UNIVERSITY INSTITUTE OF LEGAL

STUDIES, PANJAB UNIVERSITY,

CHANDIGARH

CRITICAL STUDY ON THE

POLLUTER PAYS PRINCIPLE IN
INDIA

Submitted To: Submitted By :

Professor Sabina Salim Ishaan Loomba
B.A. L.L.B (Hons.)
Semester - 8
Section - A
Roll No. 37/17

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 ACKNOWLEDGEMENT

I would like to thank my Professor, Ms Sabina Salim for giving me the opportunity to make a
project on this topic and without whose guidance imparted by way of online classes and
constant support, this project would not have been possible. I owe the successful completion
of this project to her.

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 INDEX

1. Table of cases
2. List of abbreviations
3. Introduction
4. What is polluter pays principle
5. Polluter pays principle in the Indian context and judicial pronouncements
6. Flaws in the concept of Polluter Pays Principle
7. Conclusion
8. Bibliography

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 TABLE OF CASES

1. Indian Council for Enviro Legal Action v. UoI

2. Vellore Citizens Welfare Forum v. UoI
3. M.C Mehta v. Kamal Nath, Span motel Case
4. M.C Mehta v. UoI, Oleum Gas Leak Case
5. Rylands v. Fletcher
6. S Jagannath v. UoI
7. M.C Mehta v. UoI, Calcutta Tanneries Case
8. M.C Mehta v. UoI, Taj Trapezium case

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 LIST OF ABBREVIATIONS

1. PPP- Polluter Pays Principle

2. UoI – Union of India
3. V. – Versus
4. OECD- Organisation for Economic Cooperation and Development
5. SC – Supreme Court
6. SCC – Supreme Court Cases
7. AIR – All India Reporter
8. PIL – Public Interest Litigation
9. Ors - Others

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 INTRODUCTION

DEFINING POLLUTION

There are legislative definitions of what constitutes a pollutant in the Water (Prevention and
Control) Act, 1974, the Air (Prevention and Control of Pollution) Act, 1981 and the
Environmental Protection Act, 1986. The Water Act defines pollution as "such contamination
of water likely to create a nuisance or liable to render such water harmful and injurious to
health" and the definitions in the subsequent legislations are similar. It is evident from these
definitions that the emphasis is on the fact that pollution must have a tendency to cause harm,
or must actually cause harm. Emissions per se are not pollution. Properly understood,
pollution is the coercive imposition of a harmful waste product or emission onto another
person or their property; it is a "trespass" under the principles of common law.
If the trespass is so minor that it creates no harm or inconvenience to the property owner, it
will normally be tolerated. Today's pollution dilemma is often the result of what is essentially
a universal "easement" granted by the State to polluters, even to producers of significant and
damaging pollution.
Hence, as the definition of pollution is commonly understood, for the pollutant to result in or
cause pollution there must be some consequent harm or threat of harm. The Polluter pays
principle originates from the economic theory of the “internalization of externalities”, which
imposes on the polluters the social costs borne by public authorities responsible for
inspecting, monitoring and controlling pollution. By the same token, the PPP encapsulates the
setting up of a system of charges by which the polluters (the persons who generated the
pollution by their products or services) bear the financial burden of the public policy to
protect the environment. However, despite its initial economic background, the PPP started
gradually acquiring legal expressions.
Pollution is as old as our planet itself if one considers even the commonly accepted definition
of pollution: “...the introduction by man, directly or indirectly, of substances or energy into
the environment resulting in deleterious effects of such a nature as to endanger human health,
harm living resources and ecosystems, and impair or interfere with amenities and other
legitimate uses of the environment.” However, in the early days pollution was not a concern.
The discharge of gases or wastes into the air and water was considered totally legitimate. It

