Since December 2018, Central Pollution Control Board (CPCB) is in news for imposing heavy penalties by using a specially curated formula to compute Environment Compensation (EC), on different Industrial units / Companies for violation of emission & effluent discharge and other environmental offences including non-compliance of its earlier order.

In August 2018, the Environment Court (NGT), while hearing a matter related to Water Discharge quality, directed CPCB to ensure that the discharge quality of Environmental Pollutants should remain within the standards as enlisted in legislature. Further, the bench left it open for CPCB to take penal action for failure and to assess and recover compensation from polluter for damage caused to the environment.

Accordingly, a committee was constituted by the Chairman, CPCB to arrive at a formula for calculation of Environmental Compensation (EC) and the Committee prepared a policy named as "Methodology for Assessing Penalty & Environmental Compensation and Action Plan to Utilize the Fund". The formula for calculation of EC is as follows:

EC=PI x N x R x S x LF

Where, EC is Environmental Compensation in (₹)

PI = Pollution Index of industrial sector

N = Number of days of violation took place

R = Factor in Rupees (₹) for deriving the EC, which may be a minimum of 100 and maximum of 500.

S = Factor for scale of operation which could be based on small/ medium/ large industry categorization, which may be 0.5 for micro or small, 1.0 for medium and 1.5 for large units

LF = Location factor

The formula incorporates the anticipated severity of environmental pollution in terms of Pollution Index, duration of violation in terms of number of days, scale of operation in terms of micro & small/medium/large industry and location in terms of proximity to the large habitations.

The term "Pollution Index" was first used to categorize the Industrial sectors into Red, Orange, Green and White category, in the year 2016 and the same Pollution Index is being used for the purpose of calculating EC. The Pollution Index in the range of 60 to 100 are identified as Red Industry, while 41 to 59 as Orange Industry and lastly 21 to 40 as Green Industry. Therefore, with a view to keep uniformity in assessing liabilities, the average pollution index of 80, 50 and 30 are taken for calculating the Environmental Compensation for Red, Orange and Green categories of industries, respectively.

A sample list of Location Factor is also provided in the policy which is as under:

Sl. No.



Location Factor#


Less than 1


1 to <5


5 to <10


10 and above


*Population of the city/town as per the latest Census of India

#LF will be 1.0 in case unit is located >10km from municipal boundary

Apart from this generic formula to compute the EC, the CPCB has also devised different violation specific formulas to address specific violations such as: Illegal Ground Water extraction, Untreated Sewage Discharge, Violations of provisions of the Bio Medical Waste Rules, 2016, violations under Solid Waste Rules, Graded Response Action Plan for Air Pollution in Delhi region. In the case of Illegal Ground Water extraction though the formula was devised by the committee constituted by CPCB, which included expert members from different regulators including Central Ground Water Authority (CGWA), but the right to impose the penalty still rests with the CGWA.

Recently, a heavy penalty of more than 14.5 Crore INR (approx. 20,44,217 USD) was imposed by CPCB on one of the major real estate giants in Gurgaon on the ground of discharge of untreated sewage for 281 days. Further, on the ground of illegal ground water extraction, CGWA was requested to calculate and impose the EC.

Through an order dated 01.05.2019, the NGT directed the CPCB to undertake study and prepare a scale of compensation to be recovered from the violators of Bio Medical Waste Rules. This study was ordered without prejudice to the efforts of State Pollution Control Board (SPCB) to devise methodology to recover compensation from such polluters. The NGT also added that the scale prepared by SPCBs should not be less than that of CPCB. After discussions and deliberations, the CPCB submitted its report before NGT, which was accepted by NGT vide its order dated 15.07.2019.

These formulas are now regularly been used by the CPCB for imposing EC on polluting Industries. CPCB has also provided minimum and maximum limit of penalties along with these formulas, and consolidated list of the same is provided herein below:


Minimum per day EC payable in (₹)

Maximum per day EC payable in (₹)

General Environmental Compensation



Graded Response Action Plan (GRAP) in Delhi-NCR



Untreated / Partially Treated Sewage Discharge

1,00,00,000 (this figure is lumpsum basis, and not on per day basis)

20,00,00,00,000 (this figure is lumpsum basis, and not on per day basis)

Improper Municipal Solid Waste Management

1,00,00,000 (this figure is lumpsum basis, and not on per day basis)

10,00,00,00,000 (this figure is lumpsum basis, and not on per day basis)

Illegal Extraction of

Ground Water [for Drinking and Domestic use]

10,000/- (for households) and 50,000 (for institutional activity, commercial complexes, townships etc.)


Illegal Extraction of

Ground Water [for Packaged drinking water units], [for Mining, Infrastructure and Dewatering Projects] and [for Industrial Units]



Common Biomedical Waste Treatment Facility



Healthcare Facility



The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.