22 Managing the Compensatory Afforestation Fund in India-I. Background and the need for a bill,

Various reports in the news media have confirmed that the long-awaited Compensatory Afforestation Fund (CAF) bill was finally approved by the Union Cabinet and has been introduced in Parliament on May 8 2015 for passing in the current session (www.prsindia.org/billtrack/the-compensatory-afforestations-fund-bill-2015-3782/). As expected, analyses and critiques have started appearing in the national newspapers, such as a highly critical article by Praveen Bhargav and Shekar Dattatri, in the Hindu newspaper of July 29. Since they are such well-known and respected conservationists who have also served on national committees, their views deserve to be looked at in all seriousness, and certain misapprehensions or even misconceptions clarified,  which is what I have attempted here from the hindsight of dealing with these issues from both the states’ and the centre’s point of view.

Genesis of the Compensatory Afforestation Fund and Authority (CAMPA)

It may be as well to first recapitulate the main components and motivation for this fund, which, as stated in the article referred to, had an accumulated balance of Rs.35,000 crores as of 2012 (and may have grown even larger since). There are two main components: one is a ‘tied’ fund for Compensatory Afforestation (CA), plus a few other committed items to do with catchment area treatment (CAT), protected areas (PA), etc. The lands on which these operations have to be carried out should have already been identified at the time of giving the forest diversion permissions under the Forest Conservation Act (FCA), and there are standards for per hectare costs to be incurred and so on (see the FCA Handbook, Govt of India 2004, Chapter 3). Strictly speaking, these operations ought to have been carried out immediately on inception of the concerned non-forestry projects, but because of various reasons, they have fallen way behind, exciting adverse comment from environmentalists, courts and the auditor-general.

One of the main reasons is that for a long time there was no clarity on how these funds (which come basically from the project proponents or implementing government agencies) are to be managed and deployed. The FCA Handbook (op. cit.) originally provided that each State or Union territory would receive the amounts directly into a special fund (non-interest bearing, as per Finance Ministry instructions), and maintain accounts and submit reports to the central government.  However, following the Supreme Court order dated 30-10-2002 (Dutta and Yadav, 2011, p.210 et seq.), the gazette notification dated   23-04-2004 had been issued (Handbook, Appendix-16), creating a national Compensatory Afforestation  Management & Planning Authority (CAMPA) in the central ministry, after which all existing balance amounts would have to be transferred to the central CAMPA account (and kept as interest-bearing investments in nationalized banks, post office deposits, etc.). Likewise, all future payments would also be made directly into this central account.

The NPV component

The second component is the payments toward the so-called Net Present Value (NPV), which is a measure of the value of environmental and ecological services lost as a result of the diversion. This was not a part of the original scheme, but came about as a result of the Supreme Court order dated 30-10-2002 adding this requirement in the nature of a fee, which was fixed in the range of Rs.5.8 to 9.20 lakhs per hectare, depending on the quantity (quality?) and density of the forest diverted.

Pursuant to the advice of the CEC and the instructions provided in the SC order, the MoEF order dated 23-04-2004  instructs that the NPV portion “shall be used for natural assisted regeneration, forest management, protection, infrastructure development, wildlife protection and management, supply of wood and other forest produce saving devices and other allied activities” (Handbook, p.97). This notification, however, was subjected to further discussion in the Supreme Court (Dutta & Yadav, p. 284), and further instructions issued by the Court in its long order on 26-09-2005 (op. cit., p. 294 et seq.). Key points include: increasing the number of independent environmental experts on the CAMPA Executive Committee to three; following corporate accounting based on double entry system; flexibility to take up operations in adjoining states rather than solely in the state where a particular project has utilized forest land; making it mandatory to set up “Special Purpose Vehicle” for carrying out the CA “in specified areas”; and a final ruling about the legality and modalities of levying NPV (op. cit., p.303).

The SC order dated 26-09-2005 has an interesting discourse on the concept of discounted value, and the different methods of putting a value to intangibles and non-market benefits: “opportunity cost, replacement cost, travel cost, contingent value method (CVM), revealed preference approach, and social cost benefit analysis (SCBA)” (op. cit., p.304). The SC recognizes that different types of environmental benefits would probably call for a different method of valuation. Of course, each site would have a different value in these terms, but a practical approach is called for that will not “overwhelm” the decision-maker by an “avalanche” of detailed information (p.306).  The SC decided to refer the valuation of NPV that should be recovered from project proponents, for different categories and types of forest, to a committee of experts, under the chairpersonship of Dr. Kanchen Chopra of the Institute of Economic Growth, New Delhi.

Need for an ad hoc CAMPA

While awaiting the results of this study, it was noticed by the Supreme Court that the ministry had not yet made the envisaged central CAMPA operational as desired, and on 05-05-2006 (Dutta & Yadav, p.376 et seq.), endorsing the suggestion of the CEC, the SC ordered the ministry to set up what is known as the “ad-hoc” CAMPA.

