India Palm Oil
How the Modi government tweaked environmental laws to facilitate an Adani-backed project
Oct 20, 2020

On 30 September 2020, India’s National Green Tribunal ordered a company that is part owned by the Adani Group to remove storage tanks for edible oils from a coastal zone in the country’s south-east. The National Green Tribunal is effectively India’s environment protection authority. It ordered the removal of the plant because it found that it had been established illegally. This story presents evidence of the ‘tweaking’ of environmental rules by the Indian government to enable the development to proceed, despite being incompatible with the area’s zoning and the associated risks to the adjacent marine environment.

The National Green Tribunal, in ordering the removal of tanks and pipeline, also fined the company the equivalent of AUD $50,000. It is not yet known whether the company will appeal the decision. (In India, the term ‘clearance’ means ‘approval’ when pertaining to planning procedures.)

Background on the Adani Group’s involvement with the devastating palm-oil industry can be found here, and recent developments regarding import of palm oil into India can be found here.

Did the Modi government tweak environmental laws to facilitate an edible-oil firm – which is partly owned by business tycoon Gautam Adani – to obtain a mandatory approval in an illegal manner? India’s premier court in environmental litigations, the National Green Tribunal, has scrapped the clearance (approval) under rules that regulate activities along the country’s sea coasts.

In a judgment delivered on 30 September 2020, the National Green Tribunal directed the firm to dismantle structures that had been constructed, even before getting the clearance, along India’s south-east coast near the Ennore port in Chennai for transportation and storage of imported edible oil.

The project comprises a pipeline and a transit-storage terminal. The pipeline is over 4.5 kilometers in length – from the port to the storage terminal in Tondiarpet village in Chennai – and has a diameter of 25 cm. Five storage tanks with capacities of 1720 KL, 1442 KL, 1281KL, 855 KL and 7527 KL have been installed for handling and transit of edible oil at the transit terminal.

A penalty of nearly AUD $50,000 was also imposed upon the firm that is based in Chennai, the capital city of the southern state of Tamil Nadu. The clearance that was scrapped by the National Green Tribunal had been provided to the private firm in March last year after amending the Coastal Regulation Zone (CRZ) Notification, 2011.

The CRZ Notification, 2011, framed by India’s erstwhile Congress-led United Progressive Alliance (UPA) government, contains rules to regulate human activities, primarily those of a commercial and industrial nature, along the country’s 7500-kilometer coastline.

The firm in question, KTV Health Food Private Limited, is a 50:50 joint venture between Adani Wilmar Limited and the Chennai-based KTV Health Foods Private Limited India. In addition, documents obtained by the author detailing the corporate ownership of KTV indicate Adani Wilmar’s 50% holding in the company. Adani Wilmar is a joint venture between India’s Adani Group (the group’s patriarch, Gautam Adani, is a close associate of India’s Prime Minister Narendra Modi) and the Singapore-based agrobusiness Wilmar International. The group manufactures and markets ‘Fortune’, a leading brand of edible oil in India, apart from Rag vanaspati and palmolein. It sells more than a million tons of edible oils in India each year.

Construction of the edible-oil transportation and storage project commenced in December 2015 pending clearance from India’s environment ministry, that is, the Union Ministry of Environment, Forests and Climate Change. A Chennai-based social organization engaged in protecting the coastal zone and ensuring welfare of fishing communities – Meenava Thanthai KR Selvaraj Kumar Meenava Nala Sangam – filed a petition in the National Green Tribunal in the year 2016 against the illegal construction activities. The tribunal issued a judgment ordering suspension of all construction work till the appropriate clearances were acquired under CRZ rules.

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‘The firm had applied for clearance from the union environment ministry only after beginning construction work on the project. There is no provision for post facto clearances under the CRZ Notification, 2011. So, the concerned authority within the union environment ministry, that is, the Expert Appraisal Committee, recommended the project for clearance under a different notification altogether. The authority sought to draw power from an unconnected set of rules, that is, the Environment Impact Assessment (EIA) Notification, 2011 to provide the mandatory clearance. In fact, there is no provision under the EIA Notification either for post facto clearances,’ said New Delhi-based environmental lawyer Ritwick Dutta.

