Compensatory Afforestation and CAMPA: The Compensatory Afforestation Fund Act, 2016 — Complete Note

Every hectare of forest diverted for a mine, a dam or a highway must, in law, be paid for twice: by planting forest elsewhere (compensatory afforestation) and by paying for the ecosystem services lost (net present value). For years these payments accumulated unspent, eventually running into tens of thousands of crores of rupees held under the Supreme Court's supervision. The Compensatory Afforestation Fund Act, 2016 put the money on a statutory footing, created national and State funds and authorities, and prescribed how the money is to be used. This note explains the origins of compensatory afforestation, the structure of the Act, the kinds of payments and their uses, and the debate over whether planting trees can compensate for the loss of natural forests.

1. Background: From Court Orders to Statute

Compensatory afforestation has been a condition of forest clearance under the Forest (Conservation) Act since the 1980s. In practice, States collected the money from user agencies but often diverted it to other purposes or left afforestation undone. In the T.N. Godavarman litigation the Supreme Court, acting on the Central Empowered Committee's findings, directed in 2002 that a Compensatory Afforestation Fund be created and that all compensatory afforestation money be deposited in it, to be managed by a Compensatory Afforestation Fund Management and Planning Authority (CAMPA). The Central Government notified CAMPA under the Environment (Protection) Act in 2004, and, because it did not become operational, the Court constituted an ad hoc CAMPA in 2006 to receive and hold the money. In 2009 the Court permitted release of part of the money to States through State CAMPAs under guidelines.

By the mid-2010s over forty thousand crore rupees had accumulated with the ad hoc CAMPA, largely unused. Parliament enacted the Compensatory Afforestation Fund Act, 2016 (Act 38 of 2016) to provide a permanent institutional mechanism. Its Rules were notified in 2018, and the Act came into force on 30 September 2018. In August 2019 the Central Government transferred about Rs 47,000 crore from the ad hoc CAMPA to the State funds.

2. The Funds

2.1 National Compensatory Afforestation Fund

Section 3 establishes the National Compensatory Afforestation Fund under the Public Account of India. Section 4 establishes a State Compensatory Afforestation Fund under the Public Account of each State. Because the funds are in the Public Accounts, they are non-lapsable and interest-bearing, and are not part of the Consolidated Fund, so their expenditure does not require an annual vote of the legislature in the ordinary way, though it is subject to audit and parliamentary oversight.

2.2 How money flows into and between the funds

All money received from user agencies, and the money previously held by the ad hoc CAMPA, is credited first to the State fund, and ten per cent is transferred to the National Fund, while ninety per cent remains in the State Fund. The National Fund is used for monitoring, evaluation, administrative expenses of the National Authority, and specified national-level activities; the State Funds are used for afforestation and the other permissible activities in the State. The funds receive:

• compensatory afforestation money;
• additional compensatory afforestation money;
• penal compensatory afforestation money;
• net present value;
• money for catchment area treatment plans and wildlife management plans; and
• other money received from user agencies under the conditions of forest clearance.

3. The Authorities

3.1 National CAMPA

Section 8 establishes the National Authority (commonly called National CAMPA), chaired by the Union Minister for Environment, Forest and Climate Change. It has a Governing Body, an Executive Committee and a Monitoring Group. Its functions include: managing and utilising the National Fund; approving the annual plans of operations of the States; monitoring and evaluating the activities of the State Authorities; developing a system for concurrent monitoring, with third-party evaluation; providing technical assistance; and recommending mechanisms to the Central Government.

3.2 State CAMPA

Section 10 establishes a State Authority (State CAMPA) in each State, with a Governing Body headed by the Chief Minister, a Steering Committee headed by the Chief Secretary, and an Executive Committee. The State Authority prepares the annual plan of operations, which must be approved by the National Authority's Executive Committee, releases funds to the forest department, and monitors execution of works. Funds are to be spent in accordance with the plan within the prescribed period.

4. The Kinds of Compensatory Payments

4.1 Compensatory afforestation money

Compensatory afforestation means afforestation done in lieu of the diversion of forest land for non-forest use under the Van (Sanrakshan Evam Samvardhan) Adhiniyam. The user agency ordinarily provides equivalent non-forest land (1:1) for afforestation, which is transferred to and mutated in favour of the forest department and notified as reserved or protected forest; where such land is not available, afforestation is done on degraded forest land twice the area diverted (2:1). Compensatory afforestation money is the cost of raising and maintaining this plantation, including site preparation, planting, protection and maintenance for the prescribed period.

