Without blaming Industrial development Indian Leaders worrying for rising pollution in India

High Pollution of Delhi| Mamta Banerjee| Narendra Modi| Rahul Gandhi

Delhi has been ranked as the most polluted metropolitan city in the world. 14 out of the 20 most polluted metro areas of the world are located in India. Recently, during the cricket match between India and Sri Lanka, Chief Minister of West Bengal Mamta Banerjee said that she was ashamed at seeing Srilankan cricketers in pollution masks. Expressing the same concern, Congress President Rahul Gandhi said that we need collective steps for reducing pollution levels in Delhi.

Prime Minister Narendra Modi too is concerned. However, he has blamed the people. Speaking to the State Environment Ministers, he said that the rising pollution levels are due to the changing lifestyles brought about the India’s economic development. We shall show that the problem is instead due to the failure of the Government.

Cost Benefit Analysis| Air pollution

Number of studies shows that the cost of control of air pollution is much less than the benefits. In particular air pollution affects the health of the people and the economic cost of the reduced age is much more than the cost of removing pollution. We give few studies below.

Bill and Melinda Gates| Flue Gas Desulphurization| VSL| Power Plants| Cost Benefit

A study by Bill and Melinda Gates foundation (See report here) studied the benefits and costs of introducing Flue Gas Desulphurization (FGD) technology in eight power plants in India so that the level of pollution was reduced.

Economists calculate the benefits that will accrue to the economy; and the cost that will be incurred in undertaking a particular project. The divide the benefits by the cost and arrive at a “benefit-cost ratio.” If the ratio is greater than 1, it means the benefits are greater than the costs and the project is given green light. Conversely, if the ratio is less than 1, it means the benefits are less than the costs and the project is given red light. We give the benefit-cost ratios of fitting the FGD in 8 power plants below.

Plant Name VSL=$84,036,r=3% VSL=$160,000,r=3% VSL=$256,000,r=3% VSL=$256,000,r=8%
Dadri 6.0 11 18 14
Unchahar 4.0 7.5 12 9.5
Bakreswar 1.8 3.4 5.5 4.3
Dahanu 1.3 2.4 3.8 3.0
Talcher 0.77 1.5 2.4 1.9
Koradi 0.53 1.0 1.6 1.3
Rayalaseema 0.29 0.56 0.89 0.70
Tuticorin 0.27 0.51 0.82 0.65

Table 1: Benifit/Cost Ratios for FGD Retrofits

In order to calculate the benefits economist used the concept of value of statistical life (VSL). The Value of Statistical Life measures the amount people would be willing to pay for a reduction in their chance of death. Bill and Melinda Gates foundation found that among 8 thermal plants in India, the benefits from reduction of death were more than the cost of fitting FGD equipment in 4 to 6 plants depending upon the Value of Statistical Life adopted. The benefits were 6 to 18 times in Dadri and lesser in other power plants as we can see in the table above. This means that if the Government required fitting of FGDs in these power plants, and the cost of the same is Rs. 1, then the people would be benefitted by about Rs. 10 because their life expectation will increase.

If Dadri Power Station in Uttar Pradesh will be retrofitted by FGD technique then it will be beneficial for the society

OECD| Shanghai |Coal Industry|Control of Pollution

A study by the Organisation for Economic Co-operation and Development (OECD) (see report here) measured the cost and benefits of reduction of air pollution. The study has given the graph produced below:

The red bars show the cost for low-, medium-, high- and the maximum technically feasible level of action. One can see that the benefits are about 20 times the cost in the low, medium and high levels of the action. This means if the Government invests Rs. 1 then the benefits are Rs. 20 for the control of air pollution.

A study for the city of Shanghai in China published in the Journal of Environment Management (See study here) has assessed the benefits and costs from control of pollution in power generation and use of coal in industry. The summary of the results are given below.

Case Power Scenario C1 Industry Scenario C2
Low 0.9 2.5
Medium 2.0 5.4
High 5.6 15.1

 Table 2: Health benifit/cost ratiosof the emission control scenarios

The study has assessed the benefit-cost ratio for three scenarios—low, medium and high level of control of pollution. The power plants and coal-based industries, if fitted with air pollution control equipment, will lead to health benefits for the people. They found that the benefits from pollution control in power generation are 5.6 times of the cost and in the use of coal industries the benefits are 15 times the cost of control of pollution. Similar other studies for Japan, Europe and consistently say that the benefits from control of air pollution are much greater than the cost.

