A review of polluter-pays principle (PPP) in

India’s environmental law and policy

Narendra Pai 

Abstract:
This article traces the trajectory of ‘polluter-pays principle’ (PPP) in India’s environmental law
and policy, with specific attention to the role of Supreme Court in shaping rooting the principle
in the Constitution and India’s global environmental commitments. It also discusses the
relatively new institution The National Green Tribunal (NGT) and its role in solidifying the
PPP in India’s environmental justice. The paper examines the heavy reliance on PPP and
attributes it to the neo-liberal paradigm.

Keywords: Polluter-pays principle, National Green Tribunal India, Environmental protection

I. Introduction

Negative externalities in cases of environment degradation often affect some of the most
vulnerable sections of the society, not limited to human beings alone. Three different popular
regimes are considered in literature to achieve an optimal level of environmental quality1. First,
given the true costs and benefits from pollution, a Coaseian bargain through mutual
negotiations can be arrived at, property-rights of environmental resources can be defined and
the economic agents can decide the desired level of pollution. Second is a command and control
(CAC) approach where the regulator can enforce the environmental standards based on the
optimal level of pollution 2. Third, the regulator adopts economic or market-based instruments
(MBIs) to abate pollution. MBIs include price-related instruments like pollution taxes and
permits, as well as indirect economic instruments like law of liability for damages, and


MA Public Policy and Governance, School of Policy and Governance, Azim Premji University, Bangalore
1 Aparna Sawhney, “Managing Pollution: PIL as Indirect Market-Based Tool,” Economic and Political Weekly,
2003, 32–37.
2 Sawhney.

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environmental information disclosure system3. One of the widely accepted MBIs to mitigate
pollution is the polluter-pays principle (PPP). PPP is an economic principle of allocation of
resources, environmental justice that seeks to internalize public costs of private economic
activities. It is an economic rule of cost allocation as it requires polluters of environmental to
take full responsibility for externalities 4. The Organization for Economic Co-operation and
Development (OECD) adopted the PPP principle as a formal basis for its recommendations
since as early as 1970 5. The PPP principle was formally adopted as a legal principle by the
Europe Union in the Single European Act of 1987 6, and in 1992 it was recognized by the United
Nations Conference on the Environment and Development delegates in what came to be called
as the Rio-declaration7. However, PPP is both an economic principle and an administrative
instrument to ensure externalities are accounted for, quantified, measured and compensated for.
The present article traces the trajectory of PPP in India’s environmental law and policy
discourse and adjudication of environmental adjudication.

The paper is organized into four sections. Section I is the introduction. Section II discusses the
broad trajectory of the polluter pays principle in India’s environment law and policy discourse,
it also elaborates on various landmark judgements that uphold this principle. Section III is a
discussion of the National Green Tribunal (NGT) and some of the judgements in the light of
the principle. Section IV concludes the paper with some open-ended questions for India’s
environmental law and policy paradigm.

3 Sawhney.
4 A.C. Pigou, The Economics of Welfare, 2nd edn., London: Macmillan, 1924
5 Barbara Luppi, Francesco Parisi, and Shruti Rajagopalan, “The Rise and Fall of the PPP Principle in

Developing Countries,” International Review of Law and Economics 32, no. 1 (2012): 135–44.
6 Cited in supranote 2, Single European Act, 17 February 1986, 1987 O.J. (L 169). Article 174(2) of the

consolidated versions of the Treaty on European Union and of the Treaty Establishing the European Union,
2002 O.J. (C 325) 1 provides that: “Union policy on the environment shall aim at a high level of protection
taking into account the diversity of situations in the various regions of the Union. It shall be based on the
precautionary principle and on the principles that preventive action should be taken, that environmental damage
should as a priority be rectified at source and that the polluter should pay.”
7 Cited in supranote 2, The Rio Declaration on Environment and Development (1992) UN

Doc.A/CONF.151/26/Rev.1 (93.I.8), Principle 16: “National authorities should endeavour to promote the
internalization of environmental costs and the use of economic instruments, taking into account the approach
that the polluter should, in principle, bear the cost of pollution.”

