13 Applying Economics to Forestry-IV: Why foresters don’t listen to social scientists

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The limitations of economic criteria in forestry decisions

In the previous sections, we looked at the impact of neo-classical economic analysis on approaches to forest sector strategy, on management decisions like optimal rotations and product mixes, and on the interaction of social (equity) considerations with economic efficiency criteria in the context of conversion of natural forest to teak plantations in Karnataka state of India. Owing to the numerous parameters that play a role and the large number of assumptions (many heroic!) that are necessary, any such analysis will probably have only an indicative significance rather than a prescriptive role. The aim of recounting some of the above analytical scenarios is not so much to pass judgment on what the optimal decisions in the case study forests should be, but to illustrate some broad principles regarding the application of economic analysis in forestry situations.

Firstly, if we do accept the need and justification for economic criteria in forest management, it is apparent that the results are going to be highly sensitive to the assumptions, especially the choice of discount rates. Economists, as we saw, are critical of any adoption of low rates of discount specially for forestry projects just because everybody likes standing trees or green habitats. Economists have been especially virulent in their criticism of the retention or slow conversion of old growth under the foresters’ criteria of maximum mean annual (physical) increment, contending that this keeps too much capital locked up on the ground, sacrifices other opportunities for investment, and so on. Foresters, on the other hand, have been wary of these arguments, because they realize that forestry is highly vulnerable to hasty and irreversible decisions (as the factory and the product are physically the same, and it takes little time to liquidate the capital stock, unlike the plant and machinery of a normal factory). Foresters realize that, pitted against the competing uses for land and capital, forestry (especially of long-rotation timber species) has little chance of surviving the analytical tests if purely economic criteria are imposed.

Because social environmentalists equate a concern for social justice with the rejection of the classical (colonial) forestry, it may be thought that adding social concerns, through social cost benefit analysis (SCBA), would possibly come to the rescue of long-term, long-rotation forestry options, assuming that society approves of it even if market economists do not. As we saw above, SCBA also has a myriad assumptions on various parameters like the social discount rate, wage rate, distributional bias (η), etc., all contributing to the relative values of shadow prices used for the analysis. Once again, at very low interest rates, there is a certain advantage for longer rotations. There is also a possibility of some support to longer conversion periods (i.e. keeping old growth longer on the ground in reserve hectares) if it can be shown that there is a differential flow of products (or services) over successive time periods from such locked-up resources to the poorer sections of the population. However, this advantage exists only at quite low discount rates, say 3 to 4%, depending on other parameters. Paradoxically, if all of the product could be absorbed by the target populations, then the earlier liquidation of the standing growth would be favoured even under SCBA under the maximum net present value (NPV) criterion. Further, the potential gain from early exploitation of commercial products is likely to overwhelm what little advantage the slower options may have had by supporting consumption by the poor.

How then do we reconcile the criticisms of mainstream economists with the universal popular consensus that old growth has to be retained even if not highly remunerative? Indeed, how do we justify the notion that natural habitats have to be protected, and the excesses of the era of commercial forestry reversed, if we are not to abandon the basic assumption of rational behaviour that underlies all economic theory?

Perhaps the hard truth is that there may be areas of human activity that are so important for reasons other than financial gains, that the narrow criterion of individual economic gain cannot be the basis of decisions. In other words, the decision rules of neo-classical utility theory may be operative mainly in a narrow range of choices at the margin, between a few units of resources or commodities this way or that, but this cannot be extrapolated in a grand way to the society-wide policy choices in a manner that may spell doom in the long run. Forests are a sensitive resource with such considerations of the ‘precautionary’ criterion, where economic efficiency in the narrow sense may have to be sacrificed (Dilip Kumar, 1988, p.289). The “safe minimum standards of conservation” suggested by Ciriacy-Wantrup (1952) may be of greater relevance than the maximum net present value criterion.

It is highly instructive that Hirshleifer himself, in a disarming aside, acknowledges that he was “afraid” to bring his wife with him to the conference venue “because I thought if she saw all these trees up here, she would never let me say we should cut more of them down” (Hirshleifer, op. cit., p.67). In other words, even a common person knows that there is something very wrong in the so-called expert’s recommendations when it goes so blatantly against all the instincts of common sense. Unfortunately, mainstream economists have an irrefutable answer to common sense, following the lead of the great Keynes: “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist”. Hirshleifer himself uses this formula: “Men of affairs often claim to be free of concern about issues of theory. Usually this means they are acting on the basis of some theory whose validity they choose not to question” (Hirshleifer, op. cit., p.53). Ignoring the cost of interest, Hirshleifer says, is one such instance, for it implicitly assumes, not an absence of interest as a factor, but actually a zero rate of interest, the hidden theory that is belied by the state of affairs in the real, practical world.

Despite the iron frame of neo-classical theory, a majority of citizens may well choose to go along with Mrs. Hirshleifer’s homespun wisdom rather than her husband’s learned pronouncements. This anecdote may afford an explanation of why foresters in general tend to be fairly conservative in their approach, and slow to adopt the theoretical formulations and exhortations of social experts of various hues. All over the world, foresters tend not to go down one path too far, and like to keep open the option of recovering the status quo if things do not work out. However, under the sustained demonization of traditional forestry by mainstream economists, they have in the past abandoned the old values of sustained yield, and gone so far in the other direction – clearing valuable mixed forest for eucalyptus, for instance – that they have invited equally scathing attacks and virulent criticism from another interest group, the social environmentalists who seek to combine ecology with distributional justice, and are now demonizing the forest service with equal virulence (e.g., Lele and Menon, 2014, p.403 and throughout the book).

There is, moreover, a fundamental difference between an applied science (or art) like forestry and the social sciences, which is that it is very easy in the social sciences to make major changes in ideas by merely changing a few words here and there, whereas it takes decades to change physical reality in the ‘field’. If one looks at the policy guidelines of international donors, for instance, there is clearly a shift every few years: at one time the donors were all pushing for forestry as a business, then they shifted to forestry in support of (industrial) development; then to social forestry, which they abandoned as a failure in equity terms; then participatory management (e.g. joint forest management), which was also condemned on various grounds like human rights; leading to empowerment of communities, withdrawal of the forest departments to a purely advisory role, and transfer of ownership to the community or individual. Of late, there has been another concept gaining popularity among academics and international fora, that of payment for ecological services (PES). This has its own logical deficiencies and administrative weaknesses, which require another article to explore. But international funding, research support, journal publications, travel grants, are all linked to the aspirant faithfully following the latest academic trends set  by the social scientists. The forests, however, can neither be transformed so fast nor can they be preserved in the face of such changing policy environments.

This unedifying experience with the involvement of mainstream economists recounted above, also gives cause for caution in fully accepting contemporary criticisms of public forestry, and going to the other extreme of giving up state control of the forests completely. As against the proponents of decentralization and village control of all forests, the professional forester once again advocates a middle path, which has been expressed by the author in the following words at the United Nations Forum on Forests on 2nd Feb 2011:

"As the non-forest value of forest acres in the expanding economy rises, it has been our experience that all the different strands of the polity are important in ensuring the long-term survival and sustainable management of this precious resource: well thought out legislation, a strong and independent judiciary,  strong community and civil society participation, and a professional state forester cadre and other administrative personnel and apparatus."

It would be a pity, and short-sighted in the long run, if the voice of the forester on the ground were once again ignored, and the forester vilified as if he (and increasingly she, see Marwah and Thakkar, Sanctuary Asia magazine, October 2014) were an undesirable alien in the set up.

References

Bentley, W.B. and E. Teeguarden. 1965. Financial maturity: a theoretical review. Forest Science, 11: pp.76-87.

Brandis, Dietrich. 1897. Forestry in India. Origins and Early Developments. Reprinted 1994 by Natraj Publishers, Dehradun.

Ciriacy-Wantrup, Siegfried von. 1952. Resource Conservation: Economics and Policies. University of California Press, Berkeley. 

Davis, Lawrence S. and K. Norman Johnson. 1987. Forest Management. Third Edition. Chapter 16 (pp.685-712): Analysis of Harvest Schedules. McGraw-Hill Book company, New York.

