Journal of Services Research

Environmental services: opportunities for private organizations.(protecting the environment from degradation in India)

This paper reports some of the findings of a study undertaken to assess the Environmental Industry in India for a project of Ministry of Commerce by TERI. The study reveals the structure, composition, potential of environmental market in India and the opportunities it throws up for the private sector organizations. The demand for environmental services are far greater than its supply and the government is not in a position to invest in the environmental sector to meet the demand. Environmental services market is driven by enforcement and implementation of environmental legislations, hence the study also assesses the environmental legislations, rulings and its effectiveness in terms of protecting the environment from degradation.

INTRODUCTION

The provision of environmental services plays a crucial role in the maintenance of quality of life of all the people of a nation. Traditionally, the opportunities for trade in environmental services were limited because many of the major environmental services like sewage and refuse disposal were provided by the local government bodies fearing that private monopolies would exploit the consumers, i.e. the general public. The situation is, however, changing as a consequence of the pressure to achieve environmental objectives in an economically efficient way. Governments are choosing to contract out the provision of these services to private sector. Even though the supply of public services has been privatized or contracted out to the private sector, the government still continues to procure these services and supply them to the public.

OBJECTIVE OF THE STUDY

At the advent of WTO and the inclusion of environmental services under General Agreement on Trade in Services (GATS) the question of liberalisation of environmental services has arisen. According to GATS Service Sectoral Classification list (MTN.GNS/W/120) (1) , which is in accordance with the UN Central Product Classification (CPC), environmental services include:

(a) sewage service;

(b) refuse disposal services;

(c) sanitation and similar services;

(d) other (cleaning services for exhaust gases, noise abatement services, nature and landscape protection services, and other environmental services not elsewhere classified).

This classification reflects a very traditional view of environmental services as largely public infrastructure services supplied to the general community, and focuses mainly on waste management and 'end of pipe' pollution control. But OECD/Eurostat manual defines the environmental industry "to consist of activities which produces goods and services to measure, prevent, limit, minimize or correct environmental damage to water, air, and soil as well as problems related to waste, noise and eco-system. These include cleaner technologies, products and services that reduce environmental risk and minimize pollution and resource use.

The OECD/Eurostat manual lists environmental services to include (WTO, December, 2000):

a) Water and waste water management

Sewage services

Water for human use

b) Solid and hazardous waste management

Refuse disposal and treatment service

Sanitation service

Recycling service

c) Protection of ambient air and climate

d) Noise and vibrant abatement

e) Remediation and clean-up of soil, surface water and ground water

f) Protection of biodiversity and landscape services

g) Other environmental and ancillary services

Design, consulting and engineering

Preparation of site, construction installations, assembly, repair and maintenance

Environmental research and development

Analytical services, data collection, testing analysis, assessment Environmental education, training and information.

At this juncture it is pertinent to study and understand the environmental market structure, composition, potential and its strength and weakness in India. This would help strategic negotiations at the GATS forum. Different countries have proposed different list of environmental services and highlighted the inappropriateness of the GATS classification of environmental services e.g. Colombia suggests auditing of environmental managing system (WTO, Nov. 2001).

The objective of the study is two fold:

1. Identifying the areas/sub-sectors of environmental services that are needed to protect the environment from degradation in India; and the extent to which these services are provided by private enterprises and the scope and opportunities that exist for private enterprises for venturing in.

2. Environmental service market is driven by the implementation and enforcement of environmental legislation. Environmental regulations apply to all the industries and hence influence demand for environmental services. There is a close link between environmental service market and environmental legislation. This study assesses environmental legislations to see whether they create barriers or opportunity for private enterprises.

METHODOLOGY AND APPROACH

In India, the environmental industry does not have separate industry status. Environmental services are provided by general engineering and construction companies, hence in the first phase of the survey the environmental service procurers, such as municipal corporations, sewer, water and pollution control boards, were approached. In the first phase of the survey important officials of Municipal Corporation of Delhi (MCD), Delhi Jal Board (DJB), Central Pollution Control Board (CPCB), and Confederation of Indian Industries (CII) were approached and interviewed on the issues and scope for private environmental service providers in India. MCD, DJB and CPCB procure environmental goods and services from the private environmental industries. They provided names and addresses of private environmental services providers across India, from whom they procure environmental goods and services, which is around 300; there were around 30 addresses of environmental service providers in and around Delhi. Questionnaires were sent to them. 15 of them responded to the questionnaire. They were also met personally and matters concerning opportunities and the constraints faced by them, were discussed.

This study also uses primary materials from CPCB, MoEF, WTO (country proposals and secretariat note and background papers on environmental services) and secondary materials like books, articles, newspaper reports and various websites.