The SC again made some telling remarks on the CAMPA matter on 28-11-2006 (Dutta & Yadav, p. 422), wondering why a Chief Executive Officer (CEO) had still not been appointed and comprehensive rules had still not been formulated and finalized in terms of the SC orders of 29-10-2002 and subsequent proceedings, and asked the ministry to report compliance by 15-12-2006. This the ministry has done by making the Additional DGF in the ministry the “acting CEO” with regular appointment to be made after the CAMPA is constituted, which was apparently accepted by the Court (SC order dated  05-01-2007, Dutta & Yadav, p.430). Whereas the original government notification of 23-04-2004 had provided (apart from the governing and executive bodies) for a CEO of the rank of Inspector General of Forests (IGF), a Joint CEO, and two Deputy CEOs to be appointed on deputation, apart from the other complement of staff (cf. Appendix-16 in the Handbook), the ad-hoc CAMPA has the ADGF of the ministry as the CEO, and only a tiny handful of support staff for accounts and correspondence, engaged on contract. The ad-hoc CAMPA governing committee itself is composed (as desired by the SC) of representatives from the Central Empowered Committee (CEC), Comptroller and Auditor General (CAG), and also has members from related central ministries (Rural Development), apart from the DG Forests (who acts as Chairperson) and the ADGF. All the CA and NPV monies lying with the state governments were supposed to be got transferred to the bank account maintained by this body, and all further payments were to be routed into this account. These amounts are being kept as interest-bearing deposits in (nationalized) banks, thereby fulfilling onje part of the orders.

However, it appears that in practice, there was not an agreed smooth procedure for allocating funds to the state governments to carry out the CA and other operations, so the CAMPA account was building up a large balance (now around Rs.35,000 crores or more), defeating the very purpose of the scheme. (For comparison, the amounts available in the Postal Life Insurance corpus in 2013-14 was Rs.32,716 crores according to their website www.postallifeinsurance.gov.in/static/PLICustStatistics.aspx, with a sizeable administrative structure to manage the operations over the whole country). The SC noted in order dated 25-02-2009 (Dutta & Yadav, p.519) that some 23 state proposals were pending consideration with the ad-hoc CAMPA committee, and directed it to scrutinize the proposals and file a report in the Court for orders; it is apparent the monies were not being dispersed all this time to the states. There was also a fairly extended period, from 2004 (see SC order dated 15-09-2006, Dutta & Yadav, p.409) to 2008, of a lack of trust between the ministry and the court, owing to a somewhat ill-advised move to pack the Forest Advisory Committee (FAC) with experts in Mining, Civil Engineering and Development Economics (who would tend to function as industry representatives), rather than environmentalists or wildlife experts (vide Forest (Conservation) Amendment Rules, 2004, published in Gazette of India Extraordinary on 03-02-2004, see Handbook, p.14). This resulted in a stand-off and the SC taking over part of the executive functions of the ministry with the help of the CEC (SC order dated 27-04-2007, Dutta & Yadav p.433), until finally the FAC was reconstituted with environmental experts like Madhav Gadgil and the Court returned the ministry its powers under the Forest (Conservation) Act (SC order dated 02-05-2008, Dutta & Yadav, p.485) .

The initial attempt of the then government to bring in an Act to set up the regular CAMPA in terms of the SC orders was defeated in the Rajya Sabha in February 2009 (mainly as the states did not take kindly to the centralization of the control in the hands of the ministry, as they felt that the amounts rightly belonged to the states, and should be kept at the disposal of the respective states, see www.downtoearth.org.in/news/campa-bill-defeated-3155). It was only in July 2009, after Jairam Ramesh assumed charge of the ministry, and undertook some confidence-building measures with the CEC (Ramesh, 2015, p.291), that a mutually acceptable compromise was worked out, in the form of an ad hoc CAMPA complemented by state CAMPA with their own accounts. The SC reverted control back to the ministry (SC order dated 10-07-2009, Dutta & Yadav, p.531), with the rider that the ad-hoc CAMPA would release only upto 10% of the principal amount (roughly, the interest accruing) every year to the states, on the basis of proposals (annual plans) duly approved by the national CAMPA governing body (the National CAMPA Advisory Council or NCAC under the chair of the Minister). It was also stated that the ad hoc arrangement would be replaced in short order with the regular CAMPA duly notified with the prior approval of the SC. This is what the ministry has been trying to do all these years, while continuing to operate the funds with the ad hoc committee in the meantime, and which has culminated in this new bill in Parliament.

In the next section, we will deal with some of the apprehensions about the proposed CAMPA structure.

Downloadable pdf version:
https://www.academia.edu/18796367/Managing_the_Compensatory_Afforestation_Fund_in_India

References

Bhargav, Praveen and Shekar Dattatri (2015): Sowing the seeds of a disaster. The Hindu, 29 July 2015, p.11 (Bangalore).

Dutta, Ritwik and Bhupender Yadav (2011). Supreme Court on Forest Conservation. Third Edition. Universal Law Publishing Co., New Delhi.

Government of India (2004). Handbook of Forest (Conservation) Act, 1980. Ministry of Environment & Forests, New Delhi.

Ramesh, Jairam (2015). Green Signals. Ecology, Growth and Democracy in India. Oxford University Press, New Delhi.