Introduction
The Compensatory Afforestation Fund (CAF) Act, 2016 was enacted to provide a statutory framework for the management and utilisation of funds collected for compensatory afforestation, Net Present Value (NPV) and other charges levied on the diversion of forest land for non-forest purposes. The Act seeks to ensure that money collected from user agencies is utilised exclusively for afforestation, forest regeneration and wildlife conservation, thereby compensating for the ecological loss caused by forest diversion.
The Act came into force on 30 September 2018, following the notification of the Compensatory Afforestation Fund Rules, 2018.
Background
Under the Forest (Conservation) Act, 1980 (now the Van (Sanrakshan Evam Samvardhan) Adhiniyam, 1980), any diversion of forest land for non-forest purposes requires prior approval of the Central Government. User agencies are required to bear the cost of compensatory afforestation and pay the Net Present Value (NPV) of the diverted forest.
Following the Supreme Court’s judgment in T.N. Godavarman Thirumulpad v. Union of India (2002), an ad hoc Compensatory Afforestation Fund Management and Planning Authority (CAMPA) was created in 2004 to manage these funds. However, the absence of a statutory mechanism led to accumulation of large unutilised funds. The CAF Act, 2016 was enacted to establish a permanent legal framework for their management and utilisation.
Objectives
The Act aims to:
- Establish a transparent institutional mechanism for managing compensatory afforestation funds.
- Ensure timely utilisation of funds for ecological restoration.
- Promote compensatory afforestation and regeneration of degraded forests.
- Strengthen biodiversity conservation and wildlife management.
- Enhance forest and tree cover.
- Improve accountability and monitoring of afforestation activities.
Salient Features
Establishment of Funds
The Act establishes two dedicated funds:
National Compensatory Afforestation Fund
Managed by the Central Government to finance national-level activities related to forest conservation, monitoring and capacity building.
State Compensatory Afforestation Fund
Established in every State and Union Territory to implement afforestation and forest conservation programmes at the local level.
Distribution of Funds
The Act provides that:
- 90% of the funds collected from a user agency are transferred to the State Compensatory Afforestation Fund of the concerned State or Union Territory.
- 10% is credited to the National Compensatory Afforestation Fund.
This arrangement recognises that forest diversion and restoration primarily occur within the States while retaining resources for national-level coordination and monitoring.
Sources of Funds
The funds comprise amounts realised towards:
- Compensatory Afforestation (CA)
- Net Present Value (NPV) of diverted forest land
- Additional Compensatory Afforestation
- Penal Compensatory Afforestation
- Catchment Area Treatment charges
- Wildlife conservation and mitigation charges
- Any other amount recoverable under the Forest (Conservation) Act or related conditions of forest clearance
Institutional Framework
National CAMPA
The National Compensatory Afforestation Fund Management and Planning Authority (National CAMPA) formulates guidelines, monitors fund utilisation, approves annual plans and oversees implementation across the country.
State CAMPA
Each State and Union Territory has a State CAMPA, responsible for preparing Annual Plans of Operation (APOs), implementing afforestation works and maintaining accounts of fund utilisation.
Utilisation of Funds
The Act permits utilisation of funds for activities such as:
- Compensatory afforestation.
- Artificial and assisted natural regeneration.
- Protection and management of forests.
- Forest fire prevention and control.
- Wildlife habitat improvement.
- Soil and moisture conservation.
- Catchment area treatment.
- Restoration of degraded forest landscapes.
- Conservation of biodiversity.
- Forest infrastructure.
- Capacity building, training and research.
- Monitoring and evaluation of afforestation programmes.
The funds cannot be diverted for purposes unrelated to forest conservation.
Significance
The CAF Act has significantly strengthened India’s forest governance by:
- Providing a statutory framework for managing compensatory afforestation funds.
- Ensuring dedicated financing for forest restoration.
- Supporting India’s target of increasing forest and tree cover.
- Enhancing carbon sequestration and climate change mitigation.
- Conserving wildlife habitats and biodiversity.
- Improving transparency and accountability in utilisation of afforestation funds.
- Supporting India’s commitments under the Paris Agreement, Convention on Biological Diversity (CBD) and Bonn Challenge.
Criticisms
Despite its objectives, the Act has attracted criticism on several grounds:
- Compensatory plantations cannot fully replace the ecological functions of natural forests.
- Afforestation is often carried out on ecologically unsuitable land.
- Greater emphasis is placed on plantation targets than on ecosystem restoration.
- Delays in utilisation of funds by States.
- Inadequate monitoring of plantation survival and quality.
- Concerns regarding limited consultation with forest-dependent communities and Gram Sabhas, particularly in Scheduled Areas.
- Ecological losses arising from diversion of old-growth forests are difficult to compensate through plantations.
Way Forward
- Prioritise restoration of natural ecosystems rather than monoculture plantations.
- Increase the use of native and site-specific species.
- Strengthen monitoring through GIS, remote sensing and third-party audits.
- Improve transparency through public disclosure of CAMPA projects and outcomes.
- Enhance participation of local communities, Gram Sabhas and Joint Forest Management Committees.
- Integrate compensatory afforestation with landscape restoration, watershed management and wildlife conservation.
- Focus on long-term survival and ecological quality of plantations rather than merely achieving plantation targets.
Conclusion
The Compensatory Afforestation Fund Act, 2016 provides the statutory foundation for financing forest restoration in India following the diversion of forest land for development projects. While it has significantly improved institutional arrangements and financial accountability, its success ultimately depends on ensuring that compensatory afforestation leads to the restoration of healthy, biodiverse and self-sustaining ecosystems rather than simply replacing forests with plantations. A scientific, community-based and ecosystem-centric approach is essential for achieving the Act’s conservation objectives.