REVIEW OF LITERATURE

Very little literature is available on environmental services because, the concept of environmental services itself was introduced in 1995 by the WTO when this organisation came into existence. Negotiations on Services under GATS started only in the year 2000 after that institutions started initiating studies on this subject. The following articles specifically refers to Environmental Services (that are initiated by international organization such as the UNCTAD and in India by ICRIER):

Zarrilli, (2003) exposes the inadequacy of basic sanitation and safe drinking water facility in Asian and African countries, as a result there is a huge demand for environmental services in these countries which create business opportunities for environmental industries. It highlights that some developing countries have proved not only ability to build strong environmental services sector but also are able to export it. Their success were credited to political willingness and leadership, appropriate environmental legislation and enforcement, finances made available by international agencies, technical assistance provided by developed countries, co-operation between the government and private sector and participative decision making process. This article also discusses the GATS negotiating proposals; suggests that developing countries must make qualified commitment under GATS. The qualification must focus on measures to ensure equity i.e. maximum benefit for consumers, reinvestment of profit made by foreign firms etc., and capacity building, i.e. transfer of technology and managerial know-how, training of personnel etc.

Andrew (2003) brings out the fact that the sectoral classification list on environmental services (MTN.GNS/W/120) is outdated; it reflects a very traditional view of environmental services, focuses mainly on waste management and pollution control, not clearly organized according to environmental media i.e. water, solid waste, air, noise, soil, habitat, etc., does not cover pollution prevention and sustainable resources management services; and hence require revision in the light of addressing environmental degradation and from 'end of pipe' approach to technological up-gradation approach to mitigate the environmental problem. He argues that OECD/ Eurostat manual on environmental services is more elaborate and identifies environmental services as those provided to measure, prevent, limit, minimize or correct environmental damage to water, soil, as well as problems related to waste, noise and ecosystem. It encompasses all the services that go into addressing the environmental problem such as construction and installation facilities, utilization of cleaner technologies and products that reduce environmental risk and minimize pollution. The article suggests that OECD/Eurostat manual should form the basis for environmental services negotiation or the W/120 list must incorporate the OECD list.

Ferrier (2003) presents a perspective on the present situation and trends in global markets for environmental goods and services; and options for developing countries in building capacity and export competitiveness in environmental services. He suggests some measures for capacity building in developing countries, by creating market demand for environmental services through bringing about stringent measures against polluting industries, by policies to encourage foreign investment and transfer of technology in the environmental industry, by stating clear position on privatization and by creating competent labour force.

Sawhney and Chanda (2003) explore the nature and structure of environmental services sector in general with particular focus on recent trends such as privatization and foreign investments in this sector. They enumerate the benefits of privatization and liberalization as it brings in capital, technological and expertise needed, generates employment, improves quality of environment, positive spillover effect on tourism, improves efficiency and managerial operations etc., At the same time this article points out that liberalization must ensure a balance between three broad objectives i.e. economic efficiency, social equity and environmental sustainability. Equity is essential in the provision of sanitation and drinking water since majority of population cannot pay for it at market price. It also suggests a negotiating strategy for India in environmental services in the

GATS negotiations.

SIGNIFICANCE AND IMPLICATIONS

There are no separate environmental industries as such; general engineering, construction and infrastructure development companies provide environmental goods and services. This paper studies the nature; structure and extent of environmental industry in India in order to identify different sectors/areas of environmental services that are needed/provided. It also tries to identify with the two lists of environmental services put forth, one by the WTO (MTN.GNS/W/120) and the other by OECD/Eurostat Manual. The study recommends that the government should come forward to give separate industry status to environmental industry and boost its development which would help save the environment from further degradation.

STRUCTURE OF ENVIRONMENTAL SERVICE MARKET IN INDIA

There are around 300-400 environmental service providers across India (2); composed of

* Public Sector Undertakings, e.g. Engineers India Ltd.,(EIL), National Productivity Council (NPC).

* Autonomous Bodies (E.g. Universities and Research Institutions)

* Corporate bodies

* Foreign Multinationals

* NGOs

* Individuals (Unorganized Sector)

Out of the 30 odd environmental enterprises having office located at Delhi, 15 of them responded to the questionnaire. All the companies who responded to questionnaire have branch offices in different parts of the country; some of them even have their branch offices abroad. All of them have projects/ business outside Delhi. There were two public sector undertakings, six foreign companies, five private limited companies; out of them three are exporting abroad especially to Middle East, South Asian and African countries, and one NGO, and one proprietary firm.

A graphical representation of the composition of the environmental service providers:

These environmental service enterprises provide services to:

* Environmental projects funded by World Bank, Regional Development Banks and other International Organisations and Agencies. …

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