Wednesday, October 28, 2015

24 The fear of corruption. Managing the Compensatory Afforestation Fund in India-III

The fear of corruption

In the final analysis, what is troubling the public (which is also the brunt of the article by Bhargav and Dattatri), is that the forest department (and, by implication, all government) is irredeemably and terminally corrupt, and is not fit to be trusted with public resources. This, of course, is a terribly one-sided and jaundiced view, and belied by the very fact that so much forest is still surviving, that India is one of the very few third world countries to have stabilized its forest cover, that it has still the world’s largest populations of tiger, elephant in the wild, and so on.

Foresters tend to think that the forest reservation system introduced by the British is to be thanked (or blamed, if you are a social environmentalist) for this, but wildlife enthusiasts would probably claim that it is all because of their Sisyphean efforts. There is obviously a little truth in each of these claims: thanks to the wildlifers, the country was persuaded to set aside natural habitats as wildlife sanctuaries and national parks, that are now some 4% of the total land area (and 20% of the forest area), with all the benefits to the fauna and flora mentioned above. 

On the other hand, it is the reservation of forests that has allowed the 20% or so of forest cover to survive, especially in the upper catchment areas of our rivers, thanks to the Indian Forest Act and some other forward-looking colonial legislation like the Punjab Land Protection Act 1900 (enforced in the lower Himalayas in both India and Pakistan), and the wildlife and environmental protection acts. 

It can also be accepted that the post-independence National Forest Policy of 1952 erred too much on the side of commercialization of forest operations and alienation of the forest-dependent communities, especially tribals, and the strenuous efforts of the social environmentalist and activists have contributed to the adoption of a revised policy (1988) that is much more suited to a tropical, poor country like India. Surely this revised policy would have been applauded by that arch-conservator, Dietrich Brandis, who set up the Indian forest department and inspired the foundation of the US national forest system and the US Forest Service under its founder-chief, Gifford Pinchot, in the same period at the end of the nineteenth century.

The whole discussion becomes obviously futile if one starts from the assumption that the states are all corrupt beyond redemption, that the central government is toothless and ill-intentioned, and so on. None of these assumptions is totally nonsensical, but they are not completely true either, and if extended to other sectors, would demand the closing down of  the Indian government and the withering away of the Indian state, which some social activists seemingly look forward to. 

The rest of us, who do not subscribe to these agendas, will have to continue striving with the existing state and its instruments (and a less than pure and innocent citizenry, as well!), to the best of our limited capabilities and ability to look into the future. We take recourse to the fact that there are so many levels of supervision and oversight in the states: the successive checks and counterchecks at the executive levels, the state planning and voting of budgets, the annual reports and legislative discussions, the watchdog committees, the project review and evaluation processes, internal audit, the accountant-general’s audit, and so on. Unless there is widespread complicity at all these levels, a major scam cannot take place. We comfort ourselves with the thought that all of us, commoner and prince, intellectual and layman, alike are probably going to be proven wrong in the long run. The imminent demise of the forests and squandering of the Compensatory Afforestation (CA) fund is one such prediction that is unlikely. However, as reiterated below, greater consultation of academics and NGOs may be incorporated in order to arrive at a consensus on what to do with the funds (especially the discretionary NPV portion).

Procedural suggestions

 Having said this, there are a couple of obvious potential pitfalls that the ministry may need to exercise due diligence about. One is that (as already stated) this Bill proposes to make the States the recipients and custodians of the amounts in credit and to be received in the future, which of course is a reversal of the Court-induced consolidation at the Centre. The SC order of 26-09-2005 deliberates at length on why the State governments cannot lay claim to the NPV payments, which are related to national and global environmental interests, and declares that the public trusts doctrine behoves us to protect the rights of future generations as well, and therefore the CAMPA funds “have to be used for regeneration of eco-system and the same cannot be handed over to any State Government on the premise that ecology is not property of any State but belongs to all being a gift of nature for entire nation” (SC order dated 26-09-2005, Dutta & Yadav, 2011, p.323). As such, the shape of the regular CAMPA was supposed to be got approved by the Court through the  CEC, and it would be expected that the ministry would have done this before finalizing the new proposal. If it does so, there may well be a different viewpoint on the need to divest the centre of the accumulated balance as well as the responsibility of administering the account, unless the central government can convince the Court that sufficient and strong safeguards have been built in to keep strict controls on what the amounts can be spent on. 

If however the Court is still not convinced of the desirability of divesting the management of the funds to the states, then it would be necessary for the central ministry to accept the primary responsibility to take care of the account, and in that case the central CAMPA would have to be strengthened in many ways, with proper financial and accounting staff to maintain the integrity of the account, as well as sufficient qualified technical staff and supervising officers of the forest service to keep watch on the effective utilization of the resources in the states and to do periodic monitoring, impact assessment, and render qualified and informed advice to the national governing council. In the states as well, it may be possible to set up a wider overseeing mechanism with greater involvement of local ecologists and environmentalists to ensure that the natural forests are not negatively interfered with in the name of restoration and improvement. That, perhaps, may serve to assuage the fears expressed by the authors quoted (Bhargav and Dattatri, 2015) to some extent. 

