REPORT OF THE EXPERT COMMITTEE TO EXAMINE THE QUANTUM OF PENALTY AND CREATION OF ENVIRONMENTAL RESTORATION FUND FOR LAVASA

CITY PROJECT, PUNE DISTRICT

October 25, 2011 New Delhi

REPORT OF THE EXPERT COMMITTEE TO EXAMINE THE QUANTUM OF PENALTY AND CREATION OF ENVIRONMENTAL RESTORATION FUND FOR LAVASA CITY PROJECT, PUNE DISTRICT

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Introduction On 17 January, 2011, the Ministry of Environment and Forests

(Government of India) issued a Show Cause Notice under Section 5 of the Environment (Protection) Act, 1986 to the Lavasa Corporation Ltd (Vikhroli, Mumbai) for violation of the provisions of Environment Impact Assessment Notification, 1994 as amended in 2004 and 2006. The Show Cause Notice inter-alia indicated that the MOEF is prepared to consider the project on merits with the imposition of various Terms and Conditions including the following: (i) the payment of substantial penalty for the violation of environmental laws, which is incontrovertible; (ii) over and above the penalty, creation of an Environmental Restoration Fund (ERF) by M/s LCL with sufficiently large corpus which would be managed by an independent body with various stakeholders under the overall supervision of the MOEF; and (iii) imposition of stringent terms and conditions, to ensure that no further environmental degradation takes place and any degradation that has already occurred would be rectified within a time bound schedule. Sequel to the Show Cause Notice, the MOEF Vide Order No. 19-58/20101A-III (Part) dated 9 February, 2011, constituted an Expert Committee to make recommendations on the following with respect to LCL: (i) Quantum of penalty with respect to violation of environmental laws;

(ii) Environment Restoration Fund (ERF); and (iii) Any other matter related or ancillary to the above issues. This report is in response to the above. The Committee, comprising Professor K.T. Ravindran, Chairman, Delhi Urban Art Commission and Professor, School of Planning and Architecture, New Delhi (Chairman), Dr. Chetan Vaidya, Director, National Institute of Urban Affairs, New Delhi, and Professor Om Prakash Mathur, Distinguished Professor of Urban Economics, National Institute of Urban Affairs, New Delhi (then, Professor at the National Institute of Public Finance and Policy, New Delhi) has deliberated on the said issues extensively spread over in ten meetings, and visited Lavasa for an on-site appreciation of the nature and magnitude of the environmental damage caused in violation of the EIA Notification, 1994, as amended in 2004 and the EIA Notification 2006. The Committee has had an opportunity of discussing these issues with Shri Jairam Ramesh, the then Hon. Minister, Ministry of Environment and Forests; with Mr. J. M. Mauskar, Special Secretary, Dr. Nalini Bhatt, Advisor, and Shri Bharat Bhushan, Director, MOEF, and the Collector and his officials, Pune, and the Chief Planner and Officers of the Lavasa Corporation Ltd (LCL). The Committee has reviewed the presentations and submissions made by the LCL and the officials during the Committees visit to Lavasa. It has also reviewed the California Environmental Quality Act as also the functional jurisdiction of the Scottish Environment Protection Agency.

2.

Interim Report The Expert Committee presented an Interim Report to the MOEF

on 7 March, 2011. As a preface, the Interim Report emphasized that as Indias urban profile undergoes a change as indeed it will, it becomes essential that the spirit of the EPA which calls for a proper balance between environment and development is maintained. It recognized the various regulatory and monitoring mechanisms that have been put in place by the MOEF and underlined the need to bring Lavasa project within the mechanisms already established so that instances of violation of the EPA as observed in the case of Lavasa are not repeated. The Interim Report refereed to Article 15 of the Environment (Protection) Act, 1986 which reads as under: (1) Whoever fails to comply with or contravenes any of the provisions of

this Act, or the rules made or orders or directions issued thereunder, shall, in respect of each such failure or contravention, be punishable with imprisonment for a term which may extend to five years or with fine which may extend to one lakh rupees, or with both, and in case the failure or contravention continues, with additional fine which may extend to five thousand rupees for every day during which such failure or contravention continues after the conviction for the first such failure or contravention. (2) If the failure or contravention referred to in sub-section (1) continues

