India: Unlocking the Compensatory Afforestation Fund for Maximum Benefit

Last Updated: 17 September 2018
Article by RV Anuradha and Meghna Sengupta
  • The long overdue Compensatory Afforestation Fund Rules, 2018 (CAF Rules) were recently notified by the Ministry of Environment, Forest and Climate Change.
  • The principle of "compensatory afforestation" is embodied under the Forest (Conservation) Act 1980, which mandates the prior permission of the government for diversion of forest land for a limited set of non-forestry purposes.

The long overdue Compensatory Afforestation Fund Rules, 2018 (CAF Rules) were recently notified by the Ministry of Environment, Forest and Climate Change.

This significant development has been long overdue and has the potential to unleash a significant amount of funds for undertaking a variety of activities promoting afforestation, conservation, biodiversity, and contributing towards the overall goal of sustainable and environmentally friendly development.

The principle of "compensatory afforestation" is embodied under the Forest (Conservation) Act 1980, which mandates the prior permission of the government for diversion of forest land for a limited set of non-forestry purposes. When such permission is granted, an equivalent non-forest land needs to be identified to offset the diversion and funds would be raised for afforestation of the non-forest land.

This principle was further strengthened by the Supreme Court in the TN Godavaran Thirumulpad case in 2002, wherein the SC directed that a fund be set up for collecting money received from entities on account of diversion of forest land or other protected areas. This direction of the Supreme Court was followed up by another order in 2006, after which an ad hoc Compensatory Afforestation Fund Management and Planning Authority (CAMPA) was established at the central level.

The ad hoc CAMPA has reportedly accrued Rs 66,000 crore since its inception. However, the funds collected in the ad hoc CAMPA have remained unutilised, in the absence of regulations on the manner for its utilisation. A new law - the Compensatory Afforestation Fund Act was enacted in 2016 provided a legal framework. However, crucial sections of the Act establishing the national and state funds did not come into force until the rules were enacted in August 2018. Thus, the ad hoc funds have remained untouched for twelve years.

Top-down Approach and its Limitations

The recently enacted rules notified the National Compensatory Afforestation Fund (national fund) and the State Compensatory Afforestation Fund (state fund). These are managed by the National Compensatory Afforestation Fund Management and Planning Authority (national authority) and the State Compensatory Afforestation Fund Management and Planning Authority (state authority) for each state respectively.

With respect to the funds already accrued under the ad hoc authority, 90 percent of the funds collected by a state, which had been placed under the ad hoc authority and the interest accrued, are to be transferred to the respective state funds, while the remaining 10 percent will be with the national fund for meeting the expenditure of the national authority.

With the CAF rules now in place, the main challenge is the utilisation of the funds. The rules in this regard have taken a completely top-down approach whereby the purpose for which the funds are to be utilised are to be notified in the 'Annual Plan of Operation' (APO) by each state authority.

The APO determines the release of funds to agencies identified by the state authority for execution of activities in pre-determined installments. The rules are, however, silent on the manner and criteria in which specific agencies will be identified, thereby leaving the state authority with wide discretion.

The act and rules specify the activities for which the funds can be used, and these include regeneration activities, protection of plantations and forests, soil and moisture conservation, pest and disease control, and supply of wood-saving cooking appliances and other forest produce saving devices for use in forest fringe villages.

Any top-down approach, however, is likely to have limitations since it effectively closes the option for any innovative proposals that may be conceived by local communities or other non-governmental actors.

What Could Be An Alternative Approach?

An alternative approach would be to allow eligible entities to submit proposals meeting specific pre-determined criteria to meet the goals of environment management and sustainable development. Such an approach could lead to more innovative and diverse proposals for suitable projects to utilise the state fund, and would not be dependent on the states to identify eligible agencies and schemes for the disbursement of the funds.

The approach followed by the National Clean Energy Fund (NCEF) which collects the "coal cess" levied for using coal as a fuel, was to allow eligible applicants to present the proposal for a project or scheme relating to innovative methods to adopt clean energy technology.

Although this system has its own bottlenecks, it has allowed for a range of projects to be established for promoting the adoption of clean energy. Some of the activities funded by the NCEF include remediation of hazardous waste sites, establishing waste to energy power plants, installation of Solar Photovoltaic lights, market development of medium and high Temperature Concentrated Solar Technology (CSTs) for community cooking, etc.

India is today at the stage of evolving regulatory frameworks for achieving low-carbon growth, and has undertaken a voluntary commitment under its Intended Nationally Determined Contribution (INDC) under the UN Climate Change Convention, to reduce the emissions intensity of its GDP by 20–25 percent, over 2005 levels, by 2020.

India's INDC also specifies that its long-term goal is to ensure 33 percent of its geographical area is under forest cover, which it seeks to achieve through sustainable forest management, afforestation and regulating diversion of forest land for non-forest purposes.

For achieving these objectives, the state cannot act on its own. Instead, what is needed is a mix of state-driven, community-driven, as well as market-based mechanisms for encouraging effective participation by various stakeholders.

Originally published by CNBC TV18, August 2018


RV Anuradha is a Partner, and Meghna is an Associate at Clarus Law Associates, New Delhi

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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