Forest Clearance vs Compensatory Afforestation: The Approval and Its Price

When forest land is diverted for a mine, road or dam, two things happen. The Central Government grants forest clearance, the permission to use forest land for a non-forest purpose. And the user agency must pay for compensatory afforestation, the condition that a new forest be raised elsewhere to offset the loss, together with the net present value of the forest lost. The first is a regulatory decision; the second is a mitigation obligation attached to it, now governed by the Compensatory Afforestation Fund Act, 2016.

1. Forest Clearance

Under Section 2 of the Van (Sanrakshan Evam Samvardhan) Adhiniyam, 1980 (formerly the Forest (Conservation) Act), no State Government or authority may, without the prior approval of the Central Government, de-reserve a reserved forest, permit use of forest land for any non-forest purpose, lease it to a private person, or clear naturally grown trees for reafforestation. Proposals are examined by the Forest Advisory Committee or Regional Empowered Committees, and approval is given in two stages: Stage I (in-principle, with conditions) and Stage II (final, after conditions are met). Conditions include compensatory afforestation, payment of NPV, wildlife mitigation, and a certificate of Forest Rights Act compliance with gram sabha consent (Niyamgiri, 2013). The 2023 amendment created exemptions (such as for strategic linear projects near borders), but in February 2024 the Supreme Court directed that the Godavarman definition of forest continue to apply.

2. Compensatory Afforestation

Compensatory afforestation (CA) is the obligation to raise a forest to compensate for forest land diverted. Under the guidelines and the Van (Sanrakshan Evam Samvardhan) Rules, CA is to be done on equivalent non-forest land (to be transferred to the forest department and notified as reserved or protected forest), or, where such land is not available, on degraded forest land twice the area diverted. In addition, the user agency pays the net present value (NPV) of the diverted forest, reflecting the loss of ecosystem services until the new forest matures, computed by expert committees and upheld in T.N. Godavarman Thirumulpad v. Union of India, (2006) 1 SCC 1, as well as costs of catchment treatment and wildlife management where required.

The Compensatory Afforestation Fund Act, 2016 (in force 30 September 2018, with the Compensatory Afforestation Fund Rules, 2018) established a National Compensatory Afforestation Fund and State Funds in the public accounts, managed by a National Authority and State Authorities (CAMPA). Ninety per cent of the money goes to the States. The funds are used for CA, regeneration, wildlife protection and forest management. Newer mechanisms allow accredited compensatory afforestation (land raised in advance by private parties) and, after the 2025 revisions, green credits from verified plantations to be exchanged once against CA obligations.

3. Key Differences

4. Issues

Studies and CAG audits have found that compensatory afforestation often fails: land is unavailable or unsuitable, survival rates are low, monoculture plantations cannot replace natural, biodiverse forests, and large sums in CAMPA funds remained unspent or were used for unrelated purposes. Plantations on land used by local communities have caused conflict with forest rights. The Supreme Court in Godavarman created the ad hoc CAMPA to hold funds until the 2016 Act. The deeper criticism is that CA treats forests as substitutable, while old-growth ecosystems cannot be recreated in a few decades.

5. Related Topics and Provisions