Lichen can be used as industrial pollution indicator because:

The correct answer is Option (2) → They cannot grow in polluted areas

Lichens are very sensitive to sulphur dioxide, so they do not grow in polluted areas; their presence shows clean air.

Option (1) They cannot grow in unpolluted area — Incorrect. This reverses the fact. Lichens are very sensitive to SO₂, so they grow well in unpolluted areas and are absent from polluted ones; that absence is what makes them indicators.

Option (2) They cannot grow in polluted areas — Correct. Lichens are very sensitive to sulphur dioxide (SO₂) in the air. In industrial areas with polluted air they cannot grow, so their absence tells us the air is polluted. This makes them a pollution indicator.

Option (3) They can only grow hill - stations — Incorrect. Lichens grow on rocks, tree trunks and soil in many kinds of places, not only at hill stations. Their use as indicators depends on pollution, not on altitude.

Option (4) They cannot grow in hill stations — Incorrect. Lichens do grow at hill stations, where the air is usually clean. Location by itself does not matter; what stops their growth is industrial pollution such as SO₂.