Pollution Rule Reversed, Who Pays

Good Morning. India has quietly rolled back a major pollution rule for coal-fired power plants, exempting most units from installing sulphur scrubbers. Vendors who spent years preparing for government-mandated upgrades now face stalled contracts, financial uncertainty and possible legal disputes. We break down what this policy reversal means for manufacturers, power producers and the country’s clean air goals.

In other news, TCS layoffs have sparked pushback from analysts and unions, analysts flag exposure to banking industry from China’s rare earth mineral curbs, and Indian airlines reported 183 technical glitches so far this year.

DECODE THE NEWS

India's Dilution Of Emission Rules Sparks Industry Uncertainty

What?

In a quiet reversal, the government has exempted nearly 80% of coal-fired power units from installing Flue Gas Desulphurisation (FGD) systems, which were originally mandated in 2015 to reduce sulphur dioxide emissions. A July 11 notification now allows most plants to skip FGD installation, putting capital equipment suppliers and emission-control efforts on the backfoot. Major equipment suppliers such as Bharat Heavy Electricals Limited (BHEL) and Larsen & Toubro (L&T), which had invested in developing and delivering FGD systems, now face significant financial uncertainty and stalled contracts.

Why?

The government says this decision was informed by technical studies showing sulphur dioxide levels were within safe limits even without FGD systems. It also cited cost concerns and low feasibility. But the move comes amid surging power demand and industry pressure to delay green mandates. For power companies, this offers relief from tariff hikes worth up to Rs 24,000 crore a year. But the FGD rollback upends a decade of regulatory buildup, hitting vendors and risking arbitration over cancelled contracts.

What’s Next?

Legal battles are looming. Vendors whose contracts were already awarded or under execution may seek arbitration. If compensation claims are approved, power producers may try passing that cost on to consumers, a move experts say will be hotly contested. Meanwhile, India’s reputation on air pollution and green energy commitments could take a credibility hit, even as state-run utilities like NTPC begin suspending FGD orders. With just 22,000 MW of India’s 200+ GW coal power fleet covered by FGD so far, the rollback leaves a regulatory void — and a policy contradiction in a country battling toxic air.

CORE NUMBER

153.3

That is India’s Index of Industrial Production (IIP) for June 2025, reflecting a 1.5% year-on-year growth, slightly above May’s 1.2% but below the 2.2% Bloomberg forecast.

🔎 Sectoral performance:

• Manufacturing: Up 3.9%

• Mining: Down 8.7%

• Electricity: Down 2.6%

🏗 Use-based drivers:

• Infrastructure and construction goods: +7.2%

• Intermediate goods: +5.5%

• Capital goods: +3.5%

🛍 Consumer trends:

• Durables: +2.9%

• Non-durables: -0.4%

• Primary goods: -3.0%

📦 Key growth segments:
Basic metals, petroleum products, and fabricated metals led the gains, driven by strong output in diesel, steel pipes, and HR coils.

FROM THE PERIPHERY

TCS Layoffs Raise Industry Alarm. Former Tech Mahindra CEO C.P. Gurnani said TCS’s job cuts signal a shift from valuing IT firms by headcount to focusing on outcomes and business impact. TCS will reduce its workforce by 2%—roughly 12,000 roles—in FY26.

Backdrop: Brokerage Jefferies warned that the layoffs could cause short-term execution glitches and a long-term attrition spike, especially affecting middle and senior ranks as the firm rebalances amid AI and weakening demand. However, TCS CEO K. Krithivasan had clarified in a Moneycontrol interview earlier that the cuts aren’t AI-driven but due to skill mismatches.

Implications: IT employee unions called the layoffs unlawful, advising staff not to resign under pressure. The IT ministry is also monitoring the situation, reports indicate.

Airline Safety Data Update. Indian airlines reported 183 technical faults in aircraft this year till July 23, the civil aviation ministry told the Rajya Sabha. This compares to 421 in 2024 and 448 in 2023.

Flashpoint: Following the Air India crash on June 12 in Ahmedabad that killed 260 people, Directorate General of Civil Aviation (DGCA) enhanced the check and inspection of the critical component of safety assurance to identify and rectify immediate systemic issues. The aircraft was a Boeing 787-8 flying to London Gatwick.

By the Numbers: A total of 2,094 investigations have been carried out in the last five years. Passenger complaints stood at 3,925 in 2025, compared to 4,016 in 2024 and 5,513 in 2023.

Sectors Show Mixed Growth. India Inc's revenue growth slowed to an estimated 4–6% in Q1 FY25, compared to about 7% in the previous two quarters, according to Crisil Intelligence.

By the Numbers: Power, coal, IT services, and steel sectors, accounting for a third of total revenues, dragged overall growth. Power sector revenue fell 8% year-on-year, IT services remained flat, and steel rose just 1–3%.

Impact: Pharmaceuticals (9–11%), telecom (12%), organised retail (15–17%), aluminium (23%), and airlines (15%) drove growth. Aluminium saw higher demand and exports; airlines benefited from increased capacity due to reduced groundings and new aircraft additions.

Rare Earth Exports Could Affect Banks: SBI. China’s rare earth export restrictions could impact India’s banking sector, according to a recent SBI research report. 

Catch Up Quick: Already, India’s auto, electronics and clean energy sectors, which are heavily reliant on rare earth magnets, risk production halts and export losses. Last week, Bajaj Auto warned of a “zero month” due to magnet shortages. 

Outcome: The shortage could impact banks as it reduces working capital for companies and delays repayments of loans. SBI has urged banks to monitor exposure and prepare for wider trade and credit impact across the industrial economy.

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PODCAST

On Episode 641 of The Core Report, financial journalist Govindraj Ethiraj talks to Ajay Bagga, Market Expert.

• Indian markets are falling even as Wall Street hits records, decoding the latest.

• Oil analysts are predicting more supply in the market which should keep prices stable to low.

• India’s IT industry growth used to be linked to headcount, no longer.

• US and EU announce a deal which are sketchy on details.

👥 THE TEAM

✍️ Zinal Dedhia, Salman SH, Kudrat Wadhwa | ✂️ Rohini Chatterji | 🎧 Joshua Thomas