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was believed that neither air nor water was a scarce resource and therefore, their use was free
to all. At the time of the industrial revolution in Europe there were no safety regulations.
Workers lived and died in squalid and dangerous conditions. Cities disappeared for months
on end in impenetrable fog created by the coal- fired furnaces. However, when the side
effects of pollution were felt the concern for damage to the environment, human health, and
property started. Pollution became a common concern and economists were in the forefront
of those who were looking for solutions. In economic terms the emission of gases from a
factory that causes damage to the environment is a social damage and the cost of such
damage is a social cost. This cost is not paid by the polluter but by the society as a whole
which pays a price in terms of damage to aquatic environment, human health, property, loss
of species, etc. Such a cost is external to the private cost of the polluter and is therefore, an
external cost. The effect of this external cost is known as externalities in economic literature.
The resultant inequality of social costs and private costs indicates that economic resources are
being improperly allocated in society. The misallocation of such resources is because of their
improper cost allocation. Pollution in economic terms means the improper cost allocation.
Thus the cost of these resources is not reflected in the product price. The producer instead of
processing the waste discharges it into the air because processing will cost him extra money.
This tends to induce overproduction and overconsumption of the items produced cheaply. For
decades economists have been struggling to identify and measure externalities. Different
economists proposed different solutions to the problems of externality. They have generally
adopted the position that complete efficiency could be attained only if all external costs were
somehow internalized to the firms that produced them. Economists suggested different
economic incentives to force the polluter to internalize the external costs so that the complete
production costs of the goods are reflected in the prices. In economic literature it is known as
the internalization of external costs. A. C. Pigou, in The Economics of Welfare (originally
published in 1920), has given one of the classic examples of an externality. In the early
1900s, many towns in Great Britain were heavily polluted by smoke coming from factory
chimneys. Laundered clothes hung outside to dry were dirtied by the smoke. A study carried
out in the heavily polluted city of Manchester in 1918 compared the cost of household
washing in that city with that of the relatively cleaner city of Harrogate. According to the
Manchester Air Pollution Advisory Board:

“The total loss for the whole city, taking the extra cost of fuel and washing materials alone,
disregarding the extra labour involved, and assuming no greater loss for middle-class than for

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working-class households (a considerable understatement), works out at over £290,000 a year
for a population of three quarters of a million.

Thus, smoke – the by-product of one economic activity; that is; production had a negative
effect on another economic activity – laundry.

To eliminate the effect of such external cost inflicted on the society the divergence between
the social and private costs should be eliminated. Polluters should be forced to internalize
external costs of pollution that they generate. But how should be done has become the
attractive topic for environmental economists

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What is polluter pays principle?
The ‘polluter pays’ principle essentially holds the polluter liable for the pollution caused to
the environment. The polluter is liable for every damage caused to the environment. So
according to the ‘polluter pays principle’, the polluter has to not only compensate the victims
of pollution but also compensate for the restoration of environmental degradation caused. The
polluter bears the cost of health hazard caused to the public as well as the cost of restoration
of the environment. In other words, the costs of the measures should reflect on the cost of the
goods and services, the production and/or consumption of which led to pollution. The cost of
the measures should not be accompanied by the subsidies as it would lead to distortion in
international trade and investment. The polluter pays principle is part of a set of broader
principles to guide sustainable development worldwide The ‘polluter pays’ principle forms a
part of the environmental law of India. The PPP is considered to be the most efficient
economic instrument in modern environmental policies and is used as such in the OECD
member states.

The PPP is normally implemented through two different policy approaches: command-and-
control and market-based. Command-and-control approaches include performance and
technology standards. Market-based instruments include pollution taxes, tradable pollution
permits and product labeling. The elimination of subsidies is also an important part of the
application of the PPP.

Several Articles of the Constitution, Laws/Acts as well as Judicial Pronouncements have

been made by which the concept is adapted in India.

Articles (Constitution of India):

Article 47. Duty of the State to raise the level of nutrition and the standard of living and to
improve public health. - The State shall regard the raising of the level of nutrition and the
standard of living of its people and the improvement of public health as among its primary
duties and in particular, the State shall endeavor to bring about prohibition of the
consumption except from medicinal purposes of intoxicating drinks and of drugs which are
injurious to health.

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

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

Laws/Acts:

Apart from the constitutional mandate to protect and improve the environment there are
plenty of post-independence legislations on the subject but more relevant enactments for our
purpose are: The Water (Prevention and Control of Pollution) Act, 1974 (the Water Act), The
Air (Prevention and Control of Pollution) Act, 1981 (the Air Act) and the Environment
Protection Act 1986 (the Environment Act). The Water Act provides for the Constitution of
the Central Pollution Control Board by the Central Government and the Constitution of the
State Pollution Control Boards by various State Governments in the country. The Boards
function under the control of the Governments concerned. The Water Act prohibits the use of
streams and wells for disposal of polluting matters. Also provides for restrictions on outlets
and discharge of effluents without obtaining consent from the Board. Prosecution and
penalties have been provided which include sentence of imprisonment. The Air Act provides
that the Central Pollution Control Board and the State Pollution Control Boards constituted
under the Water Act shall also perform the powers and functions under the Air Act. The main
function of the Boards, under the Air Act, is to improve the quality of the air and to prevent,
control and abate air pollution in the country.