Dilip Kumar, P.J. 1988. Cost Benefit Analysis and Sustained Yield Forestry in India. Thesis submitted for the PhD degree, Department of Forestry & Wood Science, University College of North Wales, Bangor, Wales.

Dilip Kumar, P. J. 1992. Economic analysis and the question of sustained yield in forestry. Presented at the National Seminar on “The Economics of the Sustainable Use of Forest Resources”, 2-4 April 1990, organised by Centre for Science & Environment, New Delhi. Published in the Proceedings of the seminar (Anil Agarwal, Ed., 1992: The Price of Forests).

Dilip Kumar, P. J. 1996. Optimal silvicultural regimes and rotations for teak plantations. In J.Kerr et al. (eds.), 1996, “Natural Resource Economics. Theory and Application in India”. Oxford & IBH Pub. Co. Pvt. Ltd., New Delhi.

Dowdle, B. (Ed.). 1974.  The Economics of Sustained Yield Forestry. A Symposium. College of Forest Resources, University of Washington, Seattle. (proof copy, mimeo.).

Faustmann, M. 1849. Calculation of the value which forest land and immature stands possess for forestry. Transl. W.Linnard, in M.Gane (Ed.), 1968.

Fellner, W. 1967. Operational utility: the theoretical background and a measurement. In Ten Economic Studies in the Tradition of Irving Fisher, p.39-74. John Wiley & Sons, Inc. New York.

FRI, Dehradun. 1959. Yield and Stand Tables for Plantation Teak (Tectona grandis Linn. F.). Indian Forest Records (New Series), Silviculture, Vol.9, No.4. Silviculture Branch, Forest Research Institute, Dehradun, India. Manager of Publications, Delhi.

Gadgil, M. and Ramachandra Guha. 1992. This Fissured land. An Ecological History of India. Oxford University Press, New Delhi.

Gane, M. (Ed.). 1968. Martin Faustmann and the Evolution of Discounted Cash Flow. Institute Paper 42, Commonwealth Forestry Institute, Oxford.

Hirshleifer, Jack. 1989. “Sustained Yield” versus Capital Theory. Chapter 3 in volume Time, Uncertainty, and Information. Basil Blackwell Ltd. Oxford, UK. Paper originally presented at a symposium on “The Economics of Sustained Yield Forestry”, held at the College of Forest Resources, University of Washington, Seattle, Washington in November 1974, mimeo, see Dowdle (Ed.), 1974.

Hyde, W.F.1980. Timber Supply, Land Allocation and Economic Efficiency. Resources For the Future (RFF), Inc. Johns Hopkins University Press, Baltimore and London.

Johansson, P.-O. and Loefgren, K.-G. 1985. The Economics of  Natural Resources. Basil Blackwell, Oxford.

Kula, E. 1984. Derivation of social time preference rate for the United States and Canada. QJE (November): pp. 873-882.

Ledyard, John and Leon N. Moses. Dynamics and land use: the case of forestry. In Dowdle (Ed.), 1974 (q.v.).

Lele, Sharachchandra & Ajit Menon (Eds.). 2014. Democratizing Forest Governance in India. Oxford University Press, New Delhi.

Little, I.M.D. and J.A. Mirrlees. 1974. Project Appraisal and Planning for Developing Countries. Heinemann Educational Books Ltd. London.

Marwah, Anuradha and Varun Thakkar. 2014. On their shoulders. In praise of forest guards, the foundation for wildlife protection in India. Sanctuary Asia, Vol.XXXIV, No.5 (October 2014).

NCA. 1976. Report of the National Commission on Agriculture (NCA), Part IX. Forestry. Ministry of Agriculture and Irrigation, Government of India. New Delhi.

Nautiyal, J.C.  1988. Forest Economics. Principles & Applications. First published 1988 by Canadian Scholars’ Press Inc., Toronto. Reprinted by Natraj Publishers, Dehradun.  

Pearse, P.H. 1967. The optimum forest rotation. Forestry Chronicle, 43 (2): pp.178-195.

Price, Colin. 1989. The Theory and Applications of Forest Economics. Basil Blackwell. Oxford.

Raj, K.N. 1966. Price behaviour in India. 1949-66: an explanatory hypothesis. IER 1(2). Reproduced in P.Chaudhuri (Ed.), 1972: Readings in Indian Agricultural Development, pp.155-176. George Allen & Unwin Ltd. London.

Roberts, M.J. 1974. Sustained yield and economic growth. In B.Dowdle (Ed.), 1974 (q.v.).

Samuelson, P.A. 1974. Economics of forestry in an evolving society.

Journal of Public Enquiry, 14(4): pp.466-492. 

Shyam Sunder,S. and S.Parameswarappa. 2014. Forest Conservation in India. Bishen Singh Mahendra Pal Singh, Publishers, Dehradun. 

  

Sinden, J.A. and A.C.Worrell. 1979. Unpriced Values. Decisions Without Market Prices. John Wiley & Sons, Inc. New York.

Smith, J.H.G.  1969. An economic view suggests that sustained yield should have gone out with the cross-cut saw. Forestry Chronicle 54(3): pp.167-171.

Subramanian, D.K. 1984. Energy utilization in Karnataka. In C.J. Saldanha (Ed.), 1984:   Karnataka State of Environment Report 1983-84. Centre for Taxonomic Studies, IISc, Bangalore.

Squire, L. and H.G. van der Tak. 1975. Economic Analysis of Projects. Wprld Bank Research Publication. IBRD. Johns Hopkins University Press. Baltimore and London.

Thompson, E.F. 1966. Traditional forest regulation: an economic critique. J. Forestry, 64: pp.750-752.

Waggener, T.R. 1969. Some Economic Implications of Sustained Yield as a Forest Regulation Model. Contemporary Forestry Paper Contribution No.6. Institute of Forest Products. College of Forest Resources, University of Washington, Seattle.

Wesley, D.G. 1964. The Revised Working Plan for the High Forest Blocks of Yellapur Division. Forest Department. Government Press, Bangalore.

12 Applying Economics to Forestry-III: Social weighting and management decisions

Full paper available here (pdf)

Social benefit stream and forest economics

A consideration that may come to the rescue of the long rotations and slow conversion rates of existing crops may be the indirect services that are expected to flow from such natural crops, but this is likely to support longer rotations only if the stream of such benefits is shown to increase with age of the crop. If not, as in the case of carbon sequestration, it may also come about that a series of fast-growing crops may capture more carbon in a given time period, than keeping the already locked-in carbon in standing trees. Samuelson feels that such decisions should be left to “the electorate, by that same pluralistic process” which determines other fiscal decisions and allocation of budgets (Samuelson, 1974, p.486).

Distribution considerations and economic criteria

We may however argue that there is an alternative to this laissez-faire approach:  that is if the polity decided (through a democratic -- or maybe a revolutionary-- process!) to actively favour certain classes, usually the poor or otherwise disadvantaged, bringing us to social cost-benefit analysis (SCBA), in which a positive weight is attached to income or consumption increments accruing to the poor, which of course is not allowed in neo-classical economics where inter-personal utility comparisons are not admitted (see Squire & van der Tak, 1975, for a primer on SCBA; Price, 1989 for forestry applications). Then products which flow differentially to these favoured classes will be ascribed a social value that may be higher than signalled by market prices alone. In our case study, this possibility is explored by ascribing such social weighting to non-teak smallwood (and a small portion of the non-teak timber as well), which local poor are assumed to consume directly. That is, we explore the possibility of making the consumption increments of the poor our ally in defending sustained yield against the ‘heartless’ application of financial criteria.

