JANUARY 27, 2015

By Naresh Minocha, Our Consulting Editor

IF Sir Isaac Newton were immortal as are his laws of motions and if he were asked to give a spin to his third law on India's licence raj, he would have perhaps stated: For every reform; there is equal and opposite counter-reform.

He would have written this law after witnessing dismantling of industrial licence raj and its substitution with spider-web like environmental regime over the last two decades or more.

It was a crime to produce more during licence, permit quota (LPQ) raj whose phased and substantial dismantling started in mid-1991. A similar situation now exists under the environmental raj that has grown by leaps and bounds over the last 20 years to occupy space vacated by LPQ.

Under the latter regime, productivity enhancement and technological improvements without prior permission were frowned upon. Ditto under the former.

Under LPQ, the companies had to follow a strict phased manufacturing programme (PMP) that extended right up to nuts and bolts. They had to rush to erstwhile Directorate General of Technical Development (DGTD) in Udyog Bhavan for even minor alterations in their plants and manufacturing operations.

The companies hesitantly revealed their built-in additional capacity under excess capacity regularization schemes which went through few versions in the eighties. It was akin to amnesty scheme for disclosure of black money.

The companies now follow-PMP type compliance under the present regime touted as sustainable development framework. They are filing applications for amendment of environmental clearances (ECs) to take on record higher capacity of 10-20 percent over the original disclosure.

They are queuing up before environmental authorities for seeking permission for good initiatives that might be construed by green babus as violations of long-winding stipulations. The conditions are all splashed over environmental clearance, forest clearance, wildlife clearance, consent to establish, consent to operate and other such permits.

The enterprises are living through nightmare of any state pollution control board (SPCB) or a court ordering plant closures due to non-compliance of any condition.

Under the green raj, you need permit to tinker with the fuel mixture to avail of price benefits accruing from market dynamics and integrated energy policy. You also need permit to change feedstock ratio to improve the cost competitiveness. You need permit to change the configuration of plant and machinery even if the overall production capacity remains the same as specified in EC.

The detailed project report that is prepared after issue of EC is always comprehensive. It explores all technological, economic and market dynamics to arrive at a project implementation option that constitutes deviation from EC's stipulations. The scope for such essential and desirable deviations is alien concept for environmental authorities. The frequent need for EC amendment is thus a reflection of green governance shortsightedness.

You have to seek permission even if changes either in the plant or in the production operations result in reduced emissions and effluents. Even for marginal reduction in production capacity, you have to apply for EC amendment!

You have to often apply for extending the validity of terms of reference (TOR)/1st stage approval that has a life of two years. It can't be extended only once even if the delay is solely due to non-accountable, bad green governance system.

Similarly, you have to apply for extension of validity of EC that has a life of five years even if reasons for delay clearly fall in the governance domain. And you have to again get into the queue for amendment to TOR or EC if another environmental authority such as Standing Committee of National Board on Wildlife (NBW-SC) disapproves a condition mentioned in TOR or EC.

Thus, the present sequential and compartmentalized system for different statutory approvals ensures that the companies miss timelines. Companies often move in circles for either seeking an approval or renewal from Central or State authorities. Eco-terrorists believe that such hurdle-race is required to rein in corporate greed for projects and profits.

The project developers have to sometime apply for correction of minor or major mistakes including howlers in the approval letters issued by different authorities. The mistakes can be as silly as the imposition of stipulations that are not at all relevant to the project concerned. Such mistakes happen apparently due to cutting and pasting of conditions from the model clearance template to the project approval letter.

Post Jairam's go-no-go-cum-moratorium raj and successor alleged 'Jayanthi  tax raj', Modi sarkar is getting reconciled with such linger-on effect of these twin jewels of UPA. The new Government is also happy to let the judiciary control the levers of environmental policies and governance.

The adverse effect of these UPA legacies on projects, economic growth, employment generation and revenue generation for overall national development is thus very much in play under Modi raj.

The Prime Minister Narendra Modi is not pushing for a high-speed growth path that can be pursued along with ambitious development of green cover across the country.

He might not be able to spare time to ponder over the gravity of the ground realities faced by project developers. He needs to be apprised of the fact that UPA legacies threaten to transform his vision for 'Make in India' to a mere wishful thinking.