INTERNALIZATION OF EXTERNAL COST

As discussed earlier the potential solutions to the problems of externality became the basis of
the PPP. This requires the polluter to internalize the external cost, that is, to add the cost of
pollution abatement to the production cost and thus pass it on to the user. In this way the full
production cost will be reflected in the prices of the goods. The OECD’s document mentions
explicitly that the costs of pollution prevention and control measures should be reflected in
the costs of goods and services which causes pollution in production and /or consumption. In
other words, the document is asking the member states to internalize the external costs

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because as long as the costs of pollution are social costs, the polluter will have no reason to
reduce these costs external to his realm.
The OECD’ s document tries to achieve this by applying the PPP, the object of which is not
to penalize the polluter but to ensure that the product prices express all the production costs
and thus the actual economic scarcity conditions. It is assumed that the producer will, in order
to keep production costs low, attempt to cut back on pollution. Unfortunately, even today all
external costs are not fully internalized in the OECD.

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 POLLUTER PAYS PRINCIPLE IN THE
INDIAN CONTEXT AND JUDICIAL
PRONOUNCEMENTS
In Indian environmental jurisprudence, the ‘polluter pays’ principle includes environmental
costs as well as direct costs to people or property. The Supreme Court of India has fleshed out
the ratio by stating that the ‘remediation of the damaged environment is a part of the process
of the sustainable development and as such the polluter is liable to pay the cost to the
individual sufferers as well as cost of reversing the damaged ecology.’
In Indian Council for Enviro - Legal Action v. Union of India1, case, the polluter pays
principle was applied for the first time in India. The Court tried to define the polluter pays
principle and its scope. Justice Dalveer Bhandari & Justice H. L. Dattu said ,“The polluter
pays principle demands that the financial costs of preventing or remedying the damage
caused by pollution should lie with the undertakings which cause the pollution or produce the
goods which cause the pollution. Under the principle, it is not the role of government to meet
the costs involved in either prevention of such damage, or in carrying out remedial action,
because the effect of this would be to shift the financial burden of the pollution incident to the
taxpayer. The ' polluter pays ' principle was promoted by the Organization for Economic
Cooperation and Development (OECD) during the 1970s when there was a great public
interest in environmental issues. During this time there were demands on government and
other institutions to introduce policies and mechanisms for the protection of the environment
and the public from the threats posed by pollution in modern industrialized society. The
Court further held that sections 3 and 5 of the Environment (Protection) Act, 1986
empowered the Central Government to give directions and take measures for giving effect to
polluter pays principle.
In Vellore Citizens Welfare Forum v. Union of India2, the SC declared that the polluter
pays principle is part of the environmental jurisprudence of India. The court held that the
polluting tanneries were liable to pay for the past pollution generated by them which resulted
in the environmental degradation and suffering to the residents of the area. In addition to this
a fine of rupees 10,000 each on all the polluting tanneries was also imposed, this money
along with the compensation amount recovered from the polluters were directed to be

1
2011 (8) SCC 161
2
AIR 1996 SC 2715

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deposited under a separate head called ‘Environment Protection Fund’. The fund was to be
used for the purpose of giving compensation to affected persons and for restoring the
damaged environment. In this case, explaining the meaning and scope of the polluter pays
principle the court observed the polluter pays principle as interpreted by this quote means that
the absolute liability for harm to the environment extends not only to compensate victims of
pollution but also the cost of restoring the environmental degradation. Remediation of the
damaged environment is part of the process of sustainable development and as such the
polluter is liable to pay the cost to the individual suffers as well as the cost of reversing the
damaged ecology. The court also directed the central government to constitute an authority
under section 3 subsection three of the environment protection act 1986 for implementation
of the polluter pays principle. The court opined that the authority should with the help of
expert opinion assess the loss to the environment and also identify the victims of the pollution
and assess the compensation to be paid to the said victim. The authority should further
determine the compensation to be recovered from polluters as cost of reversing the damaged
environment.
In M.C Mehta v. Kamal Nath3 case also known as Span Motel Case, the court opined that
“one who pollutes the environment must pay to reverse the damage caused by his acts”. It
was proved that the motel administration changed the course of the river in order to save the
motel from future floods. The court held that the motel should pay compensation by way of
cost for the restitution of the environment and ecology of the area. The pollution caused by
various construction's made by the motel in the riverbed and the banks of River Beas has to
be removed and reversed. The court asked the National Environmental Engineering Research
Institute, Nagpur to submit an assessment of the cost which was likely to be incurred for
reversing the damage caused by the motel to the environment and ecology of the area.
The principle also applied in the M.C Mehta v. UoI case also known as Oleum Gas Leak
Case4, Shriram food and fertilizers, a subsidiary of Delhi Cloth Mill Limited was
manufacturing caustic chlorine and oleum at a plant surrounded by thickly populated
colonies. The nature of the chemical process involved was polluting environment and was
creating a nuisance for the surrounding community of people. To address this issue public
interest litigation (PIL) was filed by environmentalist and lawyer M.C.Mehta requesting the
Supreme Court for the immediate closure and relocation of the industrial complex. On the 4th
of December 1985, one month after the petition was filed Oleum had leaked from the

