Why a Niti Aayog study on the economic costs of ‘judicial activism’ must be viewed with scepticism

In June, the government think tank Niti Aayog released a report claiming that Rs 24,541.15 crore and 82,060 jobs had been lost due to five cases in which the Supreme Court and the National Green Tribunal temporarily halted or completely banned economic activities that violated environmental laws or had adverse environmental effects.

All of these cases originated with local citizens, non-governmental organisations or regulatory bodies approaching the Supreme Court and the National Green Tribunal to emphasise the negative impacts of these economic activities.

In 2020, claiming to be concerned about the economic effects of this perceived “judicial activism”, Niti Aayog asked a policy research organsiation called the Consumer Unity and Trust Society International to conduct a study on these five cases.

The study concluded that the Supreme Court should undertake comprehensive economic impact analyses based on forecasts as part of an effort to “institutionalise cost-benefit assessment during decision making and as a continuous process of monitoring and evaluation by relevant authorities including regulators, state agencies, expert committees, judiciary, etc”.

A discussion on the costs and benefits of judicial directives on the environment is welcome. But this report fails to evaluate the costs of these judgements in an unbiased and rigorous manner.

The implications of such a study being conducted under the research scheme of the Niti Aayog could be far reaching. While the report suggests that it does not wish to “interfere with the decision-making process of the judiciary”, the project brief states that it expects that the study will serve as a training input for judicial officers by sensitising them to the economic implications of their judgements.

Such a narrative could be used to discourage judicial decisions that favour environmental and social protection against business interests. Furthermore, approaching the courts is likely the only grievance redressal mechanism for communities that are victims of environmental injustice.

There are five reasons why I believe the report and its findings should be rejected.

The five cases that Niti Aayog studied were:

1. The Goa Foundation vs M/s Sesa Sterlite Ltd & Ors, in which the Supreme Court ruled on February 7, 2018, that all mining leases renewed by the government of Goa were to be set aside and all mining lease holders had to stop mining activities with effect from March 16, 2018.
2. Hanuman Laxman Aroskar vs Union of India, in which the Supreme Court in March 2019 suspended the Environment Clearance granted to the Mopa Airport project in Goa. The court eventually lifted the suspension in January 2020 after accepting additional environmental safeguards.
3. The Tamil Nadu Pollution Control Board vs Sterlite Industries (I) Ltd by which a Sterilite Industries copper smelter plant in Tamil Nadu was permanently closed by the government of Tamil Nadu and the Tamil Nadu Pollution Control Board. This decision was backed by the Supreme in February 2019.
4. National Green Tribunal Bar Association vs Ministry of Environment and Forests and Ors. The National Green Tribunal in August 2013 had ordered that all sand mining activities in the country would be deemed illegal unless an Environmental Clearance and a license had been obtained from the competent authorities.
5. Vardhman Kaushik vs Union of India & Ors. In April 2015, in response to a Public Interest Litigation, the National Green Tribunal passed an order halting construction activities on a section of NH-24.

To start with, the premise behind the study is unclear. The report provides no explanation for why these five cases were selected. When the proposal for the study was floated in 2019, the policy implications of the research study were questioned within the Niti Aayog itself . While the report claims that it is a “purely academic exercise”, the analysis in the study seems to be working towards a pre-decided conclusion.

Second, the economic impacts of these judgements have been viewed through a narrow lens. These are all estimates of the impact on government revenues, businesses and salaries of employees.

While the study aims to conduct a cost-benefit assessment, the analysis does not look into any potential benefits of the judgements. The report does mention the environmental concerns surrounding these projects but makes no effort to quantify their adverse impacts or explain the factors that led the courts to pass judgements against them.

A rigorous, unbiased analysis would have weighed the costs incurred by the industrial and government stakeholders against the estimated economic, social and environmental benefits accruing to the local communities. These benefits would arise from the averted impact on the environment and the associated negative social and health externalities, due to these judgements.

Third, in three out of the five cases, the stakeholder sample did not include any representative from the affected communities or civil society organisations that were not affiliated with businesses. The rationale behind this industry-centric approach to stakeholder selection is not explained in the study.

Fourth, the report attributes several outcomes to these five judgements without adequate evidence.

In the case of the mining ban in Goa, the report says, “The total revenue earned by the state government between the financial years 2015-’18 was Rs 1,128.38 crore, which declined by 79.51% to Rs 231.23 crore in the assessment period, a difference of Rs 897.15 crore.” The assessment period, in this case, is March 2018 to January 2021.

The mining ban has been mentioned as the cause of this revenue loss, without considering any other potential reasons for the declining state revenue, such as the reduction in overall economic activity due to the Covid-19 pandemic.

Similarly, the report claims that “...owing to the [Sterlite] Copper Plant’s closure, the exports and imports of copper and related items have been greatly affected. While the exports have significantly fallen from the year FY 2018-’19 onwards, the imports have risen sharply to cater to the domestic demand”.

It is important to establish causality or at least consider the major global factors that could potentially affect the evaluated economic outcomes.

Fifth, the report makes the case for ex ante – before the event – economic impact assessments being conducted by courts prior to handing down judgements that are likely to have economic impacts.

One of the main recommendations made by the report is, “The Supreme Court must undertake comprehensive ex ante economic impact analyses facilitated by a group of experts including economists, environmentalists, sociologists, among others, to address and adjudicate public interest cases involving economic sensitive matters.”

It is entirely unreasonable to expect the Supreme Court to spend its time and resources to undertake an ex ante assessment of the nature suggested by the report. The court is neither equipped to undertake such an assessment, nor should it be expected to.

The National Green Tribunal consists of expert members who may be somewhat better placed to understand the socio-economic impacts of some of the judicial directions. But generalist courts like the Supreme Court and the High Courts do not have such expertise on the bench.

Moreover, in the case of the mining ban in Goa, the report suggests that the court’s analysis in the case could have explored environmental protection measures ex ante. The role of the apex court is to review the legal validity of executive actions and proposed protection measures. But can we also expect it to suggest viable alternatives to a certain policy?

It is ironic for a study that is concerned about judicial activism to suggest that courts undertake economic impact analyses and assess policy alternatives as that will only further blur the lines between the executive and the judiciary.

The Indian judiciary has on several occasions delivered judgements that curtail economic activity and favour protection of natural resources. Recently, the Supreme Court and National Green Tribunal have delivered judgements limiting mining activities, protecting forest land and questioning the dilution of environmental clearance processes.

Such directions could be perceived by some as being contrary to the economic interests of the country or hampering the ease of doing business. The debate around judicial activism typically takes the form of whether a certain judicial decision is an outcome of the court taking decisions in place of the executive and legislative or if it enables more effective implementation of a law and hence is able to give better access to justice.

Characterising judicial decisions in this manner is indicative of a myopic view of social welfare and economic development. There is a need to understand that the outcomes of environmental protection decisions affect all sections of society.

In an era where governments across the world are making efforts to incorporate the costs of a degrading environment and its effects on the economy into policy decisions, this study overstates the economic costs of environmental protection, and underplays the role of the judiciary in supporting environmental conservation measures.

Annanya Mahajan is a Senior Research Associate at the Initiative of Climate, Energy and Environment at the Centre for Policy Research. Views expressed are those of the authors, and do not represent an institutional position. CPR does not take institutional positions on issues.