Delhi’s Pollution Crisis and its Impact on Business

By Dezan Shira & Associates

Posted: 6th December 2017 08:17

India’s capital Delhi has been receiving international news coverage for its severely polluted air. Early this November, the city was engulfed in a toxic smog – a major attributing factor was dangerous emissions released from neighboring states.

In fact, industries in Delhi’s regional neighborhood have been flouting environmental regulations for years – releasing huge amounts of greenhouse gases and sulfur into the atmosphere.

The worsening pollution is disrupting business as usual. Employers in the city find it increasingly difficult to retain top-level executives and highly skilled workforce, who either take additional leave or migrate to less polluted cities to avoid the health hazards of breathing in Delhi’s air. Employers also incur increased overhead costs as they attempt to check pollution levels within the work place.

Why is Delhi’s air so polluted?

The latest smog in Delhi was triggered in part by dust storms brewing over the Middle East, coupled with other erratic international climate patterns. Nevertheless, regional and local factors contribute to the severity of air pollution in Delhi.

Primary contributors to Delhi’s air pollution are vehicular and industrial emissions. Delhi is connected to key states along north India’s industrial belt, including the states of Haryana, Rajasthan, and Uttar Pradesh. This has resulted in a large number of heavy-duty transit vehicles passing through Delhi en-route to other cities. These transport trucks release huge amounts of carbon emissions, and account for the majority of vehicular emissions.

This is compounded by Delhi’s deficient public transit system. Public buses on Delhi’s roads have reduced by 300 percent in the last few years. Meanwhile, personal vehicles have increased on the roads corresponding to rising disposable incomes among Delhi’s middle class.

Further, the National Capital Region (NCR), which includes the capital and the satellite cities of Gurgaon and Faridabad (Haryana) as well as Ghaziabad and Noida (Uttar Pradesh), is also a major construction hub in India. Such construction activity generates vast quantities of dust particles in the absence of appropriate and stringent regulations.

Industrial pollution in the region is catalyzed by the federal government’s inefficient carbon tax policy. Since carbon tax is currently levied exclusively on coal, major industries (like cement and textile) have switched to cheaper fossil fuel based alternatives (like petcoke and furnace oil) to avoid the carbon tax levy. Petcoke and furnace oil release significantly higher quantities of greenhouse gas emissions than coal, and pose greater risks to health and environment. Although these fuels have been banned in Delhi for several years, the fumes from their rampant industrial use in neighboring states permeate to the capital.

Secondary contributors to Delhi’s air pollution include other anthropogenic activities, such as the illegal garbage burning in the city and crop burning in neighboring states. Despite the existence of laws mandating responsible modes of garbage disposal, they are rarely enforced by authorities in India. The local governments and regulatory bodies frequently ignore the widespread practice of burning agricultural residue, and have failed to provide adequate incentives to farmers to implement alternate methods for waste disposal.

The NCR also lacks proper infrastructure to monitor and control air pollution, which has indirectly led to the current situation. Recent assessments by the federal Central Pollution Control Board (CPCB) have found that Delhi and its neighboring states do not have adequate monitoring mechanisms in place, resulting in unchecked, and spiraling, levels of air pollution.

How does pollution affect businesses in Delhi?

The ASSOCHAM industry body reports that Delhi’s polluted environment could drive away top corporate executives and push talent to work in other cities in India or abroad. Meanwhile, the worsening air quality situation is discouraging foreigners from coming to Delhi, while many Delhi residents, including expats, simply take long vacations during particularly acute periods of air pollution.

The health risks are real. The Delhi state government and World Health Organization (WHO) recently declared a state of public health emergency in Delhi due to the toxicity of its air pollution; the numbers of respiratory illnesses, first time respiratory disorders patients, and even cases of cancer have increased in Delhi, making living and working in the capital extremely risky. 

In terms of business operations, this translates to increased difficulty in sourcing top-level talent in the NCR, decreased workplace efficiency during periods of acute pollution due to employee sickness and absences, as well as increased costs for air purification systems and maintenance in office places.  

Human resource teams that treat duty of care seriously need to consider educating staff on air pollution risks, providing air pollution masks for staff with long commutes, and review sick leave and work from policies for personnel that may be at heightened risk of illness during bouts of severe air pollution.

While it is difficult to measure the impact on economic output specifically on Delhi, the World Bank estimated in 2016 that air pollution in India cost the country US$80 billion per year, roughly 5.7 percent of the country’s GDP. The World Bank attributes this financial loss to the rising costs of air pollution, such as the increased expenditure on public healthcare and workforce losses.

Delhi feels the weight of these costs as a primary producer of goods and services in the country, and leading destination for FDI. This is extenuated by the fact that the NCR hosts a high number of international delegations, multinational corporation offices, and serves as an established IT-BPM hub – a labor intensive industry, whose labor force puts a high premium on living conditions.

What is being done about air pollution in Delhi?

In response to the crisis in Delhi, India’s Supreme Court and the National Green Tribunal (NGT) have passed multiple orders to shut down industries that are non-compliant with environmental regulations. The NGT refers to special tribunals set up exclusively for the speedy disposal of cases pertaining to environmental issues. Petcoke and furnace oil have been banned in states neighboring Delhi, while the sale of firecrackers was recently prohibited in the capital.

The NGT has also ordered the Delhi government to improve its environmental infrastructure and public transportation networks. Although these measures will bring some relief to Delhi’s choking population, a lot more is required to bring about tangible change in the current atmosphere.

For now, the state government is keen to implement measures rationing the number of private vehicles on its roads, and plans to increase tax on the sale of private vehicles to encourage greater use of public transport. However, given the strong public criticism against some of these measures, they seem a tad bit unrealistic at the moment.

So far, most of the state government’s measures to curb emissions in Delhi have been met with lukewarm success, as evidenced from the failure of the odd-even rule for car use and the ineffective measures to disperse dust particles. Moreover, the federal government and state government are still passing the buck, without taking adequate responsibility and finding meaningful solutions. It seems that the residents of Delhi may have to brace themselves and patiently wait for this bout of smog to clear.

In India, federal statutes such as the Air Act, 1981, Water Act, 1974, and the Environment Protection Act, 1986, regulate matters concerning environmental pollution. They are enforced by the CPCB at the federal level, and by respective State Pollution Control Boards (SPCB) at the state level.

While adequate laws do exist to prevent pollution, non-compliance is rampant due to their weak enforcement resulting from an absence of strong political will coupled with India’s focus on rapid industrialization.

With an increasingly desperate government under the international spotlight, many hope that authorities will simply enforce existing environmental regulations to mitigate the crisis.

This article was first published on India Briefing.

Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll, and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India, and ASEAN, we are your reliable partner for business expansion in this region and beyond.

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