3
(1997) 1 SCC 388
4
AIR 1987 SC 965

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complex into the surrounding community resulting in one fatality and many injuries. Justice
P.N Bhagwati writing for a Constitution Bench discussed the need for the development of the
polluter pays principle in the Indian sustainable development jurisprudence. The Bench said,
“ We must also deal with one other question which was seriously debated before us and that
question is as to what is the measure of liability of an enterprise which is engaged in a
hazardous or inherently dangerous industry, if by reason of an accident occurring in such
industry, if by reason of an accident occurring in such industry persons die or are injured.”
The court also discussed the concept of strict liability and absolute liability citing the famous
Rylands v. Fletcher5 case. The decision in the case provides a principle of strict liability that
if a person who brings on to his land and collects and keeps there anything likely to do harm
and such thing escapes and does damage to another he is liable to compensate for the damage
caused. Court also cleared that this rule applies only to non natural user of the land and it
does not apply to things naturally on the land or where the escape is due to an act of god or an
act of a stranger or the default of the person injured or where the thing which escapes is
present by the consent of the person injured or in certain cases where there is statutory
authority.
The court further said that they are of the view that an enterprise which is engaged in a
hazardous or inherently dangerous industry which poses a potential threat to the health and
safety of the persons working in the factory and residing in the surrounding areas owes an
absolute and non derogable duty to the community to ensure that no harm results to anyone
on account of hazardous or inherently dangerous nature of the activity which it has
undertaken.
The enterprise must be held to be under an obligation to provide that the hazardous or
inherently dangerous activity in which it is engaged must be conducted with the highest
standards of safety and if any harm results on account of such activity the enterprise must be
absolutely liable to compensate for such harm and it should be no answer for the enterprise to
say that it had taken all reasonable care and that the harm occurred without any negligence on
its part. Since the persons harmed on account of the hazardous or inherently dangerous
activity carried on by the enterprise would not be in a position to isolate the process of
operation from the hazardous preparation of substance or any other related element that
caused the harm, the enterprise must be held strictly liable for causing such harm as part of
the social cost for carrying on the hazardous or inherently dangerous activity.

5
(1868) LR 3 HL 330

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The court also pointed out that the measure of compensation must be correlated to the
magnitude and capacity of the enterprise because such compensation must have a deterrent
effect. The larger and most prosper the enterprise the greater must be the amount of
compensation payable by it for the harm caused on account of an accident in carrying on of
the hazardous or inherently dangerous activity by the enterprise. The court also advised the
implementation process of environmental auditing for the industrial activities.

In S Jagannath v. UoI6 case also known as Shrimp Farming Case, the court applied the
Polluter Pays principle and passed orders against the shrimp farming culture industry found
guilty of polluting coastal areas. The court held that the shrimp culture industry was liable to
compensate the affected persons on the basis of the polluter pays principle.
In M.C Mehta v. UoI case also known as Calcutta Tanneries Case7, the court applied the
polluter pays principle. The court involved issues relating to pollution caused by about 550
tanneries located in the adjoining areas in Eastern fringe of the city of Kolkata. The court
directed the state government to appoint an authority/commissioner to assess the loss to the
environment in the areas affected by the pollution caused by the tanneries. The said authority
should determine the compensation to be recovered from the polluter tanneries as cost of
reversing the damaged environment.
In M.C. Mehta vs Union of India and Ors 8 also known as the Taj Trapezium Case, it was
reiterated by the apex court the reiterated the ‘polluter pays principle’ and emphasized the
need of application of the principle. The yellowing and decaying of the priceless national
monument, the Taj Mahal, was a matter of concern in this case. According to the report of the
National Environment Engineering Report Institute and Varadarajan Committee in 1990 and
1995 respectively, the foundries, chemical industry and Mathura refineries were the major
polluters of the Taj Mahal. The court ordered the industries to switch to gas from fuel or shift
their location of work. The industries which did not comply with orders, those industries were
shut down unconditionally. Justice Kuldeep Singh added a new dimension to the ‘polluter
pays principle’. He stated that the workers of the industries should suffer as a result of closure
or shifting of location. The workers were ought to be given compensatory benefits in the form
of residential accommodation, continuity of their job till the industry restart etc. Since then
the courts have time and again have emphasized that the rights and duties of the workers

