The ‘Burden’ of a Rich Forest Cover: A Call For Compensation

The Himalayan and Northeastern states in India complain that having an excess forest cover acts as a hindrance for their development. At a time marred with rapid environmental degradation, it is only apt to compensate the states maintaining a rich green cover with a special economic package in the form of a ‘Green Bonus’.

A Himalayan sub-tropical forest. Source: Wikicommons/ Adi 10rane/CC By-SA 4.0

  • This article was published as the cover story in the August 2016 issue of Terra Green-an internationally circulated environmental monthly-published by The Energy and Resources Institute (TERI).

A rich forest cover is desired by every country today. In India, the Himalayan and the Northeastern states are the richest in forest wealth. Apart from Assam, all the Northeastern states have more than 70 percent of area under forest. The Himalayan states also register an upward of 45 percent area under forest cover. This, reportedly, has become a major reason for their ‘stunted’ development.

These states, for long, have been complaining that having a rich forest cover has deprived them of ‘developmental’ opportunities and drastically reduced their ‘revenue’ sources. Since majority of the land is under forest, there hardly is any land left to carry ‘developmental’ projects. They argue that the environmental laws do not differentiate between them and states that are brown. To compensate this anomaly, they demand a ‘green bonus’ from the centre.

In the recent past, the demand of a green bonus from the Centre has become an important political issue in these states. This includes the states of Uttarakhand, Himachal Pradesh, Jammu and Kashmir and the North-eastern states. The leadership of these states, on repeated occasions, has reiterated this demand at various centre-state meetings but its realization is far from reality.

Green bonus is a relatively new term in the environmental discourse. It advocates grant of special financial package to a state that has been maintaining a rich ecological health through protection of its forest area and wildlife. In India, the Himalayan and Northeastern states have been demanding a green bonus as a compensation for their efforts in maintaining the ecology while the rest continue to pollute it.

 

Why is the Green Bonus being demanded?

The demand for a green bonus stems from the fact that the green surplus states (GSS)-states with high green cover- face a lot of handicaps owing to their large forest cover in carrying out developmental activities. Various environment laws like the Forest Conservation Act, Indian Forest Act, and Wildlife Conservation Act have provisions, adherence of which impedes the ‘development’ of these states. The Forest Conservation Act of 1980, in particular, overlooks the variation of forest cover in different states and provides a uniform application of the law.

Any diversion of forest land in the GSS for non-forest use is met with the same penalties as in states that are completely brown. As a result, in the GSS, a very small area of land is left to carry out ‘developmental’ activities. Furthermore, the environmental laws do not award any penalty to the green deficit states (GDS)-states with very low green cover- for remaining brown, whereas the states having impressive forest cover are penalised for remaining green.

States with abysmally low forest cover like Bihar (7.74 percent), Haryana (3.59 percent), Gujarat (7.48 percent), Rajasthan (4.70 percent), Punjab (3.52 percent) and Uttar Pradesh (5.96 percent) are treated equally with states that have surplus green cover like Mizoram (90.38 percent), Manipur (76.10 percent), Nagaland (76.68 percent), Arunachal Pradesh (80.39 percent), Meghalaya (77.08 percent), Tripura (76.07 percent), Uttarakhand (45.82 percent) and Sikkim (47.32 percent).

Benog Mountail Quail Sanctuary Uttarakhand. Source: Wikicommons/ Raju Kasambe CC By-SA 3.0

The allocation of green bonus is important for the Himalayan/Northeastern states also because these are states with very poor infrastructure. The mountainous terrain and unpredictable weather is a nightmare for transportation. Tourism is a significant contributor to some of their economies and it gets negatively impacted in absence of reliable roads, especially during monsoon. Things get further complicated because in many of these states more than 70 percent area is under forest and as such construction of roads become difficult due to various forest laws. Apart from the forests, significant area in the Himalayan states constitute of glaciers, rocky mountains and catchment areas where no development work can be carried out.

