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Wednesday, July 28, 2021

Underutilisation of Environmental Relief Fund defeats the “Polluter Pays” principle

In the nearly 30 years of its existence, it has become doubtful if the Fund has been achieving its purpose as accounts of underutilisation and indifference by the authorities keep surfacing.


January 11, 2021 7:07:56 pm
climate change, coronavirus impact environment, climate change report, india climate change affectThe ERF was established under the Public Liability Insurance Act, 1991 in the wake of the Bhopal Gas tragedy to ensure immediate compensation to the victims of industrial accidents.

Written by Tarika Jain

It was recently reported that a massive amount of over Rs 800 crore meant for environmental restoration and compensating victims of hazardous substances is lying unutilised in the Environmental Relief Fund (ERF). Given the significance the Fund holds in giving substance to environmental law principles like “polluter pays” and ensuring environmental restoration, it is important to identify structural and practical shortfalls in its administration.

The ERF was established under the Public Liability Insurance Act, 1991 in the wake of the Bhopal Gas tragedy to ensure immediate compensation to the victims of industrial accidents. Under the Act, every person who owns or has control over any hazardous substances is mandated to take out insurance and deposit its premium in the Fund, which is then used by the Collector to award immediate relief to the claimants. The Fund also draws its authority from the National Green Tribunal (NGT) Act, 2010 (and its predecessor, the National Environment Tribunal Act, 1995), under Section 24 of which the amount of damages or relief awarded by the NGT is to be remitted to the Fund.

The UPA government notified the Environment Relief Scheme in 2008 under which the United India Insurance Company Limited was appointed the fund manager for administering and managing the Fund. The fund manager is responsible for investing the amount in the Fund, making claim settlements as per the Collector’s order and maintaining account statements. These account statements along with the audit reports are to be submitted annually to the Ministry of Environment, Forest and Climate Change.

The Fund is born out of the “no fault liability” principle as it compels industry owners to compensate victims of hazardous substances even if no responsibility can be attributed to the owner. It is also the spine of sustainability as NGT can award damages under the polluters pay principle to ensure that environmental concerns are not traded off in the name of development. Therefore, the money in the Fund is intended to support the recovery of damages by the victim and the restoration of the environment to undo industrial or urban damage.

However, in the nearly 30 years of its existence, it has become doubtful if the Fund has been achieving its purpose as accounts of underutilisation and indifference by the authorities keep surfacing.

In December 2018, I filed an RTI application with the Ministry of Environment, seeking a statement of accounts pertaining to the compensation deposited in the Fund in compliance with NGT orders between the years 2010-2018. The Ministry transferred the application to the NGT which, in turn, denied having the information on account of being a quasi-judicial body and not a regulatory authority. Ultimately, I ended up filing a second appeal with the Central Information Commission and the final order in the case was issued in October 2020.

The CIC allowed the appeal, directing the Ministry to share the information within 15 days or file an affidavit confirming that the information is not available with the Ministry. In its order, the CIC observed that the Ministry should be maintaining this public record especially given the specific provision to this effect in the Environmental Relief Scheme 2008.

It is interesting that despite the Scheme mandating that consolidated statements of accounts be sent to the central government annually, the Ministry had to source the records for all years from the fund manager during the 15-day period to comply with the CIC order. The fact that it took two years and a CIC order for the Ministry to obtain the statements from the fund manager clearly indicates that proper records are not being maintained by the Ministry.

On perusing the statements of eight years, I found only one instance where a deposit of compensation award of the NGT was recorded. This information is hard to swallow considering there are numerous NGT orders where specific direction has been given to the polluter to deposit the compensation amount in the Fund. Moreover, the receipt was recorded under the overarching head of “Others” as opposed to a separate account head meant specifically for the NGT as is required under Rule 35(4) of NGT (Practice and Procedure) Rules, 2011. Is it the case that the polluters are not complying with the NGT orders and not depositing the compensation in the Fund? And if such deposits are indeed being made, then are the records being improperly maintained? These questions raise serious issues with regard to the management of the Fund and should be looked into by the Ministry or the Comptroller and Auditor General (CAG).

The NGT in its order dated November 20, 2020, decided a plea alleging that over Rs 800 crore was lying unutilized in the Fund. Not surprisingly, the Tribunal found that there was no information available with the Ministry on the utilisation of the Fund and called it a ‘travesty of justice’ that the welfare legislation was not achieving its purpose in bringing relief to the victims.

This is not the first time that the issue of enormous amounts of environmental compensation lying unutilised has come to the fore. In 2013, in a landmark move, the Supreme Court imposed a fine of Rs 100 crore on Sterlite Industries with the hope of having a deterrent effect on the polluter. The Apex Court directed the amount to be deposited with the Collector who would then, in turn, invest the sum and use the interest for improving the environment near Sterlite’s plant. However, in 2018 it was reported that only Rs 7 crore from this amount had been spent by the Collector.

The fact that the Court did not invoke the mechanism of the Fund but instead ordered the Collector to directly receive the money (which was then deposited in a State Bank of India branch) is perhaps another issue. Even if it is argued that the Court was not operating within the framework for PLIA and the NGT Act in its judgment, it stands to reason that when a Fund already exists for the specific purpose of environmental relief, then it must be resorted to in such cases.

The environmental jurisprudence in the country has evolved to be sympathetic to the environmental costs of development. It has attended to the victims, and gone beyond reparation to award punitive damages. However, the law can be of only so much use in the books if the relief is not reaching the victim and the environment not being actively restored. Right from the Central Government to the local Collector, the authorities need to be held accountable for their inaction. Attention needs to be drawn to the effective monitoring of large volumes of public money lying untouched in the Fund.

The writer is a Delhi-based lawyer

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