Promoting Ease Of Doing Business In India: An Analysis Of Changes In The Environmental Classification System For Setting Up New Industries

Introduction

The Government of India has accepted the long-standing demand of industry to remove the dual compliance requirement of Environmental Clearance (EC) and Consent to Establish (CTE) for setting up new industries, as per notification no. Q-15012/2/2022-CPW-Part (1) /e-240741 issued on the 12th November 2024. Non-polluting white category industries will no longer be required to obtain CTE or Consent to Operate (CTO). Industries that have already obtained EC will no longer need to acquire CTE. This move aims to1 4 reduce the compliance burden and prevent duplication of approvals. Notification to this effect has been issued by the Ministry of Environment, Forest and Climate Change (MoEFCC) under the proviso to sub-section (1) of section 21 of the Air (Prevention and Control of Pollution) Act, 1981 and sub-section (1) of section 25 of the Water (Prevention and Control of Pollution) Act, 1974.

Industrialization has been a crucial catalyst for the economic expansion in India, it has together introduced substantial environmental issues. In response to escalating concerns regarding industrial pollution, the Ministry of Environment and Forest implemented a classification system for industries in 1989 through the notification for the Doon Valley, Uttarakhand. This initiated "the Red, Orange, and Green classification system", intended to inform judgments regarding the placement of industries according to their emission risk. This classification, originally designated for the Doon Valley, was subsequently extended to other regions of the country for consent management, surveillance, and industrial inspection. The necessity for consistency in industry classification among states prompted the Central Pollution Control Board (CPCB) to publish a list in 2012 that categorized 244 industrial sectors into, Red (85), Orange (73), and Green (86) classifications. These classifications facilitated the optimization of environmental rules and ensured that companies with greater emission potential were subjected to more stringent laws.

In 2016, the CPCB implemented a new technique based on a Pollution Index (PI) to enhance the uniformity of classification criteria. This index evaluated various issues like water pollution, air pollution, hazardous waste production, fuel usage, and wastewater creation. The approach enhanced the classification by introducing a fourth category "White", which encompassed nearly non-polluting businesses. Consequently, 252 industrial sectors were categorized under¹:

- Red (60 sectors): Industries with the highest pollution potential.

- Orange (93 sectors): Industries with moderate pollution potential.

- Green (63 sectors): Industries with low pollution potential.

- White (36 sectors): Industries considered non-polluting.

The introduction of the White Category by the CPCB in 2016 demonstrated the government's dedication to fostering low-pollution and sustainable industrial practices. This refined classification approach now facilitates more efficient regulation, ensuring that industries with elevated pollution concerns get increased inspection while promoting cleaner and more sustainable technologies across all sectors. This classification system originated from the increasing environmental consciousness of the 1970s and 1980s, marked by the implementation of significant environmental legislation, including the Water (Prevention and Control of Pollution) Act, 1974, and the Air (Prevention and Control of Pollution) Act, 1981. In response to escalating industrial pollution, the Environment (Protection) Act 1986 enhanced governmental authority to regulate companies according to their environmental effects.

The Central Pollution Control Board and Its Role

The Central Pollution Control Board (CPCB) is a statutory bodyunder the Ministry of Environment, Forests, and Climate Change in India. Founded in 1974 under the Water (Prevention and Control of Pollution) Act, the CPCB principal function is to enhance the cleanliness of streams and wells across all states by preventing, controlling, and mitigating water pollution. It enhances air quality and efficiently manages garbage, so contributing significantly to environmental protection and sustainable development nationwide.

The CPCB monitors industrial pollution and offers technical services to the government for establishing standards, conducting research, and enforcing environmental legislation. It functions via regional offices and partners with State Pollution Control Boards (SPCBs) to guarantee adherence to pollution control regulations at the local level.

Role of the CPCB in Industrial Regulation

The Central Pollution ControlBoard (CPCB) serves a crucial function in India's environmental governance as the primary regulatory authority for pollution management and industry compliance. Its function encompasses multiple critical domains, all directed towards reducing industrial pollution, promoting sustainable development, and safeguarding public health.

1. Setting Environmental Standards

CPCB is responsible for formulating and prescribing standards for air, water, and noise pollution. These standards are developed in consultation with industries and experts to ensure they are both effective and achievable. Industries across India are required to operate within these standards, which helps prevent environmental degradation and the overexploitation of natural resources.

2. Industrial Monitoring and Compliance

A critical function of CPCB is to monitor industrial activity across the country to ensure compliance with environmental regulations. This involves:

• Inspecting industrial units to ensure they are meeting prescribed pollution standards.
• Monitoring emissions and effluents from industries and taking enforcement actions if standards are violated.
• Working with State Pollution Control Boards (SPCBs) to ensure effective regional oversight of industries.

CPCB also uses the pollution index score, a tool developed to evaluate and rank industries based on their potential environmental impact. This ensures that the most polluting industries are prioritized for stricter monitoring.

