Political Economy

No, the Supreme Court Didn't Cause the Economic Slowdown

Indeed, our judges shouldn't surrender their constitutional duty of striking down illegal, arbitrary and environmentally unsound decisions only to stave off their economic implications.

In the last few weeks, while the Supreme Court has been facing criticism for its handling of the migrants issue, two eminent lawyers – one a former attorney general and the other a former solicitor general – came out strongly against the Supreme Court for a completely different reason: they blamed the court for the current economic slowdown.

In a recent lecture, attorney general Mukul Rohatgi said that “in its zeal to uphold the environment, its zeal to correct government orders and inactions, the Supreme Court dealt a serious blow to the economy of the nation.” He cited the example of cancellation of coal mines across the country: “Lakhs and crores of foreign investments, lakhs and crores of equipment, infrastructure and lakhs of jobs were thrown overboard when the court set aside and cancelled all the allocation of coal blocks and coal mines, because the government did not follow the law correctly.”

In an interview to Indira Jaisingh a few months back, Harish Salve expressed similar sentiments, saying the Supreme Court “cancelled coal mines by one stroke of the pen, without examining the merits of every case. Much genuine foreign investment in the coal industry went flat. A few million people are without jobs in India.”

Following this line of thinking, in a recent article, Salve pointed out that the “coal allocation judgment and the Goa mining judgment have generously contributed to bringing down the GDP”. He continued: “Whether it be privatisation or nuclear power generation, creation of new highways, new ports or new airports – the court is asked to step in and prevent the elected executive from implementing its policies.”

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Given these statements have come from individuals who have occupied the highest legal offices in India, it is important to present the ‘other side’ of the picture and deal with their principal contentions.

‘Millions of people without jobs’

Salve and Rohatgi emphasise job losses due to the apex court’s orders. First, both of them are general statements – ‘millions’ and ‘lakhs’ of jobs. No actual number is given. There is no doubt that jobs have been lost due to restrictions imposed. But then should the courts be silent spectators when companies mined in violation of laws? The state of Goa captured only 0.3% of the mineral depletion – Rs 161 crore of the Rs 48,199 crore, mostly as royalty. The Supreme Court ruled in 2013 that all mining from November 2007 was illegal in Goa.

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With respect to iron ore mining in Karnataka: the Lokayukta report concluded that mining activities were undertaken in violation of the Mines and Minerals Development and Regulation Act 1957, Forest Conservation Act 1980, Environmental (Protection) Act 1986, Foreign Exchange Management Act 2006 and the Panchayati Raj Act. And like Goa, while mining companies earned Rs 4,000-Rs 5,000 per tonne of iron ore, the state received Rs 16 as royalty.

Even illegal activities provide employment; this is one reason why it’s not wise to examine the issue only through the lens of jobs. The Supreme Court in 1996 prohibited the export of timber from the Northeastern and Andaman and Nicobar island in the case of T.N Godavarman Thirumulpad v. Union of India and Others, where incidentally Salve was the amicus curiae, to protect these biodiversity hotspots. In the process, countless people were left with no incomes. India’s conservation community is indebted to Salve for his passionate argument in favour of the Western Ghats that led to the complete  stoppage of iron-ore mining by the Kudremukh Iron Ore Company, Ltd.

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To control air pollution, small industries in Delhi were shut, rendering countless people jobless. Here also Salve is the amicus, forcefully arguing the need for the Supreme Court to pass orders to control pollution. Despite having statutory bodies to deal with environmental problems, it is due to Salve’s initiative that two court appointed ‘super-structures’ – the Central Empowered Committee and the Environment Pollution Prevention and Control Authority – have been functioning for nearly two decades, and reporting only to the Supreme Court.

Parliament has even enacted a law based on one of the apex court’s directions: the Compensatory Afforestation Fund Act 2016. Salve as amicus curiae, was instrumental in introducing the concept of ‘net present value’ and compensatory afforestation funds in forest governance – through the Supreme Court, not through elected representatives.

However, both Salve and Rohatgi now focus on jobs instead of health, deforestation and the loss of livelihoods due to mining. Areas where coal has been mined – Korba, Raigarh, Singrauli, North Karanpura, Talcher, Chandrapur, etc. – are today toxic hotspots and have some of the lowest levels of human development.

Loss of foreign investment in coal

Both Salve and Rohatgi have said the loss of foreign investment in coal is due to the Supreme Court’s order. This statement reflects confusion about the global scenario with regard to coal, coal-financing and climate change. BlackRock, the world’s largest asset manager, announced in January 2020 that it was divesting coal as part of steps to reduce global emissions and climate risk in its portfolio. According to the Institute of Energy Economics and Financial Analysis, since 2013, over 100 significant financial institutions have divested thermal coal, including 40% of the top-40 international banks and 20 major insurers. Banks that have restricted funding to coal include Morgan Stanley, BNP Paribas, Deutsche Bank, ABN Amro, HSBC, ING, RBS, Standard Chartered and Barclays Bank.

In October 2018, the World Bank decided to cease its plans to fund a 500-MW coal-fired power plant in Kosovo because wind and solar power were cheaper. As of 2019, 20 important insurers with more than $6 trillion in assets and representing 20% of the world’s insurance assets have adopted coal divestment policies. The noted investor Jeremy Grantham even said thermal coal is “dead meat”,  and pointed out the failures of oil and coal companies to deal with the “inevitable reality that these forms of energy will be phased out”.

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It’s clear that investments in coal have declined remarkably over the years, so it’s wrong to think that the decline in foreign investment in coal or economic slowdown is because of PILs in the Supreme Court. It’s only a coincidence that the court delivered the coal deallocation judgment in 2014 – around the time investments in coal began to dwindle. So with or without the Supreme Court’s judgment, there is just little money available for coal to expand, together with stiff competition from solar- and wind-energy generation.

Rule of law, not rule of policy

India needs to think beyond the primitive way of digging the earth to become ‘developed’. The standard of living in the West world didn’t improve because it invested in resource extraction. Instead, it invested in knowledge building, innovation and human wellbeing, and exported the dirty work to countries in the global south, including India, Bangladesh and Pakistan.

By diluting environmental and labour laws and weakening courts to facilitate this foreign investment, we indirectly help clean the air, supply water and provide a higher standard of living for many western countries. It’s wrong to assume foreign mining and power companies come to India only because they wish to make money. They come to invest in India because such dirty, polluting activities are not permissible in their countries of origin.

In this situation, the judiciary has an important role: to ensure India doesn’t become a dumping ground for obsolete and polluting technology. Our judges shouldn’t surrender their constitutional duty of striking down illegal, arbitrary and wrong decisions only to stave off their economic implications. Courts are not expected to give primacy to government policy over constitutional and statutory provisions. If this were so, we would be able to create a society that prioritises ‘rule of policy’ over ‘rule of law’ – a sad state indeed for the world’s largest democracy.

In The Anarchy: The East India Company, Corporate Violence and the Pillage of an Empire (2019), William Dalrymple observes that one of the first Indian words to enter the English language was ‘loot’. It had never been used outside North India but became a common term across Great Britain in the late 18th century. The British looted India for nearly two centuries, of its natural resources. Today, the state-sponsored corporate plunder of India’s natural resources, and the resultant impoverishment of its people, is not ‘loot’. It’s being called ‘sustainable development’.

Ritwick Dutta is an environmental lawyer.