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II. PPP in India’s environmental law and policy

Fascinatingly one scholar has tried to read PPP into passages of the 300BC eastern philosopher
Kautilya’s Arthasastra8 (Study of Economics), that allude to penalties for causing damage to
the neighbour’s farm, environment and so on. He argues thusly that PPP was an intuitive policy
instrument in the socio-political milieu of the pre-modern India. Even if one were to accept this
simplistic argument, a pertinent question arises- why did it take so long for PPP to be
internalised as a legitimate policy instrument in post-modern India?

The 1986 landmark judgement also known as Shriram gas leak case9, came in the backdrop of
India’s gaping void in environmental justice and tort law, made apparent by the Bhopal gas
tragedy. Through this judgement, the court added a new principle of ‘absolute liability’ to the
discourse of environmental law. The norm was adopted by the legislature through Public
Liability Insurance Act of 1991 (PLIA) and the National Environment Tribunal Act of 1995 10
(NETA). In 1992, just few months before the Rio-declaration, the government of India came
out with its first national policy on abatement of pollution11. The policy statement sought to
“[s]hift emphasis from defining objectives for each problem area towards actual
implementation… focus [is] on the long term, because pollution particularly affects the poor” 12.
The declaration sought to integrate environmental considerations into decision-making at all
levels 13. Amidst these local developments, followed by global posturing towards PPP through
Rio declaration, the Supreme Court implicitly adopted PPP in Oleum gas leak case14, where it
observed that compensation “must be correlated to the magnitude and capacity of the enterprise
because such compensation must have a deterrent effect. The larger and more prosperous the
enterprise, the greater must be the amount payable by it…” 15. and explicitly in Indian Council

8 Mizan R. Khan, “Polluter-Pays-Principle: The Cardinal Instrument for Addressing Climate Change,” Laws 4,
no. 3 (September 23, 2015): 638–53, https://doi.org/10.3390/laws4030638.
9 “M.C. Mehta And Anr vs Union Of India & Ors on 20 December, 1986,” accessed November 3, 2018,

https://indiankanoon.org/doc/1486949/.
10 Shyam Divan and Armin Rosencranz, Environmental Law and Policy in India: Cases, Materials, and

Statutes, vol. 2 (Oxford University Press New Delhi, 2001).

11 Ministry of Environment and Forests, Government of India, Policy Statement for Abatement of Pollution (26

February 1992)
12 Ibid.

13 Divan and Rosencranz, Environmental Law and Policy in India: Cases, Materials, and Statutes.

14 AIR 1987 SC 1086

15 Ibid.

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For Enviro-Legal action vs Union Of India16. It rooted the PPP in ‘Sustainable Development’
as defined by the Brundtland Commission and observed that that remediation of the damaged
environment is part of the process of ‘Sustainable Development’ and supported PPP,
Precautionary Principle, and New Burden of Proof Principles in Art. 21, 47, 48A and 51A(g)
of the Constitution17. What is noteworthy is that almost all the judgements hereafter and include
the above came about to be through public interest litigations 18.

III. Polluter-pays principle as the principal basis for NGT

Despite enactments of PLIA and NETA. National Environmental Appellate Authority Act
1997 (NEAA) and National Tribunal Act 1995 (NTA), India’s environmental justice and
dispute resolution were ineffective and inconsistent. Civil damage awards and incentives for
private litigation were limited by sub-optimal damage compensations, lengthy adjudication of
cases, and chronic inflation19. The trajectory of PPP in the Supreme Court follows the same
trajectory as the discussion on the need for a special court to adjudicate environmental cases.
The concept of environmental courts was initially addressed in two major Supreme Court
judgements20, MC Mehta V Union of India 21 and Council for Enviro-Legal Action v Union of
India22. The court expressed the need to set-up special environmental courts on a regional basis
with a legally qualified judge and two experts and with both civil and criminal jurisdiction to
deal with environmental matters speedily23. These judgements emphasized that there was a
need for expert interpretations of the evidence submitted to the court, which often have
scientific underpinnings. The apprehension of the court was that scientific interpretations and
reinterpretations shape the adjudication process and decision-making has to apply itself
thoroughly on scientific facts, often yet to emerge during the process of adjudication. The
legislative framework through NTA, NETA and NEAA existed for setting up of such a court,
however, the NEAA had no judicial members since 2000 and the government expressed its