Mr. Modi might like to ask doubting thomases to cite specific instances that threaten to make 'Make in India' a slow-moving steam engine. Cases are galore. They reflect ABCD (Avoid. Bypass. Confuse. Delay) of new-age green governance.

Take now a few cases starting with Gujarat Polfils, the polyester division of Modern Insulators Limited.

In August 2014, it applied for EC amendment as its polyester plant in Surat is producing more than the stipulated capacity of 1200 tonnes per month due to differences in the fines and thickness of different grades of yarn.

The company stated: "Due to the different denier sizes we are able to produce 1350 MT/month of fully drawn yarn (FDY) and partially oriented yarn (POY) with the similar infrastructure facilities. This is about 12.5% higher than the licensed capacity. There is no increase in pollution load."

On 8th November 2014, the Ministry of Environment, Forests and Climate Change (MOEFCC) told Gujarat Polfils: "Please apply your application separately in EC application field as per the laid down procedures since there is increase in production capacity. This shall accordingly be discussed in the meeting." This is the stage where the case stands at present.

Why can't there be automatic endorsement of excess capacity, which often arises from operational experience or due to built-in surplus capacity in certain equipment or due to inherent flexibility in the production process? An automatic endorsement scheme would relieve the experts committee for appraisal of projects from the burden of considering amendment applications. The committees would be able to focus better on pending applications for new projects.

Take now the case of Jaiprakash Power Ventures Limited (JPVL). On 30th October 2014, it applied for EC amendment to take on record transfer of ownership of its Karcham Wangtoo Hydro Electric Project (HEP) in Himachal Pradesh (HP) to JPVL following merger of project promoting subsidiary with the parent company (JPVL).

In its letter to MOEFCC, JPVL stated: "It may kindly be noted that the 1000 MW Karcham Wangtoo HEP, due to very high silt content in the river Satluj water in the monsoon period, has been provided with overload generation upto 20% of the installed capacity without any change in environmental parameters…."

The company accordingly requested MOEFCC to take on record 1200 MW capacity and make requisite amendments to EC.

Through two additional letters, JPVL has reckon 10% excess capacity in the respective ECs for both its 400MW Vishnuprayag HEP in Uttarakhand and its 300 MW Baspa Stage-II HEP in HP. MOEF has not yet taken any stance on JPVL's three applications.

Turn now to Mann Steel & Power Limited (MSPL). On 15th January 2015, it applied for EC amendment to permit change in the configuration of sponge iron plant expansion project in Burdwan district of West Bengal.

The EC provides for four DRI kilns of 100 tonnes per day (tpd) capacity each, aggregating to 400 tonnes per day (TPD). The company has now proposed to organize this total capacity into two kilns of 200 tpd capacity each.

The proposed change in plant design would not only help the company improve its cost competitiveness but also reduce pollution load significantly without effecting any change in total manufacturing capacity.

Why can't Modi Government create a mechanism for automatic endorsement of change in plant configuration with an undertaking from the company that alteration would not result in permitted pollution load?

Turn now to the necessity to change fuel or feedstock mixtures due to factors such as shortages or price changes.

On 19th January, 2015, Ambuja Cement applied for an amendment of EC, seeking permission to use petcoke, along with coal, in cement rotary Kilns located in Solan district of Himachal Pradesh. The company has assured that there would no deviation from prescribed emission norms.

Similarly, Ramco Cement has applied for amendment to two ECs to use petcoke in its cement and captive power plants in Krishna district of Andhra Pradesh (AP). The company has pointed out that it had envisaged use of petcoke in its original documents submitted to MOEF but the latter did not incorporate this fuel flexibility in ECs.

In a letter dated 10th December 2014, Ramco says: "It is submitted that 'permission for usage of pecoke' is not mentioned in both of these environmental clearance letters. In the present scenario where coal prices are escalating continuously, we propose to use petcoke as economical alternative fuel in addition to other fuels."

Consider now the case of Coromandel International Limited (CIL). It has applied for amendment of EC to utilize liquefied petroleum gas (LPG)/propane as alternative to natural gas (NG) at its fertilizer plant at Kakinada in AP. The company has been forced to file this application to avoid risk of disruption in its operations due to interruptions in existing gas supply.

