High-level panel recommends five times increase in NPV


* The recommendation, if implemented, will increase the cost of industry, mining, irrigation, and other projects tremendously

By Kartik Lokhande 
While the Centre and State Government both are talking of conducive atmosphere for industries and developmental projects, a High Level Committee appointed to look into the forest and environment related laws has made a recommendation that will increase projects costs tremendously.
The High Level Committee on Forest and Environment Related Laws, which submitted its report to the Central Government recently has recommended that the Net Present Value (NPV) of forest land ‘should be increased at least five times’. While making this recommendation, the committee has observed that the NPV is currently ‘underestimated’.
The committee was formed in August 2014 by Union Ministry of Environment, Forests and Climate Change was headed by T S R Subramanian, former Union Cabinet Secretary. Vishwanath Anand, former Secretary to Government of India; Justice (retd) A K Srivastava, former Judge, Delhi High Court; K N Bhat, Senior Advocate, Supreme Court; Bishwanath Sinha, Joint Secretary, Ministry of Environment and Forests, Climate Change; and Hardik Shah, Member Secretary of Gujarat Pollution Control Board, were the members.
After ‘considering’ the ‘issues’ relating to compensatory afforestation, the committee recommended that NPV should ‘immediately be fixed at least 5 times of the present rates’. While making the recommendation, the committee stated that it took into account various factors including inflation. Besides, it also noted that the value of forests ‘has generally been underestimated’ in the past. The committee went on to recommend that the NPV should be ‘periodically reviewed and revised’. Considering the factors it took into account while recommending increase in NPV, the periodical revision in its rates may be only upwards.
The recommendation, if accepted by the Government and implemented, may sound a death knell for many a project and result in tremendous increase in cost of even major projects. Interestingly, the committee has realised this. However, in its words, “The committee believes that such increase will not significantly impact the major project parameters.”
The committee was constituted to assess the status of implementation of six forest and environment related laws. These laws include Environment (Protection) Act, Forest (Conservation) Act, Wildlife (Protection) Act, Water (Prevention and Control of Pollution) Act, Air (Prevention and Control of Pollution) Act, and The Indian Forests Act.
As far as compensatory afforestation is concerned, the committee has made several other recommendations also. These include ‘doing away’ with the condition that there must be at least 33 per cent forest cover in a State before approval is given for compensatory afforestation. Further, the State Government should identify revenue land available for compensatory afforestation. Where it is not available, this should be brought in public domain. The location of available revenue land should comply with conditions such as contiguity or proximity of a reserved or protected forest to enable Forest Department to effectively manage the newly planted area.
“The quantum of compensatory afforestation on revenue land should be revised upwards to double the area, as against the present norm of equivalent of diverted area,” the committee has recommended. If revenue land is not available, the report states further, compensatory afforestation on ‘thrice the amount of degraded forest land’ should be permitted. Even, it has recommended to to utilise abandoned mining sites for compensatory afforestation.
The recommendations have come at a time when there has been widespread concern over rising costs of projects and lesser availability of land for industries, mining, irrigation etc. In the recent past, many Government agencies had raised the demand to consider cost incurred for payment of NPV should be treated as ‘social cost’. Adding the funds required for payment of NPV to the project cost, would disturb ‘benefit:cost’ ratio and make project unviable. However, the High-Level Committee has not considered this demand. Instead, it has made a strong recommendation for ‘five times increase’ in NPV rates. 

(02-02-15)

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