16 1996 AIR 1446, 1996 SCC (3) 212

17 AIR 1996 SC 2715
18 1987(1) SCC 95; AIR 1996 SC; 1997 (2) SCC 411 etc.

19 Michael G Faure and AV Raja, “Effectiveness of Environmental Public Interest Litigation in India:

Determining the Key Variables,” Fordham Environmental Law Review, 2010, 239–94.
20 Gitanjali Nain Gill, “A Green Tribunal for India,” Journal of Environmental Law 22, no. 3 (2010): 461–74.

21 Supra note 6

22 Supra note 13

23 Nain Gill, “A Green Tribunal for India.”

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inability to fill the vacancy with qualified members 24 . Due to the thrusts provided by the
Supreme Court and the Law Commission of India in its 186th report strongly pitched for an
Environment Court with regional benches 25.

In chapter VIII of this report, the Law Commission drew upon global jurisprudence and the
Supreme Court’s directives as discussed above, to establish that the proposed Environment
Court must adopt PPP as one of its core principles. Thus, after prolonged silence from the
legislative side, the NGT was enacted through National Green Tribunal Act 2010 (NGTA) 26
with an aim “to provide for the effective and expeditious disposal of cases relating to
environmental protection and conservation of forests and other natural resources including
enforcement of any legal right relating to environment and giving relief and compensation for
damages to persons and property” 27. Vested with original and appellate jurisdiction over seven
environmental laws-- the Water (Prevention and Control of Pollution) Act 1974, the Water
(Prevention and Control of Pollution) Cess Act 1977, the Forest (Conservation) Act 1980, the
Air (Prevention and Control of Pollution) Act 1981, the Environment (Protection) Act 1986,
the Public Liability Insurance Act 1991, and the Biological Diversity Act 2002 the NGTA
explicitly mentioned that PPP was one of the principles the NGT would apply while passing
any order or decision or award 28

Surveying various orders of the NGT 29 30 , it can be argued that the orders are heavy on
monetary compensation nature. What processes entail the estimation of such values and
whether they are commensurate to the cost of degradation is unclear. The CSE brief on PPP in
NGT31 categorizes NGT orders that invoke PPP thus—

24 Nain Gill. Note 10

25 “One Hundred Eighty Sixth Report: On Proposal To Constitute Environment Courts,” Law Commission of
India, September 2003, 169.
26 National Green Tribunal Act 2010

27 Supra note 23

28 NGTA s.20 titled ‘Tribunal to apply certain principles’

29 Sridhar Rengarajan et al., “National Green Tribunal of India—an Observation from Environmental

Judgements,” Environmental Science and Pollution Research, 2018, 1–6.

30 Sudarshna Thapa, “5 Landmark NGT Judgments That Created History,” IPleaders (blog), March 27, 2018,

https://blog.ipleaders.in/ngt-judgments/.
31 Chandra Bhushan, Srestha Banerjee, and Ikshaku Bezbaroa, “Green Tribunal, Green Approach: The Need for

Better Implementation of the Polluter Pays Principle,” 2018.

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 A. Project activities carried out without obtaining the required permissions for work (i.e.
environmental or forest clearances) affecting environment and ecology
B. Violations of clearance conditions impacting ecology and environment
C. Industrial units operating without consents and violating pollution standards
D. Damage to the environment from large-scale pollution
E. Negligence of civic responsibilities and negligence by authorities resulting in
pollution
F. Activities directly affecting the livelihood of communities

It analyses the method of compensation arrived at in cases under each category. Through its
recommendations to better implement PPP, it draws a broad conclusion that the methods to
determine compensations must be non-arbitrary, consultative, methodical, expert-driven,
technical and be commensurate to deter parties from polluting 32.

