Who Pays When Shared Infrastructure Fails? Zero Liquid Discharge, the Utilisation Trap, and the Incidence of Compliance Cost in India's Textile and Tannery Clusters

Abstract

Many countries require factories to recycle almost all their wastewater and return none to rivers, a standard called zero liquid discharge (ZLD); in India, courts have imposed it on textile and leather clusters. Yet when enforcement tightens, small firms close while larger polluters often endure. This paper asks why, comparing Tirupur, where closures have already occurred, with Kanpur's Jajmau tanneries, where they are ongoing. Small firms depend on shared treatment plants they do not control. As these plants become underused, costs rise, performance declines, and firms with in-house treatment are better able to withstand enforcement. Because compliance is judged by equipment ownership rather than measured discharge, plant failure is attributed to member firms. This final step is the best evidenced, while the earlier links remain suggestive. The paper recommends judging compliance by measured discharge and determining whether the plant or the firm has failed before closure, so enforcement targets pollution rather than the firms least able to absorb it.