures would involve further examination, design, and, not least, consultation with the public, other government agencies, and the regulated community. It will also require that environmental agencies, sectoral institutions, and the general public patiently work together to make progress, as evident from a set o f study recommendations presented in a summary table in Annex 1. Encouragingly, several steps and initiatives setting the right direction have been taken recently by various players, including environmental regulators and sectoral agencies at the central and State level, as noted throughout the report. 5.13. It would be important to move quickly towards reaching a broad agreement with all major stakeholders on priority actions, based on the identified list (Annex l), and develop a medium- to long-term program of implementing the agreed actions, supported by necessary resources, monitorable targets and clear accountability mechanisms. The Charter on Corporate Responsibility for Environmental Protection drawn up jointly by the industry and MoEF/CPCB sets a good example o f a collaborative process to expand upon. 5.14. The most important highway that India i s yet to build i s a road into an environmentally sustainable future. The time for public consultation is now, and the country cannot afford but to make it a best practice project. With India's outstanding human capital, knowledge edge, technological genius and sense o f social responsibility, there is every opportunity for this to happen. v1 e .3 e, 32 sE08 scW0 ci m 2 v) * V '7 W 0 '! .e W & e, B 8 * E+ v) .e B .3 esY 'S0E .9 5!!3 5& 0 .3 VI sM 0 3a a .3 .% 8EB P1 .3 0 rr 3 0 E? v) B 3W 0 aB X W 0 U 2 B W ,a -2& Q .I 0 V a 0 M 0 G c 4 9 E 9 i- 8 0 8 3 8 Q n 5 x E * 0 ._ * 8 m .3 8 yl 9 ..2Y 3 -2 .- nBB a 8 zm d fi 75 'S n India: Strengthening Institutions for Sustainable Growth 89 Glossary of Terms Area-based environmental A practice ofmanagingallnaturalandphysicalresourcesina holishc management manner or integrated systems, rather than managing each individual resource as a single component. The approach may have other dimensions including the structure and processes within and between central and/or local government agencies to manage natural and physical resources. It also r e c o p e s such things as the interconnectednessand inhnsic value o f ecosystems, community values, and the interests o f current and future generations inthe management o f resources Assimilative capacity The capacity o f a natural system to accept andprocess anthropogenic inputsor perturbahons without any deletenous effect Bank guarantee An indemmtyletter mwhich a bank commits itselfto pay a certam sum mthe event o fnonperformance by the party on whose behalfthe guarantee i s issued or ifany other form o f default occurs (see also EnvironmentalPerformance bond) Best available techniques The most effective andadvanced stage mthe development o f activities and their methods o f operation which indicate the practical suitability o f particular techniques for providing onprinciple the basis for emssion limitvalues designedto prevent and, where that is notpracticable, generally to reduce emssions and the impact on the envlronment as a whole Biochemicaloxygen demand A measure of the amount o f oxygennecessary to decompose orgamc (BOD) matenals ina volume o f water. As the amount o f organic waste mwater increases, more oxygen i s needed, resultmg ma h g hBOD Carbon finance Resources provided to projects to purchase greenhouse gas ermssion reductions Carrying capacity The maximum number o f individuals that a given envlronment can support without detrimental effects Chemical oxygen demand Amount o f oxygen required for the chermcal oxidation or decomposihon (COD) o f compounds or orgamc wastes inwater Clean Development Anarrangementunderthe Kyoto Protocolallowng industnalized Mechanism (CDM) countnes with a greenhouse gas reduction comrmtment to invest in emission reducingprojects mdeveloping countries as an alternative to what is generally considered more costly emission reductions intheir own countnes (see also Kyoto Protocol) Command and control Instituhonal measures aimed directly at influencing the environmental instruments performance o fpolluters byregulatmgprocesses andproducts used, by banning or limting the discharge o f certain pollutants, and/or restrictmg activities to certam times and areas Economies of scale The decreasemwt cost realizedthrough operational efficiency as a fmexpandsitsscaleofproduction India: Strengthening Institutions for Sustainable Growth 90 Environmentalauditing A management tool compnsmg a systematic, documented, periodic and objective evaluation o fthe performance o fthe orgamzation, the environmental management system andprocesses aimed at protecting the environment by facilitatmg management control o f environmental protectionand assessingcompliance with company policies EnvironmentalImpact A tool to identifyand evaluate the potential impacts (beneficial and Assessment (EIA) adverse) o f projects/operabons on the envlronment as an integral part o f planning process EnvironmentalKuznets An inverted U-shaped relabonship betweena country's per capita Curve(EKC) income and some measure o f envlronmentaldegradation. Envlronmental degradation first worsens during the course o f economic growth and thenlaterimproves EnvironmentalManagement A set o fprocesses andpractices whch enables an organizationto System(EMS) identify, monitor and control its envlronmentalimpacts. An EMS ispart o fthe overall management system that mcludes orgarnational structure, p l a m n g acbvities, procedures, andresources for developmg, implementmg and maintaimg environmentalpolicy. (see also I S 0 14001) Environmentalperformance A deposit that polluters mustpay to a certain environmental fundonce bond an agreement on environmentalperformance is violated (see also Bank guarantee) Externality An effect o fa decisiodactionby one set o fparties on others whose choice and interests were not taken into account Integratedpollution See area-based envlronmentalmanagement management I S 0 14001 An internationalstandardfor envlronmental management systems certified by The InternationalOrganizabonfor Standardization. It details the requiredelements following five principles: comrmtment and policy, plamng, implementation, measurement and evaluabon, and review and improvement (see also EMS) Kyoto Protocol Aninternationalagreement reachedmKyoto at the Thxd Conference o f the Parties to the UNFramework Conventionon Climate Change in 1997. The Protocol established specific targets and timetables for reductions ingreenhouse gas emissions to be achieved by the framework's signatories (see also CDM) Life CycleAssessment (LCA) a quantificabon o f the level o f energy and raw matenals usedas well as the solid, liquidand gaseous wastes producedat every stage o f a product's life or process Moral hazard A situahon inwhich one o fthe parties, after an agreement is made, has an mcentive to act mthe manner that bnng benefits at the expense o f the other party and not comply with the agreement India: Strengthening Instituhons for Sustainable Growth 91 Net PresentValue An assessment ofthe future streamofcosts andbenefits of anoperation where the overall profit or loss i s expressed interms o f current monetary values Not InMy BackYard An acronym that denotes the propensityo f localcitizens to insist on (NIMBY) establishmg necessary (envlronmental) facilities anywhere but inthelr own cornunity Panelregression A regression techmque that allows for both cross-sectional and time- senes dimension o f data to be analyzed (see also Regression) Performancebond See envlronmental performance bond Publicgood A goodthat is bothnon-excludable andnon-rival. A good is non- excludable if it is not possible to prevent anyone from consurmng the good once it has been made available to the public. A good i s non-rival ifconsumption ofthat gooddoes notreducethe quantity available for consumption by someone else Publicinterestlitigation Litigationfiled ma court o f law, for the protection o fpublic mterest mcluding pollution, terronsm, road safety, construchonal ,etc. Regression A statistical techmque usedto evaluate the associationsbetween one variable and one or more other variables Supply chain Theprogressionofbusinessesmvolvedmthe supply andpurchaseo f materials and goods from raw materials to the final product Volatile organiccompounds A class of chermcal compounds that haveh g henoughvapor pressures (VOCS) under normal conditions to significantly vaporize and enter the atmosphere. They are the prime mgredient inthe formation o f ground- level ozone or smog which can damage lungtissue, cause resplratory illness, and also harm farm crops Voluntary A contract betweenthe public administrationandmdustrymwhich a agreementhnitiative f d a group o f firms agree to achieve certain envlronmentalobjectives India: Strengthemng Institutions for Sustainable Growth 92 References Afsah, S., A. Blackman and D. Ratunanda. 2000. "How Do Public Disclosure Pollution Control Program Work? Evidence from Indonesia." Discussion Paper 00-44. Washington, D.C.: ResourcesFor The Future. Afsah, S., B. Laplante and D. Wheeler. 1997. "Regulation in the Information Age: Indonesian Public Information Program for Environmental Management." Research Paper, DevelopmentResearchInstitute. Washington, D.C.: The World Bank. Asian Development Bank (ADB). 2001. Report and Recommendationof the President to the Board o f Directors on a Proposed Loan and Technical Assistance Grant to India for the Western Transport Comdor Project. RRP:IND31435. Manila: ADB. Asian Development Bank (ADB). 2005. "Making Profits, Protecting Our Planet: Corporate Responsibility for Environmental Performance in Asia and the Pacific." Asian Environment Outlook 2005. Manila: Asian DevelopmentBank. Bose, R.K. and J. Leitmann. 1996. "Environmental Profile o f Singrauli Region, India". Cities, 13(2): 71-7. Center for Science and Environment (CSE). 