The practical difficulty faced in the Himalayan states can be better understood from the fact that to construct a kilometre of motor road in the hills it costs nearly Rs. 46 lakhs, whereas in the plains it is Rs. 28 lakhs. In the hills, 27 percent of the cost incurred is on account of forest and related clearances. (Net Present Value- Rs. 5.4 lakhs, Compensatory Afforestation- Rs. 1.00 lakh, Muck Disposal- Rs. 5 lakh, Roadside Plantation- Rs. 1.00 lakh, Total- Rs. 12.40 lakh). (Source: Uttarakhand Annual Plan 2013-14)

The Himalayan states for long have been voicing that, why they should be burdened with these levies and inflate the per km cost by 27 percent? If the Forest Conservation Act of 1980 does not differentiate between a forest rich state and a forest deficient state in its implementation, then at least the former should be compensated for this anomaly by the Centre in the form of a green bonus, they reason.

This problem is also highlighted in a 2013 report of the Planning Commission which states that,

“With the procedures for environmental clearances being generally identical for all States, the States having a large forest cover find it difficult to get environmental clearances, even for infrastructural projects which hamper their developmental initiatives. There is no free or open land to take up compensatory afforestation, which by definition means converting open land into a forest by planting trees/seeds…Besides, these States are unable to use forest resources for raising revenue and at the same time have to incur significant expenditure for maintaining the forests.”

Just as environmental degradation originating at one place does not merely have local consequences and ends up affecting a much larger area, similarly, the ‘spillover effects’ of environmental conservation also are not limited solely to the area where such conservation takes place. The services rendered by environmental conservation such as carbon sequestration, purification of air, temperature regulation, prevention of soil erosion, providing natural habitat for animal, enrichment of underground water table and others, are in no manner limited to the area conserved. Its services are being enjoyed by everyone without anyone paying anything to the conserver as compensation.

 

Economic value of environmental services rendered

In 2013, a joint study titled ‘Revision of Rates of NPV Applicable for Different Class/Category of Forests’, carried out by the Centre for Ecological Services Management, the Indian Institute of Forest Management and the Forest Survey of India, quoted a report stating that the annual Total Economic Value of forests in the state of Himachal Pradesh was estimated to be more than One lakh crore as on 2000 and that of Uttarakhand was in the order of 1.61 lakh crore annually in 2007. The figures from just these two Himalayan states speak volumes of their contribution towards the ecological health of the country.

Three United Nations agencies—UN Food and Agriculture Organisation, the UN Economic Commission for Europe and the UN Environmental Programme—in 2014 brought out a joint report titled ‘The Value of Forests- Payment for Ecosystem Services in a Green Economy’. This report also advocates compensating forest owners for continuing to provide the ecosystem services by not damaging the forests. The only diverging point is that the UN study recommends payment to the people whereas the green bonus debate seeks payment to the state. The report believes that a direct payment to the people will improve resource management, create income and sustainable livelihood for rural population.

In 2009, during the Chief Ministers’ Conclave on Climate Change, the then Union Minister for Environment and Forest, Jairam Ramesh, favoured the demand for a green bonus. He had then assured that the states conserving ecology by protecting their green wealth should be compensated and that the states will start reaping the benefits of such a step from next year (2010) when the 13th Finance Commission (FC) submits its report.

The Uttarakhand government had recently requested the centre to allot a special package of Rs. 2000 crore per annum as a green bonus to the state. In response to this, the 13th FC pegged the grant at a meagre Rs. 51 crore per annum. This was inappropriate in regard to the ecological services rendered by the state to the country and the hardship that terrain therein offers to the administration.

A forested valley in Chandrashila, Garhwal Himalayas. Source: Wikicommons/ Paul Hamilton CC BY-SA 2.0

Realising the inadequacy in the mechanism adopted by the 12th and 13th Finance Commissions for incentivising budgetary allocation on the basis of environmental health of the states, a committee constituted by the Planning Commission to study the development in hill states, in its report did recommend that “the compensation to these Himalayan States on account of their contribution of environmental services (public goods) to the rest of the nation and in recognition of their special disabilities on account of these and related factors, should be at least 2 (two) percent of the Gross Budgetary Support (GBS) to the Plan each year. At the current [2013] level of GBS this would come to about Rs 10,000 crore in 2013-14”.

