Policy Instruments for Controlling Air and

Water Pollution in India

Environmental pollution, especially air and water pollution, has emerged as a critical challenge
for India due to rapid urbanization, industrialization, population growth, and unsustainable
resource consumption. The Government of India has responded with a diverse set of policy
instruments aimed at preventing, mitigating, and controlling pollution.

These instruments fall under five broad categories: Legislative/Regulatory, Economic/Market-

Based, Institutional, Programmatic, and Voluntary/Informational.

1. Legislative and Regulatory Instruments

These are command-and-control tools that mandate pollution limits, regulate
emissions/discharges, and provide penalties for violations.

Air Pollution

 The Air (Prevention and Control of Pollution) Act, 1981

o First comprehensive law to address air pollution in India.
o Provides for the establishment of CPCB and SPCBs.
o Empowers boards to set and enforce ambient air quality standards and regulate
emissions from industrial and vehicular sources.
 Environment (Protection) Act, 1986
o An umbrella legislation enacted after the Bhopal gas tragedy.
o Allows the central government to take all measures for environmental protection,
including:
 Notifying emission and effluent standards.
 Banning hazardous substances.
 Setting up environmental labs and authorities.
 Motor Vehicles Act, 1988 (Amended 2019)
o Mandates vehicular pollution checks and enforces PUC certificates.
o Introduced Bharat Stage Emission Standards (now up to BS-VI), which limit
tailpipe emissions from vehicles.
 Factories Act, 1948 (amended provisions)
o Requires installation of pollution control equipment in factories.

Water Pollution

 The Water (Prevention and Control of Pollution) Act, 1974

o Establishes legal authority for preventing and controlling water pollution.
 o Empowers CPCB/SPCBs to grant or deny consent to operate to industrial units.
o Controls effluent discharge into rivers, lakes, and groundwater.
 The Water Cess Act, 1977 (repealed in 2017)
o Imposed a cess (tax) on water usage by industries to fund pollution control.
 Coastal Regulation Zone (CRZ) Notification, 1991
o Restricts industries and activities near India’s coastline to protect marine
ecosystems and prevent water pollution.

2. Economic and Market-Based Instruments

These instruments aim to align economic incentives with environmental goals by making
pollution costly and pollution control profitable.

Pollution Taxes and Charges

 Proposed emission/effluent charges for industries based on the “polluter pays

principle.”
 Green cess and environmental compensation charged for violations.

Subsidies and Incentives

 Financial support for industries to adopt cleaner technologies or install Effluent

Treatment Plants (ETPs) and Air Pollution Control Devices (APCDs).
 Accelerated depreciation allowance on environmental equipment under the Income Tax
Act.

Tradable Pollution Permits

 Introduced under pilot projects:

o Emission Trading Scheme (ETS) for Particulate Matter (PM) in Surat
(Gujarat) and Indore (Madhya Pradesh).
o Developed with the Energy Policy Institute at the University of Chicago (EPIC
India) and CPCB.
o Aims to reduce pollution cost-effectively through market mechanisms.

3. Institutional Instruments
Central and State Pollution Control Boards (CPCB & SPCBs)

 Monitor environmental quality, enforce compliance, and issue environmental clearances.

  Collect data on air and water pollution and publish reports such as the National Air
Quality Index (NAQI).

National Green Tribunal (NGT)

 Established in 2010 under the NGT Act.

 Specialized body for expeditious resolution of environmental disputes.
 Has passed landmark judgments on air pollution (e.g., firecrackers ban, construction
bans) and water pollution (e.g., Ganga rejuvenation).

State Pollution Control Boards

 Grant “Consent to Establish” and “Consent to Operate” under the Air and Water Acts.
 Monitor compliance by local industries and urban local bodies.

4. Planning and Programmatic Instruments

These are long-term plans and national programs aimed at systemic and holistic improvements.

National Clean Air Programme (NCAP) – 2019

 Launched to reduce PM10 and PM2.5 pollution by 20–30% by 2024 (from 2017 levels)
in 132 non-attainment cities.
 Includes measures like:
o Public transport enhancement
o Control of road dust
o Introduction of cleaner fuels (CNG, LPG)
o City-specific action plans

Namami Gange Programme

 Integrated mission for the rejuvenation of the Ganga River.

 Activities include:
o Setting up of Sewage Treatment Plants (STPs)
o Bioremediation of drains
o Industrial effluent monitoring
o Afforestation and public awareness

Smart Cities Mission & AMRUT

 Include pollution monitoring and smart environmental solutions as part of urban

infrastructure planning.
5. Voluntary and Information-Based Instruments
These tools empower consumers, industries, and civil society to make informed decisions and
encourage voluntary compliance.

Environmental Impact Assessment (EIA) Notification, 2006

 Mandatory for large projects to assess environmental risks.

 Includes a public consultation process and conditions for environmental clearance.

Eco-Labelling & Certifications

 Ecomark scheme for environmentally friendly consumer products.

 ISO 14001 certification for Environmental Management Systems (EMS).

