20 Jan 2024

Evolution of Green Grants in India – An Analysis of a Working Paper

by | posted in: Conservation Science |

It is interesting to behold the pre-colonial, colonial, and post-colonial trajectory of forest governance in India. The forests have been viewed through a spectrum of administrative lenses over the past few centuries, ranging from subsistence to extraction in the past, to sustainability, conservation, and climate action in the present.

Photo credit: Dr. Anish Andheria

“The British brought with them the ideals of western industrialization which championed private property and flourished on resource-extraction. The same seeds were sown in their newest colony to birth generations of environmental degradation,” write the expert economists of Wildlife Conservation Trust (WCT) in their working paper titled ‘A Review of Efforts Directed Towards an Inclusive and Equitable Green Grant’

The annexationist attitude of the British Raj cultivated a debilitating tunnel vision with an extractive focus on forests, the residual effects of which are reflected in India’s administrative policies even today. The colonial extractive approach towards forest management continued even post-Independence till about 1980, when the ‘conservation’ approach took precedence upon recognising the “finitude of resources” in the face of “insatiable industrial demand”. A marked shift in attitude was noted in the process of legislating the Forest Conservation Act of 1980, followed by the National Forest Policy of 1988. There were now restrictions on unregulated deforestation, and central approval for diversion of forests for developmental purposes was mandatory.

Genesis of ‘Ecological Fiscal Transfers’

In the working paper, the authors analyse and relay the slow and incremental progress, towards an ecologically conscientious framework built around allocating funds to the states to conserve forests.

India’s first Finance Commission was instituted in 1951 under Articles 275 and 280 of the Indian Constitution. Constituted once every five years, the Finance Commission is a mode of facilitating inter-governmental budgetary arrangements between India’s national and sub-national governments. It is only in the 11th Finance Commission do we see the “institutionalisation of conservation efforts”, as the authors put it. Since then, every finance commission has included the forests component, in some form of the other, and scrutinised State’s performance and impact. India is currently on its 16th Finance Commission.

Notwithstanding the forests’ ecological benefits and livelihood support enjoyed by hundreds of millions of people in India, states bear substantial ‘opportunity costs’ for preserving forests. Opportunity costs involve costs borne by the states and stakeholders due to restrictions on using the protected or recognised forest areas and resources for economic gains.

According to the paper titled ‘Strengthening India’s Forest Sector: Recommendations to the Fifteenth Finance Commission’ –

‘The scale of this opportunity cost is substantial; for instance the Indian Institute of Forest Management estimated the opportunity cost of forest land that could be converted to other land uses such as horticulture and cultivation of cereal crops at INR 2,44,000 crore annually in terms of GDP contribution (Verma et al. 2014).’

One of the ways in which the Indian government encourages forest protection and growth in forest cover is by offering “compensation to states for opportunity loss” based on the ‘forest cover’ criterion. This form of incentivisation is necessary to ensure that states work towards environment protection and community development. A form of Payment for Ecological Services (PES), if you will.

The previous four finance commissions have played a proactive role in implementing a payment for ecological services’ model for forests in the country. This has led to substantial devolution of funds in lieu of the forest acreage in the states, which can be looked at as a form of reparation to states for having maintained certain land area under forest cover.

In the working paper, the authors laud the provision of such a federal fund model that facilitates ecological conservation, while arguing the evident caveat in the fiscal system – “equating ecology with forests”. The flawed and narrow focus on forests “as a substitute for the larger environment” by the finance commission in the devolution of funds to the states, discriminates against the states with lesser forested area. There is no incentive for any state government, local bodies, communities, and individuals to conserve other equally critical ecosystems such as grasslands, wetlands, deserts, coral reefs and other marine ecosystems.

Furthermore, States are rewarded for harbouring “very dense” and “moderately dense” forests, effectively undermining the open forests and their ecological value as ecosystems in their own right.

“Previous Finance Commission reports and studies have single-mindedly focused on forest cover – starting with forest acreage culminating in an inclusion of moderately and very dense forests as part of forest cover. These measures, as they still thrive in formulaic devolutions, are adorned with an ease in calculation with the inherent trade-off of being exclusionary in nature,” the authors of the working paper write.

The 14th Finance Commission mentions ‘the need to balance management of ecology, environment, and climate consistent with sustainable economic development’ for the first time. With this the concept of ‘Ecological Fiscal Transfers’ or EFTs emerged. By the 14th and 15th Finance Commissions, the authors of the working paper point out, an ecological component was now reflected in the States’ share of funds.

The working paper further goes on to highlight the erroneous nature of acknowledging monoculture plantations as part of the forest cover metric in the formula for allocation of funds. “To focus merely on canopy cover is a folly”, the authors write, “for this jeopardizes the unique biogeographic and climatic composition of every State.”

Studies show that in the long-term, resilience and carbon sequestration capacity of the natural forests outdoes any plantations by a great margin. “[A]n important takeaway is that ecology extends beyond just forests.”

One thing is clear. At the heart of India’s green grant trajectory, fiscal resources have been directed at addressing only the forests at the exclusion of all other types of habitats that together, interconnectedly make up the larger ecosystem. This is a dangerous precedent which could prove very costly for not only other non-forest ecosystems and biodiversity, but also for us as we will ultimately lose out on the crucial ecosystem services that they provide.

Note: This and other working papers were produced by WCT under the project ‘Fiscal Principles: An Impetus for Natural Capital’. They have formed the basis of consultations with economists and ecologists culminating in a policy recommendation paper. WCT’s team of economists, development researchers, and psychologists, in collaboration with H T Parekh Foundation, has undertaken this unique flagship project which aims to drive policies that create incentives for governing bodies to achieve developmental goals without compromising on ecosystem services. Providing evidence-based and scientifically robust policy recommendations to the Finance Commission on fund devolution will help to do this.

About the author: Purva Variyar is a conservationist, science communicator and conservation writer. She works with the Wildlife Conservation Trust and has previously worked with Sanctuary Nature Foundation and The Gerry Martin Project.

Disclaimer: The author is associated with Wildlife Conservation Trust. The views and opinions expressed in the article are her own and do not necessarily reflect the views and opinions of Wildlife Conservation Trust.

Your donations support our on-ground operations, helping us meet our conservation goals.

Donate Now