Rather than having to undertake a special exercise to compensate the ‘losers’ in each project, SCBA seeks to do this on a societal and economy-wide basis. In a departure from this neutral stance of neo-classical utility theory, we posit that just as the marginal utility of consumption of an individual is assumed to diminish with level of consumption of a commodity, from the point of view of society as a whole, “an extra rupee is better given to a poor man than to a rich man” (Little & Mirrlees, 1974). One function required for this is the social elasticity of the marginal utility of consumption, denoted by the Greek symbol  η (eta), which denotes the (proportional) change in marginal social utility for a corresponding (proportional) change in consumption at different income levels. Then the relative weight d_i attached to an incremental rupee of consumption at a consumption level c_i, is related to the average consumption level ĉ (or any other consumption level, for that matter), by the formula

d_{i =}  ( c_{i ∕}  ĉ ) ^η

(η being negative usually)

Of course, in order not to make the assigning of relative weights completely arbitrary, some or other reasoning is advanced. Fellner (1967) suggested that the value of η could be approximated by the ratio of the income elasticity of consumption of ‘Food’ (usually positive), to its pure price elasticity (usually negative). The higher the income elasticity, the more pervasive is poverty assumed to be (denoting that there is a greater slack to be made up), and the higher will be the number for η (of course with a negative sign). As  an example of this type of estimation of the parameter, using estimates of income and prie elasticity of food grains consumption by Raj (1966),  η works out to -0.6 or -0.7, which portrays only a mildly progressive distributive orientation. If we separate out the elasticities for the rural and urban sectors, we get the numbers for η as -1.12 for the rural sector, and -0.15 (amounting to almost neutrality to distributional interests) for urban. For a really strong pro-poor bias,  η would have to be closer to, say, -2, which would denote that as consumption level doubles,  the value of an incremental rupee becomes a quarter.

This detour was only to give an idea of the computational results for η, the social elasticity of the marginal utility of consumption. But the real interest lies in the implications for the economic analysis of sustained yield forestry decisions as laid out in our case study of the teak forests in Karnataka. In doing our social cost benefit analysis (SCBA), let us assume that a value for η of -2 represents this strong distributional bias. By itself, using SCBA on the lines outlined here does not materially alter the optimal rotation decisions for maximum NPV (details in Dilip Kumar, 1988).  For a SQ III hectare, for example, using -2 for η, and ascribing full cost of labour (shadow wage rate SWR = 1), the optimal rotation of a single rotation remains at or above 75 years up to a discount rate (STPR) of 4%, but falls to 55 years at 5%, 35 years at 6%, and 10 years at 10%. For an infinite series of rotations (soil expectation value, SE) the optimal rotation falls away from 75 years to 30 years at 5%, i.e. a little faster than the single rotation case. If we take the rather extreme case of SWR =0.25 (since wages are presumably going to very poor persons), the optimal rotation for one rotation still follows the same pattern with rising discount rate, while the rotation for maximum SE falls a little sooner, from 75 years at 3% to 30 years already at 4% rather than at 5% (because the cost of postponing future returns looms larger as initial afforestation costs become lower). All this does not give much succour for long rotations per se.

The main impact of social criteria will be through the computation of the social discount rate (SDR). One of the effects of considering the marginal utility of consumption through a parameter like η is on the consumption rate of interest CRI or social time preference rate STPR (see Kula, 1984). Considering that per capita income is expected to grow quite slowly, however, future increments of income are not very highly discounted due to η, and it was calculated that the CRI would be only around 3.6% with η= -2, allowing for mortality (the probability of surviving to enjoy the future consumption stream being around 98.5%, which imposes a time preference rate of 1.5% by itself). A simple assumption of zero mortality (survival probability = 1) would bring the discount rate (CRI) to 2% (η being -2), or essentially 0% for η = 0. Any lower figure for η like -0.5 would likewise devalue future increments less strongly, yielding an even lower discount rate like 2%. Such results are a support for maintaining longer rotations, but as the transition to shorter rotations occurs between 3% and 5%, the optimal rotation is extremely sensitive to the precise discount rate chosen, but merely using social prices rather than market, does not render long rotations any more viable.

Conversion of natural forest and social criteria

So far we have considered the optimal rotations for a fresh plantation. As we saw before, under strictly economic analysis, there is no mitigating circumstance to come to the aid of a slow pace of conversion, and even under social CBA, the social value of the firewood and small timber coming out to augment consumption of the poor would only add to the pressures to convert the standing forest. But there may be one special circumstance in which social considerations may so support a longer conversion period. This is, if only a limited portion of the production is utilisable by the poor, each year, and any excess production over this limit would go to socially neutral uses, it may make some sense from the social angle to slow down the rate of conversion of the old growth, especially if consumption by the poor is highly valued (say η= -2).

Such an exercise was actually done in the case study of Yellapur-Mundgod (Dilip Kumar, 1988, chapter 10). The working plan estimated an annual production of 6,548 cum of teak logs and 28,293 cum of non-teak logs annually on a 30-years conversion period of the remnant existing forest. If we assume that 1.5 times this comes out as firewood, this would amount to respectively 9822 cum of teak firewood and 42,439 cum of non-teak firewood annually; the latter would just be sufficient to meet the demand based on the state-wide per-capita assessment of fuelwood consumption in the Karnataka State of Environment Report in 1977-78 (Subramanian, 1984),. A similar exercise for timber demand and potential output as per the working plan indicated that just some 10% of non-teak timber would be sufficient to satisfy local needs. If now we ascribe high social value to the non-teak timber and fuelwood that is assumed to be consumed by the poor, obviously any acceleration of conversion that is not required for the years’s local consumption would have less social value (as the local poor would not have a use for it and it would go to the general market).

On these assumptions, relative weights (d_i) can be calculated for the firewood and timber produced every year under the normal (sustained yield) prescriptions and under (hypothetical) accelerated  conversion rates of natural forest, based on available information on income class distributions in the area. While not describing the detailed calculations, a few sample results are presented. With a high distributive bias (η = -2), consumption increments distributed equally over the entire population would have a aggregate relative social weight (D) of around 6.1; if restricted to the classes below the poverty line it would have a higher weight of over 8.8; or if restricted to the class of workers alone, 13; and if restricted to the poorest class, it would be as high as 491.5 (Dilip Kumar, 1988, chapter 10).

In the Little-Mirrlees scheme of SCBA, these d values are not used directly to amplify the value of incremental consumption or products; one more step is involved, that of expressing values in terms of a standard measure or ‘numeraire’, v, which is defined as the value of incremental public income (in ‘border rupees’, i.e. after correcting for distortions due to local tariffs and duties). This numeraire depends on the use to which the incremental public income is assumed to be put in the economy. A simple assumption, for example, may be that it is all applied to consumption, and further that it is equal to consumption at the reference level ĉ (the average level of consumption in the economy). Then the value of a rupee of public income income would be essentially 1.0, except that it would have to be converted to border values by multiplying by some average accounting ratio or standard conversion factor (SCF) to account for duties (we used a SCF of 0.86). An alternative formulation, however, could be that the (incremental) public income is devoted partly to investment, which may yield further incomes and even further re-investments, and partly to consumption. One could even posit that public income is put to socially very high-valued uses (for instance, income supplements to the poorest classes, say below the critical or minimum level of consumption, which would inflate its social value). These different scenarios give us different estimations of v, which is then used in the formulation D/v to convert the consumption benefits from market rupees to the corresponding social value at border prices. As can be imagined, if we assume a high value for v (public income is highly valuable), then the value of consumption benefits accruing to individuals will go down even though they may be poor, with high social weightage or D values). If we assume that public income is fairly neutral in distributive effects, then the D/v value of consumption benefits will be allowed to remain at high levels.

We cite a few variants from our constructed example of conversion of old forests in the Yellapur-Mundgod division. A simple assumption could be that all the non-teak firewood and 10% of non-teak timber that are going to local basic needs, are consumed equally by all sections of the population. Our calculations show that this component would then have a social weight in aggregate (D value) of around 6.1 (assuming the parameter η= -2); because most people have low incomes, if the product is consumed by all the classes equally, the aggregate social weight is high. In contrast, if the product were distributed in proportion to existing incomes, the aggregate social weight D would be only 1.4; while if it were restricted to the really poor, say to the workers class and below, the relative weight D would be higher, around 13.1 (Dilip Kumar, 1988).

