Compensatory Afforestation Fund Act, 2016

The Compensatory Afforestation Fund Act, 2016 provides a legal framework for the management and utilisation of funds collected from user agencies for diversion of forest land for non-forest purposes. The Act establishes National and State Compensatory Afforestation Funds and creates authorities to ensure that these funds are used for afforestation, forest conservation, wildlife protection, and ecological restoration activities.

What Is The Compensatory Afforestation Fund Act, 2016?

The Compensatory Afforestation Fund Act, 2016 is a legislation enacted to regulate the collection, management, and utilisation of money received from agencies that use forest land for non-forest purposes.

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When forest land is diverted for activities such as mining, industries, roads, railways, dams, or other development projects, the user agency is required to pay amounts towards compensatory afforestation and other environmental protection measures under the Forest (Conservation) Act, 1980.

Before the enactment of this Act, funds collected from user agencies were deposited with an ad hoc Compensatory Afforestation Fund Management and Planning Authority created pursuant to the directions of the Supreme Court. The absence of a permanent mechanism resulted in accumulation of significant unutilised funds.

The Compensatory Afforestation Fund Act, 2016 was enacted to establish a statutory system for:

• Creating dedicated funds at the national and state levels.
• Managing collected environmental compensation amounts.
• Ensuring proper utilisation of funds for forest regeneration and conservation.
• Establishing monitoring and accountability mechanisms.

The Act came into force on 30 September 2018 through a notification issued by the Central Government.

Background Of The Compensatory Afforestation Fund Act, 2016

The origin of the Compensatory Afforestation Fund Act can be traced to the Supreme Court proceedings in T.N. Godavarman Thirumulpad v. Union of India.

In its order dated 30 October 2002, the Supreme Court observed that a Compensatory Afforestation Fund should be created where all amounts received from user agencies towards compensatory afforestation, additional compensatory afforestation, penal compensatory afforestation, net present value of diverted forest land, and catchment area treatment plans should be deposited.

The Supreme Court also directed that these funds should not be limited only to plantation activities but should also be utilised for:

• Assisted natural regeneration.
• Protection of forests.
• Forest-related infrastructure development.
• Wildlife protection.
• Other activities connected with forest conservation.

Since a permanent authority was not established initially, an ad hoc authority was created to manage these funds. Later, the Compensatory Afforestation Fund Act, 2016 provided a permanent statutory framework for the management of these funds.

Objectives Of The Compensatory Afforestation Fund Act, 2016

The primary objective of the Act is to ensure that funds collected as environmental compensation are effectively used for restoration and conservation of forests.

The important objectives include:

Establishment Of Dedicated Funds

The Act aims to create separate National and State-level funds for receiving and managing money collected from user agencies.

Conservation Of Forest Ecosystem

The funds are utilised for activities relating to forest regeneration, protection, wildlife conservation, and biodiversity improvement.

Transparency In Fund Management

The Act establishes authorities, monitoring groups, audit procedures, and reporting mechanisms to ensure accountability in the utilisation of funds.

Balancing Development And Environmental Protection

The Act recognises that diversion of forest land for development activities requires compensatory environmental measures to reduce ecological damage.

Important Definitions Under Section 2 Of The Act

Section 2 of the Compensatory Afforestation Fund Act, 2016 defines various important terms used throughout the legislation.

Compensatory Afforestation

Under Section 2(d), compensatory afforestation means afforestation carried out in place of diversion of forest land for non-forestry purposes under the Forest (Conservation) Act, 1980.

The concept is based on the principle that when forest land is diverted for another purpose, equivalent ecological restoration measures must be undertaken.

Environmental Services

According to Section 2(e), environmental services include benefits provided by forests, such as:

• Provision of wood, non-timber forest products, fuel, fodder, and water.
• Wildlife protection and tourism-related benefits.
• Regulation of floods and maintenance of soil, air, and water systems.
• Carbon sequestration and biodiversity conservation.

The definition recognises forests as ecological assets that provide multiple services beyond timber production.

Net Present Value

Under Section 2(j), net present value refers to the quantification of environmental services provided by forest areas diverted for non-forest purposes.

The value of these environmental services is determined by an expert committee appointed by the Central Government.

Penal Compensatory Afforestation

Section 2(k) defines penal compensatory afforestation as afforestation undertaken in addition to normal compensatory afforestation where non-forest activities have been carried out on forest land without obtaining prior approval required under the Forest (Conservation) Act, 1980.

User Agency

According to Section 2(p), a user agency includes any person, organisation, company, or government department seeking diversion of forest land for non-forest purposes or using forest land according to the provisions of the Forest (Conservation) Act, 1980.

Establishment Of National Compensatory Afforestation Fund

Section 3: National Fund

Section 3 of the Act provides for the establishment of the National Compensatory Afforestation Fund under the Public Account of India.

The National Fund is controlled by the Central Government and managed by the National Compensatory Afforestation Fund Management and Planning Authority.

The following amounts are credited to the National Fund:

• Money collected by State Governments and Union Territory Administrations and earlier placed under the ad hoc Authority.
• Ten percent of funds realised by each State from user agencies for diversion of forest land.
• Grants received by the National Authority.
• Loans or borrowings taken by the National Authority.
• Donations or other amounts received by the authority.

Section 3 further provides that the National Fund is an interest-bearing fund and the balance remains non-lapsable.

Establishment Of State Compensatory Afforestation Funds

Section 4: State Fund

Section 4 of the Act provides for establishment of the State Compensatory Afforestation Fund by each State Government under the Public Account of the State.