In Manoj Mishra Vs. Union of India and Others, as per the Judgement dated 13-01-2015
pertaining to the clean and rejuvenated Yamuna River, Delhi, the NGT issued directions to the
Civic and Municipal authorities of Delhi to charge every household an environmental
compensation fee as part of the property/house tax 33 . This order is a "Market-based"
mechanism that imposes a tax or an equivalent price incentive on the pollution or other negative
externalities that a resource user creates 34. This manifestation of PPP allows for incentives for
negative externality causing elements to engage in their activities sustainably, without being
overburdened by the penalty. The same order directed all the industrial clusters in Delhi to
install Common Effluent Treatment Plants (CETPs), cost of which shall be borne preferably
by the authority that owns and maintains that industrial cluster; thereby adopting a ‘command-
and-control’ approach that specifies the mitigation technology35.

Curiously, the NGT allows for self-reflection in the limited nature of the application of PPP.
In its journal titled “NGT Journal of Environment”, a Delhi High Court judge writes, “the
polluter pays principle does not aim at protection of the intrinsic value of the environment- but
rather at allocation of costs for causing environmental harm. Eco-centrism on the other hand,

32 Bhushan, Banerjee, and Bezbaroa.

33 Rengarajan et al., “National Green Tribunal of India—an Observation from Environmental Judgements.”
34 Richard B Stewart, “Models for Environmental Regulation: Central Planning versus Market-Based

Approaches,” BC Envtl. Aff. L. Rev. 19 (1991): 547.

35 Stewart.

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places the human species as part of a context, i.e. as part of nature in the same way that other
species are, and all species have intrinsic value by virtue of their existence in the ecosystem.”36

IV. Conclusion
Bhuwania 37 cautions us against romanticizing the role of Public Environment interest
litigations. He argues that, most of the ‘environment’ minded PILs have produced far-reaching
orders that do not even give the most adversely affected parties, the poor, a chance to be heard.
He takes the example of ‘deindustrialization’ of Delhi, closing down of stone-crushers, closing
down of all ‘hazardous’ and ‘non-conforming’ industries around Delhi, echoing Baviskar 38 on
the bourgeois environmentalism bias that characterizes the lower sections of the society as
pollution causing ‘nuisance’. Orders that micro-manage every aspect of the Delhi’s mobility,
ends up being PPP only in principle, without being equitably applied.

Therefore, in this paper, I have attempted to trace the principle with respect to India’s
environmental law and policy trajectories. While, the judiciary (Supreme Court, essentially),
emerges as a proponent of PPP, I have argued that the executive had adopted the principle,
albeit on paper, independent of the judiciary. This paper has not surveyed other principles that
the NGTA explicitly mentions, namely- sustainable development and precautionary principles.
These three principles of the NGT may seem mutually exclusive, however, the NGT orders
may show overlaps of these principles or indistinct application of any of the principles. I have
shown that the trajectory of NGT and PPP are tied together closely. This is indeed an indication
of the nature of instruments the judiciary envisaged NGT to have. In the myriad environment
justice principles, PPP is but one. Its scope and applicability vary highly on the nature of the
issues under consideration. In a neo-liberal paradigm, PPP seems to be India’s intuitive tool to
discourage environmental degradation and pin responsibilities. NGT, having both original and
appellate jurisdiction, has an opportunity to try out other instruments through adjudication.

36 S. Ravindra Bhat, “Ecocentrism: The New Paradigm Of Environmental Jurisprudence,” NGT International
Journal on Environment II (2017),
http://www.greentribunal.gov.in/FileDisplay.aspx?file_id=hp6pqcrv0hY1hc2OYG8Sk8xCFfwF7gv7qFFtUUfn
NgyuBpK6aOQ%2b0kcvIkfGEZdFCZIwgpUi6CI%3d.
37 Anuj Bhuwania, Courting the People: Public Interest Litigation in Post-Emergency India, vol. 2 (Cambridge

University Press, 2017).

38 Amita Baviskar, “Cows, Cars and Rickshaws: Bourgeois Environmentalists and the Battle for Delhi’s

Streets,” 2007.

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