There is one more step: the  relative weight has to be converted to the numeraire by dividing it by the social value of public income v, as outlined above. If we assume that there is no reinvestment, that all is consumed at the average level of consumption, and a consumption rate of interest (CRI) of 3.56% (with expectation of mortality and η  --2), the simplest case, then v comes to around 3.3. If we assume that 15% of public income is reinvested at marginal product of 10%, and the rest consumed at the average level of consumption, then v comes out to around 4.8 (ibid., Table 8.10). The more valuable that public income is assumed to be, the lower would be the social value of consumption benefits indicated by the D/v ratios of firewood or other basic needs products (ibid.).

If we accept the scenario where incremental consumption benefit accrues to the entire population (D=6.1),  and value of public income is related to the average level of consumption (v=4.8), the accounting ratio D/v of the added consumption comes to 1.27. If we change the assumptions, the D/v ratio will also change: thus, if incremental consumption is assumed to accrue to workers only, D will be higher, 13.1, and D/v 2.7. Many more variants in assumptions regarding D or v values could be imagined, which we need not spell out here. 

Now we can try accelerating the conversion process from 30 years to say 20, 10 or even shorter periods, and see how the social value changes as diminishing proportions of the non-teak output qualify for the higher social values. For the non-teak firewood, the conversion factor (to convert value at market prices into social value in terms of the numeraire) at 30 years conversion rate (100% socially valuable) would be 1.5 using a D/v of 1.5, or 2.5 using D/v of 2.5. Under a 20-year conversion period, part of the extra firewood would go to general consumption (not 100% socially valuable), so that  falls to 1.3 (D/v = 1.5) or 1.95 (D/v = 2.5). For a 10-year conversion period, it is only 1.1 (D/v of 1.5) or 1.4 (D/v of 2.5). Non-teak timber, of which only 10% of prescribed output is socially advantageous under the 30-year period, has accounting ratios (ARs) respectively of 1.02, 0.97, 0.92 and 0.88 under conversion periods of respectively 30, 20, 10, and 3 years and D/v of 2.5 (Dilip Kumar, 1988, Table 10.5). If the consumption is assumed to accrue at lower levels, D/v may be higher, and the social accounting ratios also higher.

These accounting ratios or shadow prices are then plugged into the SCBA, under various assumptions of social discount or time preference rate (STPR) and shadow wage rate (SWR). Under our assumptions, the longer conversion period is favoured at low social discount rates and high D/v values of the non-teak component. At 3% discount rate and D/v 2.5, it is the 1-year conversion period (immediate liquidation!) that has maximum value; to favour the 30-year period, we would have to use a D/v of around 5.0. At 5% discount rate, D/v of 2.5 or even 5.0 favours still the 1-year conversion period; only if D/v were to be 7.5, does the 30-year period become favourable. In these cases, a loss in social value of the non-teak products is countered by the higher early returns from the high-price teak component. Of course, it has to be remembered that any conclusion favourable to the longer conversion periods comes about only if the afore-mentioned limits on the capacity to absorb the basic needs products is operative. If no such limit is posited, then the more that is extracted, the higher will the net social value be, and there will be no succour for the sustained yield option.

11 Applying Economics to Forestry-II: Management decisions

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Shortening of rotations under economic criteria

Is there any possibility of reconciling economic principles with long-term forestry? The author (like many another forester-turned economist) took up this conundrum in his doctoral work at the University College of North Wales, Bangor, taking the conversion to teak plantations in the Yellapur-Mundgod forests of Karnataka State’s Western Ghats as a case study (Dilip Kumar, 1988). Some of the models and results have been presented in the volume edited by Kerr et al. (Dilip Kumar, 1996), and some additional aspects on the social cost benefit side will be explained here. The details need not detain us; basically the growth model was based on the available yield tables for teak published by the Forest Research Institute, Dehradun (FRI, 1959).

If financial criteria based on costs and returns at usual market rates were applied, optimal rotations shrank drastically as discount rates rose, from the 80 plus years under the physical mean annual increment (MAI) criterion. On a SQ III hectare, the optimal rotation to maximize the net discounted revenue or NDR (of one rotation) stays above 80 years through discount rate of 4%, then at a discount rate of 5%, it drops to 55 years, and at 10%, to 20 years (it turns completely negative by 13%, which would thus be the maximum internal rate of return, IRR). Similarly, on SQ IV, the rotation of maximum NDR remains at above 80 years up to a discount rate of 4%, but thereafter the optimal rotation falls to 20 years at 5% (actually, this is the rotation of minimum loss). Rotations to maximize the soil expectation value SE (net present value of an infinite series of rotations) are even shorter.

Thus the long rotations of maximum MAI are not encouraged by the financial criterion at any medium interest rates. The whole decision, then, would hinge on the actual discount rate one applies. Samuelson (op. cit.) and other neo-classical economists argue that the forest sector ought not to be allowed to use a very low discount rate that would render long rotations profitable, just because of some (imagined) social benefit or ‘externality’. If the rest of society were indeed paying higher rates (usually a figure of 12% is used for this opportunity cost of capital), this is what should be applied, in which case long-term forestry has little chance of passing muster.

However, the discount rate in real terms falls if inflation is allowed for: maybe to less than 5%. This, for the teak plantations we examined, is a border-line rate as far as the fate of long rotations is concerned. One consideration, however, is that there is such a sudden drop in optimal rotations for a small change of discount rate between say 4% and 5%, that one may well decide to apply the criterion somewhat ‘conservatively’ (i.e. in favour of the longer rotation) within the margins of uncertainty of the data and assumptions, without running foul of the economists’ fiats.

The cost of extraction to the consumption centre may also be a material factor: the farther it is, the less economic pressure there will be to harvest early. Continuous increase in timber prices may also favour postponing the harvests (the price rise acts as a negative interest rate), although a one-time increase in prices will call for earlier liquidation (the opportunity costs of preserving the crop rise, especially if we compute the SE of an infinite series of similar crops). The cost of waiting will have a more pronounced rotation-shortening effect if there are no intermediate yields from thinnings (unlike teak).

Conversion of standing forest and economic criteria

A somewhat different problem is the linking of planting and harvesting decisions to the conversion from miscellaneous mixed forest to monoculture. If the conversion process were taking place under constant prices (timber flooding the market does not lead to a crash in prices), there would be little incentive under purely economic criteria to retain any portion of the old crop: the favoured policy would be to ‘cut and run’, as will happen if people are given a free run in the forest.  By separating the regeneration decision from the felling decision under the dictates of neo-classical economic theory, regeneration is liable to be abandoned if it is seen to be financially unviable (especially on the inferior hectares). In contrast, the traditionalist forester would probably leave the crop standing as a soil cover and potential seed source, if replanting were financially or administratively unviable; or work it on a financially less demanding system like the selection system, leaving it to nature to supply new recruits to the crop through natural regeneration and ecological succession. The business-minded manager, on the other hand,  would be justified in leaving the existing crop standing, only if the product were so inferior as to have no sale value at all, and if there were no other practical use for the land resources.

This brings us to the choice between different products like firewood and poles (small timber) versus lumber or saw-timber (large timber, logs). One of the factors that are pushing down the rotations in our teak case is that the thinnings and fellings are assumed to produce smallwood (poles and firewood) that has a positive market value. Indeed, at high interest rates, the very low optimal rotations imply that the crop is practically being worked for firewood. The higher valued saw logs are so distant in time, that they have relatively little impact on the present discounted value, like a mountain viewed from afar (with a wide angle lens!). Thus the application of any substantial discount rate is bound to act against the production of saw logs and in favour of more early, smallwood products.

Economics of converting old growth 

A consideration that may come to the rescue of the long rotations and slow conversion rates of existing crops may be the indirect services that are expected to flow from such natural crops, but this is likely to support longer rotations only if the stream of such benefits is shown to increase with age of the crop. If not, as in the case of carbon sequestration, it may also come about that a series of fast-growing crops may capture more carbon in a given time period, than keeping the already locked-in carbon in standing trees. Samuelson feels that such decisions should be left to “the electorate, by that same pluralistic process” which determines other fiscal decisions and allocation of budgets (Samuelson, 1974, p.486). We will look at the conversion problem next.

