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The small scale industries (SSIs) constitute a considerable part of total industrial pollution in India. The monitoring and enforcement of environmental laws on SSIs have, however, been highly unsatisfactory: The study focuses on ways of improving compli­ance from SSIs. The main objectives of the study are to: (i) examine the feasibility of combined treatment in controlling pollution from SSIs; and (ii) explore the feasibility of introducing incentive-based-cost-sharing arrangements. The study brings out that com­bined treatment is a cost-effective option for SSIs. Thus, the subsidy for CETPs is justified. Recommended in the study are the various changes that should be effected in the existing system including the subsidy scheme for setting up CETPs, for environmental manage­ment in SSIs to become more effective.