4.2 Net present value

Net present value is the quantification of the environmental services provided by the forest area diverted, for a period of up to fifty years, as determined by an expert committee appointed by the Central Government from time to time. It represents the value of goods and services such as timber, fuelwood, fodder, non-timber products, carbon sequestration, soil conservation, water regulation and biodiversity that are lost because natural forest cannot be replaced immediately by a plantation. The requirement originates in the Godavarman litigation (T.N. Godavarman Thirumulpad v. Union of India, (2006) 1 SCC 1), and the rates were fixed by the Supreme Court in 2008 according to the eco-class and density of the forest, with higher multiples for national parks and sanctuaries.

4.3 Additional compensatory afforestation

Additional compensatory afforestation means afforestation over and above the normal compensatory afforestation, stipulated as a condition of approval in specific cases, for example where the diversion is large, the forest is of high quality, or where it is considered necessary to offset particular impacts.

4.4 Penal compensatory afforestation

Penal compensatory afforestation is afforestation imposed on a user agency as a penalty for having used forest land for non-forest purposes without prior approval, or in violation of the conditions of approval. It is in addition to the regular compensatory afforestation and NPV, and ensures that violators cannot gain by avoiding the approval process. Penal NPV may also be levied.

5. Use of CAMPA Funds

Section 6 of the Act and the Compensatory Afforestation Fund Rules, 2018 prescribe how the money may be used. The central principle is that money received for a specific purpose must be used for that purpose: compensatory afforestation money for compensatory afforestation, catchment area treatment money for catchment treatment, and so on. The net present value and interest may be used for a wider but defined set of forest and wildlife activities. Under the Rules, eighty per cent of the NPV money is to be used for forest and wildlife management activities, and twenty per cent for strengthening forest and wildlife infrastructure, research and capacity building.

5.1 Forest regeneration

Permitted forest management activities include: artificial regeneration (plantations) and assisted natural regeneration; silvicultural operations; soil and moisture conservation works; protection of plantations and natural forests from fire, pests and encroachment; improvement of forest quality in degraded areas; forest certification; management of non-timber forest produce and medicinal plants; development of grasslands; and, under the Rules, activities in consultation with Gram Sabhas or Joint Forest Management committees where the work is on land used by communities.

5.2 Wildlife protection through CAMPA

The Act and Rules permit expenditure on wildlife habitat improvement, management of protected areas, voluntary relocation of villages from protected areas, management of human-wildlife conflict, conservation of wildlife corridors, and implementation of wildlife management plans prescribed as conditions of forest clearance. In projects affecting wildlife, the user agency's payment for a wildlife management plan is credited to the fund and spent on the specific measures prescribed.

5.3 What the money cannot be used for

The Rules prohibit the use of the funds for purposes unrelated to their objects, such as payment of salaries and travel allowances of regular staff, construction of buildings unrelated to the specified activities, purchase of vehicles beyond permitted limits, and recurring expenditure of forest departments. Misuse by States, for example on items such as office equipment and non-forestry works, has been repeatedly highlighted by audits and parliamentary committees.

6. Compensatory Afforestation versus Natural Forest Conservation

The fundamental question is whether planting trees can compensate for the loss of a natural forest. The law assumes that it can, at least partly; ecologists doubt it. The main criticisms are:

1. A plantation is not a forest. Natural forests have complex structure, soils, biodiversity and hydrological functions developed over centuries. Compensatory plantations are often monocultures of fast-growing species such as eucalyptus, acacia or teak, with low biodiversity value.
2. Wrong place. Compensatory land is often far from the diverted forest, in a different ecological zone, or fragmented, so it does not replace the lost habitat or corridor.
3. Poor survival. Audits have found low survival rates of plantations and difficulty in verifying afforestation on the ground.
4. Encroachment on commons. Compensatory plantations have sometimes been raised on land used by communities for grazing and cultivation, including land over which rights are claimed under the Forest Rights Act, creating conflict.
5. Moral hazard. A system that allows forest loss to be offset by payment may encourage diversion, treating forests as a price rather than a limit.

In response, policy has shifted towards assisted natural regeneration, native species, landscape-level planning, geo-tagging and satellite monitoring of plantations, and involvement of Gram Sabhas. The 2023 amendments to the forest conservation law and the Rules also allow compensatory afforestation on degraded reserved forests and through accredited compensatory afforestation schemes, in which land afforested in advance by any entity can be traded to user agencies. Critics fear that these changes further weaken the link between the forest lost and the forest restored.

7. Critical Appraisal

The Compensatory Afforestation Fund Act solved the immediate problem of idle funds and gave the money a statutory and accountable home. Its weaknesses lie in implementation: the quality and location of plantations, limited ecological monitoring, the use of funds for activities of doubtful forestry value, the limited role of Gram Sabhas despite the Forest Rights Act, and the deeper question whether money and plantations can ever substitute for intact natural forests. The Act works best when it is treated not as a licence to divert but as the last line of a hierarchy that starts with avoiding diversion, then minimising it, and only then compensating for what cannot be avoided.

8. Related Topics and Provisions