(For references, please see previous post)

10 Applying Economics to Forestry-I: Strategic decisions in Indian forestry sector

Full paper here (pdf)

Scientific forestry, as developed in Europe during the 19^th century and applied and expanded in India by European foresters like Brandis (1897) under the colonial government, focused on the maximization of physical mean annual increment, rather than on financial returns. However, economists have trenchantly criticised this and advocated alternative financial methods, starting with the discounted cash flow principle advanced by Faustmann (1849), which has been revisited by Gane (1968). During the later decades of the 20^th century, a number of mainstream economists have advocated economic efficiency principles for management decisions such as the cutting of old tree stands, choice of species and product mix, age at harvest, level of investment and costs, and so on (e.g., Bentley and Teeguarden, 1965; Pearse, 1967; Hyde 1980; Johansson and Loefgren, 1985; and a host of others).

Over time, the domination of economic criteria in forestry led to a backlash from ecologists and social environmentalists, who argued that such a strong orientation to industrial interests was leading to both ecological destruction and the erosion of people’s livelihoods and cultural base (see, for example, Gadgil & Guha, 1992). Attempts were made to reconcile financial objectives the interests of equity by various artifices within he framework of economic theory, such as social cost benefit analysis, SCBA (Little and Mirrlees, 1974), or including non-monetised products and services through “unpriced values” (Sinden & Worrell, 1979). The current fashion is to advocate the other extreme of completely handing over the forest to local communities (for a recent, comprehensive statement, see Lele & Menon, 2014).

Rather than be blown around by such changing currents from the social sciences, the forest establishment may well be justified in sticking to what it sees as a safe middle path, and to be somewhat slow in adopting every latest fashion in the social sciences.

Economic critique of traditional forestry

The ‘neo-classical’ economists criticised the ‘sustained yield, no drop-off, and never-declining yield’ principles of the classical European foresters and their colonial followers on the grounds that they ignored the costs of time, which imposes costs on financial investment, and of land, which has alternative uses and hence an opportunity cost that is seldom considered in public forestry, since the forest department does not have to pay for the land or its annual rent (Thompson, 1966; Smith, 1969; Waggener, 1969; Ledyard and Moses, 1974; Roberts, 1974). The economists consequently charged that the vast resources of publicly owned timber were being inadequately harvested (Hirshleifer, 1989, p.52). According to Smith (1969), “(a)n economic view suggests that sustained yield should have gone out with the cross-cut saw” (see Davis and Johnson, 1987, Chapter 16 for an analysis of harvest decision criteria).

Prominent economists like Paul Samuelson and Hirshleifer pressed home such criticisms at a symposium on “The Economics of Sustained Yield Forestry” at the College of Forest Resources, University of Washington, Seattle, Washington in November 1974, the proceedings of which were not published as originally planned because “the implication that more logging should take place on public lands was unpalatable to many in the industry” (Hirshleifer, op. cit., p.52-53). However, seeing that the ‘big guns’, like Hirshleifer himself and Samuelson, in any case managed to get their contributions published in mainstream journals, one wonders whether the disadvantage was not the other way round!

Hirshleifer suggests that this “shibboleth” of sustained yield “does seem to be irrationally worshipped in at least part of the forestry literature”, like the holy cow of India, “with seriously harmful consequences for the well-being of our nation” as “…a large part of the nation’s capital is locked up in an untouchable and unremunerative form” despite a miniscule annual increment (just 0.88% per year) (Hirshleifer, op. cit.). This amounts to working in the range of “first order absurdity” where annual yield is falling with further increments in capital stock, or even the region of “second order absurdity”, where the annual sustainable yield is deemed negative (and falling). All this calls for a decumulation of excess capital stock, and for the locked up capital to be realized so that the funds could be invested elsewhere in the economy (Hirshleifer, op. cit.). To allay fears of future shortages, technological advance over time “will allow us to get more yield from any given level of future capital stock” (ibid., p.58), which means that “less current saving and investment are needed in the case of relatively scarce capital”, and draw-down of excessive capital types can be faster (p.59).  To counter charges of  “money-grubbing”, Hirshleifer declaims that it is verily the moral duty of the foresters, as “stewards” of the public resource, to work them for maximum return, failing which “we would actually be better off giving the forests away” (op. cit., p.61).

One such “pathological” effect of sustained yield (SY) according to Hirshleifer was the so-called “allowable cut effect” (ACE), according to which adding additional areas of young growth, or even “otherwise worthless” cut-over lands (ibid., p.63), to an existing estate of mature or old growth, implies a bigger annual average increment for the entire forest, thereby justifying a faster rate of liquidation (conversion) of the old growth. Interestingly, what he finds objectionable in the ACE is, not so much that it appears to be an unethical way of justifying quicker draw-down of old growth (which economic efficiency anyway demands even without the ACE being dragged in), but that it is irrational: “Rationally, of course, if a cut of over-mature timber is justified, it remains so whether or not a separate stand of young timber is included in the same working circle” (ibid., p.62). This demolishes one of the fundamental principles of traditional SY forestry, i.e. that one has to guarantee regeneration before thinking of cutting, by separating the two decisions. Management decisions are asked to stand on their own economic feet, rather than being dependent on one another. In this spirit, Hirshleifer finds objectionable such “slogans” of the conservative forester as “evenflow”, “sustained yield”, “no-drop-off”, etc. Such ideals, which stem from the forest service’s misplaced (in the economists’ view) aim for stability, are deserving of censure as “truly pernicious” (ibid., p.61), “ridiculous” (ibid., p.64), and so on. There is even a somewhat sly suggestion that maintaining low current harvest in the public forests might be construed as a device to prop up private timber returns, even though he finds it “difficult to believe that the agency might be a tool of large-scale capitalism” (ibid., p.66).

The great Samuelson’s contribution in the same conference also got published in the mainstream (Samuelson, 1974). For him, the debate has to be decided on the basis of “sound economic analysis” (op. cit., p.466). He does not apparently recognize any intrinsic claim of the redwoods or other old growth to be preserved in lieu of some other crop that may well provide better external or other benefits. Long-rotation, sustained physical yield forestry (“jam tomorrow and never jam today”) could be conceivably justified only if some extra-ordinary positive externalities could be proved, in which case he believes that “all economists would be found on the side of the angels, sitting thigh next to thigh with the foresters” (ibid.). Like Hirshleifer, Samuelson also declares that the market forces will apply the desired corrective if the rate of exploitation is felt to be too high or when scarcity of wood looms (op. cit., p.485). Keeping old forest stands intact is, in his analysis, contingent on society making an informed choice to sacrifice current returns for this purpose, which it will when a certain level of prosperity has been attained (op. cit., p.486):

"The proper way of looking at publicly-owned land is to view it as any public asset. It’s something which is convertible into something else. Too often we’re canny as all hell in running private business and we’re reckless as all hell in running public business. Well, you can be reckless by having things grow too long as well as by not having them grow long enough. We would be better off today if we had adopted a more rational timber harvesting policy in the past." (Samuelson, in discussion reproduced in Dowdle, 1974).

Impact of economic theory on forestry strategy in India

Faced with such a formidable campaign, the traditional forester, unschooled in the art of academic polemics, was unable to put up even a weak fight, if any. From the traditional forester’s viewpoint, the ACE is a corollary of that fundamental bugbear of forestry, namely that the product (annual increment of timber) is physically indistinguishable from the factory (the standing, growing tree). The forest management systems generally require that regeneration be established on an equivalent area before taking the harvest (see Shyam Sunder and Parameswarappa, 2014, for a recent description of these practices in Indian forestry). There is a danger that if even newly regenerated or even vacant lands are added to the pool to calculate annual increment on an area basis, this may result in the more objectionable excesses of theACE, and would generally not be acceptable to the sustained yield forester, for whom the harvest decision is contingent on the state of the forest as a whole and whether or not a full or 'normal' series of young crops is being built up commensurately. If regeneration is not successfully established, fellings in the mature or old-growth crops would need to be delayed or postponed, which would again attract criticism from the economic efficiency viewpoint. Forestry, which was accused as acting as a ‘dog-in-the-manger’ by occupying large stretches of land, water and mineral resources while yielding very low direct financial returns, was less and less able to attract any support, either from policy planners or from the mainstream academics, who mostly followed the eminent economists in castigating sustained yield as too conservative and unreasonably demanding.