 

Facilitating a National Green Credit Exchange:

The issue of Green Bonus can possibly be addressed by the creation of a national exchange where green credits can be brought by the green deficit states. I do not claim any novelty on this idea. This is nothing but implementing the international practice of green index exchange at the national level which has also been suggested in the Uttarakhand Annual Plan 2013-14. This is similar to the demand of the developing countries seeking fund from the economically rich countries under the Clean Development Mechanism.

In the Uttarakhand Annual Plan 2013-14 submitted to the Planning Commission it is proposed that this can be facilitated with the evaluation of ‘Green Index’ i.e. the percentage of forest area over national average.

The government of India through an amendment in the Forest Conservation Act 1980 can set a minimum ‘Green Index Score’ that all the states would be mandated to achieve annually. This is similar to the requirements of the Kyoto Protocol. Once the states are ranked in terms of ‘Green Index’, a mechanism can be devised for exchange of Green Credits. The states which are unable to meet the minimum Green Index score can then buy green credits from the green surplus states. This in the long run will free the centre from the burden of awarding Green Bonus to the states.

Once this exchange programme is adequately implemented, the states will be free to engage with others on a bi-lateral basis while the centre can act as a mediator and provide the basic infrastructure required. However, till such mechanism comes into play, the Himalayan and the Northeastern states must be incentivised through green bonus from the centre.

However, this mechanism of Green Credit exchange has its own limitation. Firstly, the Green Credit exchange mechanism will be able to meet only one part of the Green Bonus i.e. compensation for the rich forest cover that the Himalayan States maintain. It will not address the issue of handicaps faced in developmental projects due to the nature of terrain and poor infrastructure facility. For this, the states will have to depend on the centre because there is no rationality in asking other states to pay for this. Nevertheless, the fact that a major part of the demand can be met by adopting the green credit exchange mechanism and relieve the centre from the burden of facilitating the entire bonus amount is reason bright enough to consider and investigate its viability seriously.

Secondly, the financial scenario so far in India is such that the states are overwhelmingly dependent on the centre for their budgetary expenses. In such a scenario it will be an uphill task for the states to engage in a bi-lateral green credit exchange with other states.

However, in recent years it has also been observed that there is a trend in favour of fiscal decentralisation in India.  It is being seen in the form of a greater autonomy of the states in entering into trade relations with foreign partners and proposals of a decentralised taxation policy. These can possibly strengthen the economy of the states. Fiscal decentralisation has been the catchword for the creation of the NITI Aayog. A continuation of such policy measures over the time will further strengthen the states’ economy and make the green credit exchange realisable.

 

What can be hoped next?

Despite the recommendations of the Planning Commission, the assurance of the then Environment minister and the acknowledgement of the problem in the report of the 13th Finance Commission, the ground reality has changed much. The Himalayan and Northeastern states continue to remain disadvantaged, unfortunately for having a rich forest cover. Instead of encouraging these states towards boosting their conservation efforts, the central government (both the present and the UPA govt) offered nothing more than hollow assurances.

In the given background, it is important that a nation-wide scientific study be carried out to evaluate the economic value of forests in India. Such valuation is important not only for awarding the green bonus but also for presenting India’s case regarding environmental conservation at international forums.

Given the strategic significance of the Himalayan and Northeastern states, in context of the Indo-China border, the extremely fragile ecology and the widespread out-migration in the hills, the demand for a special developmental package in the form of a green bonus is important. However, the centre must formulate a mechanism whereby the implementation of the budget allocated can be closely monitored to serve the people in general.

At present, there are 25 MPs in the Lok Sabha from the concerned states. 18 of them are from the NDA, out of which four are ex-chief ministers (Dr. Ramesh Nishank Pokhriyal, Maj Gen (Rtd) B.C Khanduri, Bhagat Singh Koshiyari and Neiphiu Rio). Their inability to press this long-standing demand to a logical conclusion is reflective of their commitment and bargaining power in the centre.

The green bonus demand should not be viewed as a burden. Rather, it should be taken as an opportunity to help these regions which are in dire need of a boost in the infrastructure development. The encouragement that a special developmental package will provide, may further boost up their conservation activities.

The security and welfare of a country rests in the happiness of the people who live in its borders. If the border regions of a country are not developed, then nothing else in it is worth developing.

  • This article was published as the cover story in the August 2016 issue of Terra Green-an internationally circulated environmental monthly-published by The Energy and Resources Institute (TERI).