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India To Industry: Clean Up Or Shut Down (Int'l Edition)

International -- Asian Business: INDIA


India's courts get tough with industries that pollute

In the South Indian town of Tiruppur, it's said that there's so much fabric dye in the water supply that local coconuts grow red. While that's an exaggeration, this much is true: Tiruppur's $1 billion knitwear industry has been spewing untreated, colored wastewater and contaminating the area's water supply for several years. "You cannot use it for any drinking water or other purposes," says Municipal Commissioner B. Balachandran. Angry farmers living downstream complained that the dye was killing their crops, then filed a lawsuit against the manufacturers. Last year, the Madras High Court ordered 750 cotton dyeing and bleaching plants to either clean up or shut down. Now, a third of them are banding together and spending $7.2 million to build common waste treatment plants, and the remainder are installing their own.

The message is clear for Indian companies: Clean up, or else. While India has long had tough antipollution laws, they were often ignored and seldom enforced. No longer. Growing pressure from courts, citizens fed up with choking air and filthy water, and foreign buyers keen to avoid environmentalists' wrath is prompting the "greening" of India. To comply, India and its industries will spend an estimated $3 billion on treatment plants, pollution-control and -monitoring equipment, and environmental advice by 2000. "It's a huge growth sector," says K.P. Nyati, head of the environmental management division of the Confederation of Indian Industry.

JUDGMENT DAY. Companies aren't the only ones under order to clean up. In one judgment, the Supreme Court ordered 300 towns and cities, including New Delhi, to install sewage-treatment plants after years of dumping tons of untreated waste into rivers. While the World Bank and Asian Development Bank are offering partial funding for the plants, some cities are preparing bond offers. Environmental enforcement agencies are also buying new monitoring devices to help them do their jobs--prompted by courts that hold government employees in contempt for failing to enforce emission laws.

Until recently, companies were able to flout the rules with impunity. State pollution-control boards were understaffed, susceptible to politics and bribes, and lacked sufficient technical expertise to crack down on rulebreakers. At higher levels, government officials thought environmental degradation was an inevitable cost of economic development. "A chimney was always regarded as a symbol of prosperity, and no questions were asked about pollution," says Dilip Biswas, chairman of the Central Pollution Control Board, which sets emissions standards but has little enforcement power. "The priority was more on industrial growth."

But over the last two years, India's Supreme Court and local benches have been prodded into action by lawsuits brought by environmental lawyers and citizens' groups. The rulings have closed hundreds of polluting industries, irrespective of the economic cost. India's leather industry, which exported $1.7 billion worth of shoes, purses, and jackets to the U.S. and Europe in fiscal 1995-96, saw exports fall 6% last year after 700 tanneries were shut down for six months for discharging chemical-laden water into rivers and turning 40,000 hectares of agricultural land into a toxic dump. In the state of Gujarat, an estimated 600 chemical and textile industries have been temporarily closed.

The crackdown is past due. Pollution is having serious effects on India's economy and the health of its people. Asthma and other respiratory ailments blamed in part on air pollution are on the rise. In large cities, average levels of particles in the air are five times higher than the World Health Organization standard. A 1995 World Bank study estimated that 40,000 Indians die prematurely every year as a result of air pollution, and that pollution-related health problems cost the economy $7 billion per year--or 2% of gross domestic product.

KEY ROLE. The media are helping to spread the word. Leading magazine India Today recently published an in-depth series on pollution called "The Poisoning of India." And Living on the Edge, a weekly television show on Star TV, examines the impact of existing ventures and proposed new investment projects on natural resources. "People are finally seeing how environmental degradation affects their everyday lives," says program director Niret Alva. India now has about 12,000 registered environmental groups, up from 600 in 1985.

European multinationals are also playing a key role. Accustomed to environmental pressure at home, companies such as Germany's Hoechst, Britain's Marks & Spencer, and Sweden's Electrolux are screening their suppliers, which include many of the small-scale manufacturers that account for nearly half of India's exports. They want to know how their suppliers dispose of waste and effluent and tell them that future orders are contingent on meeting environmental standards. While wanting to avoid having their reputations damaged by an alliance with a polluter, foreign companies also don't want to get stuck picking up the tab for a partner's earlier misdeeds--or have orders go unfilled because the courts have ordered a shutdown.

As a result, denim producer Arvind Mills Ltd., based in the northwestern city of Ahmedabad, is plowing $16 million into new pollution-control devices--in part to satisfy customer Marks & Spencer. And after New Delhi-based pharmaceutical Ranbaxy Laboratories was queried on environmental standards by Hoechst, it decided to upgrade all its manufacturing plants to make them "zero discharge" sites. Says Ranbaxy health and environment adviser Prafull Sheth: "If you are not manufacturing your products taking care of the environment, your products may not be acceptable."

While sales of such pollution-control equipment are slowing this year because of overall industrial sluggishness, they are still increasing faster than sales of other capital goods. Says Abhay Nalawade, managing director of Pune-based Thermax Ltd., which expects to sell $28 million worth of scrubbers, filters, and other equipment this year: "I think this industry will comfortably grow at a rate of 20%, even at a time when demand is slowing down." India's leading equipment makers--including Hindustan Dorr-Oliver, Ion Exchange India, Kirloskar American Air Filters, and Thermax--have all seen significant increases in sales of such equipment, says Aloke Mookherjea, director of the Indian subsidiary of Asea Brown Boveri Zurich (ABB). ABB's pollution equipment sales were up 30% in fiscal 1995-96 compared with the year before.

Environmental consultancy in India has also mushroomed. New Jersey-based Environmental Resources Management, which has worked off and on in India for a decade, set up an office in New Delhi three years ago to cater to the growing demand for environmental audits by multinational clients. ERM India now plans to expand to Pune and Calcutta. "We are facing more competition today, but the business is good enough to keep everybody busy," says deputy managing director Atul Kansal.

India still has a long way to go. Despite international aid and government grants, small-scale industries are resisting pressure to install antipollution equipment. And with all the focus on improving performance, there has been scant talk about cleaning up waste dumps at already polluted industrial sites. But India has changed. "It is not easy to get away with things that you could easily get away with five years ago," says ABB's Mookherjea. India is already on its way to looking greener.By Amy Louise Kazmin in TiruppurReturn to top

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