Is India prepared for oil spill?

Spill oil, pay Rs 5 crore to get away in India

On World Environment Day, Business Standard tracks the hazards in which India’s citizens live and how to get out of them. The BP oil spill in the Gulf of Mexico, which has substantially eroded the market capitalization of a century-old company, has put a question mark on India’s preparedness to tackle such environmental disasters. Despite witnessing some of the worst industrial accidents in the country, there is a mere Rs 5-crore liability cap irrespective of the extent of damage to life and environment.

If the relief announced by the collector exceeds the amount payable under the insurance policy purchased by the owner or exceeds the liability of the insurance company, the government’s environment relief fund (ERF) is to be utilized for paying claims. Incidents like that of the BP spill, radioactive cobalt leak in New Delhi and the fire at Indian Oil’s depot in Jaipur a few months ago have brought to the forefront the question of who pays and how much is paid. The little known Public Liabilities Insurance Act (PLIA) is the only law that tackles the issue at present, though the government plans to enact the Civil Nuclear Liability Bill to take care of industry concerns on capping the liabilities. “As far as oil exploration and production in India is concerned, the production sharing contracts signed between the companies and the government are silent on the issue of liability. In the US, the contracts have a clause limiting the liability,” said M B Lal, former chairman and managing director, Hindustan Petroleum Corporation. Lal headed a committee that went into the cause of the Jaipur fire that killed 11 persons.

Parliament enacted PLIA in January 1991. “Under this Act, victims of a hazardous industrial accident are entitled to compensation at prescribed levels, without providing any proof of negligence. The maximum compensation under the Act, however, is limited to a measly Rs 25,000, although the right of a victim to claim larger damages under any other law is expressly reserved,” said Shweta Bharti, senior partner at law firm Hammurabi and Solomon. Moreover, to ensure prompt payment of compensation to victims, the Act requires all hazardous enterprises to obtain sufficient insurance cover and provides for an independent machinery administered by the district collector for the filing for and adjudication of claims. “The rules framed under the PLIA limit the liability of an insurer to Rs 5 crore for every accident,” added Bharti. The Act provides for immediate relief to persons affected by accidents occurring while handing the notified hazardous substances. For this purpose, the owner of the industrial unit handling such hazardous substances is required to obtain one or more insurance policies. In case the amount of relief awarded by the collector exceeds the amount payable under the insurance policy purchased by the owner, or exceeds the liability of the insurance company, ERF is to be utilized for paying claims, said Environment Minister Jairam Ramesh in reply to a Parliament question.

The lack of clarity on the issue and low statutory coverage is a blessing in disguise for companies operating in India and can prevent the financial trouble that BP is currently facing, though the larger issue of who is responsible remains unaddressed. The lack of seriousness with which India tackles damage to environment and health is borne out by the fact that even after 26 years the clean-up of the 1984 chemical disaster at the Union Carbide factory in Bhopal is still to be executed. The accident had left thousands dead.NGOs feel there is lack of implementation of laws on industrial disasters. In the case of the US, which has stringent environmental regulations, BP is under political pressure to control the leak that has spread across the Gulf of Mexico and has threatened the livelihood of nearby areas. President Barack Obama has even proposed a six-month moratorium on offshore drilling. Lal said India has a lesson to learn from the BP spill, especially since technologies are getting more complex. “Unless standards are upgraded, it will be difficult to nip a disaster in its bud,” he said. Suneel Pandey, fellow at TERI, added that even though there is enough regulation in place, there is delayed implementation, so much so that the fire at the IOC depot in Jaipur took 10 days to be put off.

Kirtika Suneja & Jyoti Mukul / Business Standard…newspaper……