Opinion: The Rs 200-crore fine for Adani is a charade of environmental governance

Over the last ten days, India’s environment ministry has been at loggerheads with the Business Standard newspaper.

It all began on July 2 when the financial daily published an article saying the ministry has waived a Rs 200 crore “fine” (called an Environmental Relief Fund) imposed by the Congress-led United Progressive Alliance government on Adani Ports and Special Economic Zone for violations at its flagship complex at Mundra, Gujarat.

A day later, the ministry released a statement saying the paper had got it all wrong. It was actually replacing a financial penalty with dubious legal sanctity with a stronger one: “The fact is that the... show cause notice for creation of Environment Relief Fund (ERF) was not backed by any law under (Environment Protection) Act, 1986 and is not legally correct.”

Instead, said the statement, the ministry had decided to replace the Rs 200 crore fund with an “open ended financial commitment” by Adani Ports and SEZ for financing a study (on environmental damage); restoration and integrated conservation for protection of creeks, mangrove areas, conservation of Bocha island – a vulnerable island area near the port complex.

Its approach, averred the statement, is “much more stringent” than asking the company for Rs 200 crore.

A refutation

This was challenged by the paper on July 7. “Official file notings show that the ministry under the NDA [Bharatiya Janata Party-led National Democratic Alliance] government reconfirmed the damage to the site area. But differing from the UPA government, it internally concluded that there was no proof that existing damage had been caused by Adani.”

Under the course of action proposed by the ministry, said the article, Adani Ports and SEZ would “pay only for conservation plans to be drawn up in future after the clearance”.

It’s clear that a charade is playing out.

The Rs 200-crore fine has its genesis in a 2014 report submitted by a committee headed by environmentalist Sunita Narain. The committee had been set up by then-environment minister Jayanthi Natarajan in 2012 after persistent complaints about environmental damage by the complex from the communities living next to Adani Ports and SEZ’s flagship Mundra complex in Gujarat.

In its report, the committee said the project “has led to massive ecological changes with adverse impacts” and reported violations and non-compliance with environmental clearance conditions. In some instances, like an airstrip at the SEZ, construction had begun even before the environmental clearance. The SEZ itself had been built without an environmental clearance.

These were serious violations, running afoul of not just India’s Environment Impact Assessment notification, 2006, but also multiple ministry memorandums. All of these say that, in the case of violations related to environmental clearances, the ministry would cancel the environmental clearance and initiate criminal action.

Problematic recommendation

In its report, however, the committee decided against legal proceedings and cancelling environmental clearances saying these measures were “procedural, and would only lead to delay without any gains to the environment and the people”. Instead, it recommended, among other things, that the company set up an “environment restoration fund”, with a corpus of 1% of the project cost or Rs 200 crore, whichever is higher.

Subsequently, a ministry official confirmed the Rs 200-crore penalty and added that other action might follow.

It was a problematic recommendation. As Delhi-based environmental lawyer Ritwick Dutta told the Economic Times, the two laws that define the penal framework for such violations – the Environment Protection Act and the Environment Impact Assessment – do not give the ministry the powers to levy a fine. “They empower the ministry to start criminal prosecution in a court and to cancel an environmental clearance,” he said. “There is nothing in the laws giving the ministry any power to levy such a penalty.”

Others worried about the precedent being created. That any company would flout its environmental clearance conditions – even start work without a clearance – and win post facto approval after paying a fine.

The quantum of the fine too was a puzzle. It was too low to be a credible deterrent. In 2012-’13, Mundra Ports and SEZ had posted a net profit of Rs 1,754 crore – about nine times the fine recommended by the committee and that levied by the ministry.

Nor had the report explained how this Rs 200-crore figure was arrived at. Anand Yagnik, a lawyer in the Ahmedabad High Court who was then fighting a case on Adani SEZ’s lack of environmental clearance, told ET that any number has to be backed by a rationale to be credible. “It has to have a logical relationship between the damage and how to undo the damage,” he said. “This report is completely bogus as it doesn’t indicate a line of its own rationality.”

Endgame

The report triggered a processes of forgetting.

Its recommendations became the new frame of reference. The larger violations – and what the rule of law says about them – were obscured as the press discussed the Rs 200-crore “fine”.

This is an apolitical process. By accepting the Narain committee’s recommendations, the UPA government chose to replace the prescribed legal measures with a dubious financial penalty. And now, the NDA has decided to do away with that penalty as well.

Agreed Anand Yagnik, the Gujarat lawyer quoted above, “The UPA allowed them to purchase the violation and NDA gave back the purchase price.”

It’s an assertion that both parties will dispute hotly. Both the current and previous lot in the environment ministry will, for instance, point at their directions to the company regarding restoration of creeks, mangroves and more.

But that is a fig leaf. The best way to ensure India balances its developmental wants with its environmental needs is to apply the rule of law.

But that is not what we are getting. What we get is a kabuki masquerading as environmental governance.