One of the ‘pernicious’ effects (to borrow the economist’s favourite term of endearment) of putting economics on top, was that aspiring foresters could not advance their professional careers except by endorsing those principles. For the persons entering the Indian Forest Service in the 1970s, forest economics happened to be the main avenue for higher specialization, as most of them were not from the biology stream (a good example is afforded by Nautiyal, an Indian forester who made good in the University of Toronto, and wrote a much admired textbook on forest economics (1988)). But the economic critique was crippling, because it held up the forest department to ridicule as an outdated, unresponsive, blundering and unprofessional bureaucracy which was sitting on a quarter of the country’s land and natural resources without offering a commensurate return. The forest department was seen as a drag on the economy, and there were intense pressures to divert the forest areas for all sorts of other uses.

One of the direct consequences was the devaluing of natural forests, expressed unambiguously in the Report of the National Commission on Agriculture (NCA, 1976) which called for a major change "from the present conservation oriented forestry to a more dynamic programme of production forestry", heavily slanted toward conversion of the low-productivity mixed forests into monoculture of fast-growing species (like eucalypts) in a bid to raise the low average annual productivity of the forest estate in terms of industrial wood (e.g. pulpwood). Ironically, many Indian foresters, although by training votaries of sustained yield, were also in the vanguard of this transformation. Indeed, it would not be far off the mark to say that the forestry chapters in the NCA report were drafted by foresters who had become forest economists.

As already mentioned, this inordinate endorsement of commercial forestry led to a backlash from ecologists and social environmentalists, who mounted a successful campaign to bring back the values of ecological sustainability and social (equity) concerns. The story of the campaigns, against this type of intensive and invasive forestry involving large scale conversion of mixed native forests to monoculture and the heavy dependence on a few exotic species like eucalyptus, has been has been told and retold in the literature, and will not be repeated here. Suffice it to say that India as a polity has resoundingly rejected the neo-classical economic efficiency model in forestry, until today there are no ‘green’ fellings in most state forests (apart from clearance for development projects), no clear-felling of natural forest, exotics like eucalypts are discouraged or banned in reforestation, and the revised forest policy of 1988 clearly puts environmental and ecological interests above industrial products, and the livelihoods of local communities above commercial returns.

As for the forest departments, they were made to appear as the villains twice over: they were fated to lose in the economists’ view if they stuck to their conservative, low-input low-output ways of sustained yield, and they were fated not to win if they took to fast-growing, intensive forestry based mostly on exotic species.

References

Bentley, W.B. and E. Teeguarden. 1965. Financial maturity: a theoretical review. Forest Science, 11: pp.76-87.

Brandis, Dietrich. 1897. Forestry in India. Origins and Early Developments. Reprinted 1994 by Natraj Publishers, Dehradun.

Ciriacy-Wantrup, Siegfried von. 1952. Resource Conservation: Economics and Policies. University of California Press, Berkeley. 

Davis, Lawrence S. and K. Norman Johnson. 1987. Forest Management. Third Edition. Chapter 16 (pp.685-712): Analysis of Harvest Schedules. McGraw-Hill Book company, New York.

Dilip Kumar, P.J. 1988. Cost Benefit Analysis and Sustained Yield Forestry in India. Thesis submitted for the PhD degree, Department of Forestry & Wood Science, University College of North Wales, Bangor, Wales. 

Dilip Kumar, P. J. 1996. Optimal silvicultural regimes and rotations for teak plantations. In J.Kerr et al. (eds.), 1996, “Natural Resource Economics. Theory and Application in India”. Oxford & IBH Pub. Co. Pvt. Ltd., New Delhi. 

Dowdle, B. (Ed.). 1974.  The Economics of Sustained Yield Forestry. A Symposium. College of Forest Resources, University of Washington, Seattle. (proof copy, mimeo.).

Faustmann, M. 1849. Calculation of the value which forest land and immature stands possess for forestry. Transl. W.Linnard, in M.Gane (ed.), 1968.

Fellner, W. 1967. Operational utility: the theoretical background and a measurement. In Ten Economic Studies in the Tradition of Irving Fisher, p.39-74. John Wiley & Sons, Inc. New York.

FRI, Dehradun. 1959. Yield and Stand Tables for Plantation Teak (Tectona grandis Linn. F.). Indian Forest Records (New Series), Silviculture, Vol.9, No.4. Silviculture Branch, Forest Research Institute, Dehradun, India. Manager of Publications, Delhi.

Gadgil, M. and Ramachandra Guha. 1992. This Fissured land. An Ecological History of India. Oxford University Press, New Delhi.

Gane, M. (Ed.). 1968. Martin Faustmann and the Evolution of Discounted Cash Flow. Institute Paper 42, Commonwealth Forestry Institute, Oxford.

Hirshleifer, Jack. 1989. “Sustained Yield” versus Capital Theory. Chapter 3 in volume Time, Uncertainty, and Information. Basil Blackwell Ltd. Oxford, UK. (Paper    originally presented at a symposium on “The Economics of Sustained Yield Forestry”, held at the College of Forest Resources, University of Washington, Seattle, Washington in November 1974, mimeo, see Dowdle, ed., 1974).

Hyde, W.F.1980. Timber Supply, Land Allocation and Economic Efficiency. Resources For the Future (RFF), Inc. Johns Hopkins University Press, Baltimore and London.

Johansson, P.-O. and Loefgren, K.-G. 1985. The Economics of  Natural Resources. Basil Blackwell, Oxford.

Kula, E. 1984. Derivation of social time preference rate for the United States and Canada. QJE (November): pp. 873-882. 

Ledyard, John and Leon N. Moses. Dynamics and land use: the case of forestry. In Dowdle, 1974. (q.v.)

Lele, Sharachchandra & Ajit Menon. 2014. Democratizing Forest Governance in India. Oxford University Press, New Delhi.

Little, I.M.D. and J.A. Mirrlees. 1974. Project Appraisal and Planning for Developing Countries. Heinemann Educational Books Ltd. London.

Marwah, Anuradha and Varun Thakkar. 2014. On their shoulders. In praise of forest guards, the foundation for wildlife protection in India. Sanctuary Asia, Vol.XXXIV, No.5 (October 2014).

NCA. 1976. Report of the National Commission on Agriculture (NCA), Part IX. Forestry. Ministry of Agriculture and Irrigation, Government of India. New Delhi.

Nautiyal, J.C.  1988. Forest Economics. Principles & Applications. First published 1988 by Canadian Scholars’ Press Inc., Toronto. Reprinted by Natraj Publishers, Dehradun.  

Pearse, P.H. 1967. The optimum forest rotation. Forestry Chronicle, 43 (2): pp.178-195. 

Price, Colin. 1989. The Theory and Applications of Forest Economics. Basil Blackwell. Oxford.

Raj, K.N. 1966. Price behaviour in India. 1949-66: an explanatory hypothesis. IER 1(2). Reproduced in P.Chaudhuri (Ed.), 1972: Readings in Indian Agricultural Development, pp.155-176. George Allen & Unwin Ltd. London.

Roberts, M.J. 1974. Sustained yield and economic growth. In B.Dowdle (Ed.), q.v.

Samuelson, P.A. 1974. Economics of forestry in an evolving society. 

Journal of Public Enquiry, 14(4): pp.466-492.  

Shyam Sunder, S. and S.Parameswarappa. 2014. Forest Conservation Concerns in India. Bishen Singh Mahendra Pal Singh, Publishers, Dehraun.

Sinden, J.A. and A.C.Worrell. 1979. Unpriced Values. Decisions Without Market Prices. John Wiley & Sons, Inc. New York.