beyond a period of one year after the date of conviction, the offender shall

be punishable with imprisonment for a term which may extend to seven years. The Committee noted that while the above provision was binding, the prescribed penalty is not a substantial financial penalty to act as a deterrent. It added that The Committee is of the opinion that for the penalty to serve as a deterrent, it may be necessary to amend the provisions of the Act. The Expert Committee reaffirms this observation, and makes a specific recommendation in this respect in the latter part of the report. On the issue of the Environmental Restoration Fund, the Expert Committee observed in the Interim Report that a provision for such funds whose purposes are akin to what the MOEF visualizes, exists in several countries, and suggested that the MOEF should undertake a review of such provisions in order to arrive at a system appropriate to Indian conditions. For the purpose laid down in the terms and conditions of the Ministrys Order of February 9, 2011, and taking into account the alternative ways in which the amount of the Fund can be worked out and issues relating to the management of the Fund, suggestions have been made in Section 4 of this report. 3. Field Level Assessment As indicated earlier, the Expert Committee visited Pune-Lavasa from April 14-16, 2011 and met with the Government officials concerned with the Lavasa project. The Committee visited the Lavasa township, the various sites where part of the construction work has been completed, e.g., artificial lake in Dasve village, the working of the sewage disposal plant, the NASA

point, the Ashiana Senior Citizens Homes Complex, and the City-Centre which has a convention centre, a hotel, shopping areas etc. The Committee visited the Ekanth and familiarized itself with the broad features of the Master Plan. The main observations and conclusions of the Expert Committee on the visit are stated below. It must be underlined that the purpose of the visit to Pune-Lavasa was to obtain a better assessment of the damage that has been caused in the township area as a result of the activities of the Lavasa Corporation Ltd. The assessment is qualitative in nature. 3.1 Land

3.1 The activities of the Lavasa Corporation Limited (L.C.L.) has resulted in extensive damage to the land under active construction. While the first phase shows serious physical damage and violations of existing laws and land allotment regulations, the land under second phase development shows extensive cutting and filling of land for infrastructure developments. The construction activities appear to have been halted at present though part use of the first phase is going on. The general land environment needs to be restored and the damages already inflicted on land need to be mitigated.

3.2

Land restoration and damage mitigation measures that are required should be undertaken as an integrated policy with punitive, fiscal provisions built into them.

3.3

Restore tree cover in the entire land acquired for the project in all phases.

3.4

Ground cover restoration on the entire project area in order to prevent top-soil erosion, using appropriate native ground cover species, to restore the health of land in five different ways: a) b) c) d) e) Prevention of excessive soil erosion and reduction in surface water runoffs. Restoration of lower food - chain cycles. Reducing land slide potential. Improvement in the micro climate and overall climatic balance. Restoration of existing animal migration paths.

3.5

Greening of the land of 50 meters reserved area provided on all forest edges. The possibility of soft - lease of this land to the villagers within the project site may also be explored as a compensatory measure for loss of livelihood as well as to ensure utilization and maintenances of these lands.

3.6

A 50 meter wide linear protected area and reforestation of the same, around all swales, water channels and valleys.

3.7

Upper and lower embankments on either side of constructed roads to be turned into soft surfaces/partly soft surfaces, using biodegradable materials.

3.8

The land around water bodies/water channels within the development should be returned into the original soft land. All the paved walkways created around water bodies are in violation of the land allotment conditions and other State environmental laws. The State/Central governments should consider implementing appropriate measures for the same.

3.9

After restoration of the soft landscape around the water bodies, only Board-Walks of say about 3 meters wide should be permitted along the active building edge in order to facilitate the movement of pedestrians. This must be taken up as a priority. The building debris generated must be recycled entirely within the project.

3.10 The solid waste disposal sites especially construction waste have damaged the land profile extensively and that also in a steep gorge. This land must be restored with forest and ground cover. The solid waste disposal should be reworked towards

complete on-site-recycling without damage to land, especially low lying areas, valleys or gorges. 3.11 Extensive damage to land has been caused by re-profiling, concreting and bitumen topping for the roads. The costs of this damage are not calculable. Based on the total area under roads, twice as much area of land should be brought under native medicinal flora for which these hills were once famous. 3.12 All rock formations within the entire project area should be declared protected and mining and other related activities must be stopped forthwith. 3.2 Damage to Water Systems

3.2.1 The ponding of water by creating check dams (bandheras) has been carried out by L.C.L. for the first phase and the check dams for the rest of the project are under construction. Though the work has stopped on these as well, the repercussions of these dams need to be understood from a systemic perspective, as the impact can be far reaching for areas downstream. Apart from the agricultural activities and their natural water balance, urban usage by settlements downstream also needs attention as Pune City depends on it in summer months. In case of any water loss the L.C.L. will need to put in place appropriate strategies.

3.2.2 These issues raise the need for an immediate commissioning of a Regional Water Shed Management Plan in order to assess the resource-use equilibrium, including all human activities within the watershed area within one year. New technologies are available for accurate assessment and strategising, while it is clear that established planning measures have failed to identity the thresholds of development. Such a detailed, scientific study along with a Landscape Restoration Plan (from a broader perspective) will help establish the limits of building activities to be permitted in these sensitive lands. Only after such a watershed management study is undertaken, should further phases of the project be permitted to proceed, if found fit. 3.2.3 Such a study with proper costing could be undertaken for the entire area by the State Town Planning Office with expert help where necessary. 3.2.4 Treatment of the edges of the existing water bodies, in particular the vertical, concreted edge, needs to be reworked and replaced by natural local stone boulder-pitching and the rest of the land areas must be turned into soft landscape using only native species of grass flora, within one climatic cycle. 3.2.5 In many places, the mandated 50 meter distance has been violated, though separately stipulated by State Government.