One final point is also made, as an afterthought: why at all do we need to pass a legislation to give effect to the CAMPA? After all, the Supreme Court has been emphatic that the CA and NPV payments do not amount to a tax, but rather should be looked at as a fee for the environmental services that have been consumed by the project concerned. The enabling legislation is the Environment Protection Act or the Forest Conservation Act. The bill as such will probably excite a lot of opposition, as forests and the FCA especially have come to be seen as among the most hated manifestations of the colonial yoke and of central authority, and the state governments are smarting under their impositions. On the other hand, the ministry needs to give a proper shape to the Fund and the mode of managing and utilizing it, providing the states a measure of freedom and a modicum of financial sources that should help to salve their wounds a bit. A serious consideration may be given to the option of tabling a Resolution instead of putting a Bill to vote. This would have the added advantage of providing an easier means of making such changes as may be required by the passage of time or the further orders of the Court in the near future.

Downloadable pdf version:


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.

Monday, October 26, 2015

23 Delegating the CAMPA fund to the states, and the prophecies of doom. Managing the Compensatory Afforestation Fund in India-II

Apprehensions about the proposed CAMPA structure

We now come to the basis of the apprehensions that the new bill, if passed, will result in the wholesale squandering of the corpus. There are two aspects to this imputation: one, that the money will be used by  the states for all sorts of inappropriate things like huge buildings or expanding facilities for headquarters, once the vigilance of the centre and the SC is relaxed; and second, that the moneys will be misappropriated by making bogus accounts without any work in the field. We consider these two aspects here.

The CA portion, as well as the monies collected for specific works like catchment area treatment or PA improvement, are more or less tied funds that cannot easily be diverted into foolhardy activities by the states. Obviously, the NPV portions are not tied to particular sites or models, and are therefore available as a discretionary fund, and here is where the apprehension starts that the forest departments will tend to use them for all sorts of things that will not serve the purpose of compensating for the ecological damage occasioned by the development (non-forestry) projects, or worse still, will come up with all sorts of flashy proposals to impress the political masters and fritter away the money. Of course, forest departments are not all so reckless, but still there is a germ of realism in this fear, as we see often that governments and politicians like schemes that are out of the ordinary, seemingly innovative and even revolutionary (such as bringing back the cheetah), which will catch the public fancy and hence be likely to drain away the discretionary funds. On the other hand, the NPV portion affords a golden opportunity (to use a well-worn cliché), for the department to address many of the gaps which have plagued it in the past in carrying out its responsibilities effectively. As the present minister has stated in the Proceedings of the 5th meeting of the NCAC on 24th November 2014, para 7 (see, states should not see CAMPA funds as a convenient replacement for the regular forestry budgets. The SC has also taken into account such apprehensions and provided specific guidance on how the discretionary CAMPA funds (essentially the NPV component) should be used (in the SC order dated 29-10-2002): “Besides artificial regeneration (plantations) the fund shall also be utilized for undertaking assisted natural regeneration, protection of forests and other related activities” (Dutta & Yadav, p. 212), and as already stated above, the government notification has also followed this lead.

How these guidelines are translated into operational items is, of course, open to debate. The institutional set-up available for this so far has been for the states to submit their annual plans to the ministry, where they are put up to the National CAMPA Advisory Council (NCAC). This governing body, chaired by the minister,  has representatives of the state forest departments (in the old notification dated 23-04-2004, it was the PCCFs of 6 states, one from each Region, by rotation), as well as independent experts or civil society members. This is the watchdog committee that issues overall guidelines, as well as passing the annual operational proposals of the states. For instance, looking at Agenda item iv, p.3 of the proceedings of the 5th meeting of the NCAC on 24th November 2014 (op. cit.), reference is drawn to a list of items which the states have been “dissuaded from incurring”, which are stated to be mainly “in the nature of administrative and recurring expenditure”; still, the states were pressing “hard” for permission for some at least of the items “which were meant for protection, and for upgrading the skills in the Forest Department through e-initiatives to better subserve the purpose of monitoring of ongoing activities” (ibid.). In my experience, what the states would dearly like to use these discretionary (NPV) funds for, would be to strengthen the infrastructure and facilities, reach wages and provisions, vehicles and communications, uniforms and arms to the watchers in the field, rather than only afforestation. Such knotty questions of what is reasonable are always before the officials in the ministry (who have to provide their best guidance to the minister). The NCAC has decided, in the instance quoted, that out of the NPV funds allocated in the annual plan,

“…not less than 70% should be earmarked for the following core activities which include forest regeneration – ANR, plantations, implementation of Working Plan prescriptions, forest protection and conservation measures, and management of notified protected areas. In addition, upto 5% may be used for applied and need based research; and upto 10% may be used for communication/ ICT and capacity building and training programmes. […] The Committee recognized that, keeping in view the sanctity of CAMPA funds (emphasis added) and the necessity  to approach any demand for their use with the utmost care and caution (emphasis added), not more than 15% of the allocation to the State out of the NPV component could be allowed to be used for items hitherto placed in the category of items of work on which States are dissuaded from incurring expenditure.”

