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Business News/ Opinion / Missing the coastal growth opportunity

Missing the coastal growth opportunity

Coastal Regulation Zone norms are an example of a top-down, heavy-handed, legislative diktat from Delhi that ignores local dynamics

Restrictive market entry increases prices and constrains technological improvement. Photo: BloombergPremium
Restrictive market entry increases prices and constrains technological improvement. Photo: Bloomberg

India has a significantly large coastline measuring close to 7,517km, covering large swathes of territory across nine states and four union territories. The total population of all the coastal districts in India is around 171 million, which makes up 14.2% of India’s population. Contrasting this with China, where the coastal population stood at 590 million in 2010, roughly half the population of the country, India’s coastal regions have witnessed tepid growth in terms of size and economy.

Burdensome laws, accompanied by the onerous rules and regulations they impose, restrict economic activity in the entire country. The coastal regions suffer from the additional liability of having to comply with far-fetched coast protection norms originating under the Environment (Protection) Act (EPA). Passed under the powers conferred on the Central government by Section 3 of the EPA, the Coastal Regulation Zone (CRZ) rules were first notified in 1991 and were further amended in 2011.

As per the norms created by the Central government, a CRZ is the land area from the high-tide line to 500m inland. There is a long list of proscribed activities within this zone, such as the setting up of new industries, expansion of existing industries, establishment of fish processing units, warehouses, land reclamation, etc. Although the norms carve out exceptions within these prohibited activities for certain undertakings, such as building ports or reconstructing dwelling units for local communities, it interestingly carves out a singular exception for the development of a greenfield airport proposed at Navi Mumbai. The regulation is replete with such curious exceptions to some specific cases, which raise questions pertaining to the criteria that was followed to determine permissible and non-permissible activities.

The peculiarity of the CRZ directives is further evidenced from the universal allowance granted to areas adjoining bays, estuaries, backwaters, lagoons and other tidal-influenced water bodies. For areas falling under this category, the regulated zone extends only 100m inland from the high-tide line. As a result, many developers, entrepreneurs and builders have been asking the coastal zone management authorities to declare the water around the coastal land area within their project plans as bays or tidal-influenced water bodies. Some have approached several high courts for such declaration to avail the benefits of a smaller regulated zone.

Going even further with the regulatory tangle created by these CRZ guidelines, the norms demarcate the zones into different numbered categories—CRZ I, CRZ II, CRZ III and CRZ IV. This demarcation, it seems, is based primarily on the level of previous construction or developmental activity that’s been conducted in a region now within the regulated zone of either 500m or 100m. Another set of permissible and impermissible activities are also listed under these defined demarcated zones. Supplementary arbitrary exceptions have also been carved out for the city of Mumbai, and the states of Kerala and Goa, based on the above- mentioned demarcated zones, unusually leaving out other coastal states and districts.

The multiplicity of definitions, exceptions, permissible and impermissible activities not only lead to high regulatory and legal expenditure in obtaining project clearances, there is all-round confusion in implementation as well. The execution of the CRZ rules falls within the domain of several coastal zone management authorities created by the state governments for this purpose. The authorities have to prepare coastal zone management plans based on the complicated regulation which also lists the guidelines that the authorities must follow in preparation of the plans. Most authorities are themselves unaware of the implementation scheme and a significant number of cases concerning clearances and bay designation are sent to the Central government for clarification. This not only creates uncertainty, it also increases the time taken for permissions, burdening the firms with high compliance outlays.

The CRZ norms are another example of a top-down, heavy-handed, legislative diktat from Delhi that ignores local dynamics and the diverse needs and realities of states. Regulations like CRZ create significant entry barriers for firms unable to negotiate the myriad, complex guidelines or lobby for rent-seeking special concessions from the government. Restrictive market entry adversely affects economic development and consumer welfare, increases prices owing to high costs and constrains technological improvement.

Even though the CRZ rules stand amended as on 6 January 2011, the new rules have done little to ease the regulatory burden imposed on a wide array of economic and development activities that may be pursued in coastal regions. The Central government must assert its political will and rescind these regulations, leaving the task of administering coastal zones to the already created state coastal zone management authorities. State governments in coastal regions will be better suited to devise laws concerning coast development, given their substantial political interest in the matter and superior knowledge of state goals as well as needs. The Central government must restrict its role to advising state governments on the prospective benefits and costs of any regulation that the states propose.

Rohan Shridhar is an associate at the IDFC Institute.

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Published: 21 May 2017, 11:25 PM IST
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