India strengthens environmental governance and ESG compliance through major regulatory shift in fund management and digital transparency. ESG BROADCAST shares key takeaways.
Regulatory Extract: As a latest development in India’s environmental governance landscape, the Central Pollution Control Board (CPCB) has assumed charge as Fund Manager of the Environment Relief Fund (ERF) from 1 January 2025. This transition follows the official notification of the Environment Relief Fund (Amendment) Scheme, 2024, which empowers CPCB to oversee fund disbursement, create an online implementation portal, and coordinate environmental restoration measures. Though published in the Gazette on 17 December 2024, the scheme is now operational and being implemented.
The amendment marks a shift from the earlier model where the United Insurance Company Limited served as the fund custodian. Under the new framework, the ERF is now vested directly with the Central Government. The CPCB will manage the fund for a five-year period, with responsibilities that include timely deployment of funds within 15 days of receipt and maintaining quarterly investment reviews.
The revised scheme expands the sources contributing to the ERF. In addition to contributions under the Public Liability Insurance Act, 1991, the fund may now receive amounts levied under the National Green Tribunal Act, various penalties, and investment returns. Disbursements are to be executed based on directions from District Collectors or the Central Government.
The amendment also provides for environmental restoration funding. A new clause empowers CPCB or State Pollution Control Boards to propose restoration plans for areas affected by hazardous incidents. Upon government approval, disbursement from the ERF will support these efforts—shifting the focus from mere compensation to proactive remediation.
To strengthen transparency and accountability, auditing provisions have been revised. Annual ERF accounts will be examined by independent auditors appointed from a government-approved panel. Administrative expenditure from the fund has been raised from 1% to 2% to support expanded oversight and digital operations.
Originally proposed in July 2024, the draft amendment underwent a 60-day public consultation before finalisation. The changes are made under Section 7A(3) of the Public Liability Insurance Act, 1991, which mandates financial safeguards in cases of accidents involving hazardous substances. The 2024 update replaces and builds on the ERF Scheme first notified in 2008.
Strategic significance lies in the designation of CPCB as the nodal fund manager and the rollout of digitised systems, both of which aim to modernise India’s environmental compensation mechanism. The inclusion of ecological restoration funding signals a shift from reactive compensation to proactive recovery. These amendments are expected to accelerate claim settlements, improve public confidence, and enhance regulatory compliance among industries handling hazardous substances, thereby reinforcing India’s environmental governance framework. ESG BROADCAST will continue monitoring the updates related to this topic. Stay tuned to be updated on the related policy and pivotal regulatory shift.