3. Classification of Industries

CPCB's industrial classification system (Red, Orange, Green, and White categories) organizes industries based on their pollution potential. This classification:

• Helps in streamlining pollution control measures.
• Provides guidance to industries on their specific environmental responsibilities.
• Ensures that the most hazardous industries (Red Category) face stringent regulations, while less polluting industries (White Category) are given regulatory relief.

4. Policy Guidance and Research

The CPCB performs comprehensive research on environmental matters and offers technical assistance to the government. This research aids in the formulation of policies and the amendment of legislation to tackle developing environmental concerns. It also facilitates the advancement of innovative, cleaner technology that enterprises might implement to diminish their pollution levels.

5. Issuing Notifications and Legal Action

The CPCB has the authority to issue legal notifications to industries and enforce pollution control measures. It can impose penalties, close non-compliant industries, and mandate environmental impact assessments (EIAs) before new industries are established.

6. Public Awareness and Capacity Building

Beyond enforcement, CPCB engages in educating both industries and the public about environmental protection. It conducts workshops, awareness campaigns, and capacity-building initiatives to promote best practices in pollution control and environmental management.

• Computation of pollution index and criteria for deciding category of industrial sector²

The classification approach incorporates pollution scores related to water pollution, air pollution, and hazardous waste creation in the calculation of the pollution index. The formula for calculating the pollution index is as follows:

𝑷𝑰 = 𝒊𝒎𝒂𝒙+(𝟏𝟎𝟎− 𝒊𝒎𝒂𝒙)(𝒊𝟐 + 𝒊𝟑/ 𝟐𝟎𝟎 )

Where,

• imax, is the maximum score among water (W), air (A), and Hazardous (H) pollution scores.
• i2 and i3 are the remaining pollution scores.

The category of the industrial sector will be decided based on the pollution index ranges given.

Ranges of pollution index for different categories

Modified methodology also considers the variation in pollution potential due to various type of activities and scale of operations in a particular sector.

The Four Categories of Industrial Classification

• Definition of the Red Category (Pollution Index score of 60 and above)

The Red Category indicates industries with the greatest emission potential. These sectors produce substantial quantities of hazardous waste, effluents, and emissions, which can significantly affect air, water, and soil quality. The classification relies on a pollution index score that assesses the environmental hazards associated with industrial activity. Industries in this category face the most rigorous pollution control regulations and oversight to mitigate their negative effects.

Examples of Industries in the Red Category

Industries classified under the Red Category are typically large-scale operations that involve heavy machinery, chemical processes, and the generation of substantial waste. Some examples include:

• Thermal power plants
• Cement manufacturing units
• Petrochemical industries
• Iron and steel processing plants
• Tanneries
• Pharmaceutical manufacturing units
• Pulp and paper mills, etc.

These industries release high amounts of pollutants into the air and water, making their environmental management a top priority for regulatory authorities.

• Definition of the Orange Category (Pollution Index score of 41 to 59)

Industries categorized as Orange are characterized by a modest level of pollution impact. Although their operations are less destructive than those of Red Category businesses, they nonetheless possess the potential to inflict considerable environmental damage if inadequately managed. The pollution generated by these companies often originates from manufacturing operations, wastewater discharge, and air emissions; nevertheless, its magnitude is less than that of the Red Category.

Industries in the Orange Category are subject to significant regulatory restrictions, albeit with less stringent limitations than those imposed on highly polluting industries. This facilitates more compliance flexibility, indicative of their comparatively reduced environmental risk.

Examples of Industries in the Orange Category

Industries in the Orange Category vary widely in scale and sector. Some common examples include:

• Food Processing Units: Industries involved in the processing of fruits, vegetables, dairy products, and other food items. These industries generate organic waste, wastewater, and some emissions, but they are not as hazardous as Red Category industries.
• Textile Manufacturing: Factories engaged in the production and dyeing of fabrics, which often result in wastewater discharge containing dyes and chemicals.
• Automobile Manufacturing: Although less polluting than heavy industrial plants, the production of vehicles involves the release of gases and hazardous materials.
• Beverage Manufacturing: The production of soft drinks, bottled water, and other beverages, which can generate wastewater and use considerable energy.
• Pharmaceutical Formulation: The production of medicines, where waste and emissions are moderate compared to chemical manufacturing plants.
• Paints and Varnishes: The production of paints and coatings involves emissions of volatile organic compounds (VOCs) and other air pollutants.

These industries typically generate waste, emissions, or effluents that require intermediate levels of management to prevent environmental harm.

• Definition of the Green Category (Pollution Index score of 21 to 40)

Industries categorized as Green possess negligible pollution potential. These industries produce minimal to no hazardous waste or emissions, resulting in a markedly reduced environmental impact in comparison to the Red and Orange Category industries. Although they possess a certain environmental imprint, it remain minimal and readily controllable. Consequently, Green Category sectors encounter reduced regulatory scrutiny yet remain obligated to implement fundamental pollution control and environmentally sustainable measures.

