Collective action: an alternative institutional arrangement for reducing water pollution in an industrial estate in India

This study explores the possibility of collective action as an alternative option for reducing water pollution for a cluster of small‐scale industries. A case study of the Nandesari Industrial Estate in Gujarat, India, demonstrates the roles played by different agents, such as affected parties, polluters, non‐governmental organizations, regulators and the court. The study empirically estimates the ‘benefits’ and ‘costs’ of water pollution abatement for a cluster of 250 small‐scale industries at Nandesari, and uses these estimates for a social cost‐benefit analysis. Benefits are estimated using the contingent valuation method, with a ‘willingness to accept’ format for the rural areas, and a ‘willingness to pay’ format for the urban area of the nearby Vadodara city. The article considers costs of command and control, market‐based solutions and the option of common effluent treatment as alternative scenarios. It discusses how collective action and joint abatement at a common effluent treatment plant (CETP) by the 250 industries efficiently comply with the State Pollution Control Board norms, which had not been possible for the factories acting individually over the last 20 years. Finally, a detailed social cost‐benefit analysis has been undertaken to estimate the net present social benefits with and without CETP. The cost‐benefit analysis shows the economic advantage and social desirability of ‘collective action’ (joint treatment with CETP institutional arrangement) for water pollution abatement with respect to all possible scenarios comprising shadow prices of investment, foreign exchange, unskilled labour and equity considerations.