Net Present Value is the upfront payment made by various infrastructure projects for the loss of forests and its ecosystem services, and is used for various conservation efforts by the ministry.(HT Photo)
Net Present Value is the upfront payment made by various infrastructure projects for the loss of forests and its ecosystem services, and is used for various conservation efforts by the ministry.(HT Photo)

Government may tweak policy for infra projects in forest areas

In 2002, SC had directed that infrastructure projects pay NPV for the forest loss while hearing the TN Godavarman Thirumulpad Vs. Union of India case related to forests.
By Jayashree Nandi, New Delhi
UPDATED ON FEB 04, 2021 05:37 AM IST

The Union environment ministry proposes to increase the net present value (NPV) of forests that will be diverted for infrastructure projects, linking it to a measure of wholesale prices, a development that could have a significant impact on infrastructure projects that are to come up in forest areas, raising concern among policy analysts who say it sidesteps issues such as conservation .

NPV is the upfront payment made by various infrastructure projects for the loss of forests and its ecosystem services, and is used for various conservation efforts by the ministry. NPV is calculated depending on the density of the canopy and quality of forests.

In 2002, SC had directed that infrastructure projects pay NPV for the forest loss while hearing the TN Godavarman Thirumulpad Vs. Union of India case related to forests.

Also read: What’s the value of a tree? Age multiplied by 74.5k

But the ministry has decided to not increase the NPV values in line with the recommendations of the Indian Institute of Forest Management (IIFM), Bhopal, which had estimated in 2014 that the values should be raised to nearly four times the present value to reflect the real cost of goods and services of forests.

Instead, the ministry has proposed to use the wholesale price index (WPI) to determine NPV values for the time being.

“The NPV will have to be revised because Supreme Court has ordered that it be revised after three years. There is a delay in revising the value already. This is a draft proposal only. We don’t know if it will be accepted by the government,” said a senior environment ministry official on condition of anonymity.

Even using the WPI as the yardstick for revising NPV, there is up to a 51% jump in NPV values depending on forest types. For example, the NPV of a very dense, Class 1 category forest is 10,43,000 per ha, which will increase to 15,74,930 by tying it to the WPI.

The IIFM had classified forests into 14 forest type groups and individually determined the NPV based on goods and services like timber, bamboo, fuelwood, fodder, gene-pool conservation, carbon sequestration, carbon storage, soil conservation, water recharge, pollination and seed dispersal.

“The ministry’s document reveals the serious difficulties involved in valuation of forests. This was very challenging even for the Central Empowered Committee (CEC) when the Supreme Court was hearing this matter {in 2002}and the final result of that process was wholly undemocratic,” said Manju Menon, a senior fellow at the Centre for Policy Research think tank.

“Since then the forest governance landscape has transformed because of the introduction of Forest Rights Act. But the ministry is in denial of all this if it wants to simply revise NPV rates now without addressing the issues of forest conservation and forest rights. Even the CEC had included many ecological parameters in its valuation. All that is lost when this revision is based on Wholesale Price Index, which is an index of commodity prices,” Menon added.

In a draft note for the consideration of a Committee of Secretaries (CoS), a copy which has been seen by Hindustan Times, the environment ministry has proposed to revise the NPV rates based on a the wholesale price index.’ The note states that the Supreme Court, in its March 28, 2008 order, had said the NPV rates would hold good for three years and would need to be revised thereafter.

In 2012, an Expert Committee on Allocation of Natural Resources (CANR) headed by former finance secretary Ashok Chawla was constituted, and it recommended suitably readjusting NPV because forest land has value over and above the value of the land.

The environment ministry in 2014 also formed a high-level committee under the chairmanship of former cabinet secretary TSR Subramanian to review the five environmental laws, including the Forest (Conservation) Act, 1980. The committee recommended that NPV should be at least five times the present rates.

After various other ministries expressed reservations over the massive hike in NPV, in a meeting dated November 5, 2020, the environment ministry concluded that an abrupt increase in NPV to four times the current value, recommended by IIFM, could pose a blow to the economy.

“It was apprehended that proposal submitted to CoS envisages abrupt increase in the NPV rates as high as four times the existing rates. It may impact the existing projects and ultimately on national economy i.e. it may increase the tariff rates both for power and other infrastructure sector projects, surge import bills of Central Government and moreover, the smaller projects may be rendered unviable,” the ministry said in a draft note.

It added that the WPI was an important measure to monitor the dynamic movement of prices at the wholesale level. WPI is also used for the purpose of escalation clauses on the supply of raw materials, machinery and construction work.

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