The Environment Ministry has handed the Lavasa Lake City a lifeline, even as it declared the project unauthorised.

If the Lavasa Corporation is prepared to pay a fine, set up an Environmental Restoration Fund and follow strict terms and conditions, the Ministry is prepared to consider the future of the housing project on merits, the final order issued by the Ministry on Tuesday said. In the meanwhile, the stop work order remains in place, so that status quo is maintained at the construction site.

The Ministry has been investigating the Rs. 3,000 crore project’s compliance with environmental norms since it issued a show cause notice and stop work order in November 2010, based on complaints by civil society activists.

The Ministry found that the project, involving the development of hill station townships near Pune, is in violation of the Environmental Impact Assessment notification of 1994, its 2004 amendment and the fresh EIA notification of 2006. A site visit by a Ministry team earlier this month also found that the project has caused considerable environmental damage.

Despite these violations, the Ministry could allow the project to continue, thanks to the investments and labour which have already gone into the project, third party rights which are accrued, the employment generated, and the “claimed upliftment of the area”.

Apart from the “substantial penalty” for violation of green laws, Lavasa has been told to create an Environmental Restoration Fund, with “sufficiently large corpus” to be managed by an independent body of stakeholders under Ministry supervision. The Ministry is also imposing “stringent” conditions to ensure that no further environmental degradation takes place, while a time bound schedule is set up to rectify the damage that has already been done.

Lavasa has been told to submit detailed reports of past and future work plans and audited financial statements. It will also have to submit a comprehensive EIA report and management plan.

If the company gives “relevant and credible material”, the Ministry is prepared to consider the project on merits, said the order.