The State Government may initiate appropriate measures for the work already done and must prevent such violations in future. 3.2.6 All chemical fertiliser and manure should be banned. The water present in the lakes should be tested and appropriate treatments adopted by a State Agency to mitigate any contamination. 3.2.7 The present sources of water for the project are the reservoirs from where water is pumped up for treatment and distribution through a gravitation which based are supply. The by upper-land extensive developments characterized

independent housing, are served by separate supply reservoirs. The energy consumption on pumping water should be separated from other forms of consumption and specially targeted for alternative power sources like solar, wind, etc. The project could be implemented by the State government as a deposit work. 3.2.8 Impounding of water in the valley in linear formations prevent animal migration across the hills during different reasons. The vehicular bridges build over the Bandheras do not facilitate migration paths. Soft landscape connectivity should be provided across linear water bodies at strategic locations to facilitate the migrations across hills.

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3.2.9 The two sewage treatment plants were found in working order and the treated water was being recycled for gardening purpose. All the existing large projects under construction should be made autonomous zero-run-off projects, to reduce energy consumption for pumping of sewage into centralised STPs. 4. Recommendations and Way Forward The Expert Committee has made a serious attempt to address the terms of reference entrusted to it in the light of the discussions it has had with a cross-section of individuals, and its own qualitative assessment of the environmental damage caused by the LCL activities. As would be noted from the earlier sections, the Committees observations fall into four categories: i. Violation of the Environment (Protection) Act, 1986 as amended from time to time. The violations are difficult to monetize. The Act lays down that the failure to comply with the provisions of the Act is punishable with imprisonment for a term which may extend to five years or a fine of upto Rs. one lakh or both. The Expert Committee is bound by this statutory provision, realising though that a fine of upto Rs. one lakh is not an adequate deterrent, and the Act may need to be appropriately amended.

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The Expert Committee is of the view that any amount that may be specified in the Act will prove to be inadequate over a period of time. It is, therefore, necessary to replace the fixed amount by a percentage, and the percentage should be linked to the approved cost of the project. The Committees judgment is that the percentage should vary between 1-5 percent, the higher percentage useable in the case of the relatively smaller projects and lower percentage for larger projects. However, there will have to be a case to case assessment based on the environmental sensitivity of the project. ii. In respect of penalty for physical damage caused by activities undertaken in violation of the provisions of the Environment (Protection) Act, 1986 (as amended from time to time), the Committee has noted evidence of physical damage in the following (a) Extensive damage to land caused by reprofiling, concreting and bitumen topping of roads (b) Extensive cutting and filling of land for infrastructure development (c) Erosion of top soil, raising possibilities of land slide, and adversely affecting the animal migration paths, and food chain cycles. (d) Damage to the land profile on account of mining and solid waste disposal works

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The Committee is of the view that all damages as identified above should be repaired by the L.C.L. at its own cost, under supervision of appropriate authorities. Further, all repairs should be carried out within the period of one climatic cycle. Suggestions in respect of the certification of satisfactory completion of the repair work are made later in the report. iii. A third category of suggestions relate to such incremental activities which can make a decisive impact on the overall environment of the entire project area. These suggestions are in the nature of taking up of such activities which have cost implications but which should be borne by the LCL in the medium to long term interest of the project area. Also, these, listed below, represent a guide for the further development of the project area. (a) Soft surfacing of the upper and lower embankments on either side of the constructed roads (b) Soft landscape around the water bodies, within the mandated open area. (c) Greening agricultural use of the land of 50 meters reserved area around forest land. (d) Natural local stone boulder pitching to replace the concrete edges of the existing water bodies and soft landscape of the land areas;

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(e) Soft landscaping connectivity at strategic locations to facilitate the animal migrations across hills; (f) Decentralised, zero-run off projects to reduce energy consumption for pumping of sewage into centralized STP. A fourth category of suggestions relate to those activities which in the opinion of the Expert Committee, are important to the LCL for long term sustainable environmental improvement. It comprises of the following: (a) All rock formations in the project should be declared protected and mining activities in the site stopped. (b) Use of all chemical fertilizers should be stopped; and (c) A Regional Watershed Management Plan for the Pune region, aimed at assessing the resource use equilibrium should be commissioned. It should be able to establish the limits of developmental activities to be undertaken in the sensitive lands, including that of the future LCL phases. 5. Environment Restoration Fund (ERF) One of the terms of reference of the Expert committee is to make recommendations on the constitution of an Environment Restoration Fund (ERF). The Fund, as the Committee is given to understand, is to be used

