Premiums, Policy Types and 2026 Rules
Public Liability Insurance Act, 1991: who must buy it and what it pays
Who needs compulsory insurance under India's Public Liability Insurance Act 1991, how no-fault relief works, the Environment Relief Fund and why it is not enough alone.
The Public Liability Insurance Act, 1991 (PLI Act) requires every owner who has control over handling any hazardous substance above the quantities notified by the Central Government to take out insurance, before starting to handle it, that will pay immediate no-fault relief to people injured, to the families of people killed, and to owners of property damaged by an accident involving that substance. Since the Jan Vishwas amendments took effect on 1 April 2024, the relief amounts are prescribed in the Public Liability Insurance Rules (revised in December 2024) rather than in a Schedule to the Act. They are meant to be paid quickly without anyone proving negligence. A PLI Act policy therefore does not replace ordinary liability cover: a business that causes a serious accident can still face fault-based claims far larger than the statutory relief.
This guide belongs to the business liability insurance overview. Check the current text of the Act and Rules on India Code before acting, because they have been amended over time. Injuries to your own workers fall under a different regime; see employees' compensation insurance.
Why the Act exists
The Act was passed after the Bhopal gas disaster of 1984, when victims waited years for compensation. Its purpose is to make sure there is money available for interim relief straight after an industrial accident involving hazardous substances, without waiting for courts to decide who was at fault. Liability under the Act is no-fault: a claimant does not need to prove wrongful act, neglect or default by the owner.
Who must take a PLI Act policy
You are likely to be covered by the Act if all of these apply:
- You are an owner with control over handling a hazardous substance. "Handling" is defined broadly and includes manufacturing, processing, treatment, packaging, storage, transportation by vehicle, use, collection, destruction, conversion, offering for sale and transfer.
- The substance is hazardous within the meaning of the Environment (Protection) Act, 1986 and appears in the list notified under the PLI Act.
- The quantity handled is equal to or more than the notified threshold.
Typical examples are chemical plants, pesticide formulators, paint and solvent manufacturers, LPG and fuel storage, some pharmaceutical units, and warehouses or transporters of notified chemicals. Small quantities used in an office or a retail shop are normally below the thresholds, but check the notified list rather than assuming.
The Central and State Governments, corporations owned or controlled by them, and local authorities are exempt from the requirement. The Act also allows an owner, with government approval, to set up a fund instead of buying insurance, which in practice is used only by large organisations.
What relief the Act pays
The Jan Vishwas (Amendment of Provisions) Act, 2023 omitted the old Schedule to the Act (which fixed death relief at ₹25,000 and property relief at ₹6,000) and now leaves the amounts to be prescribed by rules. The Public Liability Insurance (Amendment) Rules, 2024, notified on 17 December 2024, raised them sharply. As reproduced from the amended Rules, the amounts are:
| Head of relief | Amount under the amended Rules |
|---|---|
| Fatal accident | ₹5,00,000 per person, plus reimbursement of medical expenses up to ₹1,50,000 |
| Permanent total or partial disability | Medical expenses up to ₹25,000 per case, plus cash relief based on the percentage of disablement, with ₹5,00,000 for permanent total disablement |
| Loss of wages due to temporary partial disability | Up to ₹25,000 a month for a maximum of 3 months, for people over 16 hospitalised for more than 3 days |
| Other injury or sickness | Reimbursement of actual expenses up to ₹25,000 |
| Damage to private property | Actual damage, up to ₹50,00,000 |
These are statutory relief amounts, not a measure of what a court might award. Confirm the figures against the Rules as published in the Gazette before relying on them.
How the policy is sized and what else you pay
- The insurance policy must be for an amount not less than the paid-up capital of the undertaking or unit (for an owner that is not a company, the market value of its assets and stocks), and may extend to the amount prescribed, but not more than ₹500 crore (section 4(2A) as amended by the Jan Vishwas Act, replacing the earlier ₹50 crore ceiling). Since the December 2024 Rules, the insurer's liability is capped at ₹250 crore per accident and ₹500 crore for all accidents in a policy year (previously ₹5 crore and ₹15 crore).
- Alongside the premium, the owner must pay a contribution to the Environment Relief Fund (ERF) equal to the premium, which the insurer collects and remits. The ERF is used to pay relief where the policy amount is exhausted.
- GST at 18% applies to the insurance premium. Whether and how GST applies to the ERF contribution should be checked with the insurer and your tax adviser.
Illustrative example
A private limited company with paid-up capital of ₹3 crore stores a notified solvent above the threshold. It must buy a PLI Act policy with an amount of at least ₹3 crore. If the illustrative premium is ₹9,000, the company also pays ₹9,000 to the ERF, plus GST on the premium of ₹1,620, making ₹19,620 in total before any other charges.
How a claim under the Act works
- After an accident, a person entitled to relief applies to the Collector of the district where the accident occurred.
- The application must be made within five years of the accident.
- The Collector holds an inquiry, decides the relief and directs the insurer to pay.
- Relief paid under the Act is deducted from any compensation later awarded under any other law. It is a first payment, not a full settlement.
Why a PLI Act policy alone is not enough
The relief amounts are capped. A serious accident can produce fault-based claims for death and injury, property damage and environmental clean-up, including before the National Green Tribunal under the National Green Tribunal Act, 2010, which applies its own principles of liability. Most businesses that need a PLI Act policy also buy an industrial public liability or CGL policy with a much higher limit, and some add environmental impairment cover. See CGL vs public liability.
Penalties and compliance
The Act provides penalties for failing to take a policy or pay the ERF contribution, and authorities can issue directions to stop handling. The Jan Vishwas (Amendment of Provisions) Act, 2023, in force for this Act from 1 April 2024, replaced imprisonment with monetary penalties imposed by an adjudicating officer: failing to take or renew the policy, or to pay the ERF contribution, attracts a penalty equal to the annual premium and up to twice that amount, plus up to one premium for each month the contravention continues; not complying with directions attracts ₹10,000 to ₹15 lakh, plus ₹10,000 a day while it continues. Read the amended sections on India Code, or check with the State Pollution Control Board, rather than relying on older summaries.
Compliance checklist
- Check your substances and quantities against the list notified under the Act
- Buy the policy before starting to handle the substance, and renew it without a gap
- Size the policy amount to at least your paid-up capital, within the ceiling
- Keep proof of ERF contribution with the policy
- Buy separate fault-based cover with a realistic limit
- Record the substance list, quantities and storage plan in the proposal form
The liability cover checklist includes this step for every business.
Frequently asked questions
Does a normal public liability policy satisfy the PLI Act?
Not automatically. The Act requires a policy issued for the purposes of the Act, with the ERF contribution. Insurers sell a specific "Public Liability Insurance Act" policy for this purpose.
Does the Act apply to transporters?
Transportation by vehicle is part of "handling", so an owner who controls the transport of notified substances above the threshold can be covered. Check who is the owner in control for each consignment.
Is relief paid even if the owner was not negligent?
Yes. Relief under the Act is no-fault. Fault matters for larger claims under other laws.
Who checks compliance?
Collectors and the authorities named in the Act and Rules, with environmental regulators. Inspections and licensing processes can ask for the policy.
Sources
- India Code — Public Liability Insurance Act, 1991, the Rules and amendments
- Ministry of Environment, Forest and Climate Change — notifications on hazardous substances and the Environment Relief Fund
- IRDAI — registered general insurers that issue PLI Act policies