In its letter dated 15th December 2014 to MOEFCC, CIL says: "Keeping in view of the interrupted NG supply by GAIL in the recent past, Coromandel intends to utilize LPG as stand-by and alternative fuel in the existing facility. Since the overall gross calorific value of NG and LPG is almost identical, the overall fuel consumption in the facility will remain unchanged from the current scenario."

Hear now the story of Uttam Galva Metallics Limited (UGML) that has achieved significant increase in its steel production at its blast furnace in Wardha district of Maharashtra through change in sinster feed and iron ore lump feed ratio.

Explaining the significance of market-forced changes in feedstock ratio, UGML says that it achieved increase in yield of hot metal "without effecting the stipulated pollution load and without increase in consumption of water. Hence there is no increase in pollution (air emissions/ambient air quality, water, effluent, noise, hazardous waste, soil) or any change in the blast furnace nor any modernization/expansion or change of product mix nor any change of raw materials."

In its letter dated 15th September 2014, the company has urged the Ministry to amend EC to endorse increase existing capacity of blast furnace as well as that of proposed expansion project.

This is where the proposal stands at present in MOEFCC, which currently lacks vision and agility to factor in efficiency gains due to the technology-driven nature of certain sectors.

Listen now to Oil and Natural Gas Corporation (ONGC). Even as it was waiting for extension of the validity of its TOR for drilling 138 development wells in its Ahmedabad asset in Gujarat during the last quarter of 2014, the company hit a jackpot of sorts.

In a letter dated 17th November 2014, the Company disclosed: "In the meantime, ONGC has recently updated reservoir data in the Gamij Field which comes under Area IV of Ahmedabad Asset. Owing to this updation, Gamji Field which has excellent potential needs to be monetized at the earliest in the interest of the nation."

It has thus asked for additional revision in TOR to provide for increase in the number of development wells to 406 from 138 specified in original approval.

As for delays inherent in green governance mechanism, take the case of Tata Steel, which has applied for extension of the validity of TOR for expansion of its Ferro Manganese plant in Odisha.

The company has been forced to seek extension as Odisha State Pollution Control Board has taken 17 months to fix a public hearing on the project after the company submitted its EIA report.

The plight of PEL Power, a Patel Engineering Group firm, is worst. It has been waiting since June 2010 for 'Consent for Establishment' from Tamil Nadu Pollution Control Board (TNPCB) to start setting up of its 1050MW project in Nagapattinam district.

In a letter dated 24th December 2014 to MOEFCC seeking EC's extension, PEL says: "We have submitted the required information/documents from time to time as required by TNPCB and continuously pursuing the matter. TNPCB has forwarded only in January 2014 our proposal to the Environment and Forest Department. Government of Tamil Nadu for consideration and we are vigorously pursuing the matter at highest level to grant CEF early. While we are yet to received CFE to implement the project, the validity of the EC granted to us vide reference cited is due to expire by 26.3.2015."

This is the state of affairs in Tamil Nadu, which is notorious for power shortages and power cuts and the consequent setback to manufacturing and other sectors. Similar stories exist in certain other States too.

Consider now a different case of delay that could have easily been avoided, had there been a single-window clearance. Birla Corporation Limited (BCL) has been forced to apply for amendment of EC as NBWL-SC has disallowed access to Chambal river water for its cement grinding unit.

In its letter dated 17th December 2014 to MOECC, the Company says: "Earlier, we have planned drawl of water from Chambal river and consequence upon decision of NBWL. We would like to change source of water as Groundwater. We would like to also mention that our project in RIICO, Paryavaran Industrial Area, Sakatpura, Ladpura, Kota (Raj.) which falls under semi critical zone as per CGWA report published in July, 2014."

There are many more stories of green reforms countering industrial reforms. Suffice is to assume that Mr. Modi would be sooner convinced of urgency of policy intervention to halt counter reforms, which are visible in other areas too.

Would he advise Niti Aayog to commission a fast-track study on counter-reforms that have prevented take-off of 'Make in India' and arrival of Achche Din?