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for restoring the damage that the L.C.L. activities have casued to the Lavasa Project area. The Committee has examined this mandate in two parts (i) the concept of the Fund, and (ii) its application to the Lavasa project. In respect of (i), the Committee has reviewed the Environmental Acts of a few countries which have provisions for such a Fund and has come to conclude that such a Fund will be a relevant instrument for deterring developmental activities from damaging the environment. It appears to have universal application and rationale. The Committees suggestion is that the Ministry of Environment and Forests may consider amending the existing Act and make a provision for establishing such Funds for projects having environmental implications. The Committees position is that the provision for such a Fund should relate to (i) the Purpose of the Fund, (ii) Size of the Fund, i.e., the basis for determining the size, and (iii) the Management of the utilization of the Fund. The Fund should be dedicated to meet the cost of restoring the damaged environment in the project impacted area. The size of the Fund should be linked to the size of the infrastructure and other related investments, and this size may vary between 1-5 percent of the approved investment as indicated in the financial closure. Its management should be entrusted to a 3-7 member independent Board of Trustees. As regards the establishment of such a Fund for Lavasa, the Expert Committee notes that damage has already taken place in the project area as a

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result of L.C.L. activities. Establishment of a Fund in such circumstances may be a less affective course of action. Instead, the Expert Committee suggests that (i) the L.C.L. be asked to restore the environment by specifically responding but not limited to, the environmental damage caused to the Lavasa project and the related areas as a result of its activities, at its own cost; (ii) an amount equal to 5% of the expenditure incurred as on the date the L.C.L. activities ceased, may be kept with the Government of Maharashtra, which may be used in case the L.C.L. fails to carry out the necessary restoration works within a specific time frame, (iii) a High Level Monitoring Group comprising the representatives of the Central and state government and Experts/NGOs may be set up to certify that the restoration work has been satisfactorily completed, and (iv) L.C.L. should be asked to prepare a time bound environmental restoration plan identifying the activities as indicated in the report and shall carrying out the works under the supervision of the High Level Monitoring Group. In addition to the constitution of the Environmental Restoration Fund, the Committee would like to make five additional suggestions:

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(a) The Expert Committee has noted that the Lavasa Corporation Ltd. has been declared as a Special Planning Authority (SPA) for the area under its jurisdiction under Section 40(1)(b) of the MRTP Act, 1966. The total area of 3656.28 ha is so notified under the SPA. The SPA has the powers to prepare and approve the draft plan and proposals and also act as a regulatory body. The Expert Committee finds this provision violative of the normal canons of laying down the powers of such Authorities. The Committee has also noted that the Director, Town Planning, Government of Maharashtra is a member of the SPA and the plans so prepared are to be submitted to the Assistant Town Planner, Pune Division. The entire constitution of the SPA and its functions needs to undergo major revisions, and there should be no scope of any conflict of interest arising out of its constitution or functions. (b) The Committee would like to draw attention of the MOEF to the 74th Constitutional amendment under which all local bodies should have an elected Council. While recognizing that Lavasa township is a Special Planning Authority (SPA) and may not, therefore, be covered by the provisions of the 74th Constitutional amendment, the Government of Maharashtra should examine the desirability and feasibility of the Lavasa township being brought within the purview of the Metropolitan Planning Committee of Pune Metropolitan District. (c) To the extent possible, bodies like the Forest Department which have extensive experience in restoration and mitigation must be co-opted into the implementation process, in a time bound manner.

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(d) Rehabilitation of affected population needs to be quantitatively and qualitatively audited, especially from livelihood perspective and the project proponent must be made responsible for both financial and land related requirements for the same. Some of the mitigation measures can be dovetailed into these rehabilitation schemes. Closing Remarks In conclusion, the Expert Committee would like to place on record its deep appreciation to Shri Jairam Ramesh, former Minister of Environment and Forests who spoke to each one of us personally to become members of the Expert Committee and to discuss the first findings of Committees deliberations; to Mr. J.M. Mauskar, Dr. Nalini Bhat and Shri Bharat Bhushan who were untiring in their efforts to brief the Committee on the nature of the tasks involved. We sincerely thank them and of course, the Ministry of Environment and Forests for their time and assistance.
The Expert Committee was fully conscious of the complex nature of its mandate, which directly or indirectly impinged on the need for balancing environmental concerns with growth objectives. The Committee could ignore neither of the two in making its

recommendations. Indeed, as the Committees work progressed, the need to strike a balance between environment and growth became even more evident. The Committee has made an earnest attempt in addressing its mandate and additionally made

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