Smith, J.H.G.  1969. An economic view suggests that sustained yield should have gone out with the cross-cut saw. Forestry Chronicle 54(3): pp.167-171. 

Subramanian, D.K. 1984. Energy utilization in Karnataka. In C.J. Saldanha (Ed.), 1984:   Karnataka State of Environment Report 1983-84. Centre for Taxonomic Studdies, IISc, Bangalore.

Squire, L. and H.G. van der Tak. 1975. Economic Analysis of Projects. Wprld Bank Research Publication. IBRD. Johns Hopkins University Press. Baltimore and London. 

Thompson, E.F. 1966. Traditional forest regulation: an economic critique. J. Forestry, 64: pp.750-752.

Waggener, T.R. 1969. Some Economic Implications of Sustained Yield as a Forest Regulation Model. Contemporary Forestry Paper Contribution No.6. Institute of Forest Products. College of Forest Resources, University of Washington, Seattle.

Wesley, D.G. 1964. The Revised Working Plan for the High Forest Blocks of Yellapur Division. Forest Department. Government Press, Bangalore.

09 Forestry and the Planning Commission-III. External relevance of plan proposals to sector priorities and needs

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External relevance of the Forest & Wildlife proposals in the 12^th Plan

In the previous sections, we examined the internal consistency of the forest sector proposals in the 12^th Plan document. We now turn to the external relevance of the plan proposals, i.e. how they relate to the ongoing concerns and priorities of the sector, a discussion which will indicate why there has been a lack of connection between the Plan and the implementing agencies, in respect of the F&WL sector. Perhaps this will also be relevant to the role and working of the Planning Commission in general, and provide some explanation for the apparent disenchantment with it to the point of the new government deciding summarily to wind it up (so early into its term).

08 Forestry and the Planning Commission-II. Internal consistency of outlays with aspirations

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Programme proposals in the 12^th Plan

In the previous section, a general introduction was given to the aspirations and goals laid out for forestry in the 12^th Plan document. Now we look at the specific provisions and how far they match the aspirations expressed in the preamble of the Plan document itself (the test of ‘internal consistency’).

07 Forestry and the Planning Commission-I. Forestry aspirations in the 12th Plan

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Revamping the Planning Commission

After the 2014 general elections and the new NDA government assuming power at the centre, one of the first major policy announcements was the winding up of the Planning Commission of India, apparently because the Commission was seen as an outside agency that has taken over too much of the power of budget formulation and allocation of funds that should rightly be under the control of the government. By now, it seems a fait accompli that the Planning Commission of India as we have known it is due to be closed down. At the same time, the government has initiated an alternate body, called the Niti Ayog, which seems to be intended as a policy advisory group (much like the National Advisory Council in the UPA regime?). A spate of articles and papers has appeared in the news media and scholarly journals, debating the pros and cons of the issue, and suggesting the way forward, but there seems to be little clarity on how the functions of the erstwhile Commission will be carried out in the new dispensation. This article discusses aspects and processes of the old Planning Commission, based on the experience of the forest sector, especially in the preparation of  the 12^th Five Year Plan document (2012-17) during the recent past, and on what lessons can be drawn that may be helpful for the successor body to maintain both internal consistency and external relevance.

Forest Sector in the Twelfth Plan – aspirations and objectives

A question arises at the outset, of how a sector-centric analysis of a national plan document could be couched. To just say that the allocation is inadequate will not be very interesting, as any conceivable plan could well leave more unfulfilled clients than satisfied ones. We propose here to examine the 12^th Plan proposals against the plan’s own statement of goals and principles, i.e. analysing it for ‘internal consistency’. It is also proposed to test the plan against the sector’s priorities and objectives, i.e. the plan’s ‘external relevance’, and to draw some general lessons on sectoral planning that may be useful for any successor institution that may be set up. 

“Environment, Forestry and Wildlife” are covered in Chapter 7 of Volume I of the 12^th Plan document (Planning Commission, 2012). The “Vision” is laid out in Box 7.1 (p.202), which stresses the objectives of managing environment, forests and wildlife for “faster and equitable growth, where ecological security for sustainability and inclusiveness is restored, equity in access to all environmental goods and ecosystem services is assured through institution of people’s participation”, and ”A future in which the nation takes pride in the quality of the environment, forests, richness of its biodiversity, and efforts by the State and its people to protect, expand and enrich it, for intra and inter-generational equity and welfare of the local and global community.”   Para 7.2 lists out the seminal concerns: “equitable access to clean air and water, adaptation and mitigation of climate change, conservation of biodiversity, sustainable forest management, safety in the management of chemicals, wastes and other hazardous substances”. Both “international cooperation and national efforts” are stated to be necessary to achieve all these objectives.

The next paragraph, para 7.3, highlights the resource constraints that have limited the effectiveness of environmental and forest resources management in the past: the ministry of environment and forest (MoEF) has been getting only Rs.2000 crores annually, a mere 0.012 per cent of GDP, and less than 0.25% of the annual national budget, which calls for a “substantial increase” in the investment for environmental protection and sustainable management of natural resources. Para 7.4 highlights the need to incorporate environmental concerns into planning and development activities in all the sectors, and para 7.5 expresses the hope that other ministries will earmark resources for environment and greening in their respective programs. Then follows a review of the Eleventh Plan.

Review of the 11^th Plan (2007-12)

Out of the four environment related targets cited from the 11^th Plan, para 7.9 refers to the forest-specific target of increasing forest and tree cover (FTC) by 5% of total land area of around 320  or million hectares  (mha) over 5 years, which would have taken the FTC from around 23.84% of total land area as per the State of Forest Report 2009 (see endnote 1) to 28.84%, or say an additional 16 mha. The plan document states that the tree planting achievement has been around 1.5 mha a year during the 11^th Plan period, but “the actual increase in green cover is not likely to be more than 5.0 million ha during the entire Plan period”(p.204). Both the target and the impact need some clarification which is done in the section on the 12^th Plan targets (see below).

Proceeding with the 11^th Plan review, Para 7.15, highlights the importance given to “Rationalisation of Schemes during the Eleventh Plan” (p.206) by “suitably merging /clubbing its 68 smaller schemes into 22 thematic schemes”. In the Forestry and Wildlife (F&WL) sector, one proposal for Afforestation through Panchayati Raj Institutions (PRI) “has been dropped following the formulation of National Mission for Green India with similar objective on a much higher scale”, leaving six schemes under Forestry, and five under Wildlife including Animal Welfare at the end of the 11^th Plan (ibid., p.406, Table 7.1). Reducing the number of schemes was apparently a big priority and matter of pride for the Commission, equally in the 12^th Plan document, ignoring its implications on sector planning and vision (see below, and Planning Commissioner Advisor Mihir Shah’s article in the EPW, Shah, 2014).

Overall in the 11^th Plan, against total “approved outlay” of Rs.10,000 cr of the ministry  for the whole 5 years (2007-12), “allocated” or actually “sanctioned” outlay amounted to some 9231 cr through the “budgeted expenditure”,  whereas “actual expenditure” amounted to around 8476 cr or 95% (ibid., p.207). Forests & Wildlife (F&WL) and National Afforestation & Eco-Development Board (NAEB) were together allotted a “sanctioned” outlay of Rs.6094 cr against which the total “actual expenditure” was expected to come to some 4438 cr over the 11^th Plan period (Figure 7.2, p.208), or some 880 cr per year, which has to cover both Forests and Wildlife (para 7.92 of the 12^th Plan document puts the current central assistance for afforestation programmes at only around Rs.350 cr per year, ibid., p.225). These figures give a convenient ground for comparing and assessing the budgetary support under the 12^th Plan proposals.

Guiding principles and objectives for the 12^th Plan (2012-17)

Targets and action for the 12^th Plan are given from para 7.22 (p.207) and in Box 7.3, listing three “monitorable targets” in the areas of Environment and Climate Change, four in Forestry, three targets under Wildlife, Ecotourism and Animal Welfare, and two under Ecosystems and Biodiversity, and additionally “15 areas which should receive special attention” presented in Box 7.4 (para 7.23). The main points are as follows.