6
(1997) 2 SCC 87
7
(1997) 2 SCC 411
8
(1997) 2 SCC 353

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cannot be compromised with. This incident was a watershed in the history of environmental
law management.
In M.C Mehta v. UoI,9 popularly known as CNG case, the court observed that Articles
39(e), 47A and 48A by themselves and collectively cast a duty on the state to secure the
health of the people, improve public health and protect and improve the environment.

9
(2002) 4 S.C.C 356

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 FLAWS IN THE CONCEPT OF PPP:

It is true that polluter pays principle has a positive effect to reduce pollution. The principle
seems quite relevant for pollution that occurs during industrial activity, although it remains
inefficient in the case of historical pollution. Most developing countries, however, have not
yet subscribed to the PPP as a main environmental policy guideline. As Rege (1994) points
out, this is due to adverse economic conditions. Legal theorists discovered few loopholes of
this rule. The flaws are as follows:

1. Firstly, ambiguity still exists in determining 'who is a polluter'. In legal terminology, a

'polluter' is someone who directly or indirectly damages the environment or who creates
conditions relating to such damage. Clearly, this definition is so broad as to be unsupportive
in many situations.
2. Second, a large number of poor households, informal sector firms, and subsistence farmers
cannot bear any additional charges for energy or for waste disposal.
3. Third, small and medium-size firms from the formal sector, which mainly serve the home
market, find it difficult to pass on higher costs to the domestic end-users of their products.
4. Fourth, exporters in developing countries usually cannot shift the burden of cost
internalization to foreign customers due to elastic demand.

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 CONCLUSION

Although there is no statutory mandate on the ‘polluter pays principle’. Nevertheless, it takes
more effort in complying people to the principle rather than mandating it. The judicial
pronouncements on this principle have been clear, crisp and undisputable. It was realised that
industries are also social units having rights and duties towards their surroundings and
community. The old concept of development hand in hand with ecological balance does not
hold good in the 21st century. Yet ravaging nature in the name of development is no more
acceptable.

In fact, the lockdown mandated throughout the world during the coronavirus infection is rest
to nature. The animals of nature coming to streets during the lockdown is analogous to
humans captured in cages and animals on a visit. Over the years our behaviour towards nature
has been inhumane. Nature has been put to overwork in the last two decades. It’s high time
for us to care for mother nature.

The principles such as ‘polluter pays’, ‘precautionary principle’, ‘sustainable development’

should be ideally inbuilt in us. It should be in our subconscious mind that each and every
activity that we do should not be harming nature. Little steps taken towards nature such as
carpooling, riding the cycle to work, avoiding single-use plastic can go a long way if taken by
every citizen. Many institutions and universities have started planting trees on special
occasions such as Independence Day, environment day etc. Such steps are necessary for
sustainable development. Balanced development is a prerequisite for harmony between
nature and us. These steps should be habits of the millennials.

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 BIBLIOGRAPHY
WEBSITES

1. https://poseidon01.ssrn.com/delivery.php?ID=65506502606910001100106512601210
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6079099000120&EXT=pdf&INDEX=TRUE
2. https://thefactfactor.com/facts/law/civil_law/environmental_laws/polluter-pays-
principle/1503/
3. https://www.legalbites.in/polluter-pays-principle-economic-legal/
4. https://blog.ipleaders.in/the-concept-of-polluter-pays-and-its-potential-in-india/
5. http://14.139.60.114:8080/jspui/bitstream/123456789/17813/1/027_The%20Polluter
%20Pays%20Principle%20and%20the%20Supreme%20Court%20of%20India%20(1
08-116).pdf?source=app
6. https://nlsir.com/wp-content/uploads/2020/07/The-Polluter-Pays-Principle.pdf

BOOK REFERRED

1. Dr. P.S Jaswal, Dr. Nishtha Jaswal, Environmental Law,Allahabad Law Agency,
Third Edition, 2009

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