India’s True GDP


I was sitting at the terrace of my billionaire friend at his 101st floor apartment in Mumbai. It was a Sunday morning. He had called me and my Professor Friend for a breakfast.

Did I ever tell you about this billionaire friend of mine? He had wealth more than Tata, Birla, Jindal and Mahindra all put together. His daily receipts of cash across his various offices in the World were more than the annual income disclosed in India’s recent income tax amnesty scheme  – embarrassing Hon Union Finance Minister Arun Jaitley. He was always looked with great respect by all the ruling Governments and those interested to rule. A man so rich, influential but at the same time so simple and discrete. Such people of invisible power could only be found on 101st floor.

He had just returned from Delhi after a secret and a high level meeting with the PM.  The meeting was presided by the PM himself with Union Finance Minister Arun Jaitley, Union Environment Minister, Mrs Nirmala Sitharaman, Minister of State for the Ministry of Commerce & Industry, as well as a Minister of State for Finance and Mr. Anil Madhav Dave, Minister of Environment & Forests & Climate Change (MoEFCC). The topic was remediation and rehabilitation of contaminated lands in India. Mr. Piyush Goel, Union Minister of Power had also joined the meeting – a bit late though.

Mr. Prakash Javdekar, then Minister of State for MoEFCC had informed the Lok Sabha (India’s Parliament) in 2015 on the status and action on remediation of contaminated sites.  PM wanted to take stock of the situation and accelerate the program prior to the national elections.

Javdekar had said

“MoEFCC operates two programmes for rehabilitation of abandoned contaminated sites and dumps cross the country.  One is a project for rehabilitation of 12 contaminated areas in eight States having multiple sites is being implemented through Central Pollution Control Board (CPCB) at the cost of Rs 8050 million. Forty per cent of the funding will come from National Clean Energy Fund (NCEF) while the remaining 60 per cent are contributions are the contributions State Governments. The eight States where the project is being implemented are Kerala, Madhya Pradesh, Odisha, Tamil Nadu, Uttar Pradesh, West Bengal, Rajasthan and Gujarat. The project activities include assessment of contamination, preparation & implementation of remediation plans for each of the selected sites, and monitoring of 50 pre-selected contaminated sites. In the implementation phase, consultants have been selected for preparation of detailed project reports for remediation of 8 sites. The initial grant of Rs.100 million to CPCB is being put to use in preparation of Detailed Project Reports.

In addition, an Externally Aided Project from World Bank for Capacity Building for Industrial Pollution Management (CBIPM) is being implemented with three objectives namely, preparation of National Plan for Rehabilitation of Polluted Sites (NPRPS) which includes institutional and methodological framework for rehabilitation of highly polluted abandoned sites; capacity building of State Government agencies for remediation: and actual remediation of 4 pilot sites in States of West Bengal, Andhra Pradesh and Telangana with 15% cost sharing by State Governments. The project outlay is Rs.3390.26 million”

“CPCB is today a practically dead organization The CBIMB has always been a slow-starter – fraught with challenges on procurement” Professor said this while lighting his Cigar. Most of the “champions” at the MoEFCC, CPCB and key States have either retired or transferred. NPRPS is not yet out and has been more of an academic exercise with clips from Google searches. The website of CBIMP as last updated is of 2011. I don’t know why these “impotent” projects are even getting mentioned today. It’s simply a hogwash”

I thought the Professor was right. I was involved in the early formulation of CBIMP in 2002 with World Bank and had repeated warned the World Bank and MoEF that this program was simply not going to “sell”. There was no national policy on remediation and rehabilitation – There was absence of of risk based standards and technical guidelines and no thought given on the estimation of costs of “legacy pollution” and the potential involvement of the private sector. Although the importance of the above enabling framework was recognized to an extent in the Project Appraisal Document (PAD) of the World Bank, the general apathy at the MoEFCC (something not surprising), poor acceptance and understanding at the State Pollution Control Boards (SPCBs) of this project with maze of procurement and bureaucratic hurdles – brought the project to significant delays.