Targets for F&WL (from Box 7.3, p.209):

FORESTS AND LIVELIHOOD

5. Greening of 5 mha under Green India Mission.

6. Technology-based monitoring of forest cover, biodiversity and growing stock including change-monitoring on periodical basis through dedicated satellite by 2017 and establishment of open web-based National Forestry and Environmental Information system for research and public accessibility by 2015.

7. Engagement of Village Green Guards/Community Foresters for every Joint Forest Management (JFM) village by 2016.

8. Establishing forestry seed bank in forest circles and Model Nursery in every district.

WILDLIFE, ECOTOURISM AND ANIMAL WELFARE

9. Twenty per cent of veterinary professionals in the country will be trained in treating wildlife.

10. Integrated Ecotourism District Plans covering 10 per cent of all potential Protected Areas (PAs) by 2017.

11. Promoting participation of private sector, civil societies, NGOs and philanthropists in animal welfare.

Goals (from Box 7.4):

FORESTS AND LIVELIHOOD

6. Improve forest productivity, production and sustainable management of biodiversity (equity in access to benefit sharing with local people).

7. Restoration and intensification of forest-rangelands/grazing-land management and establish community grazing land around forest fringe villages.

8. Build capacity of Village Forest Committees/Joint Forestry Management Committees for management of forest resources including ecotourism.

9. Revive seed orchards and silviculture plots for various forest types of the country, as well as, for enlisted species under Minor Forest Produce/Non Timber Forest Produce (MFP/NTFP) including genetic improvement of and establishment of clonal orchards.

WILDLIFE, ECOTOURISM AND ANIMAL WELFARE

10. Reducing and managing human–wildlife conflict.

11. Commercialisation of permissible marine products rich in poly unsaturated fatty acids (PUFAs), vitamins and so on.

12. Promotion of ecotourism and participatory eco-development support livelihood of local population.

An overall statement of “strategy” in para 7.24 lays out the importance of improvement in “environmental governance” and moving toward a scientific and anticipative system based on sound objective data. A major new proposal appears to be the establishment of a “high powered body” called the National Environment and Forestry Council (NEFC) with the Prime Minister as chairman and Environment Minister as vice-chairperson, with representation from various ministries and a group of experts (para 7.31, p.211). Its “primary function would be to bring in harmony in the functioning of different Ministries and to ensure that the evolution of all policies, laws and their implementation concerning development, of every kind, are in conformity with the objectives outlined in the National Environmental Policy (NEP), 2006”. Similar Councils are called for in the states, and “environmental cells” in the ministries and departments at the centre and state governments “to mainstream environmental concerns in their activities and programmes” (para 7.32). A “comprehensive review and reform” of laws concerning Environment, Forests, Wildlife and Biodiversity will be undertaken in the Twelfth Plan in order to make them “more effective, work in harmony with each other and address new challenges” (para 7.33). In the specific context of forestry, review is suggested for “Developing harmony in the working of laws in the sector with the Panchayat Extension to Scheduled Areas Act, 1996” (ibid., page 212). 

A multi-pronged approach to environmental regulation is also outlined, involving creation or strengthening of institutions like a National Environmental Monitoring Programme (para 7.37), a National Environment Assessment and Monitoring Authority, NEAMA (para 7.38), creation of a National Environment Restoration Fund, NERF (para 7.40), on the environment side of the ministry. To strengthen livelihoods support, it is proposed to develop non-timber forest products (NTFP) in a “holistic” way under an autonomous agency with branches in all the states, and a new scheme is suggested for the “overall management of NTFP resources including conservation and development of an estimated 6 lakh ha as well as value addition and marketing support” (para 7.45). A new focus on pasture management and rangeland development on “traditional grasslands on common/ revenue land around forest areas” is proposed for improving the livelihoods, nutrition and quality of life of “all fringe forest dwellers” (para 7.46).   Of direct relevance to forestry are the proposal for GIS-based mapping of areas under the Forest Rights Act 2006 (para 7.47) and strengthening of the National Forestry Information System (NFIS) to enable “networking with States for tracking changes in forest development, harvesting, trade and utilisation scenario with particular focus on issues of ownership and rights under Forest Rights Act” (para 7.66), revival of the Central Board of Forestry under the Prime Minister for policy development and consultation (para 7.48), reorientation of the Indian Council for Forestry Research & Education (ICFRE) on the lines of the Indian Council for Agricultural Research (para 7.49), amending the Working Plan Code to “incorporate new dimension” along with empowering the “cutting edge level workers” for “transferring the rights in the field” (para 7.50), and creating a “green fund” by imposing a forest development tax or eco-tax (para 7.51).

In respect of wildlife, the Integrated Development of Wildlife Habitats (IDWH) scheme would continue to be “the umbrella scheme for conservation and management of wildlife” (para 7.52), tiger conservation led by the National Tiger Conservation Authority would continue as a “flagship programme”, with emphasis on some new aspects like buffer areas and voluntary relocation of habitations along with regular monitoring of tiger population (para 7.52). Project Elephant “needs a new focus under the plan through the creation of the National Elephant Conservation Authority (NECA) and notification of critical areas of Elephant Reserves as Ecologically Sensitive Areas under the Environment (Protection) Act 1986”, and “special focus” is required on mitigation of human–elephant conflict through  strengthening of the existing Project Elephant Scheme (para 7.53). In addition, two new schemes are proposed: Operationalisation and Strengthening of Ecotourism for Local Livelihoods, and Promoting Participation of Private Sector and Philanthropists in Animal Welfare (para 7.55).

Now it remains to see how the 12^th Plan document proceeds to convert all these high-sounding principles and objectives to concrete programmes on the ground (the test of ‘internal consistency’ suggested above), and how these objectives gel with the actual priorities of the forest sector (‘external relevance’).

Keywords: forestry, planning commission, governance, budgets, India

Endnote 1. The State of Forest Report (SFR) is published once in two years by the Forest Survey of India, and is an assessment of forest cover as per the satellite imagery obtained usually two years prior to the year of publishing. This time lag (which seems to have been reduced over successive years) used to be reflected in the naming scheme of the reports. Thus, SFR 2005, prepared by mid-2007 (released actually in January 2008 as per the PM’s message contained in it), pertains mostly to November-December 2004, except for the north-east and Andaman & Nicobar Islands, which was based on imagery of January-February 2005 (FSI, 2008). The next report to be published in 2009 would have been named SFR 2007, but  the MoEF changed the naming convention, naming it SFR 2009, although it reflected the satellite imagery of October 2006- March 2007. SFR 2007 therefore does not exist. Subsequent  reports have been named the SFR 2011 (published actually in February 2012), reflecting the position as per imagery of October 2008-March 2009, and SFR 2013,  based on satellite imagery of October 2010-January 2013, formally released only in September 2014 (after  the 2014 general elections), although the copyright notification is dated 2013.

References

FSI. 2009. India State of Forest Report 2009. Forest Survey of India. Dehradun. Ministry of Environment & Forests, Government of India. .

FSI. 2011. India State of Forest Report 2011. Forest Survey of India. Dehradun. Ministry of Environment & Forests, Government of India. .

FSI. 2013. India State of Forest Report 2013. Forest Survey of India. Dehradun. Ministry of Environment & Forests, Government of India. .

Government of India. 2010. National Mission for a Green India. National Consultations. Ministry of Environment & Forests. New Delhi.

ICFRE. 2012. Forest Sector Report India 2010. Indian Council for Forestry Rsearch and Education, Dehradun. Ministry of Environment & Forests. Government of India, New Delhi.

Planning Commission of India. 2012. Twelfth Five Year Plan (2012-2017). Volume I. Government of India, New Delhi. (accessed at www.planningcommission.nic.in/plans/planrel/12thplan/welcome.html).

Shah, Mihir. 2014. The “New” Planning Commission. (EPW Web Exclusives http://www.epw.in/web-exclusives/”new’-planning-commission.html, 30 August 2014).