1982. State of India's Environment. First Citizens 'Report.New Delhi:CSE. Center for Science and Environment (CSE). 2005. Concrete Facts. Life cycle of the Indian CementIndustry.New Delhi:GreenRatingProject, CSE. Dasgupta, S., B. Laplante, H.Wang and D. Wheeler. 2002. "Confronting the Environmental KuznetsCurve." Journal of EconomicPerspectives, 16(1): 147-68. Dasgupta, S., A. Mody, S. Roy and D.Wheeler. 2001. "Environmental Regulationand Development: A Cross-countryEmpirical Analysis." World Bank Policy Research Department, Working Paper, No. 1448. Esty, D.C., M.Levy, T. Srebotnjak, andA. de Sherbinin.2005. The2005 Environmental Sustainability Index: BenchmarkingNational Environmental Stewardship. New Haven: Yale Center for Environmental Law and Policy. Greenspan, R., K.Mathur, U.Naraian and D. Simpson. 2004. "Clearing the Air: How Dekhi Broke the Logjamon Air Quality Reforms". Environment, 46(3): 23-39. Hughes, G., K.Lvovsky, and M.Dunleavy. 2001 "Environmental HealthinIndia: Priorities inAndhra Pradesh", SouthAsia Environment Unit,Washington, DC: World Bank. International Energy Agency (IEA). 2005. Key World Energy Statistics 2005. Paris: International EnergyAgency. India: Strengthening Institutions for Sustamable Growth 93 Jaggers, K. and M.G. Marshall. 2000. Polity I V Project. Working Paper. Center for InternationalDevelopment and Conflict Management. University o f Maryland. Kochhar, K., U. Kumar, R. Raja,, A. Subramanian, and I. Tokatlidis. 2006. "India's Pattern of Development: What Happened, What Follows?." Journal of Monetary Economics, 53 (5): 981-1019. Lvovsky, K. 2001. "Health and Environment". Environment Strategy Paper No. 1. Environment Department, Washington, DC: World Bank. Lvovsky, K., G. Hughes, D. Maddison, B. Ostro and D.W. Pearce. 2000. "Environmental Costs of Fossil Fuels." Environment Department Paper No: 78. Washington, D.C.: World Bank. Miller, M.R. 2005. Report on Environmental Compliance and Enforcement in India, Washington, D.C.: U S Environmental ProtectionAgency. Draft Report. Ministryof Environment and Forests (MoEF). 2005. Annual Report 2004-2005, Ministry of Environment and Forests. New Delhi:Government of India. Ministry of Environment and Forests (MoEF). 2006. National Environment Policy. New Delhi:Government ofIndia. Ministry o f Power (MOP). 2005. Annual Report 2004-2005, Ministry of Power. New Delhi: Government o f India. National Institute o f Rural Development (NIRD).2003. Rural Development Statistics 2002- 2003. Hyderabad: National Institute o f Rural Development. Narain, U., and R. Greenspan, 2004. Who Changed Delhi's Air? Resourcesfor the Future Discussion Paper, 05-48, Washington, DC. Planning Commission. 2005a. Draft Report of the Expert Committee on Integrated Energy Policy.New Delhi:Government o f India. Planning Commission. 2005b. Evaluation Study on the Functioning of State Pollution Control Boards. New Delhi:Government o f India. Registrar General and Census Commissioner. 2001. Census of India 2001. New Delhi: Government of India. Reserve Bank of India. 2005. Handbook of Statistics on Indian Economy. Mumbai: Reserve Bank of India. Saldanha, L.F. 2002. "Public Involvement in Environmental Decision Making." Paper presented at the workshop on `Judicial Enforcement o f Environmental Law in Karnataka' organized by Karnataka Judicial Academy, Environment Support Group and Environmental Law Institute, 3-4 August 2002. India: Strengthening Institutions for Sustainable Growth 94 Shrivastava, S. 2001. Proceedings of the International Workshop on Economic Instruments (EIs) for IndustrialPollution Preventionand Control in India, 13-15 June 2001, New Delhi: Ministry o f Environment and Forests, the World Bank and the Confederation of Indian Industry. World Bank. 1998a.India: Environmental Issues in the Power Sector. ReportNo. N205198, ESMAP, Washington, D.C.: World Bank. World Bank. 1998b. Mexico: The Guadalajara Environmental Management Pilot. World Bank Sector ReportNo.18071-ME.Washington, D.C.: WorldBank. World Bank.2004a. Environment Issues in the Power Sector: Long-term Impacts and Policy Optionsfor Rajasthan. ReportNo. 292104. ESMAP.Washington, D.C.: World Bank. World Bank.2004b. Environment Issues in the Power Sector: Long-term Impacts and Policy Optionsfor Karnataka. ReportNo. 293104. ESMAP.Washington, D.C.: World Bank. World Bank. 2004c. "India: Investment Climate and Manufacturing Industry." Investment ClimateAssessment. Washington, D.C.: World Bank. World Bank.2005. For a Breath of Fresh Air: Ten Years of Progress with UrbanAir Quality Management in India. Environmentand Social DevelopmentUnit, South Asia Region.New Delhi:World Bank. World Bank. 2006a. Clean Energy and Development: Towards An Investment Framework. Washington, D.C.: World Bank. World Bank. 2006b. Financing Energy Eficiency: Lessonsfrom Recent Experience with a Focus on Brazil, China, and India. ESMAP.Washington, D.C.: World Bank.(Draft) World Bank.2006~.WorldDevelopment Indicators. Washington, D.C.: World Bank.