Public Awareness Campaigns

 Swachh Bharat Abhiyan, Har Ghar Jal, and Catch the Rain campaigns aim at
improving sanitation, drinking water quality, and water conservation.

Real-time Air Quality Monitoring

 SAFAR (System of Air Quality and Weather Forecasting and Research) provides
real-time air quality data in major cities.
 National Air Quality Index (NAQI) developed by CPCB.

Challenges in Implementation
 Weak enforcement and limited technical capacity of SPCBs.
 Corruption and data manipulation by polluting industries.
 Inadequate infrastructure, especially in smaller towns for sewage and effluent
treatment.
 Urban-rural disparities in pollution monitoring.
 Limited public participation in decision-making processes.

Conclusion
India has developed a robust framework of laws, institutions, and incentives to address air
and water pollution. However, effective implementation, inter-agency coordination, use of
technology, and active public participation remain key to achieving sustainable environmental
outcomes. Strengthening the role of local governments, increasing funding for clean
technologies, and mainstreaming pollution control in all development planning are necessary
for meaningful impact.

Towards a Substitute (Backstop)

The initial discussion on resource depletion assumed that no alternative or substitute resource
was available. However, in reality, a substitute resource—often referred to as a backstop—
may exist. This substitute could be a renewable energy source such as solar energy, and it is
assumed to be available at a constant marginal cost (mc).

This leads to a new consideration: how should an exhaustible resource like oil or natural gas be
depleted when a substitute is available? The key insight is that:

 The augmented marginal cost (amc) of the exhaustible resource cannot exceed the mc
of the substitute, otherwise, society will shift to the substitute.
 The choke price, which is the maximum willingness to pay, sets the upper limit of price
and extraction costs.
 Thus, the availability of a substitute puts a ceiling on the price of the exhaustible
resource.

Mathematical Representation

When no substitute is considered, the price path is:

pt=mc+(p0−mc)(1+r)tpt=mc+(p0−mc)(1+r)t

Where:

 ptpt: price at time t

 p0p0: initial price
 mcmc: marginal cost
 rr: rate of interest

As time passes, price increases due to user cost (uc) and approaches the choke price or the
substitute’s marginal cost.

Does Price Rise Indefinitely When a Substitute Is Available?

No, it doesn’t. The availability of a substitute (backstop) prevents price from rising
indefinitely. The price will eventually level off at the cost of the substitute. This substitute can
be:

 Exhaustible (e.g., coal)

 Renewable (e.g., solar)

The backstop essentially provides a long-term cap on resource prices. For instance, if solar
energy is the backstop and is available at a marginal cost equal to mc_b, this becomes
the maximum price consumers are willing to pay.

The presence of the backstop performs two roles:

1. Sets the maximum price for the exhaustible resource.

2. Determines the initial user cost added to the price of extraction.

If the switch to the backstop occurs at time T, the price at that point becomes:

pT=mc+(p0−mc)(1+r)TpT=mc+(p0−mc)(1+r)T

With solar energy (mc_b) having no user cost, the price becomes constant:

pT=mcbpT=mcb

Calculating the Transition and Price Path

To find the initial user cost, we rearrange the price formula:

p0−mc=(mcb−mc)(1+r)Tp0−mc=(1+r)T(mcb−mc)

So, for any time before transition (t < T), the price is:

pt=mc+(mcb−mc)(1+r)T−tpt=mc+(1+r)T−t(mcb−mc)

This shows that:

 User cost increases over time.

 Price increases until it equals the backstop cost at time T.

This is illustrated in Figure 2.3, showing price rising from p0p0 to the mc of backstop over
time.
Exploration and Technological Progress
Exploration Costs

As low-cost resources are used up, remaining resources are more expensive to access. This
leads to rising:

 Marginal cost of extraction

 Marginal cost of exploration (finding new resources)

Exploration becomes costlier as firms are forced into remote or difficult environments (like
ocean beds or mountain slopes).

Technological Progress

Technology may temporarily lower extraction costs. However, with finite resources:

 Falling costs won’t last forever.

 Eventually, amc will rise again.

If exploration is successful and low-cost resources are found, it may slow the rise in costs.

Resource Extraction and Environmental Cost

Environmental Costs Not Internalized

Extraction often imposes external environmental costs not borne by the extractors. These
include:

 Strip mining damages

 Occupational health hazards
 Pollution of water bodies

These are not included in the firm’s decision-making because:

 Property rights are not clearly defined.

 Firms consider only private costs, not social costs.

Effect on Market and Policy

When external costs are ignored:

 Prices are too low.

  Demand is too high.
 Resources are depleted too quickly.

If environmental costs are internalized:

 Prices rise.
 Demand falls.
 Resource lifespan increases.

Environmental and resource decisions are therefore deeply linked, forming a key intersection in
economics (Tietenberg, 1998).

Conclusion
The availability of a substitute resource changes the economics of optimal depletion. It sets
a ceiling on price, guides user cost paths, and influences market behavior.
Additionally, rising extraction costs and environmental concernsmust be factored in for
sustainable management of natural resources.