Industrial progress is often accompanied by invisible risks. A single mishap in a chemical plant, refinery, or fertilizer unit can cause devastation for workers, nearby communities, and the environment. India learnt this lesson tragically in 1984 with the Bhopal Gas Tragedy, which exposed glaring gaps in corporate accountability and compensation mechanisms. In response, Parliament enacted the Public Liability Insurance (PLI) Act, 1991, a landmark law designed to ensure that victims of accidents involving hazardous substances are compensated swiftly and fairly.
The Act creates a no-fault relief mechanism and makes it mandatory for every owner handling hazardous substances to obtain insurance under the Public Liability Act. Its original Schedule set modest fixed relief amounts, such as ₹25,000 for death and ₹6,000 for property damage, that remained unchanged for decades. In effect, the Act was India’s way of moving towards the “polluter pays” principle, balancing industrial growth with public safety.
The law was substantially updated through the Public Liability Insurance (Amendment) Rules, 2024, notified in the Official Gazette on 17 December 2024. For the first time in more than three decades, compensation levels and liability limits were revised dramatically. Immediate relief for death has been raised to ₹5 lakh, property damage cover has been increased up to ₹50 lakh, and insurers’ per-accident liability can now extend to ₹250 crore, with an annual cap of ₹500 crore.
The scope of coverage has also widened, with explicit provisions for environmental relief. The amended Rules create procedures for handling claims arising from chemical leaks, oil spills, and untreated industrial waste. They require State and Central Pollution Control Boards to apply for restoration funds and formalise the use of the Environmental Relief Fund for community and ecological restoration. By broadening these provisions, the government has signalled that businesses can no longer treat insurance under the Public Liability Act as a minor compliance item.
Why this matters for businesses
For companies operating in any industry that handles hazardous chemicals, gases, or other risky substances, the stakes are high. A single mishap can now translate into liabilities running into tens or even hundreds of crores. For example, a mid-sized plant facing a chemical leak could be forced to pay crores in compensation and restoration costs under the new rules. Without adequate liability cover, the financial impact could threaten the very survival of such enterprises.
The 2024 Rules also add compliance obligations such as new claim forms, adjudication timelines, and public-notification requirements for owners. This makes insurance under the Public Liability Act not just a statutory requirement but a strategic safeguard. Proper coverage protects communities by ensuring immediate relief, while also shielding businesses from crippling financial shocks.
Companies must therefore reassess their policies, upgrade coverage, and integrate safety and compliance deeply into their operational strategy. In addition to insurance, firms will need to invest in preventive safety technologies, routine audits, and community awareness programs. This combination of proactive safety and financial protection is what will build long-term trust with regulators and local populations.
Aligning India with global standards
By strengthening compensation norms and broadening coverage, the amendments bring India closer to international practices. While approaches differ across jurisdictions, with some relying heavily on tort litigation rather than statutory no-fault relief, the direction is clear: polluters must bear the costs of environmental and human harm.
With the updated PLI framework, India is signalling its commitment to align with these global standards, where public safety and environmental accountability are inseparable from industrial growth. The reforms also give India an opportunity to showcase responsible industrialisation to global investors, who are increasingly focused on sustainability and environmental, social and governance (ESG) compliance.
The Public Liability Insurance Act was conceived in the shadow of one of the world’s worst industrial disasters. More than three decades later, its relevance has only grown. The 2024 amendments make it clear that businesses cannot treat liability insurance as a box to tick. It is both a moral and financial imperative. By ensuring fair compensation for victims and safeguarding companies from ruinous claims, the Act strikes a balance between growth and responsibility.
In an era where environmental hazards can trigger far-reaching consequences, the Act and its strengthened Rules stand as a reminder that industrial progress must never come at the cost of human lives and ecological safety.
