Green Credit Scheme For a better Compensatory Afforestation

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Context: Forest Advisory Committee has approved the implementation of the Green Credit scheme.

Prelims: General issues on Environmental Ecology, Bio-diversity, and Climate Change.
Mains: GS III-

  • Science and technology- developments and their applications and effects in everyday life.
  • Conservation, environmental pollution and degradation, environmental impact assessment.

Why in News?

  • Recently, the Forest Advisory Committee (FAC) has approved the Green Credit Scheme.
  • Key features of the scheme:
    • It allows “forests” to be traded as a commodity.
    • It allows the Forest Department to outsource one of its responsibilities of reforesting to non-government agencies.

Background :

  • Currently, in the case of the loss of forest, the industry needs to find appropriate non-forest land and pay Net Present Value (current economic equivalent) to the State Forest Department.
  • Then it is the Forest Department’s responsibility to grow appropriate vegetation which would grow into forests over time.

Present scenario:

  • In the current system, the industry needs to make good the loss of forest by finding appropriate non-forest land — equal to that which would be razed.
  • It also must pay the State Forest Department the current economic equivalent — called Net Present Value — of the forest land.
  • It’s then the Forest Department’s responsibility to grow appropriate vegetation that, over time, would grow into forests.


  • The scheme allows agencies — they could be private companies, village forest communities — to identify land and begin growing plantations.
  • After three years, they would be eligible to be considered as compensatory forest land if they met the Forest Department’s criteria.
  • An industry needing forest land could then approach the agency and pay it for parcels of such forested land, and this would then be transferred to the Forest Department and be recorded as forest land.
  • The participating agency will be free to trade its asset, which is a plantation, in parcels, with project proponents who need forest land.
  •  In simpler words, it will allow forests to be traded as a commodity.

Need for change:

  • Industries have often complained that they find it hard to acquire appropriate non-forest land, which has to be contiguous to an existing forest.
  • Nearly ₹50,000 crores had been collected by the Centre over decades, but the funds were lying unspent because States were not spending the money on regrowing forests.
  • The Supreme Court intervened, a new law came about with rules for how this fund was to be administered. About ₹47,000 crores had been disbursed to States until August, but it has barely led to any rejuvenation of forests.

Benefits of the scheme:

  • This scheme will encourage plantation by individuals outside the traditional forest area and will help in meeting international commitments such as Sustainable Development Goals and Nationally Determined Contributions.
  • It will also help in solving various industries’ complain that they find it hard to acquire appropriate non-forest land, which has to be contiguous to the existing forest.
  • The scheme will also supplement the Green India Mission, which is one of India’s initiatives to combat climate change.
    • It aims to sequester 2.523 billion tonnes of carbon by 2020-30 and this involves adding 30 million hectares in addition to an existing forest.
    • However, it does not solve the core problems of compensatory afforestation and creates problems of privatizing multi-use forest areas as monoculture plantation plots.


Forest Advisory Committee:
  • It is a statutory body that was constituted by the Forest (Conservation) Act 1980.
  • It comes under the Ministry of Environment, Forests & Climate Change (MoEF&CC).
  • It considers questions on the diversion of forest land for non-forest uses such as mining, industrial projects, townships and advises the government on the issue of granting forest clearances. However, its role is advisory.


Compensatory Afforestation (CA):

  • It refers to afforestation and regeneration activities carried out as a way of compensating for forest land diverted to non-forest purposes. Here “non-forest purpose” means the breaking up or clearing of any forest land or a portion thereof for-
  • The cultivation of tea, coffee, spices, rubber, palms, oil-bearing plants, horticultural crops or medicinal plants; any purpose other than reafforestation;
    • But does not include any work relating or ancillary to – Conservation, Development, and management of forests and wildlife.

Compensatory Afforestation Fund Act of 2016:

  • The salient features of the Act include:-
    • The Act established the
      • National Compensatory Afforestation Fund (NCAF) under the Public Account of India
      • And State Compensatory Afforestation Funds under public accounts of states.
    • The National Fund will receive 10% of these funds, and the State Funds will receive the remaining 90%.
    • The fund will be used for:
      • compensatory afforestation,
      • additional compensatory afforestation,
      • penal compensatory afforestation,
      • net present value,
      • catchment area treatment plan
      • or any money for compliance of conditions stipulated by the Central Government while according approval under the provisions of the Forest (Conservation) Act, 1980.
    • The act provides statutory status for two ad-hoc institutions, namely
    • National Compensatory Afforestation Fund Management and Planning Authority (NCAFM-PA) for management and utilization of NCAF.
    • State Compensatory Afforestation Fund Management and Planning Authority for utilization of State Compensatory Afforestation Fund.
    • The act also seeks to provide for the constitution of a multidisciplinary monitoring group to monitor activities undertaken from these funds.
    • The act also provides for an annual audit of the accounts by the Comptroller and Auditor General.

Net present value (NPV):

  • It is a calculation used to estimate the value—or net benefit—over the lifetime of a particular project, often longer-term investments, such as building a new town hall or installing energy-efficient appliances.
  • NPV allows decision-makers to compare various alternatives on a similar time scale by converting all options to current dollar figures. A project is deemed acceptable if the net present value is positive over the expected lifetime of the project.

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