Location of KTV (50% owned by Adani Wilmar) edible-oil tanks

An increase in the number of industrial activities such as transportation and storage of oil along the coast poses dangers to marine biodiversity, particularly in case of accidents. In January 2017, more than 20 tons of oil spilled into the seawaters off Chennai’s coastline after a ship leaving the Ennore port collided with an inbound oil tanker. As a result, dead turtles and fish washed up on Chennai’s beach. The sludge could be cleared only after massive efforts were put in by various agencies including the Indian Coast Guard. Another incident of accidental oil spill along the Chennai coast was reported in November 2018 when a tanker, the MT Coral Stars, berthed at the port began leaking its contents. Nearly two tons of oil were spilled into the Bay of Bengal.

Nevertheless, the Expert Appraisal Committee (EAC), the central agency that conducts assessments of potential environmental impacts of projects, recommended the edible oil project for clearance under the Environment Impact Assessment (EIA) Notification, 2011 with the following condition: ‘The project proponent shall submit a written undertaking that they shall be liable for restitution of environmental damage, if any, established by any Court of law.’

During the process, it was also found that KTV Health Foods had concealed facts from the environment ministry while applying for the CRZ clearance. Allegedly, KTV Health Foods had all along been seeking a prior CRZ clearance for the project even though construction activities had already commenced. As per the minutes of the EAC meeting held on 7 September 2017: ‘The Committee [EAC] was informed that on detailed examination during the course of processing of the file for clearance, it came to light that the proposal cannot be considered a fresh proposal, rather it amounts to post facto clearance, as the existing system is already in place, whereas the project proponent had submitted the application for consideration as a fresh proposal.’

But KTV Health Foods was let go with a mere ‘written apology’ for the alleged concealment of facts after it clarified that the existing system of the edible-oil project had been bought by it through an auction held by a public sector bank. Not surprisingly, the project proponent said that it ‘was unaware of the liability being acquired during the course of acquisition’. These facts find clear mention in the minutes of the EAC meeting held on 7 September 2017.

Notwithstanding the fact that coastal-zone regulations had been violated, the EAC chaired by Dr Deepak Arun Apte, who is the Director of Bombay Natural History Society, the oldest environmental conservation NGO of India, found no merit in withholding work on the project.

‘The Committee also noted that the system is idle for the last three years and that there was no merit in keeping the proposed activity of the project proponent in abeyance,’ the EAC noted in the meeting’s minutes.

A word about Adani Group and its oil-importing business: the Adani Group entered the edible oil business in 1999 with the incorporation of Adani Wilmar Limited or AWL. Since AWL is not a listed company in stock exchanges, its public disclosures are also limited to regulatory filings with the Registrar of Companies, where it is not obliged to report the quantities of oil it imports. The importance of edible oil in the infrastructure-oriented Adani Group cannot be understated as today AWL is one of the largest players in the Indian edible oil market with its most popular brand ‘Fortune’ occupying a significant percentage of market share. India is the world’s largest importer of edible oils, meeting the demand for more than half of the cooking oil demand in the country, with AWL among the top importers.

Edible-oil tanks, SE coast on India, owned by KTV (part owned by Adani)

Now, cut back to the main story of how the Indian government facilitated the CRZ clearance for the Adani-backed firm! The union environment ministry allowed a three-month moratorium for obtaining post facto clearances under the CRZ Notification, 2011. The moratorium window was opened with effect from 23 March 2018, the date on which the amended notification was issued, till 30 June 2018. And in March 2019, the firm was granted clearance to construct edible-oil storage terminals along an expressway near Chennai after transporting the oil from the port with the help of pipelines.

The CRZ clearance which was granted to KTV Health Foods in March 2019 contains a specific condition: ‘It shall be ensured that a system for detecting leakages along the pipeline shall be installed and regularly monitored through an independent agency. The results of monitoring shall be regularly submitted to the PCB [pollution control board] and the regional office of Ministry [Union Ministry of Environment, Forests and Climate Change].’

Following this clearance, Meenava Thanthai KR Selvaraj Kumar Meenava Nala Sangam filed another petition in the National Green Tribunal challenging it as illegal.

As per the amendments to the CRZ Notification, 2011, issued by union environment ministry on 6 March 2018, post facto clearance for permissible activities was made available to: ‘… such cases where the construction has been commenced before the date of this notification without the requisite CRZ approval, shall be considered only by the Ministry of Environment, Forest and Climate Change, provided that the request for such regulation is received in the said Ministry by 30th June, 2018.’

What’s more, once the rules were relaxed, the union environment ministry wrote to the Adani-backed company apprising it of the amendment and requesting it to file a fresh application for consideration of clearance.