The State Fund is controlled by the State Government and managed by the State Compensatory Afforestation Fund Management and Planning Authority.

The State Fund receives:

• Unspent balances transferred from earlier State authorities.
• Amounts transferred from the National Fund.
• Money collected from user agencies towards compensatory afforestation.
• Amounts received towards net present value.
• Funds relating to protection of biodiversity and wildlife in protected areas.

Similar to the National Fund, the State Fund is also non-lapsable and earns interest.

Utilisation Of National Fund And State Fund

Section 5: Utilisation Of National Fund

Under Section 5 of the Act, ninety percent of money collected by States and placed under the earlier ad hoc authority is transferred to the respective State Funds.

The remaining ten percent is utilised for:

• Management expenses of the National Authority.
• Monitoring and evaluation of activities.
• Specific schemes approved by the governing body of the National Authority.

Such schemes may include institutions, research centres, pilot projects, and activities related to forestry and wildlife development.

Section 6: Utilisation Of State Fund

Section 6 of the Act provides the manner in which State Funds are utilised.

Funds received for compensatory afforestation, additional compensatory afforestation, and penal compensatory afforestation are used according to approved schemes.

Funds received towards net present value and penal net present value may be used for:

• Artificial regeneration through plantations.
• Assisted natural regeneration.
• Forest management.
• Forest protection.
• Wildlife conservation.
• Development of forest-related infrastructure.

The provision also allows utilisation of funds for conservation activities in protected areas.

National Compensatory Afforestation Fund Management And Planning Authority

Section 8: Constitution Of National Authority

Section 8 of the Act provides for the constitution of the National Compensatory Afforestation Fund Management and Planning Authority.

The National Authority manages and utilises the National Fund for purposes specified under the Act.

The Authority consists of:

• Governing body.
• Executive committee.
• Monitoring group.
• Administrative support mechanism.

The governing body is chaired by the Minister of Environment, Forest and Climate Change, Government of India.

It includes representatives from ministries dealing with environment, finance, rural development, agriculture, tribal development, science and technology, and other related areas.

Executive Committee And Monitoring Group Of National Authority

Section 9: Supporting Mechanisms

Section 9 provides for the executive committee and monitoring group of the National Authority.

The executive committee assists the governing body in implementation of decisions and performs functions such as:

• Approval and execution of schemes.
• Investment of surplus funds.
• Maintenance of accounts.
• Providing technical assistance to State Authorities.

The monitoring group consists of experts from fields such as environment, economics, wildlife, forestry, remote sensing, geographical information systems, and social sectors.

Its functions include:

• Monitoring activities funded under the Act.
• Conducting inspections.
• Ensuring transparency and accountability.

State Compensatory Afforestation Fund Management And Planning Authority

Section 10: Constitution Of State Authority

Section 10 of the Act provides for establishment of State Compensatory Afforestation Fund Management and Planning Authorities.

The State Authority manages the State Fund and ensures utilisation of funds according to the objectives of the Act.

The governing body of the State Authority includes:

• Chief Minister of the State as Chairperson.
• Minister of Forests.
• Chief Secretary.
• Principal Secretaries of relevant departments.
• Principal Chief Conservator of Forests.
• Chief Wildlife Warden.

Powers And Functions Of Authorities

The Act provides detailed functions for National and State Authorities.

Functions Of National Authority

Under Section 14, the National Authority performs functions including:

• Formulating policy frameworks.
• Approving annual reports and audited accounts.
• Reviewing decisions of committees.
• Approving specific schemes.

Under Section 15, the executive committee performs operational functions such as implementation of schemes, financial management, record maintenance, and providing assistance to State Authorities.

Functions Of State Authority

Under Section 17, the governing body of State Authority lays down policy frameworks and reviews the functioning of the authority.

Under Section 18, the steering committee monitors fund utilisation and approves annual plans.

Under Section 19, the executive committee supervises implementation, maintains accounts, prepares reports, and manages daily operations.

Accounts, Audit And Annual Reports Under The Act

The Act establishes financial accountability through Sections 20 to 29.

National Authority Accounts And Audit

Under Section 22, the National Authority must maintain proper accounts and records. The accounts are audited by the Comptroller and Auditor General of India.

The audit report is submitted to the Central Government and placed before Parliament under Section 24.

State Authority Accounts And Audit

Under Section 27, State Authorities must maintain accounts and undergo audit by the CAG.

The annual report and audit report of State Authorities are placed before State Legislatures under Section 29.

Other Important Provisions Of The Act

Section 30: Power To Make Rules

Section 30 empowers the Central Government to make rules for implementing provisions of the Act, including management of funds, accounting procedures, meetings, budgets, and reporting requirements.

Section 31: Transfer Of Assets And Liabilities

Section 31 provides for transfer of assets, liabilities, rights, and obligations of earlier ad hoc authorities to the National and State Authorities established under the Act.

Section 32: Validation

Section 32 validates the transfer and crediting of funds into the National and State Funds.

Section 33: Power Of Central Government To Issue Directions

Under Section 33, the Central Government may issue policy directions to the National Authority or State Authorities, and such directions are binding.

Conclusion

The Compensatory Afforestation Fund Act, 2016 establishes a comprehensive legal framework for managing funds collected due to diversion of forest land for non-forest purposes. Through Sections 3 to 33, the Act provides for creation of funds, constitution of authorities, utilisation of money, monitoring, auditing, and reporting mechanisms. The legislation aims to ensure that environmental compensation is effectively used for forest regeneration, biodiversity protection, and sustainable ecological development.