Growth hits a green wall: Can Indian factories outgrow environmental norms?

A Supreme Court stay on eased green norms has stalled large-scale construction, reigniting a long-running clash between industrial growth ambitions and environmental safeguards

Pretty soon, the Supreme Court will face another industry versus environment challenge that would draw attention. In February this year, the court stayed a notification issued by the Ministry of Environment, Forests and Climate Change which exempted building and construction projects spanning an area of up to 150,000 square metres (a bit bigger than most cricket stadiums) from obtaining mandatory environmental clearance or EC.

 

Most new-age manufacturing projects, including even those for solar plants or electric vehicles, demand a larger factory than this limit. Any electric vehicle unit manufacturing about 1 million two-wheelers, for instance, will hit this limit, assessed an industry insider.

 

The battle over the notification is an old one, though. Since 2006, the Environment Impact Assessment notification of the central government has set a barrier of 20,000 square metres, beyond which any construction activity has to get an EC. As the aspirations of the manufacturing units became bigger, they chafed at the restriction, which is punitive by most international standards. As of now, the real estate lobby is pushing the Centre to reopen the stay by the Supreme Court.

 

A ministry spokesperson said no decision has been taken so far on whether to contest the stay.

 

“The problem is that it is not sure if an EC will at all come through,” said a government relations official in a renewable energy company. The official is not off the mark. While the prescribed time period for taking a decision on an environment clearance case is 105 days after the submission of the final environmental impact assessment and environment management plan report by an enterprise, delays creep in.

 

In a Parliament reply asking for the number of cases that are delayed because of EC, the Centre evaded a direct response. Instead, it noted that in 2025, there are 301 disputes in various courts from these clearances. Of these, 32 are in the Supreme Court. “These cases also include cases pertaining to non-compliance of the provisions of EIA Notification, 2006,” the ministry reply noted. 

 

The rules are meant to block diversion of forest land, which has often been the case for residential projects. Government data show in just three years from 2021–22 to 2023–24, forest area of 59,882.07 hectares has been “approved to be used for various non-forestry purposes including infrastructure projects under the provisions of Van (Sanrakshan Evam Samvardhan) Adhiniyam”. The size is roughly a third of the total area of Delhi city. There is obviously no data on unapproved diversions.

 

To get over the challenge of having to get an environmental impact assessment, manufacturing units often try to buy land in small parcels in contiguous plots. As their business expands, the units try to work out internal arrangements to merge those without running afoul of the current limit, set at 20,000 sq metres.

 

Some of the court cases referred to by the Ministry of Environment, Forests and Climate Change are about checking these ploys. Real estate companies building larger projects had pushed the ministry to drop the guardrails. In January this year, the ministry responded by raising the limit up to which no environment assessment will be needed to 150,000 sq metres. Those exempted included industrial sheds and educational institutions, including hostels. The definition of industrial sheds was also made liberal to include a large number of enterprises. Both of these are now on stay.

 

The possibility of buying land as contiguous plots has become impossible for companies with foreign investment. “Those companies, however, recognise that the scale at which the manufacturing units operate is too small to be viable,” said the industry official.

 

The environment ministry notification, it is understood, was meant to attract foreign investors planning to move out of China. “While the clear reason for the ministry rules is to promote the cause of the environment, it cannot be the case that all of these will operate by shutting down industry,” a senior government official from the ministry said.

 

In 2024, the government issued a list of “white category” sectors which would not need clearances for both water and air pollution (Section 21 of the Air (Prevention and Control of Pollution) Act, 1981, and Section 25 of the Water (Prevention and Control of Pollution) Act, 1974). Thirty-nine sectors benefited, but those too are under dispute, as civil society has gone to court disputing the basis of the definition. Vacating the stay order issued by a two-judge bench of the Supreme Court will therefore be difficult for the Centre and the real estate sector.