Reducing urban and industrial pollution in India

Trade in Environmental Services and Technologies (TEST, 1992-97) was designed to develop U.S.-India business linkages that would increase trade opportunities for American companies, as well as to improve environmental conditions in India. The ongoing Clean Technology Initiative (CTI) has similar aims as does TEST, but focuses on helping Indian industry become more competitive in international markets through environmental initiatives. CTI has also introduced the concept of greening the supply chain, whereby manufacturers require their suppliers to employ environmentally sound practices in the production of components. A third project, Financial Institutions Reform and Expansion (FIRE), also ongoing, touches specifically on urban (as distinct from industrial) pollution. FIRE supports the development of environmental infrastructure, such as sanitation, water supply, and solid waste management. The present report assesses the results of the three projects. Findings include the following: (1) TEST engendered 14 U.S.-India business deals valued at $35 million. Of this amount, the project financed 26%; the Industrial Credit and Investment Corporation of India (ICICI), the project's collaborating partner, financed the rest. (2) In 1991, American suppliers were exporting $6 million of environmental equipment to India annually, 4% of the total $135 million market. In 2000, these companies were exporting $150 million of such equipment. How much of this increase is attributable to TEST cannot be determined. (3) It is impossible to quantify overall changes in net air and water quality resulting from the imported technologies. However, data provided by one of the U.S.-Indian joint ventures shows a decline of 6,300 tons in particulate emissions per day in 1999 at 13 companies in 4 industries. (4) It can be assumed that urban pollution measures promoted by FIRE -- such as potable water and trash pickup -- are bound to have improved human health. But hard data are unavailable. Lessons learned are as follows: (1) Changing the mindset of key business and government leaders with respect to environmental management takes considerable time, but is essential if pollution control technologies, environmental management systems, and urban development are to be widely adopted. (2) Companies will not invest in pollution control technologies or environmental management systems unless they perceive it to be in their business interest. (3) Companies are more likely to acquire pollution control technologies if environmental standards and regulations are strictly enforced. Companies invest in pollution control technologies and environmental management systems primarily to avoid being shut down or fined for noncompliance with environmental regulations. Unfortunately, enforcement in India generally remains lax because political will and public pressure are weak. (4) Both supply- side and demand-side barriers hamper U.S.-India trade in environmental services and technologies. On the supply side, American companies often have legitimate concerns about the time, effort, and risk involved in tapping the Indian market for environmental services and technologies. On the demand side, Indian companies are reluctant to buy (and Indian financial institutions reluctant to lend funds for the purchase of) U.S. pollution technologies that have not been demonstrated to be suitable for local conditions. Moreover, American pollution technologies are typically too expensive to find widespread acceptance in the Indian market. (5) Lack of financing is typically not a constraint for large Indian firms that want to procure pollution reduction technology, but it does often hinder individual small and medium- size firms and municipalities. (6) A key to replicating technology transfer projects is careful targeting with an eye to sharing and spreading successful results. TEST used the "retail" approach to introduce pollution control technologies in India. Specific industries were not targeted; instead, any company of any size from any industrial sector located in any part of the country was eligible to apply for a loan from ICICI. By contrast, CTI is using the "wholesale" approach, strategically targeting companies. (7) Baseline data are needed to assess program impact. However, baseline data were typically not gathered under the TEST, CTI, or FIRE projects before project implementation. Relevant India data were also not available.