On 23 March 2018, the environment ministry, which is headed by BJP leader Prakash Javadekar, issued a letter to KTV Health Foods with the following content: ‘Sir, May please refer to the amendment to the CRZ Notification, 2011, issued by this ministry vide S.O. 1002 (E), dated 06.03.2018 enclosed herein. In conformity with para no. 4.3 inserted in the CRZ Notification, 2011, related to Post facto clearance for permissible activities, vide the aforesaid amendment issued on 06.03.2018, you are requested to submit recommendation of the Tamil Nadu Coastal Management Authority for regularization of your above-mentioned proposal, to enable the Ministry in taking further course of action.’

Nevertheless, the edible-oil firm did not apply for the clearance promptly. It did so well past the date on which the moratorium window closed. The application was filed by KTV Health Foods only on 11 September 2018.

A set of queries was sent to KTV Health Foods Private Limited via email on 6 October 2020 asking for its response, amongst other questions, as to why there was a delay of more than two months in submitting the application to the union environment ministry. A questionnaire was also sent to the Union Ministry of Environment, Forests and Climate Change on 6 October 2020, asking, amongst other questions, as to how the application was accepted despite being filed well past the due date. As of the date of publication, no response to these inquiries had been received.

A recommendation by state-level authorities in charge of regulating India’s coastlines is necessary for a final clearance from the union environment ministry. It is not clear whether KTV Health Foods wrote to the Tamil Nadu Coastal Management Authority demanding a recommendation for its project.

However, the Modi government’s efforts to help the private firm secure its clearance continued. The environment ministry shot off a letter to the Tamil Nadu Coastal Zone Management Authority asking it to issue specific recommendations pertaining to the edible-oil project ‘at an early date to enable the Ministry to take further course of action’. The letter was issued on 12 October 2018. The ministry did not fail to issue a reminder when it got no response.

In another letter issued on 10 January 2019, the environment ministry had again asked the Tamil Nadu Coastal Zone Management Authority for expeditious action in issuing specific recommendations so that the application by KTV Health Foods could be cleared.

The southern bench of the National Green Tribunal, which is also located in Chennai, stated the following in its 30 September 2020 judgment with respect to the amended rules: ‘It is seen from this that it was made with an intention to regularize the CRZ activities started in the CRZ Zone without getting prior Environmental Clearance in respect of permissible activities on the basis of the recommendations of the State Coastal Zone Management Authority and the same will have to be filed on or before 30.06.2018. If an application has been filed thereafter, it will not be considered and it appears that the concept of post facto clearance for regularization of activities which are permissible under the Notification but some work has been started without getting prior Environmental Clearance was introduced by this Notification as a one-time measure, but not as a regular feature of regularising the violation cases,’ stated the bench comprising judicial member Justice K Ramakrishnan and expert member Saibal Dasgupta.

Irrespective of the amendment to allow post facto clearance, Indian rules do not permit edible-oil storage terminals beyond a port or a notified port area. India’s coastal zones are categorized under four heads depending on the basis of ecological sensitivity of the particular area. Each category has a different set of rules for permissible and non-permissible activities. The project area of the edible-oil storage facility of KTV Health Foods is located along Ennore Expressway, an industrial corridor lying several miles away from the Chennai port and its notified area. This area falls under the category of CRZ-II under Indian rules, where establishment of edible-oil storage facilities is not permitted.

‘ … it can be safely concluded that the activity is not a permissible activity within the CRZ–II Zone as it has to be established beyond the port area and as such even assuming that the amended notification of 2018 can be made applicable for granting ex-post facto clearance, if such application were filed within the specified time mentioned therein, even then it cannot be treated as a category permissible activity falling under that notification as it is not a permissible activity in the CRZ-II Zone except in a notified port and not outside the port area,’ the bench stated.

In the questionnaire sent to the Union Ministry of Environment, Forests and Climate Change, it has also been asked as to what punitive actions will be or have been taken against officials for providing the clearance to KTV Health Foods despite the edible-oil storage project area being located in a CRZ-II area. The article will be updated as and when the ministry responds to the queries.

The firm, KTV Health Foods, has been directed to dismantle the structures constructed in the CRZ Zone within a period of three months from the date on which the judgment was delivered. In the event of the firm not complying with the order, the Tamil Nadu Coastal Zone Management Authority has been directed to dismantle the structure and recover the cost thereof from the firm.

A questionnaire on this issue emailed to Mr Gautam Adani on 7 October 2020 had yet to elicit a response at time of publication.