Compensatory Afforestation and Net Present Value

In one line

When a forest is diverted, the user agency pays for a new forest somewhere else and for the value of what the old one was doing, and the Compensatory Afforestation Fund Act 2016 says where that money goes.

In exam wording: compensatory afforestation is defined by section 2(d) of the Compensatory Afforestation Fund Act 2016 as afforestation done in lieu of the diversion of forest land for non-forestry use under the Forest (Conservation) Act 1980, and net present value is defined by section 2(j) as the quantification of the environmental services provided for the forest area diverted for non-forestry uses, as may be determined by an expert committee appointed by the Central Government from time to time; the sums so realised are credited to the National Fund under section 3 and the State Fund under section 4, and disbursed and utilised under sections 5 and 6 through the National and State Compensatory Afforestation Fund Management and Planning Authorities constituted by sections 8 and 10.

Section 1. The Act may be called the Compensatory Afforestation Fund Act 2016, and it comes into force on such date as the Central Government appoints, different dates being appointable for different provisions.

Why the Act exists

The money was being collected long before there was a statute for it. Section 2(a) defines the ad hoc Authority as the ad hoc Compensatory Afforestation Fund Management and Planning Authority constituted under the order dated 5 May 2006 of the Supreme Court in T.N. Godavarman Thirumulpad v. Union of India, Writ Petition (Civil) No. 202 of 1995.

So for ten years the fund was a creature of a court order. Parliament put it on a statutory footing in 2016 and, by section 3(3), transferred to the National Fund all the money collected by the States and Union territories which had been placed under the ad hoc Authority and deposited in nationalised banks.

That is the answer to a question about the source of the fund. It began as a judicial device and became a statute.

The four definitions to memorise

Section 2(d): compensatory afforestation. Afforestation done in lieu of the diversion of forest land for non-forestry use under the Act of 1980.

Section 2(j): net present value. The quantification of the environmental services provided for the forest area diverted, as determined by an expert committee appointed by the Central Government.

Section 2(e): environmental services. The definition is inclusive and has three limbs. Provision of goods such as wood, non-timber forest products, fuel, fodder and water, and services such as grazing, tourism, wildlife protection and life support. Regulating services such as flood moderation, carbon sequestration and the health of soil, air and water regimes. Supporting services necessary for the production of ecosystem services, biodiversity, nutrient cycling and primary production including pollination and seed dispersal.