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Biodiversity & Environment

Net Present Value of Forests

  • 12 Sep 2020
  • 4 min read

Why in News

The Ministry of Mines has requested the Forest Advisory Committee (Ministry of Environment, Forest and Climate Change) to exempt digging exploratory boreholes from Net Present Value (NPV).

  • In 2018, the Ministry of Coal, the Ministry of Mines and the Ministry of Petroleum and Natural Gas had sought to be exempted from forest clearances for exploratory boreholes.

Key Points

  • Exploratory Boreholes: An exploratory borehole is drilled for the purpose of identifying the characteristics, location, quantity and quality of a resource (coal, metal or petroleum).
    • It is a part of prospecting a site for future use for mining and extraction activities.
  • Net Present Value (NPV): It is a mandatory one-time payment that a user has to make for diverting forestland for non-forest use, under the Forest (Conservation) Act, 1980.
    • Calculation: This is calculated on the basis of the services and ecological value of the forests.
      • It depends on the location and nature of the forest and the type of industrial enterprise that will replace a particular parcel of forest.
      • These payments go to the Compensatory Afforestation Fund (CAF) and are used for afforestation and reforestation.
      • The CAF is managed by the Compensatory Afforestation Management and Planning Authority (CAMPA).
    • Decided by: The Forest Advisory Committee constituted by the Ministry of Environment, Forest and Climate Change (MoEF&CC) decides on whether forests can be diverted for projects and the NPV to be charged.
      • It is a statutory body constituted by the Forest (Conservation) Act 1980.
    • Exemptions: Some projects have been provided exemption from paying NPV like construction of Schools, Hospitals, village tanks, laying down of optical fibre etc. Projects like underground mining and wind energy plants have been given a 50% exemption from NPV.
    • Background: In the N. Godavarman Thirumulpad v. Union of India case, 2008, the Supreme Court mandated the payment of NPV.
      • The Kanchan Gupta Committee developed the concept of NPV after this case.
  • Argument by Ministry of Mines: All areas of exploration are not converted into mining. Only about 1% of cases are converted to mining.
    • Payment of NPV at a present rate of 2% or 5% NPV of the total forest area in the lease area is one of the major challenges which leads to delay in the exploration/ prospecting activities.
  • Response from the Forest Advisory Committee : While it was not possible to do away with NPV, it recommended that the MoEF&CC may consider charging NPV on a per borehole basis instead of the present practice of charging 2 or 5%.

Forest Conservation Act, 1980

  • The Forest Conservation Act, 1980 stipulated that the central permission is necessary to practice sustainable agro-forestry in forest areas. Violation or lack of permit was treated as a criminal offence.
  • It puts a restriction on the use of forest-land for non-forest purposes.
  • It targeted to limit deforestation, conserve biodiversity and save wildlife.

Source: TH

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