Knowing the right thing to do

Of course, there can be many divergent views on what is worthwhile and what amounts to “colossal mistakes” as the authors (Bhargav and Dattatri, op. cit.) call the forest clearance decisions of the government and the afforestation activities of the forest department. The model of forest restoration termed ANR (Assisted Natural Regeneration), for instance, is seen by some as a good departure from the “mindless tree planting” of the past (ibid.), but others have criticized it as leading to indiscriminate weeding and cleaning of the undergrowth (to ‘assist’ natural seedlings or coppice shoots of tree species to establish themselves) at the cost of a host of food and medicinal plants. Another example is the improvement of water and fodder in the forests for wildlife which is frequently urged with the best of intentions to reduce man-animal conflict (endorsed by the environment minister as well, see the 08-06-2015 datelined article at, but such measures have been criticized in the past by wildlife experts as interfering unduly with the existing habitat and artificially boosting population growth rates, which will have overall negative impact. 

Bhargav and Dattatri, on their part, have said (op. cit.) that the main activities needed to be funded are “to consolidate large Reserved Forest blocks, PAs, and the creation of wildlife corridors”, and “natural restoration or regeneration of degraded forests”, which can be achieved by just the “appropriate protection measures like trenching, fencing and fire prevention”, after which the degraded forest “will then recover through a natural process at a very nominal cost”. This sounds a magical formula, but anybody who has tried it (forester or NGO, government of private) will have found out how difficult it is to actually maintain protection over the long periods required (who will protect the fence itself!), how many enemies there are: weeds, fire, cold, heat, rain, dry spells, termites, herbivores, idle graziers swishing their sticks, trampling, pests and pathogens), and how disheartening the picture of an untended regeneration plot is to the forest staff, the village communities, and to the eye in the sky that everyone wants to monitor the process. 

The picture is even more uninspiring when we insist on planting local hardwoods, which usually show only some 10% survival, while the more hardy exotics like Acacia auriculiformis invariable show much higher survival rates, say 80%, which is the reason that the department plantations are able to pass muster by combining both and reporting a respectable overall average.

This brings me to the last part of the apprehensions, that the money will all be squandered as the entire Rs.35,000 crores are distributed like largesse. That however is not my understanding. The NCAC will still be in overall control of the way the funds are spent, by making the broad policy directions, while the annual operational plans will be duly approved by the executive committee of the NCAC (the state proposals being passed previously through a similar two-tier state CAMPA set-up). After all, that is how the funds are being deployed even now; merely by making the states the primary account holders, it does not mean that they will have a freedom to dispose of the moneys without waiting for the central ministry’s green signal.

My concern, however, is that the major change, which is that the CA and NPV payments should go directly into the state CAMPA accounts, needs to be cleared in principle by the Supreme Court,  especially as it has been so emphatic in establishing the national interests involved (see above). There is the clear direction that any new arrangement will be cleared through the Supreme Court: even in the 5th NCAC meeting of 24 November 2014 cited above, agenda item viii, while conceding the need to exceed the 1000 crore annual limit imposed by the SC, on account of inflation, and opining that the cap should not apply to the CA component, which after all was a pre-condition of the FC clearance itself, the NCAC has only instructed the ministry to file an application before the Supreme Court for clarifications in the matter, rather than issuing orders suo moto

In the present case of the CAF bill itself, it is not clear whether it has been passed through the SC scrutiny (which would entail examination by the CEC); it will be advisable to do so before subjecting it to a vote in Parliament to avoid any unpleasant surprises.

It would be a mistake if anybody assumes that the CAF bill will give a green signal to open the floodgates; in any case even the forest departments will not be able to deal with such a huge influx of funds all of a sudden. On the other hand, it is also true that deployment of the CA portion has been badly delayed, so much so that even the lands originally identified for CA may in many cases be no longer available (as they are in scattered locations, not part of the regular beats of the forest staff). So there is also a case for increasing the annual allocations, without assuming that they will be squandered away. However, the main motivation of the CAF legislation is to make the process of the states getting their funds less laborious and time-consuming, because in the annual cycle of budgeting and accounting that we are required to follow, the funds reach so late that the time-bound operations of sowing, raising nurseries, planting and so on are thrown completely out of rhythm, contributing to poor performance.

In the third and final segment, some general remarks will be made on the attitude to corruption.

Downloadable pdf version:


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.

Sunday, October 25, 2015

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 ( 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, 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 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:


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.