The Professor continued. “And I really don’t see why the Government is proposing to use the National Clean Energy Fund. So illogical isn’t it?”

My billionaire friend agreed.

Through Finance Bill 2010-11 a corpus called National Clean Energy Fund (NCEF) was created out of cess on coal produced / imported (“polluter pays” principle) for the purposes of financing and promoting clean energy initiatives, funding research in the area of clean energy or for any other purpose relating thereto. An Inter-Ministerial Group (IMG) chaired by Finance Secretary approves the projects/schemes eligible for financing under the NCEF. These projects include innovative schemes like Green Energy Corridor for boosting up the transmission sector, Jawaharlal Nehru National Solar Mission (JNNSM)’s installation of solar photovoltaic (SPV) lights and small capacity lights, installation of SPV water pumping systems, SPV Power Plants, Grid Connected Rooftop SPV Power Plants, pilot project to assess wind power potential etc.

In 2012, NCEF was permitted to be used to finance TSDFs for hazardous waste (not for remediation as such). Minister Goyal wasn’t quite happy with such arbitrary allocations and “fitment” of TSDF and remediation component under clean energy.

Apparently, Union Minister of Commerce Mrs Sitharaman offered that she could insert in Schedule 7 of the CSR directive under the Company’s Act that industry’s expenditure on remediation of contaminated lands will be permitted as CSR spent. “I will discuss this possibility with IICA” she said

“Well, this is certainly not acceptable” I said “On one side you allow industries to recklessly pollute our lands and then allow the expenditure for clean up or remediate as a CSR”

My billionaire friend was listening. He nodded to our observations.

After the briefing and discussions, PM had requested him to put some 100 billion Rs. as a “private sector involvement”, set an example to industries and help the Government. No CSR and no NCEF – he said emphatically. And we are not interested in the World Bank unlike Jayaram Ramesh. Bank just wants to “experiment” their half-baked ideas from Harvard and MIT on countries like us.

He came directly to the point.

I asked my billionaire friend about his response. He had said “Sir, billions here and there is no problem for me. I will send my accountant to Mr. Jaitleys office and you may advise how you want to have this money to be delivered. From Zurich or via Mauritius or in the form of carefully packed gold bars that I stock in Dubai or in form of real estate on the Pacific Islands that you can sell and give you cash from drug mafia. Sorry, I have stopped using the Nationalized Banks for fund transfer after the tightening of screws done by Raghuram, earlier RBI Governor.  My only request will be not use my money for UP and Punjab elections. In return, please allow me to “sell” the decontaminated lands for brownfield development in the real estate market. This is how I will recover my “investments”

Mr. Jaitley was not however very comfortable with my billionaire friends options. “I will have to look into very carefully” he said. But the real scale of the problem of contaminated lands was worrying him. The actual number of contaminated lands will be far more than the one officially reported he guessed – like cases reported on dengue fever in Delhi. The 2013 report of Blacksmith Institute had already shown presence of 41 prominent contaminated sites in India

He then whispered to the PM. “The National Green Tribunal (NGT) is  already breathing down our neck slapping orders for “compensation”. How the NGT arrives at these costs is debatable, but the news headlines are screaming on this issue already.

The problem is serious PM said but Arun – you seem to be too much perturbed

“Well Sir, I was about to show trend of India’s GDP over past 5 years and next 5 years of likely projection. I now realize that I will have to lower the figure by at least 1.5% to reflect the costs to be incurred to remediate and rehabilitate the contaminated lands. That will the India’s true GDP”

Jaitley is right – Professor said while getting up and extinguishing his cigar. It could even be 2% if you looked at economic impacts (health and natural resources) of hundreds of city landfills or rather dumps that are leaching and emitting pollutants every day.

“So is the Government going to borrow money from you” I asked a stupid question in closing that my billionaire friend did not answer – as if he never heard. Have some corn flakes imported for you from Australia he said instead.

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