Control of Air Pollution by coal-based industries in China will provide benefits 15 times the cost of control of the same.

Bangladesh| Copenhagen Consensus Centre|Brick Kiln|Costs and Benefits

The question is when the benefits of the air pollution are greater than the costs, then why the Government does not implement measures to control the pollution? The solution to this riddle is given in a study of Bangladesh undertaken by the Copenhagen Consensus Centre (see report here). The problem is that the benefits of control of air pollution occur to the larger population whereas the cost is borne by the people who pollute. So it is not beneficial for the polluters to control pollution because the cost of installing equipment is much higher and the benefits are less for them although the benefits for the society are much larger. As there as a mismatch between the persons who have to bear the cost of air pollution and persons who gain the benefits of the air pollution. This has explained beautifully in this study of Bangladesh. This study has calculated the benefits and costs according to the society and to the brick kiln owners for installing better pollution control equipment in the brick kilns near Dhaka in Bangladesh.

  Benefits      Cost
From FCK to IZK 4857 3,184 408
New IZK 4857 3,184 815
New VSBK 8606 6,097 1,605
New HHK 13,766 11,257 3,261

Table 3: Annualized Social benifits and costs of full coversation to cleaner brick kilns in Greater Dhaka, 2014 (BDT million) 

The study has found that moving from the FCK to IZK technology of air pollution control, the benefits to the people is Rs. 4857 whereas the cost to the people is Rs. 408. However the benefits and costs to the brick kiln owners is altogether different. In the table below. we can see that the cost to the brick kiln owners is Rs. 5333 whereas the benefits to them are only Rs. 1440.

  From FCK to IZK New IZK New VSBK New HHK
Costs: - - - -
Investment Cost 5,333 10,667 21,000 42,667
Benefits: - - - -
Increased production Value per year 0 0 0 3,000
Cost savings per year 1,440 1,440 3,440 5,600
Private benefits per year 1,440 1,440 3,440 8,600

Table 4: Private costs and benifits of full conversation to cleaner brick kilns in GreaterDhaka, 2014 (BDT million)

Therefore while moving from FCK to IZK technology, the brick kiln owners are at a loss. They will have to incur a net cost of Rs 3893 BDT Million whereas there benefits would be only 1440 BFT Million. Therefore they are not interested in implementing this technology. But if we combine the private and social costs, we can see that the total cost for moving from FCK to IZK technology for the society and the brick kiln owners together is 5741 BDTM whereas the benefit is 6297 BDTM. This explains that although installation of IZK technology is beneficial for the society at large, it is not profitable for the brick kiln owners. Therefore the brick kiln owners do not want to install air pollution control equipment and the people continue to suffer from air pollution.

Installation of air pollution control equipment in Brick Kiln of Dhaka in Bangladesh will help to remove pollution

Conclusion| Polluting Industries| Air Pollution Equipment|Problem of Pollution

The solution to this problem is for the Government to create regulations making it mandatory for the polluters to install air pollution equipment. In that case the industries will bear the cost of installing these equipment and this cost will be reflected in a higher cost of production of their goods. For example if the Government requires brick kilns in Bangladesh to install IZK technology the cost of a brick may go up from Rs. 8 to Rs. 10 and this will be a burden on the people. But the people will be benefited by a larger amount. In the end air pollution will get controlled.

The problem of air pollution is actually a problem of inaction by the government. Control of pollution is beneficial for the society and the benefits are more while the costs are less. But because the costs are born by private producers therefore they are reluctant to install air pollution control equipment. It is for the Government to make regulations and implement so that the private industries install the air pollution control equipment, the air pollution can be cleaned up and the people’s health is saved.

The problem of the air pollution in India is not of lifestyle as Prime Minister Narendra Modi has said. The problem is that the Government is not willing to stand up to the polluters. The result of this inaction is that the people of the country are suffering. If the Government forced the polluters to install air pollution control equipment then the society at large would be much better off.

The explanation given by Mr Modi also does not hold because among the cleanest metros of the world we find Bredkalen in Sweden,  Muonio in Finland, El Pueyo in Spain, La Plaine in France, Guimaraes in Portugal etc.where the lifestyles require much higher levels of material consumption. Therefore if lifestyle was the problem, then these large cities should have been more polluted than Delhi. The problem is not lifestyle but the failure of the Government to tax the polluters for securing the social good.

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