Examples of Industries in the Green Category

Green Category industries are often small to medium-sized operations that involve minimal manufacturing or assembly processes with limited environmental risks. Examples of industries in this category include:

• Cotton and Woollen Hosiery Making (Dry Process): This involves the production of hosiery using cotton and wool, but without any dyeing or washing processes that would generate significant wastewater.
• Paper Pin and U-Clip Manufacturing: These industries involve the fabrication of simple stationery products, which typically have a low environmental impact due to the absence of hazardous chemicals or processes.
• Handloom/Carpet Weaving (Without Dyeing and Bleaching): This traditional method of producing textiles is generally eco-friendly, particularly when dyeing and bleaching operations, which could generate pollutants, are excluded.
• Solar Module Manufacturing: The assembly of solar panels and modules for renewable energy generation falls under the Green Category due to its environmental benefits and limited pollution.
• Bio-fertilizers and Bio-pesticides manufacturing (Without Using Inorganic Chemicals): The production of organic fertilizers and pest control products, especially without the use of synthetic chemicals, resulting in minimal pollution.

These industries, by nature of their operations, generate relatively low amounts of waste, effluents, and emissions, making them more environmentally sustainable.

Definition of the White Category (Pollution Index score up to 20)³

The White Category denotes industries deemed nearly non-polluting. These industries exhibit minimal or no environmental effects, thereby being excluded from many compliance duties mandated for industries in the Red, Orange, and Green Categories. The categorization was established by the CPCB to alleviate regulatory constraints on enterprises employing clean methods, facilitating their growth and operation with little interference from pollution control authorities.

Industries classified in the White Category do not produce substantial air or water pollution and are not linked to hazardous waste generation. These industries are exempt from obtaining the Consent to Establish (CTE) or Consent to Operate (CTO) from State Pollution Control Boards (SPCBs), providing considerable relief for enterprises in this sector.

The Ministry of Environment, Forest and Climate Change of India and CPCB have issued notification no. Q-15012/2/2022-CPW-Part (1) /e-240741 to streamline the compliance procedure for White Category industries, facilitating commercial operations.

1. Minimal Reporting Requirements: While higher-polluting industries need to submit regular environmental audits and reports to SPCBs, White Category industries are exempted from such requirements. This reduces administrative burdens and allows businesses to focus on operations without the need for continuous environmental monitoring.
2. Automatic Exemptions: White Category industries are automatically considered compliant as long as they continue to meet the criteria for minimal pollution. They are not required to apply for pollution control certifications or undergo environmental inspections unless a specific complaint or issue arises.
3. Encouragement of Clean Technology: The classification incentivizes industries to adopt clean technologies and eco-friendly practices. Businesses that operate within the White Category can scale operations more easily because of their environmental sustainability.

On 12th November 2024, the List of White Category Sectors Classified by the CPCB According to the 2016 Classification Methodology.⁴

* Classified vide CPCB letter no. B-29016/ROGW/IPC-VI/2020-21, dated 30.04.2020.

** Classified vide CPCB letter no. CPCB/IPC-VI/ROGW/6686-6730, dated 22.09.2021.

• Conclusion:

The CPCB industry classification system is crucial for fostering sustainable development and facilitating India's economic progress. The system classifies industries according to their pollution potential—Red, Orange, Green, and White ensuring that those with greater environmental concerns are subject to rigorous regulations, while those with minimum or no pollution receive regulatory relief.

The use of the White Category has significantly transformed sectors with minimal to no environmental impact. These industries benefit from automatic exemptions from environmental clearances, reduced reporting obligations, and exemption from regular inspections. The streamlined compliance procedure incentivizes enterprises to implement cleaner technology and sustainable practices, facilitating their operational expansion while maintaining environmental accountability. The CPCB classification promotes a business-friendly regulatory framework, particularly benefiting small and medium enterprises (SMEs), allowing them to concentrate on growth and innovation without the substantial administrative and financial encumbrance of stringent compliance protocols. The revised directives from the Ministry of Environment, Forests, and Climate Change streamline the procedure for low-emission sectors, enabling expedited approvals, cost reductions, and an enhanced process for establishing enterprises. The CPCB classification system facilitates corporate operations and supports sustainable industry practices, aligning with India's vision for a greener and more prosperous future. This framework guarantees environmental protection while fostering economic growth, enabling enterprises to prosper and contribute to India's long-term sustainability objectives.

Footnotes

1. https://cpcb.nic.in/openpdffile.php?id=TGF0ZXN0RmlsZS9MYXRlc3RfMTE4X0ZpbmFsX0RpcmVjdGlvbnMucGRm

2. http://www.indiaenvironmentportal.org.in/files/file/classification%20of%20industrial%20sectors.pdf

3. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2073234

4. https://static.pib.gov.in/WriteReadData/specificdocs/documents/2024/nov/doc20241114434301.pdf

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